United States Court of Appeals
For the First Circuit
No. 24-1754
U.S. SECURITIES AND EXCHANGE COMMISSION,
Plaintiff, Appellee,
v.
GREGORY LEMELSON, a/k/a REV. FR. EMMANUEL LEMELSON;
LEMELSON CAPITAL MANAGEMENT, LLC,
Defendants, Appellants,
THE AMVONA FUND,
Relief Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Rikelman, Lynch, and Howard, Circuit Judges.
Russell G. Ryan, with whom Andreia Trifoi, John J. Vecchione,
New Civil Liberties Alliance, Douglas S. Brooks, and Libby Hoopes
Brooks & Mulvey, P.C. were on brief, for appellants.
Paul G. Álvarez, Senior Appellate Counsel, with whom Jeffrey
B. Finnell, Acting General Counsel, Elizabeth McFadden, Deputy
General Counsel, Melinda Hardy, Assistant General Counsel, and
Timothy N. McGarey, Special Trial Counsel, Securities and Exchange
Commission, were on brief, for appellee.
Theodore M. Cooperstein, with whom Theodore Cooperstein PLLC
was on brief, for Southern Policy Law Institute, amicus curiae.
J. Marc Wheat, with whom Advancing American Freedom, Inc. was
on brief, for Advancing American Freedom, Inc.; American Encore,
Americans for Limited Government; Catholics Count; Eagle Forum;
Eagle Forum of Georgia; Family Institute of Connecticut Action;
Charlie Gerow; International Conference of Evangelical Chaplain
Endorsers; JCCWatch.org, Tim Jones, Former Speaker, Missouri
House, Chairman, Missouri Center-Right Coalition; Men and Women
for a Representative Democracy in America, Inc.; New Jersey Family
Policy Center; Melissa Ortiz, Principal & Founder, Capability
Consulting; Project 21 Black Leadership Network; Pro-Life
Wisconsin; Pamela S. Roberts, Immediate Past President - Kentucky
Federation of Republican Women; Rick Santorum; Setting Things
Right; 60 Plus Association; Stand for Georgia Values Action; Tea
Party Express; Tea Party Patriots Action, Inc.; The American
Association of Senior Citizens; Women for Democracy in America,
Inc.; Yankee Institute; Young Conservatives of Texas; Young
America's Foundation; amici curiae.
May 27, 2025
LYNCH, Circuit Judge. This appeal arises out of a
Securities and Exchange Commission (SEC) enforcement action
against Gregory Lemelson, also known as Rev. Fr. Emmanuel Lemelson,
and Lemelson Capital Management, LLC (together, "Lemelson"). In
a prior decision, we affirmed the jury's liability findings as to
three asserted violations. See SEC v. Lemelson, 57 F.4th 17, 20
(1st Cir. 2023). Here, Lemelson appeals from the district court's
denial of his motion for attorneys' fees and costs under the Equal
Access to Justice Act (EAJA),
28 U.S.C. § 2412(d)(1)(D), arising
out of the SEC's claims, some of which were unsuccessful although
others were successful. See SEC v. Lemelson,
742 F. Supp. 3d 73,
78 (D. Mass. 2024). For the reasons that follow, we vacate the
denial of fees and costs and remand for further proceedings
consistent with this opinion.
I.
The underlying facts as to the enforcement action are
recited in our earlier opinion. See Lemelson, 57 F.4th at 20-23.
We focus here on the facts most relevant to this appeal.
In 2018, the SEC brought this civil action alleging that
Lemelson made untrue statements of material fact in violation of
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
(17 C.F.R. § 240.10b-5), that he did so as part of a fraudulent
scheme, and that he violated Section 206(4) of the Advisers Act
and Rule 206(4)-8 (
17 C.F.R. § 275.206(4)-8). The SEC alleged
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that Lemelson's challenged activities "generat[ed] approximately
$1.3 million in illegal profits." The complaint requested as
relief that Lemelson (1) "disgorge the proceeds [of] their ill-
gotten gains, plus prejudgment interest"; (2) be "[p]ermanently
restrain[ed]and enjoin[ed] " from violating certain securities
laws; and (3) "pay appropriate civil monetary penalties." Lemelson
moved to dismiss the complaint, and the district court granted his
motion with respect to one of the challenged statements (which the
court referred to as the "tangible equity" statement). The SEC
filed an amended complaint with additional allegations regarding
the "tangible equity" statement on March 21, 2019, and the jury
ultimately rejected the claim. The jury also rejected the SEC's
scheme liability and Advisers Act claims but found for the SEC on
the three remaining statements. The key language as to the relief
sought remained the same in the amended complaint.
