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Round 2 – SEC v. Jackson & Ruehlen

A new round of briefing has begun in the SEC’s Foreign Corrupt Practices Act enforcement vs. Mark Jackson and James Ruehlen.

By way of background, in February 2012 (see here for the prior post), the SEC charged Jackson (the former Noble Corporation CEO) and Ruehlen (a current Noble employee) in the S.D. of Texas with FCPA violations based on the same core set of facts at issue in the November 2010 Noble Corporation FCPA enforcement action (alleged improper payments to Nigerian officials in connection with temporary import permits for oil rigs).

Defendants filed a motion to dismiss in May 2012 (see this prior post) and the first round of briefing on resulted in a December 2012 decision by Judge Keith Ellison dismissing the SEC’s monetary claims based on statute of limitations grounds (specifically that the SEC failed to plead any facts to support an inference that it acted diligently in bringing the complaint) as well as the SEC’s failure to adequately plead discretionary functions relevant to the facilitation payments exception.  (See here for the prior post).

Judge Ellison’s dismissal was without prejudice meaning that the SEC was allowed to file an amended complaint.  As noted in this previous post, the SEC filed an amended complaint on January 25th.

Last Friday, Defendants’ filed this joint motion for partial dismissal of the amended complaint.  The motion to dismiss focuses on statute of limitations issues and states, in pertinent part, as follows (internal citations omitted).

“Defendants jointly move for partial dismissal of the Amended Complaint under Fed. R. Civ. P. 12(b)(6) based on the expiration of the statute of limitations. The parties agree that the SEC’s claims for civil monetary penalties are time-barred to the extent they are based on alleged conduct that occurred before May 10, 2006, unless the SEC can establish a basis to extend the statute of limitations. A Rule 12(b)(6) motion to dismiss based on the expiration of the statute of limitations should be granted “where it is evident from the plaintiff’s pleadings that the action is barred and the pleadings fail to raise some basis for tolling or the like.”

The SEC has offered two bases for avoiding the limitations bar—the doctrines of fraudulent concealment and continuing violations. With respect to the fraudulent concealment doctrine, the plaintiff bears the burden of showing “that the defendants concealed the conduct complained of, and . . . that the plaintiff failed, despite the exercise of due diligence on his part, to discover the facts that form the basis of his claim.”  The allegations must be pleaded with particularity under Fed. R. Civ. P. 9(b).  With respect to continuing violations, the doctrine only applies to claims based on the cumulative effect of a series of individual acts, not a series of discrete but factually related acts.

The SEC is not entitled to extend the statute of limitations under 28 U.S.C. § 2462.  First, tolling based on fraudulent concealment requires the plaintiff to establish both concealment and diligence, but the Amended Complaint alleges neither. The SEC has not pleaded any affirmative acts of concealment, nor has it pleaded that it reasonably relied on Defendants’ denials of wrongdoing. Moreover, the SEC disregarded the Court’s express instruction that it plead facts establishing its diligence; the Amended Complaint is simply bereft of facts that would justify the SEC’s delay in bringing this lawsuit, which centers on events that took place from 2003-2007. In addition, the equitable tolling doctrine of fraudulent concealment should not apply in cases where the government seeks to impose punitive sanctions on individuals with whom it had no prior relationship.

Second, the continuing violations doctrine does not apply as a matter of law to the SEC’s bribery claims, books and records claims, and circumvention of internal controls claim because each of these claims is based on discrete acts, rather than the cumulative effect of a series of individual acts. Accordingly, there is no basis for the SEC to avoid the statute of limitations, and therefore its claims for civil monetary penalties based upon conduct before May 10, 2006 must be dismissed.”

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