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Securities and Exchange Commission v. Louis

United States District Court, S.D. California

July 30, 2014

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
LOUIS
v.
SCHOOLER and FIRST FINANCIAL PLANNING CORPORATION, dba Western Financial Planning Corporation, Defendants.

ORDER DENYING MOTION FOR PARTIAL RECONSIDERATION OF APRIL 25, 2014 SUMMARY JUDGMENT ORDER (ECF NO. 592)

GONZALO P. CURIEL, District Judge.

On April 25, 2014, the Court denied Defendants' Motion for Partial Summary Judgment and granted in part and denied in part the SEC's Motion for Partial Summary Judgment. (ECF No. 583, "Summary Judgment Order.") In doing so, the Court found no dispute of material fact with regard to application of the first Williamson factor. See Williamson v. Tucker, 645 F.2d 404, 424 (5th Cir. 1981); Koch v. Hankins, 928 F.2d 1471, 1478 (9th Cir. 2011) (adopting Williamson analysis for use in the Ninth Circuit).[1]

In applying the first Williamson factor, the Court examined the "Partnership Agreement" and the "Co-Tenancy Agreement." The Partnership Agreement governs the relations among investors in the general partnerships ("GPs") that Defendants organized to hold undivided, fractional interests in raw land. Investors generally signed a Partnership Agreement upon purchasing their interests in the GPs-i.e., at the time they gave their money to Defendants. The "Co-Tenancy Agreement" governs the relationships between those GPs that own properties as co-tenants. The Court found that investors had no powers under these two agreements at the time of investment because, according to their express terms, these agreements did not become effective until months or years after investors gave their money to Defendants.

Based on that finding, the Court concluded the first Williamson factor was satisfied, meaning the Court found that investors were left with so little power at the time of investment that the resulting allocation of powers was more akin to a limited partnership. This meant that the third Howey element was satisfied. Thus, because the first two Howey elements were not in dispute, the Court found the GP interests that investors bought from Defendants to be securities in the form of investment contracts.

Presently before the Court is Defendants' request for reconsideration of the Summary Judgment Order. (ECF No. 592, "Motion for Reconsideration.") Specifically, Defendants ask the Court to reconsider its ruling on the first Williamson factor. The SEC opposes Defendants' Motion for Reconsideration, (ECF No. 605), and Defendants have filed a reply, (ECF No. 607). The Court finds Defendants' Motion for Reconsideration suitable for disposition without oral argument. See CivLR 7.1.d.1. Having considered the parties' submissions and the applicable law, and for the reasons that follow, the Court will DENY Defendants' Motion for Reconsideration.

District courts have the discretion to reconsider interlocutory rulings until a final judgment is entered. Fed.R.Civ.P. 54(b); United States v. Martin, 226 F.3d 1042, 1048-49 (9th Cir. 2000). While the Federal Rules of Civil Procedure do not set forth a standard for reconsidering interlocutory rulings, the "law of the case" doctrine and public policy dictate that the efficient operation of the judicial system requires the avoidance of re-arguing questions that have already been decided. See Pyramid Lake Paiute Tribe of Indians v. Hodel, 882 F.2d 364, 369 n.5 (9th Cir. 1989).

As such, most courts adhere to a fairly narrow standard by which to reconsider their interlocutory rulings. This standard requires: (1) an intervening change in the law; (2) additional evidence that was not previously available; or (3) that the prior decision was based on clear error or would work manifest injustice. Id .; Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 880 (9th Cir.2009); Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir.1993).

Reconsideration is an "extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000). "A motion for reconsideration is not an opportunity to renew arguments considered and rejected by the court, nor is it an opportunity for a party to re-argue a motion because it is dissatisfied with the original outcome.'" FTC v. Neovi, Inc., 2009 WL 56130, at *2 (S.D. Cal. Jan. 7, 2009) (quoting Devinsky v. Kingsford, 2008 WL 2704338, at *2 (S.D.N.Y. July 10, 2008)).

In addition to these substantive standards, Civil Local Rule 7.1.i.1 requires a party moving for reconsideration to submit an affidavit or certified statement of an attorney

setting forth the material facts and circumstances surrounding each prior application, including inter alia: (1) when and to what judge the application was made, (2) what ruling or decision or order was made thereon, and (3) what new or different facts and circumstances are claimed to exist which did not exist, or were not shown, upon such prior application.

Rule 7.1.i.2 provides that "any motion or application for reconsideration must be filed within twenty-eight (28) days after the entry of the ruling, order or judgment sought to be reconsidered."

Defendants argue the Court clearly erred in applying the first Williamson factor because the Court applied this factor to a "formation, subscription phase of the GPs" "for the first time ever." (ECF No. 592-1 at 7.) Defendants argue that, "even if the subscription period were relevant to the Williamson analysis, the Court's Order does not correctly identify when the Partnership Agreement is in effect." Defendants assert, that contrary to the Court's conclusion, "[t]he Partnership Agreement is in effect during the subscription phase." Defendants argue the Court further erred because "this Court had previously ruled twice that the first Williamson factor had not been met." Finally, Defendants argue the Court erred by treating disputed facts as undisupted.

In opposition, the SEC argues Defendants' Motion for Reconsideration should be denied because Defendants' assertions of clear error are based on re-arguments of the same position Defendants took in opposition to the SEC's Motion for Partial Summary Judgment. The SEC also argues Defendants failed to comply with Civil Local Rule 7.1.i.1 because Defendants did not provide an affidavit setting forth the material facts and circumstances surrounding its prior request for relief. On the merits, the SEC argues the Court did not err in applying the first Williamson factor because the Partnership Agreement, as written, was not effective at the time of investment. The SEC argues the Court's prior rulings on the first Williamson factor have no impact on the Summary Judgment Order because those prior rulings were made at the pleading stage and because the Court had never before considered the effective dates of the Partnership Agreement. Finally, the SEC argues the facts Defendants claim the Court improperly treated as undisputed are irrelevant to application of the first Williamson factor.

As a preliminary matter, the Court rejects Defendants' arguments that the Court's prior rulings on the first Williamson factor during the pleading stage of this case preclude the Court's ruling on that factor at the summary judgment phase. The Court further finds the facts that Defendants' argue the Court improperly ...


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