Case of the Day: Lathigee v. BC Securities Commission
Posted on December 22, 2020
The case of the day is Lathigee v. British Columbia Securities Commission (Nev. 2020). The British Columbia securities regulator brought an administrative proceeding in British Columbia for securities fraud against Michael Lathigee. The proceeding resulted in a judgment that he had raised millions of dollars from investors without making necessary disclosures. The regulator ordered disgorgement of “the ill-gotten $21.7 million” to the Commission, which had rules allowing the defrauded investors to make claims and then recover from the disgorged funds. The decision also imposed a $15 million penalty. The Commission registered the decision with the BC Supreme Court, which had the effect, under BC law, of making the decision an enforceable judgment. Lethigee then moved to Nevada, and the Commission brought an action for recognition and enforcement of the disgorgement portion of the judgment (not the penalty portion). Lathigee resisted recognition on the grounds that even the disgorgement portion was a penalty.
The UCMJRA, which Nevada has adopted, does not apply, by its terms, to money judgments for a “fine or other penalty.” But the law has a savings clause allowing courts to consider whether to recognize judgments that do not fall under the statute on the basis of comity or otherwise.
The court reasoned that although the judgment ran in favor of the BC government, it was remedial in its purpose, because the funds recovered were meant to provide restitution to the investors. See Restatement (Third) of the Foreign Relations Law of the United States § 483 cmt. b (1987). As an alternative basis for the decision, the court held that the judgment was properly recognized as a matter of comity, noting that Canada has recognized similar disgorgement judgments in favor of the SEC. The court emphasized the “special strength” of the comity rationale in the case of Canada, since the two countries often work together to defeat securities fraud.