Sec. & Exch. Comm'n v. Nutmeg Grp., LLC, 09–cv–1775

• Citation: 162 F.Supp.3d 754
• Decision Date: 18 February 2016
• Docket Number: No. 09–cv–1775,09–cv–1775
• Parties: Securities and Exchange Commission, Plaintiff, v. The Nutmeg Group, LLC, Randall Goulding, and David Goulding, Defendants, David Goulding, Inc., David Samuel, LLC, Financial Alchemy, LLC, Philly Financial, LLC, and Eric Irrgang, Relief Defendants.
• Court: U.S. District Court — Northern District of Illinois

162 F.Supp.3d 754

Securities and Exchange Commission, Plaintiff,

v. The Nutmeg Group, LLC, Randall Goulding, and David Goulding, Defendants,David Goulding, Inc., David Samuel, LLC, Financial Alchemy, LLC, Philly Financial, LLC, and Eric Irrgang, Relief Defendants.

No. 09–cv–1775

United States District Court, N.D. Illinois, Eastern Division.

Signed February 18, 2016

Robert MacDonald Moye, Andrew Charles Shoenthal, Benjamin J. Hanauer, U.S. Securities & Exchange Commission, Stephen Novack, Timothy John Miller, Olivia Grace St. Clair, Rebekah Hava Parker, Novack and Macey LLP, Chicago, IL, for Plaintiff.

Randall Goulding, Deerfield, IL, pro se.

David Samuel Goulding, Madison, WI, pro se.

Fredrick Rahn Harbecke, Law Offices of Fred R. Harbecke, Alan M. Wolper, Ulmer & Berne, LLP, Jamie S. Franklin, The Franklin Law Firm LLC, Martin Wojslaw Jaszczuk, Locke Lord Bissell & Liddell LLP, Daryl M. Schumacher, Howard J. Rosenburg, Kopecky, Schumacher & Bleakley, PC, Chicago, IL, Randall S. Goulding, Law Offices of Randall S. Goulding & Associates, Deerfield, IL, for Defendants/Relief Defendants.

MEMORANDUM OPINION AND ORDER

Jeffrey T. Gilbert, United States Magistrate Judge

Plaintiff Securities and Exchange Commission (the “SEC”) sued three defendants—The Nutmeg Group, LLC (“Nutmeg”); Randall Goulding (“Randall”); and David Goulding (“David”)—alleging violations of the Investment Advisers Act of 1940 (the “Advisers Act”), 15 U.S.C. § 80a–1 et seq., and the rules promulgated thereunder. The SEC also sued five other related defendants—David Goulding, Inc.; David Samuel, LLC; Financial Alchemy, LLC; Philly Financial, LLC; and Eric Irrgang (collectively, “Relief Defendants”)—asserting an equitable claim for unjust enrichment. The Amended Complaint contains nine counts. Amended Complaint, ECF No. 314. Counts I, II, III, and VII allege primary violations of the Advisers Act and its rules, while Counts IV, V, VI, and VIII allege aiding and abetting violations. Counts I and II are against Nutmeg and Randall, but Counts III and VII are against Nutmeg only. All of the aiding and abetting counts are against both Randall and David. Count IX is against Relief Defendants.

The SEC has moved pursuant to Federal Rule of Civil Procedure 56 for partial summary judgment. Plaintiff's Revised Motion for Summary Judgment (“SEC Motion”), ECF No. 719. The SEC is not seeking summary judgment on Count IX against Relief Defendants or on portions of Counts I and IV against Nutmeg, Randall, and David. With respect to the latter two counts, the SEC is not seeking summary judgment for alleged misvaluation and misappropriation in violation of Section 206(1). Id. at 1–2; Plaintiff's Revised Memorandum in Support of Its Motion for Summary Judgment (“SEC Opening Brief”), ECF No. 721, at 1. The SEC is seeking summary judgment on all other counts (including the other portions of Counts I and IV). Defendants do not argue that the SEC's motion for partial summary judgment is improper as a procedural matter. They do object that the SEC has spent much of this litigation prosecuting claims for misappropriation and seeking disgorgement of allegedly ill-gotten gains but now moves for summary judgment only on non-scienter based claims such as books and records violations. The Court assumes without deciding that it is procedurally appropriate for the SEC to move for summary judgment on the claims as to which it has moved because, among other reasons, the issue has not been briefed by the parties. The Court leaves for another time what impact, if any, that has on the SEC's other claims.

Randall, who is pro se, has moved for summary judgment on all counts. Randall Goulding's Memorandum in Opposition to Plaintiff's Motion for Partial Summary Judgment (“Defendants Opening Brief”), ECF No. 726. David, who also is pro se, has joined his motion. David Goulding's Memorandum in Opposition to Plaintiff's Motion for Partial Summary Judgment (“David Brief”), ECF No. 728. Nutmeg's Receiver filed an initial response to the SEC's motion in which the Receiver said she wanted to review Randall's and David's filings before responding substantively. Receiver's Response to Plaintiff's Motion for Summary Judgment, ECF No. 722. The docket does not reflect any other relevant filings on Nutmeg's behalf opposing summary judgment. The SEC, though, has not argued that the Receiver's response was deficient in such a manner as to entitle the SEC to summary judgment against Nutmeg based solely on a failure to respond. Further, as a practical matter, the individual defendants' briefs effectively respond on behalf of Nutmeg as well. Therefore, the Court has not relied on Nutmeg's failure to respond substantively to the SEC's motion in resolving the motion.

