Securities & Exchange Commission v. Capital Solutions Monthly Income Fund, LP, 2016 U.S. App. LEXIS 4697

Background

The SEC sued Todd Duckson, the Capital Solutions Monthly Income Fund (the Fund), and related entities alleging securities fraud: violations of Section 10(b)/Rule 10b-5, aiding and abetting, and Section 17(a).
At trial a jury found Duckson liable on all counts for two discrete time periods (Mar–Oct 2008 and Oct 2008–Dec 2009); the jury found scienter (knowing or reckless conduct) for the Exchange Act claims and also found knowing, reckless, and negligent violations of Section 17(a).
Before trial the court limited admission of full third‑party property appraisals unless foundation under Rule 104 and relevance outweighed prejudice under Rule 403 were established; summaries and selected pages were later admitted after the defense abandoned efforts to introduce full reports.
Duckson contended the excluded full appraisals were critical to his defense (showing reasonable belief in asset value and undermining scienter); the district court admitted appraisal summaries and related testimony but excluded complete reports for lack of foundation or under Rule 403.
The district court submitted a special verdict form that separated claims by two time periods rather than listing every alleged misstatement individually; Duckson argued this obscured which misstatements supported which findings and hindered remedy determination.
The district court entered equitable remedies (injunction, officer/director bar, disgorgement, prejudgment interest, and civil penalties); Duckson sought a new trial or amended judgment, arguing evidentiary and verdict‑form errors. The Eighth Circuit affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Admissibility of full third‑party appraisals	SEC argued defense lacked foundation for full appraisals and risked confusion/prejudice	Duckson argued full appraisals were critical evidence showing belief in asset values and lack of scienter	Court affirmed exclusion absent proper foundation; summaries and testimony were sufficient and no clear prejudice shown
District court's Rule 104/403 evidentiary rulings	SEC maintained individualized foundation and Rule 403 analyses were proper	Duckson claimed abuse of discretion in excluding appraisal evidence	Court held district court exercised proper case‑by‑case discretion; no clear abuse of discretion
Use of Special Verdict Form (not listing each alleged misstatement)	SEC/ court argued form appropriately addressed liability by time period and aided clarity	Duckson argued jury should decide each specific misstatement to guide remedies and appellate review	Court upheld special verdict; judge determines equitable remedies and form did not conflict with jury findings
Whether verdict could rest on March 2008 COM alone for Period 2	SEC argued jury was instructed which documents apply to each period	Duckson argued March 2008 COM brief usage might have been used to find liability in Period 2	Court held jury instructions explicitly excluded March 2008 COM as basis for Period 2; verdict necessarily relied on more documents

Key Cases Cited

White v. McKinley, 605 F.3d 525 (8th Cir.) (standard for reviewing denial of new trial based on evidentiary rulings)
Wilson v. City of Des Moines, 442 F.3d 637 (8th Cir.) (review standard for evidentiary rulings in Rule 59 context)
Horstmyer v. Black & Decker, Inc., 151 F.3d 765 (8th Cir.) (trial court discretion to use special verdicts under Rule 49)
Davis v. Ford Motor Co., 128 F.3d 631 (8th Cir.) (trial court's Rule 49 discretion is not ordinarily reviewable)
Dairy Queen, Inc. v. Wood, 369 U.S. 469 (U.S.) (distinguishing legal vs. equitable claims and right to jury trial)
S.E.C. v. Lipson, 278 F.3d 656 (7th Cir.) (equitable relief in SEC actions decided by judge consistent with jury liability findings)
Salitros v. Chrysler Corp., 306 F.3d 562 (8th Cir.) (district court may consider facts not determined by jury when fashioning equitable relief)