Court Opinion

ID: 4533204
Source: CourtListenerOpinion
Date Created: 2020-05-11 16:00:27.612135+00
Date Added: 2024-06-11T12:33:24.556960
License: Public Domain

FILED
                                                                 United States Court of Appeals
                         UNITED STATES COURT OF APPEALS                  Tenth Circuit

                               FOR THE TENTH CIRCUIT                    May 11, 2020
                           _________________________________
                                                                    Christopher M. Wolpert
                                                                        Clerk of Court
COMMODITY FUTURES TRADING
COMMISSION; STATE OF UTAH
DIVISION OF SECURITIES, through
Attorney General, Sean D. Reyes,

       Plaintiffs - Appellees,

v.                                                         No. 19-4100
                                                (D.C. No. 2:18-cv-00892-TC-DBP)
RUST RARE COIN INC., a Utah                                  (D. Utah)
corporation; GAYLEN DEAN RUST, an
individual; DENISE GUNDERSON
RUST, an individual; JOSHUA DANIEL
RUST, an individual;

       Defendants,

and

ALEESHA RUST FRANKLIN,
an individual, R LEGACY RACING INC.,
a Utah corporation, R LEGACY
ENTERTAINMENT LLC, a Utah limited
liability company, and R LEGACY
INVESTMENTS LLC, a Utah limited
liability company,

       Relief Defendants.

------------------------------

ANDREW JOHNSON; TALLY
JOHNSON,

       Movants - Appellants,

and
 JONATHAN O. HAFEN,

       Receiver - Appellee.
                       _________________________________

                           ORDER AND JUDGMENT*
                       _________________________________

Before BRISCOE, LUCERO, and HARTZ, Circuit Judges.
                   _________________________________

      Andrew Johnson and Tally Johnson (the “Johnsons”), proceeding pro se,

moved under Federal Rule of Civil Procedure 24(a) to intervene as of right in an

enforcement action filed by the federal Commodity Futures Trading Commission

(“CFTC”) and the State of Utah Division of Securities (“UDS”). The district court

denied the Johnsons’ motion, holding they failed to show that their interest in the

property that is the subject of the enforcement action will be impaired or impeded

absent intervention. Exercising jurisdiction under 28 U.S.C. § 1291,1 we affirm.

      *
        After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      1
        “An order denying intervention is final and subject to immediate review if it
prevents the applicant from becoming a party to an action.” Hutchinson v. Pfeil,
211 F.3d 515, 518 (10th Cir. 2000) (quotation omitted).
                                           2
                                             I

       In November 2018, the CFTC and the UDS brought an enforcement action

under the Commodities Exchange Act (“CEA”) and the Utah Uniform Securities Act

against individual defendants and a business, Rust Rare Coin, Inc. The amended

complaint alleges that the defendants operated a Ponzi scheme by which they

fraudulently solicited money from investors to buy, pool, and trade physical silver

but instead used the money to pay earlier investors, fund business ventures, and pay

personal expenses. The district court entered an ex parte order freezing Rust Rare

Coin’s assets and appointed a Receiver to identify, marshal, and preserve the assets

in the receivership estate.

       Shortly before the enforcement action commenced, the Johnsons agreed to

purchase gold coins from Rust Rare Coin. After they wired over $96,000 to the

business’s bank account, the district court froze Rust Rare Coin’s assets.

Consequently, the transaction was not completed.

       Under Federal Rule of Civil Procedure 24(a), the Johnsons moved to intervene

as of right in the enforcement action. Denying the motion, the district court held that

the Johnsons failed to demonstrate that the disposition of the enforcement action

may, as a practical matter, impair their ability to protect their interest in the property

that is the subject of the action. Citing Commodity Futures Trading Commission v.

Chilcott Portfolio Management, Inc., 725 F.2d 584 (10th Cir. 1984), the court

explained that “[i]n an enforcement action such as this, where an applicant for

intervention seeks to resolve a claim against a receivership estate, the applicant’s

                                             3
interest is protected when it has the opportunity to bring the claim without

intervening.”

