Opinion ID: 802495
Heading Depth: 2
Heading Rank: 5

Heading: Second Motion to Set Aside: Commission Review

Text: Next, Rapoport filed a motion with the SEC to set aside the Default Order, which it denied on January 2, 2011. The Commission provided a condensed version of the facts alleged in the OIP that were included in the Default Order, and recited the events culminating in the entry of the Default Order and the law judge’s refusal to set aside the Order. The Commission examined Rapoport’s asserted reasons for failing to defend the proceeding and found that those reasons did not support setting aside the Default Order. The Commission also found that Rapoport did not file his Motion to Set Aside in a reasonable amount of time. The Commission looked to the date of service of the OIP—January 8, 2009—as the first date Rapoport could have been put on notice that default was a 9 possibility. The Commission recognized that Rapoport actually went into default on March 2, 2009, when he failed to file his answer to the Division’s default motion. The Commission then looked to the date the ALJ entered the Default Order—July 31, 2009—to determine that Rapoport waited almost five months to file the motion. The Commission also mentioned the date that the customs officer served Rapoport personally with the Default Order. The Commission recognized that the text of Rule 155(b) requires a party moving to set aside a default order to state his proposed defenses. It reasoned, however, that “[i]f Rapoport had established that his reasons for the failure to defend the proceeding supported setting aside the Default order, and that Motion to Set Aside I was filed within a reasonable time, then we would consider whether his proposed defenses had potential merit.” But because Rapoport did not file his motion within a reasonable time and had offered no good reason for failing to defend the proceedings, the Commission decided that “[e]valuating the merits of his defenses would in effect grant him the hearing that he chose to forego by failing to defend the proceeding.” Instead, the Commission opined, respondents should be motivated to participate in proceedings knowing that a default order can be entered on the basis of allegations in the OIP. The Commission concluded that it was “not unjust” for the ALJ to issue the Default Order or to impose the sanctions. Rapoport now petitions this Court to review the Commission’s application of Rule 155(b), as well as the Commission’s imposition of sanctions on him. 10