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SEC v. GELLAS

April 17, 1998

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, against STEPHEN D. GELLAS, DIERDRE C. STEINHAUS and ROBERT E. AINBINDER, Defendants.

William C. Conner, Senior United States District Judge.


The opinion of the court was delivered by: CONNER

OPINION AND ORDER

Conner, Senior D.J.:

 Before the Court is defendant Robert Ainbinder's motion to vacate a default judgment entered against him by plaintiff Securities and Exchange Commission (the "SEC"). For the reasons discussed below, the motion is denied.

 BACKGROUND

 On September 20, 1991, the SEC commenced the above-captioned action against Ainbinder and his co-defendants. In its complaint, the SEC alleged, inter alia, that Ainbinder violated certain federal securities laws, rules, and regulations by fraudulently liquidating stocks through a clearing firm and wrongfully obtaining extensions of credit.

 On September 23, 1992, Ainbinder and the SEC executed a written Consent Agreement, agreeing to entry of a permanent injunction against Ainbinder without his admission or denial of the SEC's allegations. On February 10, 1993, this Court entered a Final Judgment of Permanent Injunction that incorporated the terms of the Consent Agreement (the "Consent Judgment"). The Consent Judgment permanently enjoined Ainbinder from violating certain securities laws, rules, and regulations. It further provided that "this Court will retain jurisdiction for all purposes including implementation and enforcement" of the Consent Judgment.

 Approximately one month after entry of the Consent Judgment, the SEC commenced an administrative proceeding against Ainbinder by issuing an Order Instituting Proceedings Pursuant to Sections 15(b) and 19(h) of the Securities Exchange Act of 1934 (the "OIP"). The purpose of this proceeding was to determine whether any disciplinary sanctions should be imposed on Ainbinder based on entry of the permanent injunction. See 15 U.S.C. § 78o(b)(4)(C), (b)(6)(A)(iii). The OIP required Ainbinder to file an answer within fifteen days and stated that failure to answer would result in default, and would allow the proceeding to be determined against him with the SEC's allegations deemed true.

 Ainbinder maintains that his attorney at the time, Herbert Jacoby, told him that an answer had been filed. Apparently, this proved to be untrue; the SEC did not receive an answer or other response to the OIP. Accordingly, on June 1, 1993, the SEC issued a Default Order barring Ainbinder from association with any broker, dealer, investment company, investment adviser or municipal securities dealer.

 Four years later, on March 19, 1997, Ainbinder filed a pro se motion with this Court seeking to vacate the Consent Judgment and, apparently, the Default Order. Ainbinder argued that he had received ineffective assistance from Paul Chernis, the attorney who advised him to enter the Consent Agreement. He maintained that he would not have entered into the consent arrangement if he had been informed that the Consent Judgment could impair his ability to continue working in the securities industry. Subsequently, after retaining his current attorney, Ainbinder withdrew that motion.

 Instead, Ainbinder petitioned the SEC to set aside the Default Order on the ground that he had received ineffective assistance from Herbert Jacoby, the attorney who apparently failed to file an answer to the OIP. On October 1, 1997, the SEC issued an order denying the petition. Ainbinder did not appeal this denial to the Second Circuit Court of Appeals pursuant to Section 25(a)(1) of the Exchange Act, 15 U.S.C. § 78y(a)(1).

 Instead, on February 17, 1998, Ainbinder filed the instant motion seeking to vacate the SEC's Default Order pursuant to Rules 60(b)(4) and 55(c) of the Federal Rules of Civil Procedure. He contends that the Consent Agreement, as incorporated by the Judgment, barred the SEC from instituting the administrative proceeding that precipitated the Default Order. Accordingly, Ainbinder asserts that the Default Order is void and must be vacated pursuant to Rule 60(b)(4).

 DISCUSSION

 Rule 60(b)(4) provides that a court may relieve a party from a final order if that order is void. *fn1" However, except in limited circumstances not present here, a Rule 60(b) motion must be brought in the court that rendered the disputed order. See 12 Moore's Federal Practice § 60.60[1], at 60-190 to 60-191 (3d ed. 1997); 11 Wright, Miller & Kane, Federal Practice & Procedure § 2865, at 377 (2d ed. 1995); accord Bankers Mortgage Co. v. United States, 423 F.2d 73, 78 & n.9 (5th Cir. 1970); Taft v. Donellan Jerome, Inc., 407 F.2d 807, 809 (7th Cir. 1969); Teltronics Servs., Inc. v. Anaconda-Ericsson, Inc., 587 F. Supp. 724, 729 (E.D.N.Y. 1984), aff'd, 762 F.2d 185 (2d Cir. 1985); cf. United States ex rel. Aigner v. Shaughnessy, 175 F.2d 211 (2d Cir. 1949) (refusing to consider transforming improper collateral attack on denaturalization decree, made by way of habeas corpus petition, into Rule 60(b) motion because it was not filed in the court that rendered the original judgment). In the instant case, the Default Order was entered not by this Court, but by the SEC.

 In addition, Rule 60(b) appears not to apply to final orders of administrative agencies such as the SEC. See Wapnick v. United States, 1996 U.S. Dist. LEXIS 12002, No. 95-4844, 1996 WL 636106 (E.D.N.Y. July 31, 1996) ("By its very terms, [Rule 60(b)] applies to judgments and orders in civil cases before federal district courts. . . . It does not apply to administrative actions taken by agencies of the federal government."), aff'd, 112 F.3d 74 (2d Cir. 1997). At the very least, Rule 60(b) does not apply to administrative determinations where, as here, Congress has provided a specific mechanism for review of such actions. See 15 U.S.C. § 78y(a)(1) (final orders of the SEC may be appealed to the appropriate federal court of appeals within 60 days of the order); see also ...


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