The opinion of the court was delivered by: PETER LEISURE, District Judge
Plaintiff, Securities and Exchange Commission ("SEC"),
initiated this action against defendants for violations of the
federal securities laws in connection with the registration for
the initial public offering of Windfall Capital Corp.
("Windfall") and trading irregularities involving defendant U.S.
Environmental, Inc.'s ("USE") stock. Following a bench trial,
this Court entered judgment against defendants Michael T. Studer
and Castle Securities, Corp. ("Castle") on July 21, 2003 ("order"
or "July 21 order").*fn1 The judgment enjoined both
defendants and held defendants jointly and severably liable for
illegitimate profits and prejudgment interest. Defendant Studer filed this motion for relief or a new trial
pursuant to Rule 60 of the Federal Rules of Civil Procedure
("FRCP") pro se*fn2 on October 31, 2003, and supporting
memorandum on January 6, 2004. Defendant alleges that on October
1, 2003, he gained possession of exculpatory evidence which was
not made available to him or his defense counsel, John E. Lawlor,
Esq., during the discovery period of the instant action. For the
reasons set forth below, defendant's motion is denied.
The factual background of this case is explained in detail in
the findings of fact of this Court's July 21 order, U.S.
Envtl., 2003 WL 21697891, familiarity with which is assumed. On
September 13, 1994, SEC brought this action alleging violations
of the antifraud provisions of the federal securities laws in
connection with the registration for the initial public offering
of Windfall and trading irregularities involving defendant USE's
stock. On July 21, 2003, after a bench trial, this Court entered
judgment granting SEC full relief against defendants Studer and
Castle, and finding defendants had violated sections 5(a), 5(c)
and 17(a) of the Securities Act of 1933 and sections 10(b) and
15(c)(1) of the Securities and Exchange Act of 1934. Defendants
Studer and Castle were permanently enjoined from engaging in any
future securities related activities. Defendants were also held
jointly and severably liable for $134,224 in illegitimate profits
and approximately $240,000 in prejudgment interest running from
September 30, 1990 to July 21, 2003, calculated pursuant to the
Internal Revenue Service's statutory rate. Defendant filed a
notice of appeal on August 28, 2003.*fn3 On August 20, 2003,
Securities and Exchange Commission issued an Order Instituting Public Administrative
Proceedings and Notice of Hearing ("OIP"), pursuant to section
15(b) of the Securities Exchange Act of 1934, against defendants
Studer and Castle. Plaintiff's Memorandum in Opposition to
Defendant's Motion for a New Trial ("Pl.'s Mem.") at 3. The OIP
was to determine if any remedial sanctions should be imposed
against defendants. Id. During discovery in preparation for the
OIP action, plaintiff sent both defendants electronic copies of
all transcripts of SEC's investigatory interviews relevant to the
action that were not offered into evidence during the bench
trial. Id. at 4. Defendant Studer alleges that two of these
transcripts, those of 1990 SEC interviews with Alan Berkun and
Paula Morelli, were not made available to either Studer or his
legal counsel, during discovery prior to the bench trial before
this Court. On this basis, defendant moves for relief or a new
trial pursuant to FRCP Rule 60.
1. Motion for Relief From Judgment or a New Trial
Construed liberally, defendant's motion is properly analyzed
under FRCP Rule 60(b). See LaBounty v. Adler, 933 F.2d 121,
122 (2d Cir. 1991) (obliging courts to construe pro se
litigants' papers liberally). Rule 60(b) provides that: On motion and upon such terms as are just, the court
may relieve a party or a party's legal representative
from a final judgment, order, or proceeding for the
following reasons: (1) mistake, inadvertence,
surprise, or excusable neglect; (2) newly discovered
evidence which by due diligence could not have been
discovered in time to move for a new trial under Rule
59(b) [ten days post-judgment]; (3) fraud . . .,
misrepresentation, or other misconduct of an adverse
party; (4) the judgment is void; (5) the judgment has
been satisfied, released, or discharged . . .; or (6)
any other reason justifying relief from the operation
of the judgment.
