United States District Court, D. New Jersey
L. LINARES CHIEF JUDGE.
matter comes before the Court by way of Plaintiff Guy
Gentile's motion for a preliminary injunction against
Defendant Securities and Exchange Commission
("SEC"), (ECF No. 5), and the SEC's motion to
dismiss, (ECF No. 11). The Court decides this matter without
oral argument pursuant to Rule 78 of the Federal Rules of
Civil Procedure. For the reasons set forth below, the Court
grants the SEC's motion to dismiss and denies Plaintiffs
motion for a preliminary injunction as moot.
Court has previously summarized the facts underlying this
dispute in its March 8, 2019 Opinion denying Plaintiffs
ex parte application for a temporary restraining
order ("TRO"). (ECF No. 6). The Court therefore
includes an abbreviated statement of the factual and
procedural history to the extent such background is relevant
to the instant motions.
February 8, 2019, Plaintiff filed this action for declaratory
and injunctive relief to prevent an ongoing investigation
into his activities conducted by the Miami Regional Office of
the SEC. (Compl. ¶ 1). Since around August of 2015,
Plaintiff has been aware of an SEC investigation out of the
Miami Regional Office into whether Plaintiff and his
Bahamas-based broker-dealer, SureTrader, improperly solicited
United States customers. (Compl. ¶¶ 27, 36-37, 88).
According to Plaintiff, the Florida SEC investigation relies
on a formal order of investigation ("FOI") dated
November 5, 2013 entitled "In the matter of Traders
Cafe, LLC," which authorizes an investigation into
individuals related to an entity called Traders Cafe. (Compl.
¶ 2). The Traders Cafe FOI "makes no reference to
[Plaintiff] or anyone or anything related to him."
(Compl. ¶ 2). Indeed, Plaintiff alleges that there is no
connection whatsoever between Traders Cafe and Plaintiffs
Bahamian broker-dealer, other than the fact that Traders Cafe
maintains or maintained an account at Plaintiffs
broker-dealer. (Compl. ¶¶ 2, 27, 30). Plaintiff
therefore argues that the Traders Cafe FOI is an improper
basis for an investigation into Plaintiff and his
broker-dealer, and that the SEC Miami Regional Office lacks
the necessary authority to proceed or to enforce existing
subpoenas absent a proper FOI. (Compl. ¶¶ 1-3, 33).
Accordingly, Plaintiffs action seeks "to quash several
subpoenas and any evidence obtained through them that [were]
served ... pursuant to the Traders Cafe FOI." (Compl.
¶ 5). He also seeks "a declaration ordering the SEC
to cease its unauthorized 'investigation.'"
(Compl. ¶ 5).
further alleges that the Florida investigation is an attempt
by the SEC to revive claims against Plaintiff that were
dismissed by this Court in 2017. (Compl. ¶¶ 60-61).
The Court assumes the parties' familiarity with the facts
underlying the prior SEC civil enforcement proceedings
against Plaintiff before this Court, but a brief summary is
provided to the extent the facts are relevant to the instant
motions. In March of 2016, the SEC Northeast Regional Office
filed a complaint against Plaintiff seeking equitable relief
in connection with two penny stock manipulation schemes.
SEC v. Gentile, No. 16-1619, 2017 WL 6371301, at *1
(D.N.J. Dec. 13, 2017). On December 13, 2017, this Court
dismissed the SEC's complaint, concluding that the action
was barred by a five-year statute of limitations under 28
U.S.C. § 2462. Id. at *4. The SEC appealed that
decision, which remains under review by the Third Circuit.
See SEC v. Gentile, No. 18-1242 (3d Cir., filed Feb.
2, 2018). Plaintiff alleges that the SEC is using the Florida
investigation as a pretext to gather additional information
to further its case in New Jersey and to overcome the statute
of limitations. (Compl. ¶¶ 60-61). He also argues
that, to the extent the Florida investigation was ongoing
during periods when the New Jersey enforcement proceedings
were stayed, any subpoenas issued during that time violated
the stay. (Compl. ¶ 62).
February 6, 2019, the SEC Miami Regional Office filed two
actions in the United States District Court for the Southern
District of Florida to enforce subpoenas issued to Carla
Marin, Plaintiffs personal attorney, (Compl. ¶ 78), and
MinTrade Technologies, LLC, seeking testimony and documents
related to Plaintiff and his Bahamian broker-dealer. (Compl.
¶ 94); see also SEC v. Marin, No. 19-20493
(S.D. Fla., filed Feb. 6, 2019); SEC v. MinTrade Techs.,
LLC, No. 19-20496 (S.D. Fla., filed Feb. 6, 2019). These
Florida enforcement proceedings prompted Plaintiffs
initiation of this action two days later. (Compl. ¶ 94).
On March 4, 2019, the SEC issued Litigation Release No.