On March 18, 2020, the district court held Lemelson in
contempt after Lemelson violated a protective order by leaking
confidential materials to a journalist. Through his counsel,
Lemelson also "threatened a priest, who had provided allegedly
false information about Lemelson's credentials as a priest to the
[SEC], with litigation." See SEC v. Lemelson, 596 F. Supp. 3d
227, 232 (D. Mass. 2022).
After the jury verdict against him, Lemelson filed a
renewed motion for judgment as a matter of law, which the district
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court denied. On December 22, 2021, the SEC moved for entry of
final judgment, seeking a permanent injunction against both
Lemelson individually and Lemelson Capital Management, a $656,500
civil penalty against Lemelson individually, a $775,000 civil
penalty against Lemelson Capital Management, $656,500 in
disgorgement, and $208,624 in prejudgment interest.
On March 30, 2022, the district court entered final
judgment, issuing an injunction against both Lemelson individually
and Lemelson Capital Management, but only for five years, and
imposing a $160,000 civil penalty against Lemelson individually,
not the $656,500 sought. See Lemelson, 596 F. Supp. 3d at 230.
The district court did not impose a civil penalty on Lemelson
Capital Management. Id. In deciding to issue the five-year
injunction against Lemelson, the district court stated that
Lemelson continues to unabashedly defend his
actions. Lemelson does not recognize the
wrongfulness of his conduct or acknowledge
when he was clearly wrong (like the statements
[for which the jury found him liable]). His
pugilistic approach to the litigation (e.g.,
the tweets and the leaked documents) indicates
he has not learned his lesson.
Id. at 233.
Lemelson appealed, and this court affirmed. See
Lemelson, 57 F.4th at 20. This court denied rehearing en banc.
Order Den. Reh'g En Banc, SEC v. Lemelson, No. 22-1630 (1st Cir.
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Mar. 6, 2023). The Supreme Court denied Lemelson's petition for
certiorari. Lemelson v. SEC, 144 S. Ct. 486 (2023).
Lemelson next moved for an award of costs and fees
totaling $1,789,051.64 under the EAJA, arguing that both the SEC's
complaints and post-trial motion for entry of final judgment made
"demand[s]" that were "substantially in excess" of the final
judgment under Section 2412(d)(1)(D).1 His motion raised a number
of arguments: (1) the complaints' request for disgorgement
constituted a "demand," (2) the SEC's request for $2,296,624 in
post-verdict briefing constituted a demand, (3) the SEC's requests
for permanent injunctions in both the complaints and its post-
verdict briefing constituted demands, and (4) these demands were
in excess of the judgment and were unreasonable when compared to
the final judgment.
In response, the SEC raised a number of alternate
defenses based on the text of the statute. The SEC disputed
Lemelson's interpretation of the term "demand," arguing that (1)
1 Lemelson also argued that he was a "prevailing party"
and that the SEC's position was not "substantially justified" under
Section 2412(d)(1)(A). The district court concluded that Lemelson
was a prevailing party as to "at least some" of the SEC's claims
but that the SEC's position was substantially justified. See
Lemelson, 742 F. Supp. 3d at 76-77. For purposes of this appeal,
the SEC has not contested Lemelson's "prevailing party" status as
to certain claims. Lemelson disavows any appeal of the district
court's holdings as to Section 2412(d)(1)(A), stating that "this
appeal challenges only the district court's rulings with respect
to the excessive demands provision of EAJA."
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the request for disgorgement in the complaint was merely a factual
allegation and not a demand, (2) the SEC's post-verdict briefing
was not a demand because it did not "le[a]d to the adversary
adjudication," and (3) the requested relief in the SEC's complaint
falls under the statute's safe harbor for "a recitation of the
maximum statutory penalty in (i) the complaint, or (ii) elsewhere
when accompanied by an express demand for a lesser amount," 28
U.S.C. § 2412(d)(2)(I). Regardless of the proper interpretation
of the term "demand," the SEC presented more global arguments,
which would avoid those textual interpretation issues, that the
statute nonetheless required denial of his motion because: (1)
Lemelson (a) committed a "willful violation of the law" and (b)
acted in bad faith; (2) that "special circumstances rendered an
award unjust"; and (3) the SEC's proposed remedies were not
excessive because they were authorized by statute and were
reasonable. The district court chose to address only some of those
defenses.
In reply, Lemelson argued that the safe harbor does not
exclude all demands made in a complaint, and that the fact that
the SEC's alleged demands were authorized by statute did not make
them reasonable. Lemelson also argued that Lemelson did not commit
a "willful violation of the law" because the jury's scienter
finding could have been based on either willfulness or
recklessness.
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The district court denied the motion on July 23, 2024.
The district court concluded that even if the complaints' request
for disgorgement amounted to an "express demand" under the meaning
of the statute, it fell within the statute's safe harbor for a
"recitation of the maximum statutory penalty . . . in the
complaint." See Lemelson, 742 F. Supp. 3d at 78 (quoting 28 U.S.C.
