Jalbert v. SEC

United States Court of Appeals
For the First Circuit

No. 18-2043

CRAIG R. JALBERT, in his capacity as
Trustee of the F2 Liquidating Trust, on behalf
of himself and all others similarly situated,

Plaintiff, Appellant,

v.

U.S. SECURITIES AND EXCHANGE COMMISSION,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. F. Dennis Saylor IV, U.S. District Judge]

Before

Torruella, Thompson, and Kayatta,
Circuit Judges.

Alex Lipman, with whom William R. Baldiga, Justin S. Weddle,
Ashley L. Baynham, and Brown Rudnick LLP were on brief, for
appellant.
John B. Capehart, Senior Counsel, Securities and Exchange
Commission, with whom Robert B. Stebbins, General Counsel,
Michael A. Conley, Solicitor, and Daniel Staroselsky, Senior
Litigation Counsel, were on brief, for appellee.

December 20, 2019
 TORRUELLA, Circuit Judge. Plaintiff-appellant Craig R.

Jalbert ("Jalbert"), in his capacity as trustee for the

F2 Liquidating Trust, appeals the district court's order granting

the Securities and Exchange Commission's ("SEC") motion to dismiss

his complaint for lack of subject matter jurisdiction and failure

to state a claim. The district court determined that the right

to judicial review of the SEC order at issue had been waived as

part of a settlement between the SEC and former investment advisory

firm F-Squared Investments, Inc. ("F-Squared"). The district

court also held that, in any event, Jalbert's claims were only

reviewable within the SEC's exclusive statutory review structure,

which does not involve the federal district courts. After careful

consideration, we affirm on the ground that F-Squared failed to

state a claim upon which relief could be granted inasmuch as it

waived judicial review by any court.

I. Background

A. Factual Background

F-Squared was an SEC-registered investment adviser firm

headquartered in Wellesley, Massachusetts. It served clients in

the advisor, institutional, retail, and retirement markets. At

some unspecified point, the SEC began investigating F-Squared for

violations of federal securities laws.

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 On December 4, 2014, with the threat of administrative

and cease-and-desist proceedings looming, F-Squared executed an

Offer of Settlement pursuant to Rule 240(a) of the Rules of

Practice of the SEC, 17 C.F.R. § 201.240(a) (the "Offer"). The

Offer included the following language: "By submitting this Offer,

Respondent hereby acknowledges its waiver of those rights

specified in Rules 240(c)(4) and (5) [17 C.F.R. § 201.240(c)(4)

and (5)] of the Commission's Rules of Practice." Rule 240(c)(4)

provides, as relevant to this appeal, that "[b]y submitting an

offer of settlement, the person making the offer waives, subject

to acceptance of the offer . . . [j]udicial review by any court."

17 C.F.R. § 201.240(c)(4).

The SEC accepted the Offer and settled with F-Squared on

December 22, 2014, through the entry of an "Order Instituting

Administrative and Cease-and-Desist Proceedings" (the "Order"), to

which F-Squared consented. Under the terms of the Order,

F-Squared admitted that, between April 2001 and September 2008,

advertising materials for one of its investment strategies

included statements based on the inaccurate compilation of

performance and historical data which improved and inflated the

strategy's historical performance. That conduct, F-Squared

accepted, violated federal securities laws. F-Squared agreed to

cease and desist from committing further securities-laws

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violations and to undertake certain compliance measures. The

Order also required F-Squared to pay $30 million in disgorgement

and a $5 million civil money penalty to the United States Treasury.

As agreed, F-Squared transferred $35 million directly into the

Treasury.

In July 2015, F-Squared filed for bankruptcy. The

F2 Liquidating Trust was established during the bankruptcy

proceedings to recover on behalf of F-Squared as its

successor-in-interest. The bankruptcy court appointed Jalbert as

the trustee.

