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* Local Rule 47.5 provides: "The publication of opinions that
have no precedential value and merely decide particular cases on
the basis of well-settled principles of law imposes needless
expense on the public and burdens on the legal profession."
Pursuant to that Rule, the Court has determined that this opinion
should not be published.
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 94-10597
Summary Calendar
__________________
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff-Appellee,
versus
MAXWELL C. HUFFMAN, JR.,
ET AL.,
Defendants,
JAMES F. STEWART,
Defendant-Appellant.
______________________________________________
Appeal from the United States District Court for the
Northern District of Texas
(3:90-CV-2036-H)
______________________________________________
(April 17, 1995)
Before GARWOOD, HIGGINBOTHAM and DAVIS, Circuit Judges.*
GARWOOD, Circuit Judge:
Defendant-appellant James F. Stewart (Stewart) appeals the
district court's judgment ordering him to disgorge $513,784, an

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2
amount equal to funds allegedly acquired in violation of the
securities laws. On appeal, Stewart argues that the district court
erred in disallowing an offset for state law exemptions and in
finding that he had failed to prove an inability to pay. We
affirm.
Facts and Proceedings Below
In September 1990, the Securities and Exchange Commission (the
SEC) filed a civil suit against Stewart, Maxwell C. Huffman, Jr.,
James T. Henry, John J. Forsberg, and twenty-seven corporate
defendants they controlled, alleging violations of several
provisions of the securities laws. Without conceding liability,
Stewart and the other individual defendants consented to permanent
injunctions and orders to disgorge an amount equal to the profits
received from the illegal activities alleged in the SEC's
complaint. In the consent agreement, the defendants preserved as
an affirmative defense their inability to pay some or all of the
ordered disgorgement. The district court then entered the
settlement as a consent order, which, among other things, directed
Stewart to pay $513,784.
The defendants all claimed they were unable to pay the
disgorgement. Following an evidentiary hearing on August 26, 1991,
a magistrate judge appointed by the district court determined that
the Debt Act, 28 U.S.C. § 3001 et seq., applied to disgorgement
orders. The Debt Act permits an individual debtor to exempt from
collection under the Act any property that is exempt from debt
collection under the state law of the debtor's domicile. Id. §
3014(a)(2)(A). On this basis, the magistrate judge reduced the

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1 All the defendants had some exempt property and were
therefore ordered to pay amounts smaller than those specified in
the consent order.
2 In a footnote, we observed that the parties had assumed that
the amounts ordered to be repaid "are a form of 'disgorgement,'
rather than the simple settlement of a law suit" and, in so
doing, had further assumed that the amounts they were ordered to
3
amount each defendant was ordered to disgorge in accordance with
Texas homestead, personal property, and retirement plan exemptions.
The magistrate judge found that Stewart had $385,925 in non-exempt
assets and, in a report filed on November 29, 1991, recommended
that he be ordered to disgorge that amount. After increasing
Stewart's personal property exemption, the district court, on
January 15, 1992, adopted over Stewart's objection the report and
recommendations of the magistrate judge, and ordered Stewart to
disgorge $354,925.59.1 On January 27, 1992, Stewart filed a motion
for reconsideration, arguing that the magistrate judge had
miscalculated the amount of non-exempt assets available for
disgorgement. The district court denied his motion, observing that
Stewart had not "plainly and unmistakably" shown an inability to
pay the amount ordered.
Stewart and the other defendants appealed the district court's
calculation of assets available for disgorgement, and the SEC
cross-appealed the district court's determination that the Debt Act
applied to disgorgement orders. We reversed and held that
disgorgement is not a debt under the Debt Act and that,
consequently, the defendants were not entitled to any state law
exemptions as a matter of right. S.E.C. v. Huffman, 996 F.2d 800,
803 (5th Cir. 1993) (Huffman I).2 We noted, however, that