24415, publicly announcing the enforcement actions against
Marin and MinTrade Technologies. (ECF No. 5-28). The
Litigation Release describes the subpoenas as seeking
documents and testimony "related to activities conducted
by a foreign-based broker-dealer and its principal concerning
potential violations of the federal securities laws involving
solicitation of U.S.-based customers and the movement of
customer funds." (ECF No. 5-28).
filed an ex parte application for a TRO and
preliminary injunction motion one day after the SEC issued
the Litigation Release. (ECF No. 5). Plaintiff argues that
the language in the Litigation Release "explicitly
refer[s] to [Plaintiff] and his Bahamas-based
broker-dealer." (ECF No. 5-40 ("PI Br.") at
5). Plaintiff claims that the release "was intended to
tar [Plaintiff] as a wrongdoer" and to "inflict
maximum harm to [Plaintiff] before this Court had an
opportunity to rule on his cause of action." (PI Br. at
5). Plaintiff argues that the ongoing Florida investigation
is intended only to harass him, to blacklist him in his
business community, and to circumvent this Court's 2017
dismissal of the SEC's claims of penny stock
manipulation. (PI Br. at 6, 28). Plaintiff therefore asked
this Court for immediate intervention to stem the ongoing
stigmatization and loss of business that has resulted from
the Florida investigation. (PI Br. at 9 10).
March 8, 2019, this Court denied Plaintiffs application for a
TRO, concluding that Plaintiff had "failed to
demonstrate a 'clear showing of immediate irreparable
injury' in the absence of a TRO" pending a decision
on the preliminary injunction motion. (ECF No. 6 at 5
(quoting ECRI v. McGraw-Hill, Inc., 809 F.2d 223,
226 (3d Cir. 1987)). The Court ordered the SEC to reply to
Plaintiffs preliminary injunction motion and directed the
parties "to address any issues concerning the proper
jurisdiction and/or venue for this matter in their
briefing." (ECF No. 7 at 2). On March 29, 2019, the SEC
filed a combined opposition to Plaintiffs preliminary
injunction motion and a motion to dismiss. (ECF No. 11). The
SEC moves to dismiss under Rule 12(b)(1) of the Federal Rules
of Civil Procedure, arguing that this Court lacks subject
matter jurisdiction over this action because the SEC has not
waived sovereign immunity. (ECF No. 11-1 ("MTD
Br.") at 21-27). The SEC also argues that the Southern
District of Florida retains exclusive jurisdiction under the
first-to-file rule, (MTD Br. at 27-32), that venue is
improper in this District, (MTD Br. at 32-33), and that the
Complaint fails to state a claim for relief under Rule
12(b)(6) of the Federal Rules of Civil Procedure, (MTD Br. at
Federal Rule of Civil Procedure 12(b)(1), a court must grant
a motion to dismiss if it lacks subject matter jurisdiction
to hear a claim. When a defendant challenges subject matter
jurisdiction under Rule 12(b)(1), the plaintiff bears the
burden of persuasion. Hedges v. United States, 404
F.3d 744, 750 (3d Cir. 2005). A motion under Rule 12(b)(1)
"may be treated as either a facial or factual challenge
to the court's subject matter jurisdiction."
Gould Elecs. Inc. v. United States, 220 F.3d 169,
176 (3d Cir. 2000). Under a facial attack, the movant
challenges the legal sufficiency of the claim and the court
considers only "the allegations of the complaint and
documents referenced therein and attached thereto, in the
light most favorable to the plaintiff." Id. The
SEC's motion presents a facial challenge to the
Court's jurisdiction as it is based on the defense of
sovereign immunity. Dempsey v. United States, No.
15-2847, 2015 WL 6561217, at *1 (D.N.J. Oct. 29, 2015).
United States, as sovereign, is immune from suit save as it
consents to be sued." United States v.
Mitchell, 445 U.S. 535, 538 (1980) (quoting Untied
States v. Sherwood, 312 U.S. 584, 586 (1941)). It is
well-settled that "[w]ithout a waiver of sovereign
immunity, a court is without subject matter jurisdiction over
claims against federal agencies or officials in their
official capacities." Treasurer of N.J. v. U.S.
Dep't of the Treasury, 684 F.3d 382, 395 (3d Cir.
2012). Such a waiver "must be express and unambiguous to
confer subject matter jurisdiction on a court."
Id. at 396. A waiver "must be strictly
construed in favor of the sovereign, and the terms of the
waiver define the extent of the court's
jurisdiction." Id. (internal citations
argues that Section 702 of the Administrative Procedure Act
("APA"), 5 U.S.C.§ 702, provides the necessary
waiver of sovereign immunity in this case. (ECF No. 16 at
20-23). The Third Circuit has recognized that "[S]ection
702, when it applies, waives sovereign immunity in
'nonstatutory' review of agency action under [23
U.S.C. §] 1331." Jaffee v. United ...