SAN FRANCISCO—On October 11, the Securities and Exchange Commission (SEC) was able to convince the United States Court of Appeals for the Ninth Circuit to affirm its summary judgement already granted by a lower court.
Circuit Judge Clifford Wallace authored the opinion; fellow judges Marsha S. Berzon and Conseulo M. Callahan concurred.
The appeals court affirmed the ruling in favor of the SEC from the United States District Court for the Central District of California. In its original lawsuit, the SEC accused defendant Mitchell Stein of infringing on several federal securities laws. The SEC sued Stein and Heart Tronics, claiming Stein, as official counsel for Heart Tronics, took part in multiple fraudulent schemes to boost the company’s stock price in order to profit from selling its securities to potential investors.
9th Circuit Judge Marsha Berzon
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The Department of Justice also charged Stein with 14 counts on his fraudulent activity, and he was convicted of all of them.
The appeals court said that the prior convictions gave the SEC everything it needed to prove the securities fraud claims. Stein appealed the lower court’s decision, which granted the SEC its motion for summary judgment, but the appeals court rejected his arguments, including the one concerning the application of issue preclusion, which blocks “parties from relitigating an issue if the same issue was already adjudicated in prior litigation,” the court pointed out. It also determined the district court acted correctly when it denied Stein’s request for a continuance pending further discovery. It said Stein didn’t meet the requirements for Rule 56(d) as he didn’t point out which facts would possibly be discovered if he was allowed more discovery time. The appeals court also decided the lower court correctly denied Stein’s motion for summary judgement.
“Stein’s criminal conviction conclusively established all of the facts the SEC was required to prove with respect to the specified fraud claims,” the appeals court reiterated as it backed the lower court’s ruling to grant the SEC its motion for summary judgement.