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pay should be analyzed under disgorgement as opposed to standard
contract principles. Huffman I, 996 F.2d at 801 n.1. Although
recognizing that such distinctions may relate to whether the Debt
Act applies and thus whether state law exemptions must be
allowed, we determined not to consider the question because
neither party had raised it. In this appeal, Stewart now
attempts to raise this point for the first time, engaging in a
dispute with the SEC over the applicability of a recent,
intervening case, Securities & Exchange Commission v. AMX
Internat'l, 7 F.3d 71, 76 (5th Cir. 1993). In AMX, this Court
held that an amount ordered as disgorgement is not a debt under
the Debt Act whether it results from a settlement agreement or
from full litigation. Stewart argues that AMX is distinguishable
because the amount of disgorgement in that case was determined by
litigation and not by consent. Id. at 72. Whatever the merits
of Stewart's argument, it comes too late. Our justified refusal
to consider this question in the first appeal is now law of the
case and therefore binding. Chevron USA v. Traillour Oil Co.,
987 F.2d 1138, 1150 (5th Cir. 1993). Our task in this second
appeal is merely "to follow the findings, holdings, and
instructions contained in the appellate court's initial mandate .
. . ." Reid v. Rolling Fork Public Utility, 979 F.2d 1084, 1086
(5th Cir. 1992) (internal quotation marks omitted). We did not
remand this case for a determination whether the Debt Act should
apply to the disgorgement; that determination was made once and
for all in the last appeal.
Also barred by the law of the case doctrine is Stewart's
argument that the consent agreement is voidable for mutual
mistake of law. This argument again relates to whether
disgorgement should be analyzed under standard contract
principles, an issue we explicitly decided not to consider in the
prior appeal because it had not been raised. Huffman I, 996 F.2d
at 801 n.1. We further observe that the argument is unpersuasive
in any event. Stewart has completely failed to show how, at the
time of the consent agreement, the SEC was under the mistaken
impression that the Debt Act applied to disgorgements; to the
contrary, the SEC has consistently argued that the Debt Act does
not apply. Indeed, Stewart has never alleged, either here or
below, that the SEC made any mistake of law; he merely notes that
all the defendants assumed that the Debt Act applied. By
definition, however, mutual mistake of law requires that both
contracting parties be mistaken. In re Topco, Inc., 894 F.2d
727, 738 (5th Cir. 1990) (applying Texas law).
4
principles of equity nevertheless give the district court broad
discretion to allow state law exemptions when fashioning a
disgorgement order. Id. Finally, we determined that the district
court had incorrectly required Stewart to establish his inability

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3 On remand, the magistrate judge allowed the parties to brief
the issue whether the defendants should benefit from state law
exemptions. On no other issues was additional briefing allowed.
5
to pay by plain and unmistakable proof. We held that the correct
standard of proof is a preponderance of the evidence, but noted
that the district court was not bound under either standard to
accept any "unsubstantiated, self-serving testimony as true." Id.
Leaving "to the trial court the decision whether on remand to re-
open the evidence or to re-evaluate it . . . in light of the
thorough record already compiled," we reversed and remanded. Id.
On remand, the magistrate judge reviewed, but did not re-open,
the evidence and concluded that the defendants had failed to
establish their inability to pay by a preponderance of the
evidence.3 Finding for a second time that the proof offered by the
defendants was "characterized by a lack of documentation and
corroboration," the magistrate judge rejected point by point
Stewart's contention that his available assets had been
miscalculated and determined that his alleged liabilities were
unsubstantiated. The magistrate judge also determined that state
law exemptions should not offset the full amount of disgorgement
($513,784). Over Stewart's detailed objections, the district court
adopted the magistrate judge's report and recommendations and, on
June 1, 1994, entered a final judgment directing Stewart to
disgorge the full $513,784 according to the following schedule:
one payment of $354,925.59 on August 17, 1994 (an amount equal to
the district court's prior calculation of non-exempt assets);
$25,000 a year from August 17, 1995 through August 17, 2000; and,

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4 On June 27, 1994, Stewart filed both his notice of appeal
and a motion to reconsider the judgment pursuant to Federal Rule
of Civil Procedure 60(b). The district court denied the motion
to reconsider on July 1, 1994. No further notice of appeal has
been filed. This appeal is therefore only from the district
court's June 1 judgment and not from the district court's denial
of Stewart's Rule 60(b) motion.
6
finally, one payment of $8,858.41 on August 17, 2001. This appeal
followed.4
Discussion
On appeal, Stewart makes the following three arguments: that
the district court erred in finding that he was able to pay the
ordered disgorgement, that the district court failed to apply the
correct evidentiary standard, and that the district court abused
its discretion in not applying state law property exemptions to
offset the total disgorgement.
At the outset, we must reject Stewart's contention that the
district court employed an erroneous evidentiary standard in
evaluating the quality of Stewart's proof on his inability-to-pay
defense. In the report adopted by the district court, the
magistrate judge clearly and unequivocally followed this Court's
instructions in the first appeal to apply the preponderance of the
evidence standard. The magistrate judge quoted our holding in
Huffman I as well as this Circuit's Pattern Jury Instructions,
which correctly define a preponderance of the evidence as "evidence
that persuades you that the plaintiff's claim is more likely true
than not." Pattern Jury Instructions (Civil Cases) 2.20 (West
1994).
We find unpersuasive Stewart's assertion that the magistrate

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7
judge merely nodded to the appropriate evidentiary standard. The
basis for this assertion is the magistrate judge's reliance on
caselaw requiring plain and unmistakable proof. However, the
magistrate judge made it clear that these cases were referred to
only for "guidance" and carefully noted that the plain and
unmistakable burden "does not apply to this determination."
Further, the magistrate judge cited these cases largely in
reference to the proposition that a party claiming an inability to
pay does not establish it simply by bald, conclusory assertions.
This proposition is equally true under the preponderance of the
evidence standard. As we stated in the first appeal, the
magistrate judge and district court are not "bound . . . to accept
[Stewart's] unsubstantiated, self-serving testimony as true."
Huffman I, 996 F.2d at 803.
We must also reject Stewart's contention that the district
court abused its discretion in disallowing state law exemptions.
As we held in Huffman I, the decision whether to apply state law
exemptions is committed to the broad discretion of the district
court under its power to fashion equitable remedies. Id. In the
report adopted by the district court, the magistrate judge examined
the reason for disgorgement and concluded that its primary goal was
deterrence, a goal that the magistrate judge concluded would be
frustrated here by the sizeable reduction Stewart and the other
defendants sought from state law property exemptions. This
determination, based as it is on equitable principles of public
policy, provides in the present factual context an adequate basis
for refusing to allow Stewart to benefit from generous exemptions,