B. Procedural History

On October 26, 2017, Jalbert filed a complaint in the

U.S. District Court for the District of Massachusetts against the

SEC purporting to represent the F2 Liquidating Trust and "all other

individuals and entities similarly situated" who had "money

collected from them by the SEC as 'disgorgement' without statutory

authority or in excess of statutory authority" during the six years

prior to the filing of the complaint. Jalbert asserted two claims

under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551

et seq., alleging that: (1) in light of the then-recent Supreme

Court opinion in Kokesh v. SEC, 137 S. Ct. 1635 (2017),1 the SEC

1 Kokesh held that, in the securities-enforcement context,
disgorgement is a penalty within the meaning of the five-year
limitations period under 28 U.S.C. § 2462 where it is ordered to

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"exceeded its statutory authority by seeking and obtaining

disgorgement from F-Squared and the similarly situated members of

the Proposed Class as a separate monetary penalty" in both

administrative proceedings and federal court actions and (2) the

SEC "failed to observe the procedural requirements" of federal

securities law by not obtaining an accounting of profits allegedly

acquired as a result of wrongdoing before ordering disgorgement.

The complaint sought a declaration that the SEC's collection of

disgorgement was unlawful pursuant to 5 U.S.C. § 706; the setting

aside of the $30 million disgorgement paid by F-Squared under the

Order; and a refund of that payment, as well as similar refunds

for the putative class members.

punish and deter violations of securities laws and is paid directly
to the United States Treasury. 137 S. Ct. at 1639, 1643–44. The
Court concluded, therefore, that disgorgement actions must be
commenced within five years of the claim's accrual. Id. at 1639.
The Kokesh Court, however, pointed out that its decision was
narrow, for purposes of only the statute of limitations, and was
not meant to undermine disgorgement in SEC enforcement actions in
federal court. See id. at 1642 n.3 ("Nothing in this opinion
should be interpreted as an opinion on whether courts possess
authority to order disgorgement in SEC enforcement proceedings or
on whether courts have properly applied disgorgement principles in
this context[.] The sole question presented in this case is
whether disgorgement, as applied in SEC enforcement actions, is
subject to § 2462's limitations period."). We note that the
Supreme Court recently granted certiorari in a case which presents
the question that was expressly avoided in footnote 3 of Kokesh.
See SEC v. Liu, 754 F. App'x 505 (9th Cir. 2018), cert. granted,
2019 WL 5659111 (U.S. Nov. 1, 2019) (No. 18-1501).

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 On April 4, 2018, the SEC filed a motion to dismiss the

complaint pursuant to Federal Rules of Civil Procedure 12(b)(1)

and (6). On August 22, 2018, the district court entered a

memorandum and order granting the SEC's motion to dismiss.

Jalbert v. SEC, 327 F. Supp. 3d 287 (D. Mass. 2018). The court

determined that it lacked subject matter jurisdiction because

Congress vested the courts of appeals with exclusive jurisdiction

over challenges to SEC orders. Id. at 296–97, 299–300. It also

held that Jalbert had failed to state a claim upon which relief

could be granted because "F-Squared, as part of the settlement,

clearly and unambiguously waived the right to judicial review by

any court." Id. at 295. Jalbert then filed this timely appeal

of the district court's dismissal.

II. Discussion

We review a district court's dismissal for lack of

subject matter jurisdiction and for failure to state a claim

de novo, construing the complaint "liberally" and treating "all

well-pleaded facts as true." Aurelius Capital Master, Ltd. v.

Commonwealth of P.R. (In re Fin. Oversight & Mgmt. Bd. for P.R.),

919 F.3d 638, 644 (1st Cir. 2019) (quoting Town of Barnstable v.

O'Connor, 786 F.3d 130, 138 (1st Cir. 2015), and citing Newman v.

Lehman Bros. Holdings Inc., 901 F.3d 19, 24 (1st Cir. 2018)). We

accord Jalbert "the benefit of all reasonable inferences." Town

-6-
of Barnstable, 786 F.3d at 138 (quoting Murphy v. United States,

45 F.3d 520, 522 (1st Cir. 1995)). Nevertheless, the complaint

must allege "a plausible entitlement to relief." Decotiis v.

Whittemore, 635 F.3d 22, 29 (1st Cir. 2011) (quoting Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 559 (2007)).