For the reasons explained below, the SEC's motion for summary judgment is granted in part and denied in part. Randall and David's motion for summary judgment is denied.

I. LEGAL STANDARD

Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a) ; see Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 951 (7th Cir.2013). In deciding a motion for summary judgment, the court “review[s] the evidence in the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in its favor.” NES Rentals Holdings, Inc. v. Steine Cold Storage, Inc., 714 F.3d 449, 452 (7th Cir.2013) ; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party opposing the motion for summary judgment “gets the benefit of all facts that a reasonable jury might find.” Loudermilk v. Best Pallet Co., LLC, 636 F.3d 312, 314 (7th Cir.2011). However, the opposing party cannot rely on mere conclusions and allegations to create factual issues. Balderston v. Fairbanks Morse Engine Div. of Coltec Indus., 328 F.3d 309, 320 (7th Cir.2003). Nor can speculation be used “to manufacture a genuine issue of fact.”

Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir.2008) (citing Amadio v. Ford Motor Co. , 238 F.3d 919, 927 (7th Cir.2001) ). A court will grant summary judgment “if no reasonable trier of fact could find in favor of the non-moving party.” Hoppe v. Lewis Univ., 692 F.3d 833, 838 (7th Cir.2012) (internal quotation marks omitted); see also Northbound Group, Inc. v. Norvax, Inc., 5 F.Supp.3d 956, 966–67 (N.D.Ill.2013).

Local Rule 56.1 requires a party moving for summary judgment to submit a statement of material facts with “specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts....” N.D. Ill. R. 56.1(a). Then, “the party opposing the motion for summary judgment is required to file and serve ‘a concise response to the movant's statement that shall contain ... a response to each numbered paragraph in the moving party's statement, including, in the case of any disagreement, specific references to the affidavits, parts of the record, and other supporting materials relied upon.’ ” Curtis v. Costco Wholesale Corp., 807 F.3d 215, 218 (7th Cir.2015) (quoting N.D. Ill. R. 56.1(b)(3)(B)). “When a responding party's statement fails to dispute the facts set forth in the moving party's statement in the manner dictated by the rule, those facts are deemed admitted for purposes of the motion.” Id. Specifically, the responding party's failure “to cite to any admissible evidence to support facts presented in response” renders “the facts presented by the moving party as undisputed.” Id. Because Local Rule 56.1 serves an important function by organizing evidence and identifying disputed facts, the district court has the discretion to require strict compliance. Flint v. City of Belvidere, 791 F.3d 764, 767 (7th Cir.2015) ; F.T.C. v. Bay Area Bus. Council, Inc., 423 F.3d 627, 633 (7th Cir.2005). That is true even when a litigant is pro se. Coleman v. Goodwill Indus. of Se. Wisconsin, Inc., 423 Fed.Appx. 642, 643 (7th Cir.2011).

At various points in their Local Rule 56.1 filings, all parties run afoul of one or more of these prohibitions. The SEC, for example, has a tendency to provide responses that are not concise, but, rather, stretch to near or over a page. Plaintiff's Response to Defendant Randall Goulding's Separate Statement of Material Facts (“SEC Response to Randall SOF”), ECF No. 741, ¶¶ 32, 40, 41, 59, 60, 75, 76; Plaintiff's Response to Defendant David Goulding's Separate Statement of Material Facts (“SEC Response to David SOF”), ECF No. 742, ¶¶ 28, 35, 36. Randall's and David's responses also suffer from technical deficiencies. Often they fail to cite directly to supporting evidence when denying a factual statement, instead citing to an earlier response which then cites to evidence, some of which may be germane to the fact statement in question and some not. See, e.g., Defendant Randall Goulding's Response to Plaintiff's Revised Statement of Undisputed Material Facts (“Randall Response to SEC SOF”), ECF No. 726–1, ¶¶ 78, 79, 80, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 99; Defendant David Goulding's Response to Plaintiff's Revised Statement of Undisputed Material Facts (“David Response to SEC SOF”), ECF No. 729, ¶¶ 78, 79, 80, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 99. And, on one occasion, Randall and David cite an earlier response without ever admitting or denying the statement in question. Randall Response to SEC SOF, ¶ 53; David Response to SEC SOF, ¶ 53.

Both parties also provide “responses” that are nonresponsive and/or are not supported by evidence. For instance, in denying paragraph 69 of the SEC's Local Rule 56.1 Statement, neither Randall nor David cites any supporting evidence. Randall Response to SEC SOF, ¶ 69; David Response to SEC SOF, ¶ 69. They only offer meritless argumentative objections...