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United States District Court 

Northern District of California 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SECURITIES AND EXCHANGE 

COMMISSION, 

Plaintiff, 

v. 

SAN FRANCISCO REGIONAL CENTER 

LLC, et al., 

Defendants. 

Case No. 17-cv-00223-RS 

ORDER DENYING MOTION TO 

ALTER JUDGMENT

I. INTRODUCTION 

 Former relief defendant Berkeley Healthcare Dynamics, LLC moves pursuant to Rule 

60(b)(6) of the Federal Rules of Civil Procedure for relief from the judgment that was entered 

against it over one year ago. BHD contends that a Supreme Court decision issued this past June 

represents a change in law that undermines the basis of one portion of the judgment. Even if BHD 

were to show that the principles protecting the finality of judgments would not necessarily 

preclude relief, its motion must be denied because the Supreme Court case on which it relies does 

not affect the grounds on which the challenged portion of the judgment was based. 

II. BACKGROUND 

As the parties are familiar with the general factual background of this action and its 

procedural history, those matters will not be recounted here. In late 2018, the Securities and 

Exchange Commission moved for partial summary judgment, seeking a finding that BHD, 

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together with defendants San Francisco Regional Center, LLC (“SFRC”), and North America 3PL, 

LLC (“NA3PL”) was liable for “disgorgement” of $23.9 million. The motion was unopposed by 

SFRC and NA3PL, and was granted as to them. 

As to BHD, the disgorgement claim had three elements. First, the SEC sought recovery of 

approximately $2.7 million that went into the purchase of the warehouse owned by BHD. That 

aspect of the SEC’s motion was not challenged, was granted, and is not implicated by the present

motion to alter the judgment. 

The primary dispute at the time of the summary judgment motion was the SEC’s claim to 

approximately $17.4 million in diverted investor funds, which it had not shown were ever in the 

possession of BHD. That issue was resolved in BHD’s favor, and is also not part of the current 

motion under Rule 60(b). 

The remaining element of the SEC’s claim, and the only one at issue now, involved 

additional monies, also in the amount of approximately $2.7 million, that had been transferred into 

BHD from other entities to cover various expenses. The summary judgment order observed in a 

footnote that the Intervenors were arguing some of those monies were appropriately paid from 

NA3PL (the warehouse tenant) to BHD (the landlord), to reimburse it for various expenses it had 

incurred that were actually the tenant’s responsibility under the lease. The footnote concluded, 

however, that there was no factual dispute that those funds “came from and/or were commingled 

with misdirected investor funds, and therefore are subject to disgorgement.”

The order on the SEC’s motion for summary judgment entered in January of 2019. After 

the parties met and conferred regarding certain calculation and procedural details, a final judgment 

was entered against BHD on June 27, 2019. At the same time, a stipulated order issued 

terminating the receivership as to BHD, effective July 1, 2019. 

On June 22, 2020, the United States Supreme Court issued Liu v. Securities & Exch. 

Comm’n, 140 S. Ct 1936 (2020). BHD contends Liu supports a conclusion that most or all of the 

additional $2.7 million it received for “legitimate business expenses” was not legally subject to 

disgorgement. BHD filed this motion within 10 days of the Liu decision. 

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III. LEGAL STANDARD 

Rule 60(b)(6) provides that, “[o]n motion and just terms, the court may relieve a party or 

its legal representative from a final judgment, order, or proceeding for . . . any . . . reason that 

justifies relief.” Fed. R. Civ. P. 60(b)(6). This clause “gives the district court power to vacate 

judgments ‘whenever such action is appropriate to accomplish justice.’” United States v. Sparks, 

685 F.2d 1128, 1130 (9th Cir. 1982) (quoting Klapprott v. United States, 335 U.S. 601, 615 

(1949)). A party movant seeking relief under Rule 60(b)(6), however, “must show ‘“extraordinary 

circumstances” justifying the reopening of a final judgment.’” Jones v. Ryan, 733 F.3d 825, 833 

(9th Cir. 2013) (quoting Gonzalez v. Crosby, 545 U.S. 524, 535 (2005)). 

“[A] change in the controlling law can— but does not always—provide a sufficient basis 

for granting relief under Rule 60(b)(6).” Henson v. Fid. Nat’l Fin., Inc., 943 F.3d 434, 444 (9th 

Cir. 2019). In Henson, the Ninth Circuit concluded that a list of factors previously applied in the 

habeas context are also relevant in ordinary civil cases. Those “Phelps” factors are, (1) the nature 

of the intervening change in the law, (2) the moving party’s exercise of diligence, (3) the parties’

reliance interest in the finality of the case, (4) the length of time between the final judgment and 

the Rule 60(b)(6) motion, (5) the closeness of the relationship between the decision resulting in 

the original judgment and the subsequent decision that represents a change in the law. See Phelps 

v. Alameida, 569 F.3d 1120, 1135–40 (9th Cir. 2009); Henson, 943 F.3d at 446-453.1

IV. DISCUSSION 

In Liu, the Supreme Court reversed a Ninth Circuit decision upholding a disgorgement 

order in an SEC enforcement action that, like this one, involved EB-5 investors. The question Liu 

addressed was “whether § 78u(d)(5) [of the Securities Exchange Act of 1934] authorizes the SEC 

to seek disgorgement beyond a defendant’s net profits from wrongdoing.” 140 S. Ct. at 1942. The 

1

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context. See Henson, 943 F.3d at 453.