Jalbert's big-ticket argument is that in light of the

Supreme Court's decision in Kokesh -- which holds that disgorgement

ordered in civil enforcement proceedings constitutes a "penalty"

subject to the five-year statute of limitations set forth in

28 U.S.C. § 2462,2 137 S. Ct. at 1639 -- the SEC's $30 million

disgorgement order against F-Squared was unauthorized under the

statutes governing SEC disgorgement because it was a penalty and

not a remedial, compensatory charge. Jalbert contends that the

SEC intended F-Squared's disgorgement as a penalty because, like

in Kokesh, it was ordered to punish and deter conduct, and the

proceeds were paid directly into the Treasury rather than returned

to the injured investors. But as the district court correctly

concluded, we do not need to delve into the merits of these

arguments because they are not properly before us.

2 That statute provides, "[e]xcept as otherwise provided by Act
of Congress, an action, suit or proceeding for the enforcement of
any civil fine, penalty, or forfeiture, pecuniary or otherwise,
shall not be entertained unless commenced within five years from
the date when the claim first accrued . . . ." 28 U.S.C. § 2462.

-7-
 The SEC's Rules of Practice allow "[a]ny person who is

notified that a proceeding may or will be instituted against him

or her, or any party to a proceeding already instituted [to]

propose in writing an offer of settlement." 17 C.F.R.

§ 201.240(a). The Rules also require an offer of settlement to

"recite or incorporate as a part of the offer the provisions of

paragraphs (c)(4) and (5) of this section," 17 C.F.R. § 201.240(b),

which, as relevant to this appeal, include the waiver, subject to

the acceptance of the offer, of "[j]udicial review by any court,"

§ 201.240(c)(4)(v).

F-Squared voluntarily executed such an offer to settle

with the SEC. In compliance with 17 C.F.R. § 201.240(b), the

Offer included an acknowledgement of F-Squared's "waiver of those

rights specified in Rules 240(c)(4) and (5) [17 C.F.R.

§ 201.240(c)(4) and (5)] of the Commission's Rules of Practice."

Thus, as part of the Offer, F-Squared knowingly and voluntarily

agreed to waive judicial review of the ensuing order if the SEC

accepted it. In due course, the SEC accepted the Offer in its

December 22, 2014 Order. See 17 C.F.R. § 201.240(c)(7) ("Final

acceptance of any offer of settlement will occur only upon the

issuance of findings and an order by the Commission.").

Accordingly, the district court properly determined that

F-Squared's "clear[] and unambiguous[]" waiver barred the court's

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consideration of Jalbert's claims on the merits. Jalbert, 327

F. Supp. 3d at 295. While Jalbert posits several arguments to the

contrary on appeal, none are persuasive.

First, Jalbert argues that the SEC's "longstanding

practice of obtaining additional, extra-statutory penalties"

disguised as "disgorgement" constitutes a structural

separation-of-powers violation that cannot be waived. Relying on

Kokesh, Jalbert's argument assumes that the SEC exceeded its

statutory authority in ordering disgorgement that is, according to

Jalbert, punitive and unauthorized, which alone is enough to

implicate separation-of-powers principles. But the Kokesh Court

explicitly stated that "[n]othing in this opinion should be

interpreted as an opinion on whether courts possess authority to

order disgorgement in SEC enforcement proceedings or on whether

courts have properly applied disgorgement principles in this

context," and it limited its holding to the applicability of the

five-year limitations period under 28 U.S.C. § 2462 to the SEC's

requests for disgorgement. Kokesh, 137 S. Ct. at 1642 n.3; see

also id. at 1640–41. Indeed, with the enactment of the Securities

Enforcement Remedies and Penny Stock Reform Act of 1990, Pub. L.

No. 101-429, 104 Stat. 931, Congress explicitly authorized the SEC

to enter orders requiring "accounting and disgorgement" in

administrative and cease-and-desist proceedings. See 15 U.S.C.

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§§ 77h-1(e), 78u-3(e), 80a-9(e) and (f)(5), 80b-3(j) and (k)(5);

see also S. Rep. No. 101-337, at 8, 16 (1990) ("The legislation

authorizes the SEC to seek civil money penalties in court

proceedings and to impose penalties and order disgorgement in

administrative proceedings for violations of the federal

securities laws. . . . The Committee believes . . . that the SEC

should have the express authority to order disgorgement in its

administrative proceedings in order to ensure that respondents in

administrative proceedings do not retain ill-gotten gains.").