Fed.R. Civ. Pro. 60(b). Rule 60(b) further requires that
"[t]he motion shall be made within a reasonable time" and within
one year of final judgment for subsections (1)-(3). A motion for
a new trial is "addressed to the sound discretion of the district
court," and the court's decision is reviewed only for abuse of
discretion. Nemaizer v. Baker, 793 F.2d 58, 61-62 (2d Cir.
1986). The Second Circuit has stated that Rule 60(b) "`preserves
a balance between serving the ends of justice and ensuring that
litigation reaches an end within a finite period of time.'"
Paddington Partners v. Bouchard, 34 F.3d 1132, 1144 (2d Cir.
1994) (quoting House v. Sec'y of Health & Human Servs.,
688 F.2d 7, 9 (2d Cir. 1982)). Although the rule "should be broadly
construed to do `substantial justice,' . . . final judgments
should not be lightly reopened." Nemaizer, 793 F.2d at 61
(citing Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 401 (5th
Cir. 1981)). Because Rule 60(b) allows extraordinary judicial
relief, it is invoked only if the party seeking relief from
judgment meets the heavy burden of demonstrating "exceptional
circumstances," Paddington, 34 F.3d at 1142, or "extreme and
undue hardship." DeWeerth v. Baldinger, 38 F.3d 1266, 1272 (2d
Cir. 1994) (internal quotations and citations omitted); see
United States v. Int'l Bhd. of Teamsters, 247 F.3d 370, 391 (2d
Cir. 2001); Nemaizer, 793 F.2d at 61. Finally, although "[a]
pro se litigant . . . `should not be impaired by the harsh
application of technical rules,'" they are not excused from the
requirement that they produce "highly convincing" evidence to
support a Rule 60(b) motion. Major v. Coughlin, No. 94 Civ.
7572, 1997 WL 391121, at *2 (S.D.N.Y. July 11, 1997) (quoting Kotlicky v. U.S. Fid. & Guar. Co.,
817 F.2d 6, 9 (2d Cir. 1987); Traguth v. Zuck, 710 F.2d 90, 95 (2d
In the instant action, defendant's motion does not reference
specific subsections of Rule 60, however, the Court believes
subdivision (b)(2) is the most relevant to defendant's argument.
Defendant argues that new evidence quashes, or at minimum
lessens, his responsibility for the securities violations found
in this Court's July 21 order. He further argues that this
evidence was in plaintiff's possession at the time of trial but
was not made available to defendant or his counsel until October
1, 2003. This claim clearly sounds in subsection (b)(2). Rule
60(b)(6) is inapplicable because it requires a showing that,
among other things, "the asserted grounds for relief are not
recognized in clauses (1)-(5)." Nemaizer, 793 F.2d at 63. Thus,
because section (b)(2) controls defendant's claims, section
(b)(6) is not properly considered by this Court.
II. Defendant's claim analyzed pursuant to Rule 60(b)(2)
A party moving for relief or a new trial under Rule 60(b)(2)
faces "an onerous standard." Int'l Bhd. of Teamsters,
247 F.3d at 392. Defendant must show (1) that the newly discovered
evidence existed at the time of the proceeding; (2) defendant was
justifiably ignorant of the evidence because it could not
previously have been discovered despite exercising due diligence;
(3) the evidence is admissible and would have likely changed the
outcome of the proceeding; (4) the evidence is not "merely
cumulative or impeaching." Id.
Defendant fails to meet the second requirement under Rule
60(b)(2), justifiable ignorance, because if he or his counsel had
exercised due diligence, the evidence could have been discovered
in time for trial or a Rule 59 motion for a new trial. According
to plaintiff representatives' sworn statements, the allegedly
exculpatory transcripts excerpted in defendant's motion papers
were made available to all defendants and their counsel beginning
in 1994 and continuing through April 2001. Declaration of Alexander M.
