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Securities and Exchange Commission v. Tourre

United States District Court, Second Circuit

January 7, 2014

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
FABRICE TOURRE, Defendant.

OPINION & ORDER

KATHERINE B. FORREST, District Judge.

On August 1, 2013, a jury returned a verdict against defendant Fabrice Tourre for violating a variety of provisions of the securities laws. The jury found Tourre liable of six of the seven of the SEC's claims against him; the jury found him to have violated Section 17(a)(1) of the Securities Act, Section 17(a)(2) of the Securities Act, Section 17(a)(3) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5(a), Section 10(b) of the Securities Exchange Act and Rule 10b-5(c), and Section 20(e) of the Securities Exchange Act. This verdict followed more than three years of litigation, and a trial comprised of eleven days of testimony in which Tourre declined to put on a case.

On September 30, 2013, Tourre moved, pursuant to Federal Rule of Civil Procedure 50(b) and 59(a)(1), for judgment as a matter of law or, in the alternative, for a new trial. (ECF No. 474.) In substance, Tourre raises the following sets of issues in support of his motion:

(1) That the jury returned verdicts based on insufficient evidence;
(2) That there was insufficient evidence for the jury to find that Tourre made any offer in the United States for purposes of the SEC's Section 17(a) claims, combined with what Tourre asserts was legal error by the Court in its instructions on the domesticity requirement of this statute;
(3) The Court erred in granting partial summary judgment on the issue of whether the swaps at issue were "security-based swap agreements";
(4) A catch-all argument that Tourre simply incorporates by reference that there was no evidence of any false statement or omission, no evidence that any such false statement or omission was material, no evidence that such a statement was made in connection with the offer, purchase or sale of a security-based swap agreement, and no evidence that Tourre acted with the requisite level of scienter; and
(5) That the finding of aiding and abetting pursuant to Section 20(e) was premised on a theory that Tourre's own conduct established the primary violation, and that there was an insufficiency of evidence of a primary violation by any other employee of Goldman Sachs.

For the reasons set forth below, none of these arguments has merit and Tourre's motions are DENIED.

I. FACTS

This matter has been heavily litigated since the Securities and Exchange Commission ("SEC") first brought this case in April 2010. There have been numerous decisions issued in this litigation and a trial record which sets forth in detail the facts, allegations, and defenses offered by the parties.

In light of the fully developed trial record and the submissions of the parties on these motions (particularly that of the SEC) which lay out facts adduced at trial, the Court will not here rehash the facts underlying its decision. The Court assumes familiarity with its prior decisions and with the trial record.

II. LEGAL STANDARD

Tourre's post-trial motions are brought pursuant to both Rule 50(b) and Rule 59(a)(1). Different legal standards apply to each motion.

A. Rule 50(b)

At the close of the SEC's case, Tourre's counsel made an oral motion for judgment as a matter of law pursuant to Rule 50(a), which the Court deferred argument on until the close of Tourre's case. (Trial Tr. at 2429-30, 2435.) Tourre's counsel argued the motion outside of the presence of the jury following the close of evidence (id. at 2439-59); counsel to the SEC responded to Tourre's motion and made its own Rule 50(a) motion as to the interstate commerce requirement for each of its claims against Tourre (id. at 2460-75). The Court denied Tourre's motion and granted the SEC's motion on the record. (Id. at 2476-82.) The case then went to the jury, which returned a verdict of liable as to six of the seven counts and a verdict of not liable as to Count 5 - the alleged violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5(b).[1]

Rule 50(b) permits a party who has previously made a motion for judgment as a matter of law under Rule 50(a) to renew that motion following a jury verdict. Fed.R.Civ.P. 50(b). In reviewing such a motion, the Court must review the record as a whole and consider the evidence in the light most favorable to the non-moving party - here, the SEC. See Reeves v. Sanderson Plumbing Prods. , 530 U.S. 133, 150-51 (2000); see also Zellner v. Summerlin , 494 F.3d 344, 370-71 (2d Cir. 2007). As non-movant, the SEC is entitled as a matter of law to all reasonable inferences a jury might have drawn in its favor. See Zellner , 494 F.3d at 371.

The law is clear that once a jury has returned a verdict, a movant's burden on a motion for judgment as a matter of law pursuant to Rule 50 is a heavy one, "particularly heavy" where the jury has deliberated and returned a verdict in favor of the non-movant. Cash v. Cty. of Erie , 654 F.3d 324, 333 (2d Cir. 2011). The Court must leave that verdict in place unless "the evidence is such that, without weighing the credibility of witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable [persons] could have reached." This Is Me, Inc. v. Taylor , 157 F.3d 139, 142 (2d Cir. 1998) (citations omitted); see also Concerned Area Residents for Env't v. Southview Farm , 34 F.3d 114, 117 (2d Cir. 1994) (requiring complete absence of evidence supporting verdict for Rule 50(b) motion).

"[A] Rule 50 motion may only be sustained based on insufficiency of evidence - not on an alleged inconsistency in the jury's verdict." In re The Reserve Fund Sec. & Derivative Litig., 09 Civ. 4346 (PGG), 2013 WL 5432334, at *7 (S.D.N.Y. Sept. 30, 2013); see also Kosmynka v. Polaris Indus., Inc. , 462 F.3d 74, 87 (2d Cir. 2006); Tolbert v. Queens College , 242 F.3d 58, 74 (2d Cir. 2001); In re Vivendi Universal S.A. Sec. Litig. , 765 F.Supp.2d 512, 550 (S.D.N.Y. 2011).

B. Rule 59(a)(1)

Rule 59(a) permits a court, on motion to grant a new trial "after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court...." Fed R. Civ. P. 59(a)(1)(A). Courts will typically only grant a motion for a new trial pursuant to Rule 59 if the jury's determination was seriously erroneous or represented a miscarriage of justice. Elyse v. Bridgeside, Inc., 367 F.Appx. 266, 268 (2d Cir. 2010); Sorlucco v. N.Y.C. Police Dep't , 971 F.2d 864, 875 (2d Cir. 1992). "The remedy for an inconsistent verdict is a new trial, not judgment as a ...


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