114 F. Supp. 3d 1321
N.D. Ga.2015Background
- Defendants moved to dismiss and sought oral argument; court denies both motions.
- SEC alleges a pump-and-dump scheme involving Strebinger, Chapman, Muskateer, and others related to Americas Energy Company (AECo).
- Defendants acquired >5% AECo stock in 2009 without timely Schedule 13D disclosures; engaged in promoting AECo stock via Wollstein and Cohen Reports.
- Promotional reports allegedly contained false/misleading statements; defendants sold AECo stock through offshore accounts during the promotion.
- AECo later went bankrupt; SEC filed action November 3, 2014 asserting multiple securities-law violations.
- Court applies continuing violations doctrine to toll the five-year limitations period, allowing claims through April 2010.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 2462 bar applies to the SEC claims | SEC contends continuing violations tolls period. | Defendants say discrete acts pre-2009 time-barred. | Not time-barred; continuing violations apply. |
| Whether Section 10(b) claim against Strebinger is adequately pled | Complaint pleads timing, misrepresentations/omissions, and scienter. | Insufficient particularity; reliance on conclusions. | Sufficient under Rule 9(b) and 8; survives dismissal. |
| Whether Section 17(a) claims against Strebinger are viable | Section 17(a) claims analogous to 10(b) claims. | Janus limitation on liability applies. | Maker limitation not applicable to §17(a)(1)&(3); §17(a)(2) lacks the maker requirement; claims viable. |
| Whether aiding-and-abetting claim against Strebinger survives | Strebinger knowingly aided Chapman’s violations. | Lack of direct participation; insufficiency. | Aiding-and-abetting claim survives at pleading stage. |
| Whether §20(b) claim against Strebinger is viable | Strebinger used third parties to disseminate false information. | Control element required? unclear under §20(b). | Court rejects control-as-only element; §20(b) claim survives. |
Key Cases Cited
- Gabelli v. SEC, 133 S. Ct. 1216 (U.S. 2013) (continuing violations and penalties limitations applied to SEC actions)
- SEC v. Merch Capital, LLC, 483 F.3d 747 (11th Cir. 2007) (fraud elements under Section 10(b) and Rule 10b-5)
- Monterosso v. SEC, 756 F.3d 1326 (11th Cir. 2014) (maker liability distinctions under Rule 10b-5(a) and (c) vs(b))
- Big Apple Consulting USA Inc., 783 F.3d 786 (11th Cir. 2015) (Janus limits on 10b-5(b) not extending to §17(a) and 10b-5(a)/(c))
- Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (U.S. 2011) (maker liability under 10b-5(b) limited; does not apply to §20(b))