         The court concluded the Johnsons had such an opportunity. Pursuant to the

claim resolution procedure implemented in this case, the Receiver had filed a motion

to liquidate Rust Rare Coin’s assets. The court explained that the procedure allowed

claimants to file objections to the motion with the Receiver and seek discovery to

support the objections.2 The Receiver would then file the objections with the district

court, and the court would conduct a hearing and issue a decision. This process

protected the Johnsons’ interests in the absence of intervention because it allowed

them to present their claim to the gold coins or the wire-transferred funds “as if they

were full parties” to the enforcement action. Accordingly, the district court denied

the Johnsons’ motion to intervene.

                                            II

         We review de novo the district court’s denial of the Johnsons’ motion to

intervene under Rule 24(a). See Kane Cty., Utah v. United States, 928 F.3d 877, 889

(10th Cir. 2019). Because the Johnsons are proceeding pro se on appeal, we construe

their briefs liberally, but we do not act as their advocate. See Cummings v. Evans,

161 F.3d 610, 613 (10th Cir. 1998); Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.

1991).

         2
        The Johnsons also sought to dismiss the enforcement action. The Receiver
informed the district court that he had construed the Johnsons’ motion to dismiss as
an objection, and the court accepted this construction.
                                            4
       Under Rule 24, “a nonparty seeking to intervene as of right must establish (1)

timeliness, (2) an interest relating to the property or transaction that is the subject of

the action, (3) the potential impairment of that interest, and (4) inadequate

representation by existing parties.” Kane Cty., 928 F.3d at 889. The district court

denied the Johnsons’ motion to intervene based on their failure to satisfy the third

requirement—potential impairment of their interest—in light of the availability of the

claim resolution procedure established in the enforcement action.

       On appeal, the Johnsons fail to distinguish their circumstances from those we

considered in Chilcott. They contend that they were not investors in defendants’

alleged Ponzi scheme but were merely customers of Rust Rare Coin seeking to

purchase gold coins. But in Chilcott, a similar case involving a CFTC enforcement

action and claim resolution procedure, we rejected a similar argument by a would-be

intervenor that the defendants held his funds as a “mere bailee.” 725 F.2d at 585-86.

We affirmed the district court’s denial of the motion to intervene, holding that the

claims procedure set up by the court-appointed receiver would protect the movant’s

interest in the assets controlled by the receiver. See id. at 587. The Johnsons

advance no argument that the claim resolution procedure set up by the district court

in this case is inadequate to protect their claims because they are merely customers of

Rust Rare Coin.

       The Johnsons also assert that their property (presumably the gold coins they

attempted to purchase) is not fungible and is not part of the holdings of Rust Rare

Coin. To the extent they argue that their claim is thus entitled to priority, or that the

                                             5
claim resolution procedure does not “fit” their circumstances, we rejected similar

contentions in Chilcott. See id. at 586 (holding movant was not foreclosed from

asserting his priority claim pursuant to the claims procedure); id. at 587 (rejecting

contention that the claims procedure was inadequate for movant’s purposes). And

again, the Johnsons advance no argument that the claim resolution procedure is

inadequate to resolve their contentions relating to the fungibility of their property.

      Additionally, the Johnsons argue that their interest in their property is

impaired because the claim resolution procedure has delayed them from obtaining

their property. Again in Chilcott, we rejected substantially the same argument that

“undue delay” renders a claim resolution procedure inadequate. Id. at 587.

      Finally, the Johnsons contend that the district court lacked jurisdiction to

address the CFTC’s and the UDS’s enforcement action. Specifically, they argue that

silver is not a “commodity” under the CEA, and the United States District Courts are

unconstitutional “legislative courts.” They cite no authorities supporting these

arguments, and they again advance no argument that the claim resolution procedure

is inadequate to address them.

                                           III

      Ultimately, the Johnsons fail to demonstrate that any aspect of their claim

involving the gold coins or the wire-transferred funds cannot be asserted and resolved

without impairment of their interest through the claim resolution procedure

                                            6
established by the district court in the enforcement action.3 We therefore affirm the

district court’s denial of their motion to intervene as of right under Rule 24(a). We

also deny the Johnsons’ motion to reconsider our order precluding them from filing

an untimely second reply brief.

                                           Entered for the Court

                                           Carlos F. Lucero
                                           Circuit Judge

      3
        The Johnsons devote a large portion of their opening brief to arguing the
merits of their motion to dismiss. As noted, the Receiver is treating their motion to
dismiss as an objection pursuant to the claim resolution procedure.

                                           7