In re Towers Financial Corp. Noteholders Lit., 93 Civ.0810(WK)(AJP).
| Decision Date | 10 November 1999 |
| Docket Number | No. 93 Civ.0810(WK)(AJP).,93 Civ.0810(WK)(AJP). |
| Citation | 75 F.Supp.2d 178 |
| Parties | In re TOWERS FINANCIAL CORPORATION NOTEHOLDERS LITIGATION & Related Cases. |
| Court | U.S. District Court — Southern District of New York |
Daniel C. Girard, Girard & Green LLP, San Francisco, CA, for Plaintiff.
Joseph E. Coughlin, Lord, Bissell & Brook, Chicago, IL, for Defendant.
We have reviewed and considered the Report and Recommendation of Magistrate Judge Andrew J. Peck, dated October 11, 1999, concerning plaintiffs' motion for summary judgment against defendants Mitchell Brater and Michael Rosoff, which motion was based upon the criminal convictions, after a jury trial, of those defendants for violations of the securities laws, specifically § 10(b) and Rule 10b-5.
In the Report, Judge Peck recommends that we grant plaintiffs' motion for summary judgment against Brater and Rosoff, not merely on the grounds of default as neither defendant opposed the motion, but also on the merits as the key issues have been established by collateral estoppel in the prior criminal proceeding.
As to damages, the Report sets out a distinction between the activities of these defendants and prior defendants against whom we granted summary judgement in the amount of $250 million dollars. In this connection, the Report sets out a schedule and procedure for a damages inquest.
We find the Report to be wholly reasonable, and having received no objections thereto, we here adopt it in its entirety. Accordingly, summary judgment as against defendants Brater and Rosoff is GRANTED. With respect to damages, we are confident that the approach ordered by Judge Peck will result in the fixing of a just and reasonable quantum of damages as against Brater and Rosoff, and so await Judge Peck's further recommendations in this regard.
SO ORDERED.
REPORT AND RECOMMENDATION
Plaintiffs in this securities class action move for summary judgment against defendants Mitchell Brater and Michael Rosoff, based on those defendants' conviction, after a jury trial, of criminal violations of the securities laws. Defendants have not responded to the motion.
This Court previously granted plaintiffs summary judgment against other defendants in this case based on their guilty pleas to criminal securities fraud. See In re Towers Fin. Corp. Noteholders Litig., 996 F.Supp. 266 (S.D.N.Y.1998) (Knapp, D.J. & Peck, M.J.). Here, defendants Brater and Rosoff were convicted by the jury after trial, as opposed to having pled guilty.
For the reasons set forth below, I recommend that the Court grant plaintiffs summary judgment against defendants Brater and Rosoff.
This uncontested motion is part of a series of actions brought against Towers and its officers and directors arising from the "Ponzi scheme" involving Towers' Notes and Bonds, more fully described in this Court's prior opinions, familiarity with which is assumed. In re Towers Fin. Corp. Noteholders Litig., 996 F.Supp. 266, 268 n. 1 (S.D.N.Y.1998) (Knapp, D.J. & Peck, M.J.) (citing additional prior opinions). The Court will not repeat the background facts contained in this Court's prior opinion.
Defendant Brater "was Towers' Senior Vice President, Chief Operating Officer and Vice-Chairman of its Board of Directors." (Pls.' Rule 56.1 Stmt. ¶ 7.)1 "Brater was the person `primarily responsible for the distribution and marketing of the Towers Notes to investors."' (
Defendant Rosoff was Towers' Senior Vice President, General Counsel and a member of Towers' Board of Directors. (Pls.' 56.1 Stmt. ¶ 7.)
Plaintiffs' complaint charges these defendants with, inter alia, violation of § 10(b) and Rule 10b-5, and common law fraud. (See Pls.' 56.1 Stmt. ¶¶ 9-10.)
