## Facts

- In a prior SEC enforcement action, the court entered a final consent decree permanently enjoining Robert Maurice Sherwood from violating the Securities Act of 1933 registration provisions in the offer and sale of Canadian Javelin Limited common stock.
- During the consent proceedings, it was stated that shares Sherwood received from the issuer or a control person would be treated as “control shares” in his hands and would not be sold without registration or an SEC no-action letter followed by a court modification of the injunction.
- After the injunction, Sherwood sold substantial amounts of Canadian Javelin stock in the United States and Canada without filing a registration statement, and without obtaining an SEC no-action letter and modification of the decree.
- The United States initiated a criminal contempt proceeding under Federal Rule of Criminal Procedure 42(b) and 18 U.S.C. § 401, alleging Sherwood willfully violated the injunction.
- Sherwood opposed, contending the injunction was not sufficiently definite to support criminal contempt and disputing that the sales were of a type requiring registration, including disputing that he was a control person or statutory underwriter.

## Issues

1. Whether Sherwood’s post-injunction stock sales fell within conduct clearly prohibited by the injunction.
2. Whether, for the challenged sales, Sherwood was a control person or a statutory underwriter such that registration was required under the Securities Act of 1933.
3. Whether the injunction was sufficiently definite under Federal Rule of Civil Procedure 65(d) to support criminal contempt, and whether a willful violation was proven beyond a reasonable doubt.

## Decision

- The court denied the government’s application and refused to adjudge Sherwood in criminal contempt.
- The government failed to prove beyond a reasonable doubt that the challenged sales violated the injunction.
- Properly construed, the injunction did not clearly and unequivocally prohibit the specific sales at issue absent a proven showing that registration was required for those transactions.

## Legal Principles

- Criminal contempt requires proof beyond a reasonable doubt of a willful violation of a clear and unambiguous court order.
- An injunction must describe in reasonable detail the acts restrained; generalized commands can be insufficient for criminal contempt where violation turns on fact-intensive legal classifications.
- An injunction against “violations” of securities registration provisions reaches only transactions for which the securities laws require registration; contempt cannot rest on uncertain or disputed applicability of registration duties.
- Whether resales require registration may depend on evidence of actual control and whether the seller acquired securities with a view to distribution (statutory underwriter status), including circumstances such as ownership percentage, influence over management, holding period, and intent at acquisition.

## Conclusion

The court declined to impose criminal contempt sanctions because the government did not prove beyond a reasonable doubt that Sherwood’s stock sales were transactions requiring registration and plainly covered by the injunction, and the order’s general phrasing and the disputed control/underwriter questions prevented a finding of a clear, willful violation.


United States v. Sherwood, 175 F. Supp. 480 (S.D.N.Y. 1959)