Vasilescu, Esq. ("Vasilescu Decl.") ¶¶ 11-13 (swearing to the
availability of the transcripts from 1999-April 2001);
Declaration of Clark S. Abrams, Esq. ("Abrams Decl.") ¶¶ 2-3
(swearing to the availability of the transcripts from 1994-1998).
Because of the voluminous quality, the transcripts at issue and
all other investigatory transcripts were held at SEC's New York
offices. Vasilescu Decl. ¶ 11. Defense counsel was invited to
inspect and tag whichever transcripts counsel wished to copy.
Id. SEC's principal counsel on the matter from 1994-1998, Mr.
Abrams, does not specifically remember if Mr. Lawlor ever visited
SEC's office but does remember that defendant Studer did not
visit. Abrams Decl. ¶ 5. SEC's principal counsel on the matter
from 1999-present, Mr. Vasilescu, states that during his many
discovery-related conversations with Mr. Lawlor, Mr. Lawlor never
showed any interest in reviewing the transcripts. Vasilescu Decl.
¶ 13. Further, SEC actually introduced portions of the
transcripts at issue while deposing other witnesses, thus
evidencing that Studer and Mr. Lawlor were quite aware of the
transcripts' existence. Id. ¶ 16.
The only "evidence" defendant offers to refute plaintiff's
sworn statements is defendant's recollection of a phone call
between himself and Mr. Lawlor wherein Mr. Lawlor stated that the
Berkun and Morelli transcripts "were not made available to him in
discovery."*fn4 Defendant Michael T. Studer's Memorandum in
Support of Defendant's Motion for Relief or a New Trial ("Def.'s
Mem.") at 2. However, defendant fails to submit a statement from
Mr. Lawlor corroborating this claim. Nor does defendant have any
personal knowledge of what was available during discovery.
Transcript of October 21, 2003 SEC OIP Hearing, Vasilescu Decl., Exhibit 6 ("Exh. 6") at 29-30. Further, when testifying during
SEC's OIP proceeding, Studer demonstrated a murky recollection of
his phone call with Mr. Lawlor: "[Mr. Lawlor] told me verbally
that it was not available, the two [transcripts] that I'm
introducing today. He didn't know . . . he did represent to me
that he did not see the two that I'm introducing today." Id. at
Defendant fails to meet the high burden of clear and convincing
evidence required for the Court to revisit its July 21, 2003
decision. See Anthony v. City of New York, No. 00 Civ. 4688,
2002 WL 731719, *4 (S.D.N.Y. Apr. 25, 2003) ("[T]he newly
discovered evidence must be `highly convincing.'" (quoting
Kotlicky, 817 F.2d at 9)). Defendant's account of his phone
conversation with Mr. Lawlor leaves this Court in quandary as to
whether the transcripts at issue were 1) available; 2)
unavailable or; 3) available but Mr. Lawlor failed to review them
at SEC's invitation and thus "did not see" the Berkun and Morelli
transcripts. Therefore, the evidentiary value of Studer's
description of the phone call is not at all "clear" as required
under Rule 60. Nor is the evidence that the transcripts were
unavailable "convincing" as required under the Rule. Defendant's
claim is uncorroborated as lacking a sworn statement of one with
personal knowledge of documents available for discovery.
Defendant offers no objective evidence other than his own
self-serving, post-judgment account of a phone call between him
and his attorney. Cf. United States v. Gordan, 156 F.3d 376,
380-81 (2d Cir. 1998) (noting that petitioners post-conviction,
self-serving claim of ineffective assistance of counsel required
objective corroboration to be considered). Moreover, that SEC
freely and voluntarily reproduced the transcripts for defendant
during discovery for the OIP hearing tends to show that the
transcripts were in fact available. Based on all the ...