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court discussed the history of the term “disgorgement” and common law principles of restitution 

and accountings at length. At all points in the analysis, however, the focus was on profits-based

remedies imposed against wrongdoers. See Liu, 140 S. Ct. at 1942–44 (“Equity courts have 

routinely deprived wrongdoers of their net profits from unlawful activity, even though that remedy 

may have gone by different names . . . . Decisions from this Court confirm that a remedy tethered 

to a wrongdoer’s net unlawful profits, whatever the name, has been a mainstay of equity courts.”). 

The ultimate holding in Liu precludes the SEC from recovering a wrongdoer’s gross 

profits—rather only net profits after deductions for legitimate business expenses may be recovered 

from a defendant. See 140 S. Ct. at 1946. Liu, however, simply has no bearing on the propriety of 

the judgment entered against BHD, which was not a defendant, was not accused of wrongdoing, 

and which was not required to disgorge “profits,” gross or net.

The SEC’s brief in support of its motion for summary judgment did conflate the issues to 

some degree, particularly because it was seeking to impose a joint and several obligation on relief 

defendant BHD and ordinary defendants SFRC and NA3PL. Nevertheless, the SEC plainly 

distinguished the basis of its claim as to BHD from the claims against SFRC and NA3PL. The 

SEC first recited the legal principles relating to ordinary defendants. See Dkt. No. 495 at p. 9 

(“Once the district court has found federal securities law violations, it has broad equitable power 

to fashion appropriate remedies, including ordering that culpable defendants disgorge their 

profits.” SEC v. Razmilovic, 738 F.3d 14, 31 (2d Cir. 2013).”). The SEC then went on to invoke 

authorities relevant to its claim against BHD. 

A relief or nominal defendant “is a person who holds the subject 

matter of the litigation in a subordinate or possessory capacity as to 

which there is no dispute.” SEC v. Colello, 139 F.3d 674, 676 (9th 

Cir. 1998) (quotations and citation omitted). To order disgorgement 

against a relief defendant, the “court need find only that [the relief 

defendant] has no right to retain the funds illegally taken from the 

victims.” Id. at 679. Disgorgement is appropriate against a relief 

defendant where the SEC demonstrates that (1) the relief defendant 

received ill-gotten funds, and (2) it does not have a legitimate claim 

to those funds. E.g., SEC v. Ross, 504 F.3d 1130, 1141 (9th Cir. 

2007); SEC v. Cavanagh, 155 F.3d at 136 (citing SEC v. Colello, 

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139 F.3d at 676-77). 

Dkt. 495 at p. 11. 

 The Intervenors, who had not then yet regained control of BHD, filed an opposition that 

also conflated the issues to some degree, which was understandable given how the SEC presented 

the motion. Nevertheless, the Intervenors recognized that the SEC’s claim against BHD stood on a 

different footing than the claims against SFRC and NA3PL. The Intervenors expressly 

acknowledged the case law cited by the SEC applicable to relief defendants, and argued that it 

supported their own argument that “disgorgement” was “limited to $2.7 million used in the 

acquisition of the warehouse, and, arguably, the additional $2.7 million lawfully used to develop a 

state-of-the-art warehouse facility for use as a Customs Examination Station.” Dkt. No. 515 at 

p.17. 

Contrary to BHD’s current assertions, the Intervenors did not argue that the additional $2.7 

million represented gross profits from which legitimate expenses should be deducted before a 

disgorgement amount could be awarded. By the same token, the judgment was not based on any 

pre-Liu authorities that might have permitted an award of gross profits without such deductions. 

Rather, the dispute regarding the additional $2.7 million at the time of the summary judgment was 

only whether the SEC met the standard for recovering monies in the hands of a relief defendant by 

adequately showing BHD did not have “a legitimate claim to those funds.” See Intervenor’s 

opposition, Dkt. No. 515 at pp. 20-22 (arguing that the use of the funds was consistent with the 

disclosures to investors). 

 The order granting summary judgment expressly cited the same authorities relevant to 

recovery against a relief defendant. Neither the disgorgement of the $2.7 million used to acquire 

the warehouse (which Intervenors did not oppose) nor the disgorgement of the additional $2.7 

million (which the Intervenors conceded was “arguably” appropriate) represented recovery from a 

wrongdoer of profits gained from an unlawful activity. 

 It may be that BHD believes the prior order legally and/or factually erred in rejecting the 

Intervenors’ argument that BHD had a legitimate claim to at least some portion of the additional 

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$2.7 million, given the representations to investors, the terms of the lease, and all of the 

circumstances. The time for challenging any such error, however, has long since expired. The Liu 

decision addresses recovery of profits earned by wrongdoers—a theory that was never applied to 

BHD here. As such, it does not serve as a relevant change in law that would support relief under 

Rule 60(b)(6).2

V. CONCLUSION 

BHD’s motion for relief from the judgment is denied. In light of this disposition, BHD’s 

pending motion for a temporary restraining order is denied as moot. 

IT IS SO ORDERED. 

Dated: August 7, 2020 

______________________________________ 

RICHARD SEEBORG 

United States District Judge 

2

 Because this litigation is ongoing and the funds that BHD disgorged pursuant to the judgment 

have not yet been distributed, BHD is not wrong to argue that the interest in finality of judgments 

is less pronounced here than in many cases. BHD also acted with appropriate diligence. As Liu is 

not a relevant change in law, however, it is of no consequence that those Phelps factors might 

favor BHD. 

______________________________________

RICHARD SEEBORG

United States District Judge

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