Notably, Kokesh does not even mention the application of

disgorgement in the context of administrative or cease-and-desist

proceedings. Instead, it addresses disgorgement solely in the

civil enforcement context within the meaning of section 2462.

Kokesh, 137 S. Ct. at 1639. Thus, the SEC's statutory authority

to request disgorgement in administrative proceedings is seemingly

undisturbed by Kokesh.

Jalbert does not challenge the statutes granting that

authority. Rather, Jalbert's structural separation-of-powers

argument is based on his contention that the SEC's disgorgement

practices exceed the bounds of the SEC's statutory authority. But

this argument does not implicate a structural separation-of-powers

issue. We have held that "the doctrine of separated powers serves

to eliminate arrangements that threaten to permit one branch either

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to aggrandize its power or to encroach on functions reserved for

another branch." United States v. Hilario, 218 F.3d 19, 26

(1st Cir. 2000) (citing Mistretta v. United States, 488 U.S. 361,

381-82 (1989)). "Separation-of-powers principles are intended,

in part, to protect each branch of government from incursion by

the others." Bond v. United States, 564 U.S. 211, 222 (2011).

Even if Jalbert were correct that the SEC acted beyond its

statutory powers in interpreting the accounting and disgorgement

provision and seeking disgorgement in a "punitive fashion," this

is not a case in which the "usurp[ation of] the prerogatives of

another branch of government" would be implicated. Hilario, 218

F.3d at 27. Further, there is no "accret[ion] to a single [b]ranch

[of] powers more appropriately diffused among separate

[b]ranches," nor has the "authority and independence" of the other

branches been undermined. Mistretta, 488 U.S. at 382; see also

Hilario, 218 F.3d at 26.3

As the district court noted, Jalbert's claim that the

SEC was acting outside the scope of its statutory authority is, at

best, viewed as an assertion that the SEC was acting ultra vires.

3 Jalbert also takes issue with the cases upon which the district
court relied in concluding that F-Squared's waiver was effective
because, according to Jalbert, none involved structural
separation-of-powers violations. But because we have determined
that Jalbert's claim is not one of structural separation-of-powers
violations, we do not address this point any further.

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See Jalbert, 327 F. Supp. 3d at 296. But even if this were true,

that claim was waivable. We agree with the district court's

reliance on City of Arlington v. FCC, 569 U.S. 290 (2013), to

support its conclusion that ultra vires claims of error can be

waived. See Jalbert, 327 F. Supp. 3d at 296. In City of

Arlington, the Supreme Court rejected as merely "illusory" the

distinction, for Chevron purposes, between "jurisdictional" and

"nonjurisdictional" agency interpretations and errors. 569 U.S.

at 298. The Supreme Court also defined any "improper" agency

action as "ultra vires". Id. at 297–98. In doing so, it reasoned

that

A court's power to decide a case is independent of
whether its decision is correct . . . . Put
differently, a jurisdictionally proper but
substantively incorrect judicial decision is not
ultra vires. That is not so for agencies charged with
administering congressional statutes. Both their
power to act and how they are to act is
authoritatively prescribed by Congress, so that when
they act improperly, no less than when they act beyond
their jurisdiction, what they do is ultra vires.
Because the question -- whether framed as an incorrect
application of agency authority or an assertion of
authority not conferred -- is always whether the
agency has gone beyond what Congress has permitted it
to do, there is no principled basis for carving out
some arbitrary subset of such claims as
"jurisdictional."

Id. Therefore, if the SEC was acting unlawfully in seeking the

$30 million disgorgement from F-Squared, its actions were no more

ultra vires than if the SEC had misinterpreted its statutes. And

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statutory construction claims are largely subject to waiver. See

Boston Redevelopment Auth. v. Nat'l Park Serv., 838 F.3d 42, 47-50

(1st Cir. 2016) (finding waiver of challenge to the National Park

Service's construction of the Land and Water Conservation Fund

Act); see also Nat. Res. Def. Council, Inc. v. EPA, 25 F.3d 1063,

1073–74 (D.C. Cir. 1994) (finding waiver of statutory and

regulatory construction challenge). Moreover, generally, while

jurisdictional issues can be raised at any time during the case

and are never waived, non-jurisdictional issues are waivable. See

Gonzalez v. Thaler, 565 U.S. 134, 141 (2012); see also Wolf v.

