ABA Banking Journal - November/December 2017 - 16

> LEGAL BRIEFS

Courts Stay Strong on
Statute of Limitations
BY DAWN CAUSEY, THOMAS PINDER
AND ANDREW DOERSAM

THE LAWS SURROUNDING the federal statute of limitations have been well
established for years. But recently, the Securities Exchange Commission and the
Consumer Financial Protection Bureau have attempted to go back on years of
legal jurisprudence and upend those laws, prompting pushback from the courts.
It's been common practice for the SEC
to pursue civil monetary penalties and
disgorgement of unlawful gains from
those alleged to have violated federal
securities laws. In 2013, the Supreme
Court held in Gabelli v. SEC that civil
monetary penalties are subject to a
five-year statute of limitations. The
SEC argued that the five-year period
is triggered on the date that the SEC
discovered the wrongdoing, but the
court ruled that the five-year period
is triggered when the defendant's
alleged wrongful conduct occurred,
shooting down the SEC's notion that
an indefinite time period can elapse
before the five-year period is triggered.
Instead of accepting the court's
decision and adjusting its conduct
accordingly, the SEC revisited the
issue this year in Kokesh v. SEC,
claiming this time that the statute of
limitations does not apply to actions
for disgorgement. In this case, the
Supreme Court once again ruled that
the SEC's disgorgement is limited to
the five-year statute of limitations under
28 U.S.C. § 2462.
In a unanimous decision written by
Justice Sonia Sotomayor, the court
asserted that statute of limitations
is "vital to the welfare of a society"
and that even "wrongdoers are
entitled to assume that their sins
may be forgotten." By holding that
16

ABA BANKING JOURNAL | NOVEMBER/DECEMBER 2017

In a unanimous decision
written by Justice Sonia
Sotomayor, the court
asserted that statute of
limitations is "vital to the
welfare of a society."
the five-year period applies to claims
for disgorgement, the court lifted the
weight off defendants' shoulders by
providing them certainty as to when the
SEC can push to obtain civil penalties.
Additionally, the Kokesh case was a
reminder to the SEC that it cannot
simply ignore Gabelli by seeking
disgorgement in circumstances where
the SEC would have pushed for a
monetary penalty.

established statute of limitations,
arguing unsuccessfully in the PHH
case that no statute of limitations
applies to claims it brings in
administrative proceedings, except
under Section 2462.
Since then, the CFPB has not given up
its quest for a statute of limitations-free
utopia for administrative proceedings.
The agency sent a letter to the D.C.
Circuit Court citing the Kokesh
decision and proposing that Section
2462 provides the limitations period
for CFPB disgorgement awards. But
by the CFPB's logic, the Real Estate
Settlement Procedures Act's statute
of limitations only applies to actions
brought in court, which means that
its administrative proceeding is not
an action.
In effect, the CFPB is embracing a
statute of limitations for disgorgement,
but not for administrative actions. PHH
said it best in its reply to the CFPB's
letter that the agency's "freelancing
merely underscores that [CFPB
Director Richard Cordray] answers to
no one but himself."

Sotomoyor also clarified in a footnote
that the high court was not ruling
on whether courts possess the
authority to order disgorgement in
SEC enforcement proceedings-
thus casting doubt on whether
court-ordered disgorgements in SEC
enforcement actions should even
be permitted.

At the end of the day, the SEC and
CFPB are attempting to upset settled
law on the statute of limitations despite
repeated reprimands from the courts.
Hopefully the Kokesh decision will be
the last time they decide to re-tread the
same ground.

The CFPB has been equally as
obstinate in its push to upend the

DAWN CAUSEY is general counsel at ABA,
where THOMAS PINDER is SVP for litigation and
ANDREW DOERSAM is a paralegal.



Table of Contents for the Digital Edition of ABA Banking Journal - November/December 2017

Chairman’s View
Upfront
Legal Briefs
Economic Outlook
Power Up Profile
Pitching In
Choices and Options Down on the Farm
Eager or Not, Every Board Needs an M&A Strategy
Adapting to Survive
More Than Just a Drink
Operations
Payments
Small Business Lending
Human Resources
ABA Compliance Center Inbox
From the States
Corporate Social Responsibility
Index of Advertisers
From the Vault
ABA Banking Journal - November/December 2017 - Intro
ABA Banking Journal - November/December 2017 - ebelly1
ABA Banking Journal - November/December 2017 - ebelly2
ABA Banking Journal - November/December 2017 - cover1
ABA Banking Journal - November/December 2017 - cover2
ABA Banking Journal - November/December 2017 - 3
ABA Banking Journal - November/December 2017 - 4
ABA Banking Journal - November/December 2017 - 5
ABA Banking Journal - November/December 2017 - 6
ABA Banking Journal - November/December 2017 - 7
ABA Banking Journal - November/December 2017 - Chairman’s View
ABA Banking Journal - November/December 2017 - 9
ABA Banking Journal - November/December 2017 - Upfront
ABA Banking Journal - November/December 2017 - 11
ABA Banking Journal - November/December 2017 - 12
ABA Banking Journal - November/December 2017 - 13
ABA Banking Journal - November/December 2017 - 14
ABA Banking Journal - November/December 2017 - 15
ABA Banking Journal - November/December 2017 - Legal Briefs
ABA Banking Journal - November/December 2017 - 17
ABA Banking Journal - November/December 2017 - Economic Outlook
ABA Banking Journal - November/December 2017 - Power Up Profile
ABA Banking Journal - November/December 2017 - Pitching In
ABA Banking Journal - November/December 2017 - 21
ABA Banking Journal - November/December 2017 - 22
ABA Banking Journal - November/December 2017 - 23
ABA Banking Journal - November/December 2017 - 24
ABA Banking Journal - November/December 2017 - 25
ABA Banking Journal - November/December 2017 - Choices and Options Down on the Farm
ABA Banking Journal - November/December 2017 - 27
ABA Banking Journal - November/December 2017 - Eager or Not, Every Board Needs an M&A Strategy
ABA Banking Journal - November/December 2017 - 29
ABA Banking Journal - November/December 2017 - Adapting to Survive
ABA Banking Journal - November/December 2017 - 31
ABA Banking Journal - November/December 2017 - 32
ABA Banking Journal - November/December 2017 - 33
ABA Banking Journal - November/December 2017 - More Than Just a Drink
ABA Banking Journal - November/December 2017 - 35
ABA Banking Journal - November/December 2017 - Operations
ABA Banking Journal - November/December 2017 - 37
ABA Banking Journal - November/December 2017 - Payments
ABA Banking Journal - November/December 2017 - 39
ABA Banking Journal - November/December 2017 - Small Business Lending
ABA Banking Journal - November/December 2017 - 41
ABA Banking Journal - November/December 2017 - Human Resources
ABA Banking Journal - November/December 2017 - 43
ABA Banking Journal - November/December 2017 - 44
ABA Banking Journal - November/December 2017 - ABA Compliance Center Inbox
ABA Banking Journal - November/December 2017 - From the States
ABA Banking Journal - November/December 2017 - 47
ABA Banking Journal - November/December 2017 - Corporate Social Responsibility
ABA Banking Journal - November/December 2017 - Index of Advertisers
ABA Banking Journal - November/December 2017 - From the Vault
ABA Banking Journal - November/December 2017 - cover3
ABA Banking Journal - November/December 2017 - cover4
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