United States District Court, D. Utah
MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS'
MOTION TO REINSTATE TRIAL BY JURY
Nuffer, United States District Judge.
January 25, 2016, Defendants filed a Jury
Demand. In response, the United States filed a
Motion to Strike Jury Demand. Defendants responded in
opposition. The United States replied. On April 27,
2016, Magistrate Judge Wells heard from counsel and took
under advisement the Motion to Strike Jury
Demand. On May 2, 2016, Magistrate Judge Wells
granted the Motion to Strike Jury Demand stating that the
relief the United States is seeking is “equitable in
nature, ” therefore the “Seventh Amendment right
to a jury trial is not implicated.” However,
Magistrate Judge Wells stated that “the court will
allow Defendants to make a motion for a jury trial if
penalties become part of this case.”
moved to reinstate a trial by jury on February 9,
2018. The United States opposes this
Motion. The parties' memoranda have been
carefully reviewed. For the reasons set forth below,
Defendants' Motion is DENIED.
Motion is untimely. On April 6, 2016, a 10-day bench trial
was set for April 16, 2018. The amended scheduling order
filed on July 6, 2017 set the motions deadline as November
17, 2017. After input of counsel, on January 25,
2018, the schedule was amended only to split the dates of
trial and move the first day of trial up two weeks to April
2, 2018. Split trial dates, not in consecutive
order, make a jury trial difficult.
Motion relies heavily on Kokesh v.
S.E.C. to argue that Defendants are entitled to
a trial by jury. Kokesh was decided in June
2017, over five months before the motions cut-off date.
Defendants had ample time to file a timely motion. But
Defendants did not file the Motion until February 9, 2018.
The Motion was filed over two months after the motions cutoff
date; two weeks after the amended scheduling order
rescheduling and splitting the trial dates; and less than two
months before trial begins on April 2nd. The
untimeliness of the Motion by itself warrants denial;
however, other arguments will be addressed.
IS EQUITABLE AND NOT A SUBJECT FOR JURY DECISION
United States requests “disgorgement, in the nature of
restitution, of Defendants' gross receipts from their
fraudulent conduct.” Defendants argue that this
type of disgorgement is a penalty and therefore Defendants
are entitled to a jury. Contrary to Defendants' argument,
disgorgement is equitable and is not tried by a jury.
test for determining whether a party has a right to a trial
by jury is whether the “action involves rights and
remedies of the sort traditionally enforced in action at law,
rather than in action in equity or
admiralty”. The Ninth Circuit, in Fifty-Six
Hope Road Music, Ltd. v. A.V.E.L.A., Inc., stated
“[a] claim for disgorgement of profits…is
equitable, not legal.” “[T]he current law
recognizes that actions for disgorgement of improper profits
are equitable in nature.” Also, the Second Circuit
found that “[a] historic equitable remedy was the grant
of restitution ‘by which defendant is made to disgorge
ill-gotten gains or to restore the status quo, or to
accomplish both objectives.'” The Second
Circuit held there is no right to jury trial in a case
seeking “disgorgement of profits in an action brought
by the SEC to enjoin violations of the securities laws
[because]…the court is not awarding damages to which
plaintiff is legally entitled but is
exercising…discretion to prevent unjust
enrichment.” District courts hold bench trials where
the government seeks injunctive relief pursuant to 26 U.S.C.
§7408 and injunctive relief and disgorgement of profits
pursuant to 26 U.S.C. §7402.
United States is seeking an order requiring all Defendants to
disgorge “the gross receipts that they received from
any source as a result of the solar energy
scheme…” The United States contends that the
disgorgement they are requesting will compensate the United
States; “bring the parties back to their original
starting point[;] and ensure that wrongdoers are not enriched
by their ill-gotten gains…” This classic
disgorgement is an equitable remedy which does not entitle
Defendants to a jury trial.
IS INCIDENTAL TO INJUNCTIVE RELIEF
Supreme Court has held that a monetary award may be an
equitable remedy where (1) it is “restitutionary, such
as in ‘action[s] for disgorgement of improper
profits'” or (2) it is “incidental to or
intertwined with injunctive relief.” The relief
that the United States is seeking meets both of these tests.
“Restitution is limited to ‘restoring the status
quo and ordering the return of that which rightfully belongs
to the [victim].” As stated above, the United States
seeks disgorgement in order “to compensate the U.S.
Treasury for the millions of dollars it has lost due to
Defendants' unlawful conduct that resulted in their
unjust enrichment.” Secondly, even if disgorgement
under 26 U.S.C. § 7402 were considered a legal remedy, a
jury trial is not required if the monetary award is
“incidental to or intertwined with injunctive
relief.” Here, “the primary relief the
United States seeks is a civil injunction, an equitable
remedy.” The disgorgement sought here is
incidental to injunctive relief and therefore, a jury trial
is not required.
DOES NOT APPLY
v. SEC decided whether disgorgement is a penalty for the
purpose of applying a statute of limitation. Kokesh
is a statutory analysis of terms. The Supreme Court does
not state in Kokesh that its ruling determines that
disgorgement is a penalty in all contexts. And,
Kokesh certainly did not discuss or ...