Reliance Standard Life Ins. Co., 71 F.3d 444, 446, 449

(1st Cir. 1995).

The Supreme Court's analysis in City of Arlington leads

us to conclude that challenges to ultra vires agency action are

waivable. Our conclusion comports with other circuits' decisions.

See PGS Geophysical AS v. Iancu, 891 F.3d 1354, 1362

(Fed. Cir. 2018) ("Even if the [Patent Trial and Appeal Board of

the U.S. Patent and Trademark Office] could be said to have acted

'ultra vires' in refusing to institute reviews of some claims and

grounds -- and then proceeding to merits decisions concerning the

claims and grounds included in the instituted reviews -- the

Board's error is waivable . . . ."); Metro-North Commuter R.R. Co.

v. U.S. Dep't of Labor, 886 F.3d 97, 108 (2d Cir. 2018) (relying

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on the Supreme Court's decision in City of Arlington to find that

challenges to an agency's jurisdiction over certain claims can be

waived); 1621 Route 22 W. Operating Co. v. NLRB, 825 F.3d 128,

139—42 (3d Cir. 2016) (finding the challenge to an agency's

jurisdiction was waived); CBS Broad., Inc. v. EchoStar Commc'ns

Corp., 450 F.3d 505, 520 n.27 (11th Cir. 2006) (finding the

argument that the FCC acted beyond the scope of its authority and,

thus, that its action was ultra vires, to be waived); see also

Boston Redevelopment Auth., 838 F.3d at 47 (finding the argument

waived that because agency action was ultra vires the agency's

determination should be reviewed de novo).

Faced with, at most, a claim alleging that the SEC

exceeded its jurisdictional authority and acted ultra vires in

seeking disgorgement, the district court correctly concluded that

the claim was waivable and that F-Squared had undeniably waived

the right to assert the claim by settling with the SEC.

Next, Jalbert avers that the waiver does not reach his

APA claims because he is not seeking review of the Order and does

not intend to "disturb the merits of the SEC's substantive

decision" regarding F-Squared's securities laws violations and the

amount of the civil penalty. Instead, he contends that he is

simply seeking a declaration that the SEC lacks the power to enter

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disgorgement orders, and consequently, the disgorgement against

F-Squared is void.

Contrary to Jalbert's contention, by challenging the

validity of the disgorgement, he is challenging the Order itself

because it was through that Order (to which F-Squared consented)

that the SEC directed F-Squared to pay a disgorgement of

$30 million into the Treasury. Furthermore, the plain text of the

waiver states that it applies to "[j]udicial review by any court."

See 17 C.F.R. § 201.240(c)(4)(v). This language is broad enough

to encompass claims under the APA because those entail judicial

review of an agency decision, see 5 U.S.C. § 706(2)(A)-(F)

(providing bases for a reviewing court to "hold unlawful and set

aside agency action, findings, and conclusions"), even if Jalbert

does not challenge the substantive findings of the Order. When

F-Squared chose to settle and execute the Offer, it decided to

waive all judicial review by any court without qualification.

Relatedly, Jalbert posits that his challenge to the

SEC's disgorgement practices is not limited to F-Squared's

disgorgement order but includes a challenge to the SEC's

"longstanding practice and procedure of obtaining disgorgement in

an unauthorized punitive fashion in a host of cases" on behalf of

a putative class of similarly situated parties. This argument,

too, is unavailing.

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 We have noted that "in most respects, the class members

other than the named plaintiffs are merely potential parties until

subject matter jurisdiction for the named plaintiffs is

established and the district court has decided to certify a class."

