Securities & Exchange Commission v. Levine et al, No. 2:2007cv00506 - Document 130 (D. Nev. 2010)
Court Description: ORDER granting 120 Motion for District Judge to Reconsider Order and VACATES the portion of Order 118 denying the SECs motion for summary judgment against MaryAnn Metz as to her liability under Section 5 of the Exchange and Securities Act. Plain tiff Securities and Exchange Commission shall file a proposed order and final judgment granting the SECs motion for summary judgment as to MaryAnn Metzs liability under Section 5 of the Exchange and Securities Act within 30 days of this Order. Signed by Judge Lloyd D. George on 7/28/10. (Copies have been distributed pursuant to the NEF - ECS)
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Securities & Exchange Commission v. Levine et al Doc. 130 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 DISTRICT OF NEVADA 7 8 9 10 SECURITIES AND EXCHANGE COMMISSION, 2:07-cv-00506-LDG-RJJ 11 Plaintiff, ORDER 12 v. 13 GERALD HAROLD LEVINE, et al., 14 Defendants. 15 16 17 18 By order, filed on March 16, 2010, this Court entered an order granting the Plaintiff 19 Securities and Exchange Commission’s (“SEC”) motion for summary judgment against defendants 20 Gerald Levine, Marie Levine, Alan Copeland, and Nu Star (#118). The Court denied the SEC’s 21 motion in its entirety as it pertained to defendant MaryAnn Metz because “issues of fact exist[ed] 22 whether [her] conduct met the scienter and state of mind requirements of the alleged violations of 23 the Exchange and Securities Acts.” The SEC has moved for reconsideration of the portion of the 24 Court’s order that pertains to the SEC’s claim against MaryAnn Metz under Section 5 of the 25 Securities Act of 1933 (#120) and for summary judgment against MaryAnn Metz on that claim. 26 Dockets.Justia.com 1 The SEC argues that a Section 5 claim has no scienter element. The Court grants the motion for 2 reconsideration based on the following. 3 Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a), (c), forbid the 4 unregistered offer or sale of securities in interstate commerce. The plain language of the statute 5 has no scienter requirement. 15 U.S.C. §§ 77e(a), (c). See SEC v. Alpha Telecom, Inc., 187 F. 6 Supp. 2d 1250, 1258 (D. Or. 2002) (“There is no scienter requirement under Section 5”), aff’d sub 7 nom, SEC v. Rubera, 350 F.3d 1084 (9th Cir. 2003). Furthermore, other circuits have held that no 8 scienter is required under a Section 5 claim. SEC v. Calvo, 378 F.3d 1211, 1215 (11th Cir. 2004) 9 (“Scienter is not a consideration”); Swenson v. Englestad 626 F.2d 421, 424 (5th Cir. 1980) ("The 10 Securities Act of 1933 imposes strict liability on offerors and sellers of unregistered securities . . . 11 regardless of . . . any degree of fault, negligent or intentional, on the seller's part") (internal citation 12 omitted) . 13 In this case, there is no dispute that neither Nu Star nor Judgment Recovery Service (JRS) 14 filed registration statements with the SEC. Section 5 liability extends to those who are “both a 15 necessary factor and a substantial factor in the sales transaction[s].” SEC v. Phan, 500 F.3d 16 895, 901 (9th Cir. 2007). Defendant MaryAnn Metz, as an officer and director of Nu Star 17 and JRS, approved the sale of Nu Star JRS stock and signed the paperwork authorizing the stock 18 offering making her a “substantial factor” in the unregistered sale of Nu Star and JRS stock. 19 Accordingly, she is liable for violating Section 5. 20 THE COURT HEREBY GRANTS PLAINTIFF’S MOTION FOR RECONSIDERATION 21 (#120) AND VACATES the portion of its March 16, 2010, order (#118) denying the SEC’s 22 motion for summary judgment against MaryAnn Metz as to her liability under Section 5 of the 23 Exchange and Securities Act. 24 25 THE COURT FURTHER ORDERS that plaintiff Securities and Exchange Commission shall file a proposed order and final judgment granting the SEC’s motion for summary judgment 26 2 1 as to MaryAnn Metz’s liability under Section 5 of the Exchange and Securities Act within thirty 2 (30) days of the filing of this order. 3 DATED this _____ day of July, 2010. 4 5 ______________________________ Lloyd D. George United States District Judge 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 3
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