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Securities and Exchange Commission v. Joseph F. Apuzzo

August 8, 2012

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF-APPELLANT,
v.
JOSEPH F. APUZZO, DEFENDANT-APPELLEE



Appeal from the judgment of the United States District Court for the District of Connecticut (Thompson, J.) granting the motion of Defendant-Appellee Joseph Apuzzo to dismiss the Complaint. The Securities and Exchange Commission alleges that Apuzzo aided and abetted securities laws violations through his role in a fraudulent accounting scheme.

The opinion of the court was delivered by: Rakoff, District Judge:

11-696-cv

SEC v. Apuzzo

Argued: March 14, 2012

- 11-696-cv

22 Before 23 WINTER, RAGGI, Circuit Judges, and RAKOFF, District Judge*fn1

The district 29 court granted Apuzzo's motion to dismiss on the ground that the Complaint did not meet the 30 "substantial assistance" component of aiding and abetting liability because it failed to adequately 31 allege that Apuzzo proximately caused the harm on which the primary violation was predicated.

1 We hold that, in SEC civil enforcement actions, the test for substantial assistance is that the aider 2 and abettor "in some sort associate[d] himself with the venture, that he participate[d] in it as in 3 something that he wishe[d] to bring about, [and] that he [sought] by his action to make it 4 succeed." United States v. Peoni, 100 F.2d 401, 402 (2d Cir. 1938). Applying that test, we hold 5 that the Complaint plausibly alleged that Apuzzo aided and abetted the primary violation.

6 REVERSED and REMANDED.

18 The Securities and Exchange Commission ("SEC") alleges that defendant Joseph Apuzzo 19 aided and abetted securities laws violations through his role in a fraudulent accounting scheme. 20 In order for a defendant to be liable as an aider and abettor in a civil enforcement action, the SEC 21 must prove: "(1) the existence of a securities law violation by the primary (as opposed to the 22 aiding and abetting) party; (2) 'knowledge' of this violation on the part of the aider and abettor; 23 and (3) 'substantial assistance' by the aider and abettor in the achievement of the primary 24 violation." SEC v. DiBella, 587 F.3d 553, 566 (2d Cir. 2009) (quoting Bloor v. Carro, 25 Spanbock, Londin, Rodman & Fass, 754 F.2d 57, 62 (2d Cir. 1985)). After Apuzzo moved to 26 dismiss the Complaint, the district court, Thompson, J., granted Apuzzo's motion to dismiss. 27 Although the district court found that the Complaint plausibly alleged that Apuzzo had actual 28 knowledge of the primary violation, it concluded that the Complaint did not adequately allege 29 "substantial assistance." Specifically, the district court held that the "substantial assistance" 2 1 component required that the aider and abettor proximately cause the harm on which the primary 2 violation was predicated, and that the Complaint did not plausibly allege such proximate 3 causation.

4 For the reasons set forth below, we hold that to satisfy the "substantial assistance" 5 component of aiding and abetting, the SEC must show that the defendant "in some sort 6 associate[d] himself with the venture, that he participate[d] in it as in something that he wishe[d] 7 to bring about, [and] that he [sought] by his action to make it succeed." United States v. Peoni, 8 100 F.2d 401, 402 (2d Cir. 1938). Applying that test, we hold that the Complaint plausibly 9 alleged that Apuzzo aided and abetted the primary violation, and we therefore reverse the district 10 court.

11 FACTUAL ALLEGATIONS

12 We review de novo a district court's dismissal of a complaint under Rule 12(b)(6). 13 Litwin v. Blackstone Group, L.P., 634 F.3d 706, 715 (2d Cir. 2011). We accept as true all well- 14 pleaded factual allegations in the Complaint and we draw all reasonable inferences in favor of 15 the plaintiff. Id. To survive a motion to dismiss, "a complaint must plead enough facts to state a 16 claim to relief that is plausible on its face." Id. (quoting ECA, Local 134 IBEW Joint Pension 17 Trust of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 196 (2d Cir. 2009)). "A claim has 18 facial plausibility when the plaintiff pleads factual content that allows the court to draw the 19 reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 20 556 U.S. 662, 678 (2009).

21 The following facts are drawn from the allegations in the Complaint, together with those 22 "documents . . . incorporated in it by reference" and "matters of which judicial notice may be 3 1 taken." Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002) (internal quotation 2 marks omitted). 3 The Terex Corporation ("Terex") manufactures ...


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