Court Opinion

ID: 2723964
Source: CourtListenerOpinion
Date Created: 2014-09-05 15:00:42.41244+00
Date Added: 2024-06-11T10:03:02.985590
License: Public Domain

Case: 14-10363     Date Filed: 09/05/2014   Page: 1 of 8

                                                         [DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                        ________________________

                              No. 14-10363
                          Non-Argument Calendar
                        ________________________

                   D.C. Docket No. 1:13-cv-22600-CMA

SECURITIES AND EXCHANGE COMMISSION,

                                                                Plaintiff-Appellee,

                                   versus

CITY OF MIAMI,

                                                                       Defendant,

MICHAEL BOUDREAUX,

                                                          Defendant-Appellant.

                        ________________________

                 Appeal from the United States District Court
                     for the Southern District of Florida
                       ________________________

                            (September 5, 2014)
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Before PRYOR, MARTIN and KRAVITCH, Circuit Judges.

PER CURIAM:

      In this interlocutory appeal, Michael Boudreaux, former Budget Director for

the City of Miami (City), appeals the district court’s denial of his motion to dismiss

the Securities and Exchange Commission’s (SEC) securities fraud suit against him

based on qualified immunity. For the reasons that follow, we affirm.

                                          I.

      The SEC instituted a civil enforcement action alleging that the City and

Boudreaux (collectively “the defendants”) committed securities fraud, and that the

City violated a 2003 SEC cease-and-desist order, imposed after the City violated

the anti-fraud provisions of the federal securities laws in connection with the

issuance of municipal bonds in 1995. As relief, the SEC requested that the district

court: (1) grant injunctive relief that would permanently enjoin the defendants from

further violations of federal securities law; (2) order the City to comply with the

2003 cease-and-desist order; and (3) impose civil monetary penalties on the

defendants.

      The crux of the SEC’s allegations concerned alleged material

misrepresentations and omissions reflected in 2007 and 2008 fiscal year-end City

financial documents that were incorporated by reference into the City’s bond

offerings in 2009. Boudreaux, who was the City’s Budget Director during the

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relevant time period until his termination in March 2010, was responsible for

preparing the overall capital budgets, monitoring fiscal expenditures, and providing

the data used in the City’s Comprehensive Annual Financial Reports (CAFRs). In

its complaint, the SEC alleged that Boudreaux: (1) engineered a series of improper

monetary transfers to the City’s general revenue fund in a bid to mask the City’s

deteriorating financial condition; and (2) furnished materially false and misleading

information, including budget information that he knew would be relied upon in

preparing the CAFRs, to city officials, bondholders, and ratings agencies. The

SEC asserted that Boudreaux devised the transfers for the purpose of helping the

City obtain positive bond ratings in furtherance of a scheme to defraud bond

investors.

      The City moved to dismiss the SEC’s complaint, in pertinent part, because

the complaint failed to plead any false or misleading statements or demonstrate

materiality as to any of the challenged statements. Boudreaux adopted the

arguments in the City’s motion to dismiss, and also separately moved to dismiss

the claims against him based on the doctrine of qualified immunity because he was

acting within the scope of his official responsibilities as City Budget Director when

the alleged misconduct occurred. The district court denied the City’s motion to

dismiss. Additionally, the court denied Boudreaux’s separate motion, reasoning

that the doctrine of qualified immunity did not bar the SEC’s suit seeking civil

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penalties against Boudreaux based on alleged securities fraud. Boudreaux then

filed the instant interlocutory appeal.

                                          II.

      “We review de novo a district court’s decision to grant or deny the defense

of qualified immunity on a motion to dismiss, accepting the factual allegations in

the complaint as true and drawing all reasonable inferences in the plaintiff’s

favor.” Dalrymple v. Reno, 334 F.3d 991, 994 (11th Cir. 2003).

      Qualified immunity is an immunity from suit that extends to government

officials performing discretionary functions. See Harlow v. Fitzgerald, 457 U.S.
800, 817-18 (1982). Under this common-law defense, public officials sued in their

individual capacities are entitled to qualified immunity when their actions do not

violate “clearly established statutory or constitutional rights.” Id. at 818.

“Qualified immunity balances two important interests—the need to hold public

officials accountable when they exercise power irresponsibly and the need to shield

officials from harassment, distraction, and liability when they perform their duties

reasonably.” Pearson v. Callahan, 555 U.S. 223, 231 (2009).