A superseding indictment, was filed by a federal grand jury against Brater and Rosoff on December 16, 1997. The indictment charged Brater and Rosoff with, inter alia, conspiracy to commit securities fraud in violation of § 10(b) and Rule 10b-5 (count one), securities fraud in connection with the October 15, 1991 Towers' Notes offering (count three), and securities fraud in connection with the March 23, 1992 Towers' Notes offering (count four). 2
After a jury trial, Brater and Rosoff were found guilty of all charges on February 18, 1999. Sentencing is currently scheduled for October 12, 1999. (See Dkt. entry for 9/14/99 in 97 Cr. 0336.)
By letter dated August 30, 1999, plaintiffs' counsel asked for permission to file this summary judgment motion. By Memo Endorsed Order dated September 7, 1999, the Court granted the motion and ordered that:
Defendants Brater and Rosoff are to respond to the motion by 9/28/99 or the motion likely will be granted on default.
(9/7/99 Order, ¶ 2.) Neither Brater nor Rosoff responded to the motion.
"[C]ourts in this Circuit have granted summary judgment by default where a party has failed to respond to the motion in violation of court rules and/or scheduling orders." In re Towers Fin. Corp. Noteholders Litig., 996 F.Supp. 266, 273-74 (S.D.N.Y.1998) (Knapp, D.J. & Peck, M.J.) (citing numerous authorities). Defendants Brater and Rosoff, who are represented by counsel, were explicitly warned by the Court that failure to respond to plaintiffs' summary judgment motion could result in the granting of the motion on default. Nevertheless, defendants Brater & Rosoff chose not to respond to the motion.
For these reasons and as further set forth in In re Towers, 996 F.Supp. at 271-74, I recommend that the Court grant plaintiffs' summary judgment motion by default against defendants Brater and Rosoff.
As in In re Towers, In re Towers Fin. Corp. Noteholders Litig., 996 F.Supp. 266, 274 (S.D.N.Y.1998) (Knapp, D.J. & Peck, M.J.).
The elements of a § 10(b) and Rule 10b-5 claim are set out in In re Towers, 996 F.Supp. at 274-75, and will not be repeated herein. The indictment charged defendants Brater and Rosoff with two counts of criminal securities fraud in violation of § 10(b) and Rule 10b-5. (See page 3 above.) The jury found defendants Brater and Rosoff guilty of those criminal securities fraud charges in violation of § 10(b) and Rule 10b-5. Plaintiffs' civil complaint here alleges the same conduct as charged in the criminal case. The jury's conviction of defendants Brater and Rosoff serves to collaterally estop them in this civil action. See, e.g., Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5, 332-33, 337, 99 S.Ct. 645, 649 n. 5, 652, 654-55, 58 L.Ed.2d 552 (1979) (); SEC v. Bilzerian, 29 F.3d 689, 692-94 & n. 10 (D.C.Cir.1994) (); Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 42-43, 44 (2d Cir.1986) (), cert. denied, 480 U.S. 948, 107 S.Ct. 1608, 94 L.Ed.2d 794 (1987); Wolfson v. Baker, 623 F.2d 1074, 1077-81 (5th Cir.1980) (), cert. denied, 450 U.S. 966, 101 S.Ct. 1483, 67 L.Ed.2d 615 (1981); United States v. Podell, 572 F.2d 31, 35 (2d Cir.1978) (); SEC v. Grossman, 887 F.Supp. 649, 659 (S.D.N.Y.1995) (); United States v. United States Currency in the Amount of One Hundred Forty-Five Thousand, One Hundred Thirty-Nine Dollars, 803 F.Supp. 592, 597-98 (E.D.N.Y.1992) (), aff'd, 18 F.3d 73 (2d Cir.), cert. denied, 513 U.S. 815, 115 S.Ct. 72, 130 L.Ed.2d 27 (1994); S.E.C. v. Dimensional Entertainment Corp., 493 F.Supp. 1270, 1274-76 (S.D.N.Y.1980) (); cf. S.E.C. v. Monarch Funding Corp., 192 F.3d 295 at 302-06 (2d Cir. 1999) ().
Accordingly, on the merits, because of the collateral estoppel effect from defendan...
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