Securities & Exchange Commission v. Kramer
778 F. Supp. 2d 1320
M.D. Fla.2011Background
- SEC sues Kramer to permanently enjoin broker registration violation under Section 15(a)(1) of the Exchange Act and seeks disgorgement, pre-judgment interest, civil penalties, and penny stock bar.
- Bench trial from Jan 18–27, 2011; Commission presented alleged broker conduct evidence; Kramer raised multiple objections (Rule 30(b)(6) deposition, in limine, sanctions, directed verdict).
- Contested: Baker statements (unavailability and hearsay) and Rule 30(b)(6) deposition of the Commission; broader issue whether Kramer engaged in broker activity under Section 15(a).
- Kramer argues Baker statements unreliable/unavailable; Commission argues admissibility under Rule 804(b)(3) or 807; Magistrate Judge McCoun denied/denied some items.
- Court ultimately (i) excludes Baker statements under 804/807/403, (ii) sustains Kramer’s objection to Rule 30(b)(6) deposition, (iii) denies several limine/motion requests as moot, and (iv) finds Kramer did not engage in broker activity; judgment entered for Kramer.
- The Clerk is directed to enter judgment in favor of Kramer and against the Commission.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Baker’s statements are admissible against Kramer | Commission contends Baker unavailable; statements fit Rule 804(b)(3) or 807 | Kramer argues statements unreliable, cross-examination denied, improper service, and privilege concerns | Excluded under Rule 804/403 and not admitted under Rule 807 |
| Whether the Commission may depose the SEC under Rule 30(b)(6) | Rule 30(b)(6) applies; Commission designated knowledgeable witnesses | Deposition would intrude on work product/deliberative process; alternative discovery insufficient | Kramer's objection sustained; Magistrate Judge McCoun's order denying deposition overruled |
| Whether Kramer acted as an unregistered broker under Section 15(a) | Kramer engaged in broker activity via finder-like network, transaction-based compensation, and investor solicitation | Finder-like conduct; no proof of “engaged in the business” or accounts of others; insufficient evidence of broker activity | Kramer did not engage in the business of effecting transactions for others; judgment for Kramer |
| Whether other pending motions should be granted | Various in limine and discovery motions; sanctions | Requests moot or unfounded | Rulings: several moot or denied; some granted in part; others denied as moot |
| What is the appropriate disposition given the Findings of Fact and Conclusions of Law | Judgment entered in favor of Kramer; Commission’s requests denied |
Key Cases Cited
- Crawford v. Washington, 541 U.S. 36 (U.S. 2004) (confrontation and reliability of testimonial hearsay)
- United States Gypsum Co., 333 U.S. 364 (U.S. Supreme Court, 1948) (clearly erroneous standard; evidentiary review)
- Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981) (binding effect of former Fifth Circuit precedents)
- S.E.C. v. M & A West, Inc., 538 F.3d 1043 (9th Cir. 2008) (finding limits of broker activity in reverse mergers)