      The SEC is an agency of the United States created by Congress to enforce

federal securities laws. 15 U.S.C. §§ 77t(a)-(d), 78u(a)-(d). Congress has

authorized the SEC to bring civil law suits for violations of the securities laws and

to seek, as relevant here, injunctions against future violations and civil monetary

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penalties. Id. §§ 77t(b)-(d), 78u(d). “In suing to enforce the securities laws, the

SEC is vindicating public rights and furthering public interests.” SEC v. Calvo,

378 F.3d 1211, 1218 (11th Cir. 2004). As such, an important distinction exists

between a private enforcement action and an SEC enforcement action: In a private

enforcement action under section 10(b) of the Securities Exchange Act of 1934, 15

U.S.C. § 78j(b) (the Act) and Rule 10b-5 promulgated thereunder, the plaintiff

must show “justifiable reliance” on the material misstatement or omission and that

the misstatement caused the plaintiff’s damages. See Bruschi v. Brown, 876 F.2d
1526, 1529 (11th Cir. 1989). “Justifiable reliance,” however, is not an element of

an SEC enforcement action because Congress designated the SEC as the primary

enforcer of the securities laws, and a private plaintiff’s “reliance” does not bear on

the determination of whether the securities laws were violated, only whether that

private plaintiff may recover damages. SEC v. Morgan Keegan & Co., Inc., 678
F.3d 1233, 1244 (11th Cir. 2012).

                                          III.

      On appeal, Boudreaux asserts that as a public official sued in his individual

capacity for his official conduct as the City’s Budget Director, he is entitled to the

defense of qualified immunity against the SEC’s suit seeking civil penalties.

Neither this court nor any of our sister circuits has addressed the issue of whether

municipal officials are entitled to qualified immunity in a SEC enforcement action

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under the federal securities laws. As a starting point, we note that the anti-fraud

provisions of the Act contain no express language granting municipal officials

immunity, but rather each provision broadly prohibits “any person” from engaging

in securities fraud. See 15 U.S.C. §§ 77q(a), 78j. Moreover, there is no history at

common law of civil immunities being applied as a defense to federal enforcement

actions. Cf. Owen v. City of Independence, 445 U.S. 622, 637 (1980) (explaining

that an absence of express statutory immunity is fatal to an immunity claim unless

the “tradition of immunity was so firmly rooted in the common law and was

supported by such strong policy reasons that Congress would have specifically so

provided had it wished to abolish the doctrine”) (quotation omitted).

      We agree with Boudreaux’s assessment that courts have routinely applied

the qualified immunity defense to actions seeking damages against public officials

performing discretionary functions. See, e.g., Tapley v. Collins, 211 F.3d 1210,

1216 (11th Cir. 2000) (noting that “the defense of qualified immunity is available

to public officials who are sued under the Federal Wiretap Act” in a private cause

of action); Gonzalez v. Lee Cnty. Hous. Auth., 161 F.3d 1290, 1299-1300 (11th Cir.

1998) (concluding that Congress’ silence regarding the common law defense of

qualified immunity indicated that it was available to “a public official sued in her

individual capacity” by a former employee under the Fair Housing Act, 42 U.S.C.

§ 3601 et seq.). But the instant case is distinguishable. The SEC does not seek

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damages from Boudreaux in a private suit; rather this is a government enforcement

action that seeks civil monetary penalties against the defendants. See Gabelli v.

SEC, 568 U.S. __, ___, 133 S. Ct. 1216, 1223 (2013) (“In a civil penalty action, the

Government is not only a different kind of plaintiff, it seeks a different kind of

relief,” namely “penalties, which go beyond compensation, are intended to punish,

and label defendants wrongdoers”); see also Tull v. United States, 481 U.S. 412,

422 (1987) (penalties are “intended to punish culpable individuals,” not “to extract

compensation or restore the status quo”).

      Additionally, civil monetary penalties imposed in a SEC enforcement action

are “payable into the Treasury of the United States,” and do not constitute

compensation for actual pecuniary loss. 15 U.S.C. §§ 77t(d)(3)(A),

78u(d)(3)(C)(i); see also Ellett Bros., Inc. v. U.S. Fid. & Guar. Co., 275 F.3d 384,

388 (4th Cir. 2001) (noting that “civil penalties . . . are not ‘damages’ payable to

the victim, but fines or assessments payable to the government”).

      Boudreaux’s reliance on our decision in D’Aguanno v. Gallagher, 50 F.3d
877 (11th Cir. 1995)—to argue that qualified immunity protects a public official in

an action that seeks the imposition of any type of monetary award—is misplaced.

In D’Aguanno, we clarified that for qualified immunity purposes, the term

“damages” includes costs, expenses of litigation, and attorneys’ fees claimed by a

plaintiff against a defendant in the defendant’s personal or individual capacity. Id.

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at 881. But, as previously noted, the SEC is seeking civil penalties, and not

damages, against Boudreaux in the instant action.

       In sum, because the doctrine of qualified immunity was unavailable to

Boudreaux as a defense against the SEC’s civil enforcement action, we conclude

that the district court properly denied his motion to dismiss.

      AFFIRMED.

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