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5 In arguing that the district court abused its discretion in
disallowing state law exemptions, Stewart has repeatedly insisted
that the magistrate judge incorrectly determined that he has
approximately $95,000 in non-exempt annuities. Stewart claims
that these assets are in fact part of, and not in addition to, an
exempt IRA account worth approximately $175,000. The magistrate
judge rejected this argument on remand, concluding that Stewart
had failed to establish that these annuities were part of his
retirement accounts. Even if the magistrate judge clearly erred
in this determination, and we believe she did not, Stewart has
completely failed to explain how these alleged errors relate to
his contention that the district court erred in disallowing state
law exemptions. That decision was based entirely on public
policy concerns, and on that basis we support it. The bare
allegation that Stewart has somewhat fewer non-exempt assets than
the magistrate found he had is beside that point. As we note
below, the magistrate judge took Stewart's contentions into
account in determining his ability to pay and on that basis
recommended a graduated payment plan. The plan devised by the
magistrate judge explicitly relied on Stewart's own estimates of
his assets. See infra note 8.
8
particularly as the district court factored equitable
considerations into its decision to spread the payment of a large
portion of the disgorgement over a period of seven years. The
district court therefore did not abuse its broad discretion.5
Finally, we must determine whether the district court clearly
erred in finding that Stewart had the ability to pay a disgorgement
of $513,789. We review the district court's factual findings for
clear error. Von Clark v. Butler, 916 F.2d 255, 258 (5th Cir.
1990); see also CFTC v. Wellington Precious Metals, Inc., 950 F.2d
1525, 1529 (11th Cir.), cert. denied, 113 S.Ct. 66 (1992). In her
report filed after remand, the magistrate judge reevaluated the
evidence concerning Stewart's ability to pay the disgorgement.
This confusing and sometimes conflicting evidence consisted of
Stewart's oral testimony at a hearing before the same magistrate
judge on August 26, 1991; three financial statements, one dated

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6 The magistrate judge reported,
"[E]ven accepting as true [Stewart's] representations
regarding his present financial condition, as set out
in his November 23, 1993 Brief . . ., Stewart has
sufficient assets to disgorge this amount. His brief
sets out that he has assets totalling $557,279 as of
October 29, 1993. In addition, his brief shows
retirement accounts worth $227,566. And accepting his
valuation as to the worth of his personalty as of
October, 1993, he has another $32,000 available to pay
his disgorgement." (citations omitted).
7 For instance, there is no writing (or testimony) from the
alleged mortgagee indicating that these liabilities in fact
exist. The same lack of corroboration characterizes Stewart's
9
1990, the other two dated 1991; his individual and corporate tax
returns for 1989 and 1990; and his oral deposition, given on April
10, 1991 and filed on May 24, 1991. After reviewing this evidence
on remand, the magistrate judge concluded that Stewart had failed
to prove an inability to pay by a preponderance of the evidence.
According to the evidence before the district court, including
an updated 1993 financial statement included in his brief on
remand, Stewart has, by his own admission, assets sufficient to pay
the disgorgement in full.6 On appeal, Stewart contends that the
district court erred, however, in not offsetting these assets by
more than $300,000 in alleged liabilities, which, he claims, reduce
his net worth to approximately $214,000SQan amount considerably
below the $354,925 the district court directed him to pay by August
17, 1994. The bulk of these liabilities stem from Stewart's sworn
assertion that his $300,000 homestead is subject to a $290,000
mortgage. At no time, however, has Stewart offered any evidence,
besides his own self-serving statements, that he in fact has this
or any other liability.7 Our explicit instructions in the prior

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claim at the 1991 hearing that a $67,000 mortgage receivable
Stewart obtained as inheritance is pledged to a bank.
8 Stewart's insistence that his own testimony is
uncontroverted by the SEC in no way makes his evidence less self-
serving or unsubstantiated. The burden is on Stewart to prove
his inability to pay by a preponderance of credible evidence, and
we have held that the district court may disregard evidence such
as that presented here.
10
appeal provided that "[t]he district court was not bound . . . to
accept [Stewart's] unsubstantiated, self-serving testimony as
true." Huffman I, 996 F.2d at 803. Because all the evidence in
the record concerning Stewart's liabilities is unsubstantiated and
self-serving, we can not say that the district court erred in
disregarding it. Accordingly, we hold that the district court did
not clearly err in finding that Stewart had failed to prove an
inability to pay the disgorgement by a preponderance of the
evidence.8
Conclusion
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.

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