Cases
SEC v. Lemelson
CASE SUMMARY
NCLA asks the U.S. Court of Appeals for the First Circuit to reverse a lower court’s denial of costs and attorney’s fees that Rev. Fr. Emmanuel Lemelson incurred in successfully defending himself against outrageously excessive sanctions demands by the Securities and Exchange Commission. A Massachusetts federal jury in 2021 rejected nearly all of the SEC’s baseless charges against Fr. Lemelson, a Greek Orthodox Priest and activist investor, including its false and incendiary allegations that he engaged in a scheme to defraud the market and even his own fund investors.
Despite the jury’s rebuke, SEC demanded as sanctions a permanent, lifetime prior restraint on Fr. Lemelson and more than $2 million in surrendered profits, interest, and civil penalties. The U.S. District Court for the District of Massachusetts saw right through SEC’s overreach and granted only a small fraction of what SEC demanded. Yet despite acknowledging the “large disparity” between SEC’s demands and the final judgment, the court nevertheless ruled that Fr. Lemelson was not entitled to recover any of his defense costs and fees under the Equal Access to Justice Act (EAJA).
The EAJA, a law originally passed in 1980 and amended in 1996—both times with overwhelming bipartisan support in both houses of Congress—was specifically designed to deter powerful government agencies like SEC from making excessive demands to intimidate the private citizens and small businesses they sue in court, forcing them either to capitulate to unfair settlements or to incur costs and legal fees to defend themselves. The First Circuit should correct the District Court’s error and rule that SEC’s demanded sanctions against Fr. Lemelson were “excessive” and “unreasonable” within the meaning of the EAJA.