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SEC v. WILLIS

March 19, 1992

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, against ROBERT H. WILLIS, MARTIN B. SLOATE, HOWARD KAYE and KENNETH STEIN, Defendants.


The opinion of the court was delivered by: WILLIAM C. CONNER

 CONNER, D.J.:

 In this action, the Securities and Exchange Commission (the "SEC") charges defendant Martin B. Sloate ("Sloate") with violating Section 10(b) of the Securities Exchange Act, and Rule 1Ob-5 promulgated thereunder, under the misappropriation theory of liability. This matter is before the Court on the motion of defendant Sloate to reargue this Court's denial of his motion to dismiss the Complaint. Sloate contends that the Second Circuit's en banc decision in United States v. Chestman, 947 F.2d 551 (2d Cir. 1991), petition for cert. filed, No. 91-1085 (U.S. Jan. 2, 1992) (hereinafter "Chestman II "), as well as a recent motion in a criminal case against a former defendant herein, Robert H. Willis ("Willis"), support reargument of certain of the issues already presented by Sloate and rejected by this Court in its decision of November 15, 1991. The Court assumes familiarity with its earlier decision.

 BACKGROUND

 Commencing on or about April 3, 1981, Willis communicated to Sloate material, nonpublic information about the Shearson merger which Willis had obtained in confidence from Mrs. Weill. Cmplt. at P25. From on or about April 9 through 14, 1981, Sloate, while in possession of the information, traded in Shearson securities for his own account and for at least two of his customer accounts. Cmplt. at PP27-28. Commencing on or about January 14, 1986, Willis communicated to Sloate material, nonpublic information about Weill's BankAmerica plans which Willis had obtained in confidence from Mrs. Weill. Cmplt. at P52. From on or about January 22, 1986 through on or about February 11, 1986, while in possession of the information, Sloate traded in BankAmerica securities for his own account and on behalf of his customers. Cmplt. at PP55, 57.

 The Complaint further alleges that (1) Sloate tipped Stein, his customer and friend, confidential information about both the Shearson merger and Weill's BankAmerica plans (Cmplt. at PP30, 63), and (2) he tipped Kaye, his friend and neighbor, about Weill's BankAmerica plans (Cmplt. at P60). Sloate allegedly communicated to Stein and Willis that the information had been obtained from a friend who was a psychiatrist, and that the psychiatrist's source of that information was a Willis patient who was a Weill family member. Cmplt. at PP30, 60, 63. Sloate is alleged to have earned profits and commissions on the purchases and sales of the Shearson and BankAmerica stock for himself and for his customers. Cmplt. at PP32, 36, 38, 56, 58.

 DISCUSSION

 Standard for Reargument

 The standard for granting a motion for reargument is strict in order to preclude repetitive arguments on issues that have already been considered fully by the court. Ruiz v. Commissioner of D.O.T. of City of New York, 687 F. Supp. 888, 890 (S.D.N.Y.), aff'd, 858 F.2d 898 (2d Cir. 1988). Such motions may be granted only where the court has overlooked matters or controlling decisions which might have materially influenced the earlier decision. See Caleb & Co. v. E.I. DuPont De Nemours & Co., 624 F. Supp. 747, 748 (S.D.N.Y. 1985) (citing New York Guardian Mortgagee Corp. v. Cleland, 473 F. Supp. 409, 420 (S.D.N.Y. 1979)).

 Sloate's Motion to Reargue

 In support of his motion to reargue, Sloate contends that this Court considered, but misconstrued, a controlling precedent, Chestman II. In addition, Sloate points to former defendant Willis's withdrawal of his guilty plea in the criminal action entitled United States v. Willis, 89 Cr. 561 (MGC), a case involving many of the same facts alleged in the Complaint in this action. The purpose of Willis's plea withdrawal was to allow Judge Cedarbaum to reconsider her earlier decision denying Willis's two prior motions to dismiss the indictment, see United States v. Willis, 737 F Supp. 269 (S.D.N.Y. 1990), in light of the recently issued en banc decision in Chestman II. Judge Cedarbaum denied Willis's renewed motion. See United States v. Willis, 778 F. Supp. 205 (S.D.N.Y. 1991).

 The Court cannot agree with Sloate's analysis. In a misappropriation case, the Complaint must allege a breach of a fiduciary relationship or a similar relationship of trust or confidence. United States v. Carpenter, 791 F.2d 1024 (2d Cir. 1986), aff'd, 484 U.S. 19, 98 L. Ed. 2d 275, 108 S. Ct. 316 (1987). "The critical relationship is the one between the misappropriator and the person to whom the misappropriator owes a fiduciary duty, and not the relationship between such person and any insider source of the information." United States v. Willis, 778 F. Supp. 205, 208 (S.D.N.Y. 1991). In Chestman II, the government charged that Keith Loeb misappropriated confidential information from his wife, Susan Loeb -- consequently, the relationship between husband and wife was pertinent. In the instant case, the government has alleged that Sloate was a tippee of confidential information misappropriated by Dr. Willis from his patient, Mrs. Weill. In this case, the analogous relationship to that between Keith Loeb and his wife ...


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