Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-30-2008

SEC v. Black
Precedential or Non-Precedential: Non-Precedential

Docket No. 07-1031




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"SEC v. Black" (2008). 2008 Decisions. Paper 1663.
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                                                      NOT PRECEDENTIAL

             UNITED STATES COURT OF APPEALS
                  FOR THE THIRD CIRCUIT



                            No. 07-1031


          SECURITIES AND EXCHANGE COMMISSION

                                 v.

  JOHN GARDNER BLACK; DEVON CAPITAL MANAGEMENT, INC.;
BANKRUPTCY ESTATE OF FINANCIAL MANAGEMENT SCIENCES, INC.

                                      John Gardner Black,

                                                     Appellant

                   _________________________

           On Appeal From the United States District Court
               for the Western District of Pennsylvania
                     (D.C. Civ. No. 97-cv-02257)
           Chief District Judge: Hon. Donetta W. Ambrose

                   _________________________

             Submitted under Third Circuit LAR 34.1(a)
                        September 7, 2007


       Before: BARRY, CHAGARES and ROTH, Circuit Judges

                  (Opinion filed January 30, 2008)




                            __________
                                        OPINION
                                        __________


PER CURIAM

       Pro se Appellant John Gardner Black appeals from a District Court order denying his

motion filed pursuant to Federal Rule of Civil Procedure 60(b), to set aside the District Court

orders in this case. We will affirm the District Court order denying Black’s Rule 60(b)

motion.

                                              I.

       Black controlled a registered management adviser, Devon Capital Management, Inc.,

whose primary clients were school districts and governmental entities. During the course of

an investigation, the Securities and Exchange Commission (“SEC”) determined that Devon

had assets at materially inflated values. Furthermore, it determined that Devon and Black

were concealing these losses from their clients by overvaluing a type of collateralized

mortgage obligation. In 1997, the SEC brought this civil enforcement action against Black

(along with Devon and Financial Management Sciences, Inc. “FMS”). The SEC sought to

enjoin Black’s illegal conduct, freeze assets, have Black disgorge any unlawfully obtained

proceeds, and pay civil penalties. Ultimately, the District Court entered a permanent

injunction as well as an order of disgorgement and civil penalties against Black.1


  1
    A criminal action was also brought against Black. See United States v. Black, W.D. Pa.
99-cr-00203. After pleading guilty in January 2000, Black was sentenced to forty-one
months imprisonment with three years supervised release. He was also ordered to pay
$61,300,000 in restitution.

                                              2
       In December 2006, Black filed the Rule 60(b) motion giving rise to this appeal. In

the motion, Black sought to set aside all of the District Court orders in this case.

Specifically, Black stated that the SEC’s civil complaint was fraudulent and misleading, and

that the complaint failed “to disclose that Black’s business practices were in compliance with

and controlled by published Internal Revenue Service Regulations.” (Mot. Set Aside 1) He

also stated that all of the orders should be set aside because the District Court lacked subject

matter jurisdiction. Specifically, Black asserted that the SEC “does not have jurisdiction to

introduce a complaint in district court which does not allege a violation of securities laws nor

plead the facts of those violations.” (Appellant’s Informal Br. 2).

       We liberally construe Black’s motion as filed pursuant to both Federal Rule of Civil

Procedure 60(b)(3) and 60(b)(4). See, e.g., Dluhos v. Strasberg, 

, 369 (3d Cir.

2003). Federal Rule of Civil Procedure 60(b)(3) provides for relief from judgment where

there has been “fraud . . . misrepresentation, or other misconduct of an adverse party.” “To

prevail, the movant must establish that the adverse party engaged in fraud or other

misconduct, and that this conduct prevented the moving party from fully and fairly

presenting his case.” Stridiron v. Stridiron, 

, 207 (3d Cir. 1983)(citation

omitted). Federal Rule of Civil Procedure 60(b)(4) provides relief from judgment if the “the

judgment is void.” Here, Black asserts that the judgment is void because the District Court

lacked subject matter jurisdiction over the civil complaint. In the motion, Black asserted that

the SEC failed to disclose that his practices were in accord with Internal Revenue Service

regulation 26 C.F.R. § 1.148-5(d), and that the market value of the Collateralized Investment

                                               3
Agreement (“CIA”) was never misrepresented to its owners. The District Court denied the

motion. Black timely filed a notice of appeal.

                                              II.

       We have jurisdiction pursuant to 28 U.S.C. § 1291. We review a denial of a motion

filed pursuant to Federal Rule of Civil Procedure 60(b)(3) for abuse of discretion. See Coltec

Indus., Inc. v. Hobgood, 

, 269 (3d Cir. 2002)(citation omitted). The denial of

a motion filed pursuant to Federal Rule of Civil Procedure 60(b)(4) is subject to plenary

review. See Page v. Schweiker, 

, 152 (3d Cir. 1986)(citation omitted).

Furthermore, “a Rule 60(b) motion may not be used as a substitute for appeal, and, legal

error, without more, cannot justify granting a Rule 60(b) motion.” Smith v. Evans, 

, 158 (3d Cir. 1988)(citations omitted).

                                              III.

       Black’s Rule 60(b) motion was properly denied. First, the District Court had subject

matter jurisdiction over the civil complaint. See, e.g., 15 U.S.C. §§ 77t(b) and 77t(d); see

also 28 U.S.C. § 1331. Second, Black did not state that the SEC’s alleged misconduct

prevented him from fully and fairly presenting these issues in his case initially. See

. Furthermore, as we have previously stated, a Rule 60(b) motion

cannot serve a substitute for a direct appeal. See 

. Therefore, we

affirm the denial of the Rule 60(b) motion. Appellant’s motion to disqualify the SEC’s brief

and for summary action is denied. Appellee’s motion to supplement the record and to file

a supplemental appendix is denied as moot.

                                               4