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Home / Case Digests / Second Circuit — Sanctions: SEC v. Smith, et al.

Second Circuit — Sanctions: SEC v. Smith, et al.

U.S. Court of Appeals for the Second Circuit 


Appellate Jurisdiction — Trust Assets

SEC v. Smith, et al.
Judges Winter, Livingston and Rakoff

Background: A proceeding was brought to remedy securities fraud and recover assets to be distributed to the victims of the fraud. Several defendants appealed from an order imposing sanctions and authorizing a receiver to dispose property owned by an irrevocable trust.

Ruling: The Second Circuit dismissed two appeals for lack of jurisdiction, affirmed the sanction against one of the defendants, and remanded to allow the trust to contest the court’s order regarding the disposition of the trust property. The court held that because the sanction order did not seek to compel compliance with an existing court order, but was available to as a deterrent to delaying tactics, the order was not final. The sanction order was affirmed because the appellant was asked to list her accounts and assets and the annuity in question was clearly an asset. The fact that her children were listed as the sole beneficiaries of the trust did not mean that the trust was arranged for the sole benefit of her children. Finally, the Second Circuit held that the it was appropriate to allow the magistrate to consider the trust’s arguments.

James D. Featherstonhaugh and Stephen B. Hanse of Fetherstonhaugh, Wiley & Clyne for the defendant-appellants; Benjamin Zelermyer of Steinberg & Cavaliere for the non-party appellant Jill A. Dunn; Fred N. Knopf of Wilson, Elser, Moskowitz, Edelman & Dicker for non-party appellant David M. Wojeski; Kevin P. McGrath of the Securities and Exchange Commission for the plaintiff-appellee