Securities and Exchange Commission v. Stein, No. 15-55506 (9th Cir. 2018)
Annotate this CaseThe Ninth Circuit affirmed the district court's grant of summary judgment for the SEC on its claims that defendant violated federal securities laws. Having considered the records in the criminal and civil proceedings in light of the relevant Restatement factors, the panel held that defendant's conviction determined the identical issues the SEC was required to prove to establish defendant's liability for securities fraud. Therefore, the district court did not err in entering summary judgment based on the preclusive effect of defendant's conviction. The panel rejected defendant's arguments to the contrary, and all pending motions were denied as moot.
Court Description: Securities Law. The panel affirmed the district court’s summary judgment in favor of the Securities and Exchange Commission (“SEC”) on the SEC’s claims that Mitchell Stein violated various federal securities laws. The SEC brought a civil enforcement action against Stein, alleging that while he acted as purported outside counsel to co-defendant Heart Tronics, he engaged in a series of frauds designed to inflate the company’s stock price so that he could profit from selling its securities to investors. Concurrently with the SEC’s case, the Department of Justice brought a criminal case, charging Stein with fourteen counts for the same fraudulent conduct; and Stein was convicted on all counts. The panel held that Stein’s criminal conviction conclusively established all of the facts the SEC was required to prove with respect to the specified securities fraud claims. First, both the criminal and civil case involved the same fraudulent scheme carried out by Stein. Second, the SEC’s securities fraud claims involved “the application of the same rule of law” as that involved in the criminal case. Finally, pretrial preparation and discovery related to the criminal proceeding could “reasonably be expected” to have embraced the issues sought to be presented in the SEC’s civil case. The panel concluded that the district court did not err
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