§ 2412(d)(2)(I)). The district court also held that the
complaints' request for disgorgement "was reasonable" but did so
"in light of the scope of the initial claims [the SEC] brought."
Id. As to the SEC's post-verdict request for $2,296,624, the
district court cited United States v. One 1997 Toyota Land Cruiser,
248 F.3d 899, 905 (9th Cir. 2001), and held that a post-verdict
demand was not an "express demand of the United States which led
to the adversary adjudication." Lemelson, 742 F. Supp. 3d at 78.
The district court did not reach the SEC's more global defenses of
whether "the party ha[d] committed a willful violation of law or
otherwise acted in bad faith, or special circumstances ma[d]e an
award unjust,"
28 U.S.C. § 2412(d)(1)(D). Although it interpreted
certain statutory phrases, it did not address others.
II.
We review the district court's interpretation of
statutory language de novo, see Nowd v. Rubin, 76 F.3d 25, 26 n.1
(1st Cir. 1996), and its assessment of reasonableness under the
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EAJA for abuse of discretion, see Michel v. Mayorkas, 68 F.4th 74,
78 (1st Cir. 2023).
The EAJA is a limited waiver of sovereign immunity.
Aronov v. Napolitano, 562 F.3d 84, 88 (1st Cir. 2009). The purpose
of the EAJA, enacted in 1980, is "to eliminate the barriers that
prohibit small business and individuals from securing vindication
of their rights in civil actions and administrative proceedings
brought by or against the Federal Government." Scarborough v.
Principi,
541 U.S. 401, 406 (2004) (quoting H.R. Rep. No. 96-1005,
at 9 (1979)).
Congress amended the EAJA in 1996, adding, inter alia,
a provision allowing parties who defended against civil actions
brought by the United States to collect attorneys' fees and costs
under certain limited circumstances where the United States has
made an "excessive demand":
If, in a civil action brought by the United
States . . . the demand by the United States
is substantially in excess of the judgment
finally obtained by the United States and is
unreasonable when compared with such judgment,
under the facts and circumstances of the case,
the court shall award to the party the fees
and other expenses related to defending
against the excessive demand, unless the party
has committed a willful violation of law or
otherwise acted in bad faith, or special
circumstances make an award unjust. Fees and
expenses awarded under this subparagraph shall
be paid only as a consequence of
appropriations provided in advance.
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28 U.S.C. § 2412(d)(1)(D); see also
Pub. L. No. 104-121, Title II,
§ 232,
110 Stat. 863 (1996). The Act further sets forth that the
term "demand" means:
the express demand of the United States which
led to the adversary adjudication, but shall
not include a recitation of the maximum
statutory penalty in (i) the complaint, or
(ii) elsewhere when accompanied by an express
demand for a lesser amount.
28 U.S.C. § 2412(d)(2)(I). We refer to the "shall not" clause as
the safe harbor provision.
"When interpreting a statute, we begin with the text."
Lackey v. Stinnie, 604 U.S. __,
145 S.Ct. 659, 666 (2025); see
also Bondi v. VanDerStok,
604 U.S. __,
145 S.Ct. 857, 875 (2025)
("[A] statute's text and context are critical . . . "); City and
Cnty. of San Francisco v. EPA, 604 U.S. __,
145 S.Ct. 704, 717
(2025) ("It is a 'fundamental canon of statutory construction that
the words of a statute must be read in their context and with a
view to their place in the overall statutory scheme.'" (quoting
Utility Air Regul. Grp. v. EPA, 573 U.S. 302, 320 (2014))). Policy
considerations, even those presenting "serious concerns," "cannot
overcome the statutory text and structure." Cunningham v. Cornell
Univ.,
604 U.S. __,
145 S.Ct. 1010, 1031 (2025).
The plain language of the EAJA makes clear that there
are two comparators when evaluating reasonableness: the "demand"
and the "the judgment finally obtained by the United States." 28
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U.S.C. § 2412(d)(1)(D). The district court incorrectly compared
the alleged demand to "the scope of the initial claims [the SEC]
brought." Because the district court erred in its interpretation
of the relevant final comparator to which the term "express demand"
must be compared, we must remand.2 We do not reach other issues.
See Lionbridge Tech., LLC v. Valley Forge Ins. Co., 53 F.4th 711,
725-26 (1st Cir. 2022).
Should the SEC prevail on its more global defenses, other
issues, such as the interpretation of certain terms, would become
moot. We explain briefly, without resolving them, some of the
questions of statutory interpretation. For example, the parties
dispute whether the SEC's post-verdict briefing qualifies as a
"demand" under Section 2412(d)(2)(I), offering diverging
interpretations of the statute's phrase that a demand must have
"led to the adversary adjudication." See 28 U.S.C.