Pruell v. Caritas Christi, 645 F.3d 81, 84 (1st Cir. 2011). When

a class action is filed, it "includes only the claims of the named

plaintiff or plaintiffs. The claims of unnamed class members are

added to the action later, when the action is certified as a class

under [Federal Rule of Civil Procedure] 23." Id. (quoting Gibson

v. Chrysler Corp., 261 F.3d 927, 940 (9th Cir. 2001)). Here, the

district court did not certify a class. It merely determined that

it lacked subject matter jurisdiction. Thus, the purported

existence of those claims by "similarly situated parties" was

irrelevant to the district court's decision to dismiss the case.

It is also hard to see how, for the putative class's claim, Jalbert

could meet the injury-in-fact requirement of Article III, which

requires a plaintiff to establish an injury that is "concrete and

particularized" and "actual or imminent, not 'conjectural' or

'hypothetical.'" Reddy v. Foster, 845 F.3d 493, 500 (1st Cir.

2017) (quoting Susan B. Anthony List v. Driehaus, 573 U.S. 149,

158 (2014)); see Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1545

(2016) ("[T]he injury-in-fact requirement [of Article III]

requires a plaintiff to allege an injury that is both 'concrete

-16-
and particularized.'" (emphasis in original) (quoting Friends of

the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S.

167, 180–81 (2000))); see also Simon v. E. Ky. Welfare Rights Org.,

426 U.S. 26, 40 n.20 (1976) ("[E]ven named plaintiffs who represent

a class 'must allege and show that they personally have been

injured, not that injury has been suffered by other, unidentified

members of the class to which they belong and which they purport

to represent.'" (quoting Warth v. Seldin, 422 U.S. 490, 502

(1975))).

Next, Jalbert takes aim at the SEC's use of Rule 240 --

which requires the waiver of judicial review as a condition of

settlement -- arguing that it cannot overcome the presumption that

SEC actions are judicially reviewable under the APA. He contends

that the incorporation of Rule 240 into SEC orders is unlawful

because the SEC may not "contract out" of APA review.

To begin, nothing in the record suggests that the purpose

or aim of Rule 240 is to overcome the presumption of reviewability

of SEC actions under the APA. Surely, before entering into the

settlement with the SEC, F-Squared knew or should have known there

were avenues, both direct and collateral, to obtain judicial review

of an SEC order. Indeed, F-Squared expressly acknowledged in its

Offer that it was waiving certain procedural rights. See 17 C.F.R.

§ 201.240(c)(4)-(5). F-Squared knowingly and voluntarily chose

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to enter into an early settlement and waive judicial review rather

than partake in public administrative and cease-and-desist

proceedings. We have found that settlements are strongly

encouraged by public policy, especially, where "a government actor

committed to the protection of the public interest has pulled the

laboring oar in constructing the proposed settlement." United

States v. Cannons Eng'g Corp., 899 F.2d 79, 84 (1st Cir. 1990)

(citing FTC v. Standard Fin. Mgmt. Corp., 830 F.2d 404, 408

(1st Cir. 1987)).

Moreover, the APA itself requires an agency to give

parties opportunity for "the submission and consideration

of . . . offers of settlement." 5 U.S.C. § 554(c)(1). The Senate

Report accompanying this provision states that "[t]he settlement

by consent provision is extremely important because agencies ought

not to engage in formal proceedings where the parties are perfectly

willing to consent to judgments or adjust situations informally."

S. Doc. No. 79-248, at 361 (1946). We note that other agencies

have similar regulations requiring the waiver of judicial review

as a condition of settling an action with the agency. See, e.g.,

16 C.F.R. § 2.32 (FTC regulation requiring that "[e]very agreement

[in settlement of an FTC complaint] waive further procedural steps

and all rights to seek judicial review or otherwise to challenge

or contest the validity of the order"); 47 C.F.R. § 1.94(c)(3)

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(FCC regulation requiring "[a] waiver of the right of judicial

review or otherwise to challenge or contest the validity of the

consent order" to be included in settlement agreements); 49 C.F.R.

§ 511.26(d)(2) (DOT regulation requiring an offer of settlement to

contain "[a]n express waiver of further procedural steps, and of

all rights to seek judicial review or otherwise to contest the

validity of the order"). And Jalbert cites no authority for

upending a waiver of judicial review contained in a settlement

with a governmental agency.

