NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 6 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
U.S. SECURITIES & EXCHANGE No. 19-55289
COMMISSION,
D.C. No.
Plaintiff-Appellee, 5:15-cv-02387-SVW-KK
v.
MEMORANDUM*
ROBERT YANG; et al.,
Defendants-Appellants,
v.
CELTIC BANK,
Third-party-defendant,
______________________________
STEPHEN J. DONELL,
Receiver.
Appeal from the United States District Court
for the Central District of California
Stephen V. Wilson, District Judge, Presiding
Submitted May 15, 2020**
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Pasadena, California
Before: EBEL,*** WARDLAW, and HUNSAKER, Circuit Judges.
Defendants Robert Yang, Claudia Kano, Yanrob Medical, Inc., HealthPro
Capital Partners, LLC, and Suncor Care, Inc. (collectively Defendants) appeal the
district court’s remedial order issued after Defendants entered into consent
agreements with the Securities and Exchange Commission (SEC) acknowledging
liability for their unlawful scheme to raise money from foreign investors. We have
jurisdiction under 28 U.S.C. § 1291. We reverse and remand with instructions for
the district court to conduct further proceedings consistent with this decision.
1. Defendants did not waive their right to appeal the remedial order under
their consent agreements with the SEC. We construe consent agreements de novo.
Blair v. Shanahan, 38 F.3d 1514, 1521 (9th Cir. 1994). In the Defendants’ consent
agreements they acknowledged their liability but did not consent to the amount of
disgorgement, prejudgment interest, or civil penalties. Instead, the agreements
provided that any monetary remedies would be “determined by the Court” upon a
motion from the SEC. Moreover, Defendants waived only their right to appeal entry
of the Judgment which occurred before the district court resolved the SEC’s remedy
motion. Thus, Defendants’ appeal of the district court’s remedial order is beyond the
***
The Honorable David M. Ebel, Senior United States Circuit Judge for
the U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
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scope of their appeal waiver. See Garza v. Idaho, 139 S. Ct. 738, 744 (2019).
2. Civil penalties are intended to punish the wrongdoer and deter future
securities violations. See Gabelli v. SEC, 568 U.S. 442, 451–52 (2013). Courts
determine the amount of civil penalties awarded “in light of the facts and
circumstances” of the case. 15 U.S.C. § 78u(d)(3)(B)(i). The parties agree that
determining the appropriate amount of penalty is discretionary with the court. They
also agree that, in exercising this discretion, courts routinely consider the factors set
out in SEC v. Murphy, 626 F.2d 633 (9th Cir. 1980). See, e.g., SEC v. CMKM
Diamonds, Inc., 635 F. Supp. 2d 1185, 1192 (D. Nev. 2009) (noting same).
Defendants argue the district court failed to exercise discretion in setting the
amount of civil penalties and instead rubber-stamped the SEC’s requests. On the
record presented, we find no error in the district court’s imposition of third-tier
penalties under 15 U.S.C. § 78u(d)(3)(B)(iii), nor do we find error in its rejection of
many of Defendants’ arguments as inconsistent with admissions made in the consent
agreements. Nonetheless, because the district court granted the SEC’s requests for
civil penalties without discussing the Murphy factors or otherwise explaining its
rationale, we are unable to meaningfully review whether the district court considered
the statutory purposes for imposing civil penalties or exercised any discretion in
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setting the penalty amounts.1 See United States v. $11,500.00 in U.S. Currency, 710
F.3d 1006, 1011 (9th Cir. 2013) (“A district court abuses its discretion if it . . . fails
to consider the factors relevant to the exercise of its discretion.”) (internal quotation
marks and citation omitted); see also Hayes v. Heckler, 785 F.2d 1455, 1457 (9th
Cir. 1986) (“It is impossible here to determine whether the district court abused its
discretion when the order below contains no information or explanation concerning
the basis for the district court’s decision.”). Therefore, we reverse the district court’s
imposition of civil penalties and remand for further proceedings for the district court
to consider all the “facts and circumstances” of the case, including the factors
relevant to its exercise of discretion. 15 U.S.C. § 78u(d)(3)(B)(i).
3. The Supreme Court recently held that ordering disgorgement in an
amount that “does not exceed a wrongdoer’s net profits and [that] is awarded for
victims” is permissible under the equitable authority granted in 15 U.S.C.
§ 78u(d)(5). Liu v. SEC, 140 S. Ct. 1936, 1940 (2020). Because this power arises
under equity, disgorgement orders must be crafted so that their effect is restitutionary
only, not punitive, reaching beyond the consequences of the specific wrongdoer’s
actions. Id. at 1943, 1947–50.
Here, despite making numerous arguments against imposition of monetary
1
The court ordered Yang to disgorge $2,014,050 with $237,032 prejudgment
interest, totaling $2,251,082. This amount is $200 less than that requested by the
SEC. Because we remand, we need not address this discrepancy.
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remedies, Defendants did not challenge the SEC’s calculation or supporting
evidence establishing the amount of gains Defendants received from their unlawful
conduct, which was their burden to do if they believed the government’s calculation
was wrong. SEC v. Platforms Wireless Int’l Corp., 617 F.3d 1072, 1096 (9th Cir.
2010). However, it is unclear whether the district court limited its disgorgement
orders imposed against the two individual defendants to their specific conduct
where, for example, it made them both jointly and severally liable for the
disgorgement amounts ordered against the entity defendants. See Liu, 140 S. Ct. at
1945, 1949. Likewise, it is unclear that the disgorgement amounts ordered are
“appropriate and necessary for the benefit of investors.” 15 U.S.C. § 78u(d)(5); see
Liu, 140 S. Ct. at 1948–49. Therefore, on remand we further direct the district court
to determine, consistent with the terms of the consent agreements, whether its
disgorgement orders comply with the Supreme Court’s decision in Liu.
REVERSED and REMANDED with instructions.
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