§ 2412(d)(2)(I). Lemelson argues that this phrase merely requires
that the demand be made prior to the final judgment, whereas the
SEC's position is that the phrase limits "demands" to those made
at the onset of the case, although we also observe that the
statute's safe harbor language refers to demands made "elsewhere"
than a complaint. Moreover, Section 2412(d)(1)(D) uses the terms
Although the district court must compare the demand to the
2
final judgment on remand, it may still consider the scope of the
initial claims as part of the "facts and circumstances of the
case." See 28 U.S.C. § 2412(d)(1)(D).
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"civil action" and "adversary adjudication," and the statute
elsewhere defines the term "final judgment," but "judgment" is not
an "adjudication," see 28 U.S.C. § 2412(d)(2)(G). In addition,
throughout, the statute refers to "the" demand, a single term.
See
id. § 2412(d)(1)(D), (2)(I). Lemelson also raises
interpretive issues of whether the SEC's requests for injunctive
relief are demands and whether the SEC's request for disgorgement
constitutes an express demand. Further, there are interpretive
issues as to Section 2412(d)(2)(I)'s safe harbor, including a
determination of what the phrase "when accompanied . . . "
modifies. Id. The parties have pointed us to, and we have found,
no controlling authority and very limited persuasive authority on
any of these issues. See One 1997 Toyota Land Cruiser,
248 F.3d
at 905; Am. Wrecking Corp. v. Sec. of Lab.,
364 F.3d 321, 327-28
(D.C. Cir. 2004); In re Clarence Z. Wurts, SEC Release No. 194, 76
SEC Docket No. 492,
2001 WL 1343997, at *3-6 (ALJ Oct. 31, 2001);
SEC v. Berlacher, No. 07-3800,
2012 WL 512201, at *6 (E.D. Pa.
Feb. 15, 2012). Although the district court determined that the
government's post-verdict motion was too late to constitute "the
demand" under the EAJA, it did not consider all of these related
questions of statutory interpretation.
We may decline to reach "important" questions of
statutory interpretation when "significant questions of fact or
law have been insufficiently considered by the parties or the trial
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court," and the issues "have the potential of allowing a court to
avoid, or at least to frame more precisely," the inquiry.3 Antilles
Cement Corp. v. Acevedo Vila, 408 F.3d 41, 51 (1st Cir. 2005); see
also United States v. Costa,
890 F.2d 480, 483 (1st Cir. 1989)
("[W]e are averse to considering on appeal a fact-specific matter
that is best considered in the first instance by a trial court.").
On remand, the district court may choose to consider
first whether Lemelson "has committed a willful violation of law
or otherwise acted in bad faith, or special circumstances make an
award unjust," 28 U.S.C. § 2412(d)(1)(D). If the textual
interpretation issues are addressed, the court should consider,
3 Avoidance principles typically come into play when we
consider constitutional issues. See, e.g., ACLU of Mass. v. U.S.
Conf. of Cath. Bishops, 705 F.3d 44, 52 (1st Cir. 2013) ("[F]ederal
courts are not to reach constitutional issues where alternative
grounds for resolution are available."). However, even in nonconstitutional contexts, we can elect not to decide potentially
dispositive issues that the district court did not reach and remand
for the district court to resolve them in the first instance. See
González-Droz v. González-Colón, 660 F.3d 1, 9 (1st Cir. 2011).
We also observe that avoidance of unnecessary statutory
interpretation of the EAJA bears some similarities to the reasons
for constitutional avoidance. The EAJA is a waiver of federal
sovereign immunity, see Michel,
68 F.4th at 78, and federal
sovereign immunity stems from common law traditions of immunity in
England, which informed the framers of the Constitution. See Alden
v. Maine,
527 U.S. 706, 715 (1999) ("The generation that designed
and adopted our federal system considered immunity from private
suits central to sovereign dignity. When the Constitution was
ratified, it was well established in English law that the Crown
could not be sued without consent in its own courts."); Kern-Limerick v. Scurlock, 347 U.S. 110, 122 (1954) ("The doctrine of
sovereign immunity is so embedded in constitutional history and
practice that this Court cannot subject the [federal] Government
or its official agencies to state taxation . . . .").
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inter alia, (1) whether the statute's definition of "demand"
includes a timing requirement, in light of the use of the term
"adversary adjudication" in the EAJA; (2) whether the statute
encompasses injunctive relief; (3) and the meaning of Section
2412(d)(2)(I)'s safe harbor. And if in doing so the district court
finds the SEC made an excessive demand, the court should evaluate
the reasonableness of that demand in comparison to the final
judgment obtained.
We vacate the district court's denial of Lemelson's
motion and remand for further proceedings consistent with this
opinion. No costs are awarded.
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