In his final attempt to dodge the waiver, Jalbert invokes

contract principles to allege that the waiver is unenforceable

because the agreement was infected with a mutual mistake of law.

Specifically, Jalbert avers that both the SEC and F-Squared

believed the SEC had the authority to obtain the $30 million

disgorgement from F-Squared, and that it was not until the Supreme

Court's decision in Kokesh that F-Squared realized the mistake.

This argument, again, assumes that Kokesh changed the law on SEC

disgorgement despite its explicit, narrow holding. And even taking

as true Jalbert's assertion that Kokesh changed the law since

F-Squared and the SEC settled, that case is silent about

agreed-upon disgorgement orders, a product of parties' agreements

to settle impending administrative proceedings, like the

disgorgement here.

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 In any event, under Massachusetts law, "a party cannot

avoid a contract merely because the parties are mistaken as to an

assumption, even though significant, on which the contract was

made." Shawmut-Canton LLC v. Great Spring Waters of Am., Inc.,

816 N.E.2d 545, 550—51 (Mass. App. Ct. 2004) (citing Restatement

(Second) of Contracts § 152 cmt. c (1981)). "Relief is only

appropriate in situations where a mistake of both parties has such

a material effect on the agreed exchange of performances as to

upset the very basis for the contract." Id. at 551 (quoting

Restatement (Second) of Contracts § 152 cmt. a). Moreover, the

mistake must be based on a fact "capable of ascertainment at the

time" the parties entered the contract.4 LaFleur v. C.C. Pierce

Co., 496 N.E.2d 827, 830 (Mass. 1986); Cook v. Kelley, 227 N.E.2d

330, 333 (Mass. 1967). Here, the purported change in law was not

"capable of ascertainment" when F-Squared and the SEC entered into

the settlement. By Jalbert's own concession, the law was "so well

established at the time of the settlement," that "the parties were

not settling because of any uncertainty about the SEC's statutory

authority to obtain disgorgement. Instead, the parties settled

4 The Restatement (Second) of Contracts clarifies that it does
not "draw the distinction that is sometimes made between 'fact'
and 'law.'" Restatement (Second) of Contracts § 151 cmt. b.
Rather, it "treat[s] the law in existence at the time of the making
of the contract as part of the total state of facts at that time."
Id.

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over the issue of whether there had been a violation of the

securities laws." Thus, Jalbert cannot escape the final settlement

that F-Squared willingly entered into in 2014 for reasons

completely collateral to a then-unforeseeable Supreme Court

decision that was handed down nearly three years later to have a

second bite of the apple in an attempt to obtain a refund of $30

million.5

Unconvinced by Jalbert's arguments that the voluntary,

express waiver of judicial review in the Order is void or

ineffective, we conclude that the district court correctly decided

that the complaint failed to state a claim upon which relief could

be granted inasmuch as F-Squared waived judicial review by any

court. Having decided that Jalbert's claims are not entitled to

judicial review, it is unnecessary to address Jalbert's remaining

5 We should also note that Jalbert's request that a party to a
final and binding settlement agreement should be allowed to
back-pedal when purportedly more favorable law emerges several
years later does not comport with this Court's policy favoring
settlement "as a preferred alternative to costly, time-consuming
litigation." Fid. & Guar. Ins. Co. v. Star Equip. Corp., 541 F.3d
1, 5 (1st Cir. 2008) (quoting Mathewson Corp. v. Allied Marine
Indus., Inc., 827 F.2d 850, 852 (1st Cir. 1987)). See also
Mathewson Corp., 827 F.2d at 852 ("We have characterized a
settlement negotiated, as here, 'under the eyes of the court [as]
a most solemn undertaking.'" (alteration in original) (quoting
Warner v. Rossignol, 513 F.2d 678, 682 (1st Cir. 1975))); id. at
852–53 (finding that we "will enforce the [settlement] without
regard to what the result might have been had the parties chosen
to litigate" (quoting Terrain Enters., Inc. v. W. Cas. & Sur. Co.,
774 F.2d 1320, 1321 (5th Cir. 1985))).

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arguments, and our conclusion is sufficient to dispose of this

appeal.

III. Conclusion

For the foregoing reasons, we affirm the district

court's order.

Affirmed.

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