Ussec v. Bobby D. Jones

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 1, 2020
• Docket: 17-17042
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JUL 1 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

U.S. SECURITIES & EXCHANGE No. 17-17042 COMMISSION, D.C. No. 2:15-cv-00609-SMM Plaintiff-Appellee,

v. MEMORANDUM*

JANUS SPECTRUM LLC; DAVID ALCORN; KENT MAERKI; DOMINION PRIVATE CLIENT GROUP LLC; JANUS SPECTRUM GROUP LLC; SPECTRUM MANAGEMENT LLC; SPECTRUM 100 LLC; SPECTRUM 100 MANAGEMENT LLC; PRIME SPECTRUM LLC; PRIME SPECTRUM MANAGEMENT LLC; DARYL G. BANK,

Defendants,

and

BOBBY DEAN JONES; PREMIER SPECTRUM GROUP PMA,

Defendants-Appellants.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. U.S. SECURITIES & EXCHANGE No. 18-15403 COMMISSION, D.C. No. 2:15-cv-00609-SMM Plaintiff-Appellee,

v.

JANUS SPECTRUM LLC; DAVID ALCORN; DAVID ALCORN PROFESSIONAL CORPORATION,

Defendants-Appellants,

KENT MAERKI; DOMINION PRIVATE CLIENT GROUP LLC; JANUS SPECTRUM GROUP LLC; SPECTRUM MANAGEMENT LLC; SPECTRUM 100 LLC; SPECTRUM 100 MANAGEMENT LLC; PRIME SPECTRUM LLC; PRIME SPECTRUM MANAGEMENT LLC; DARYL G. BANK; BOBBY DEAN JONES; PREMIER SPECTRUM GROUP PMA,

Defendants.

Appeal from the United States District Court for the District of Arizona Stephen M. McNamee, District Judge, Presiding

Argued and Submitted June 3, 2019 Seattle, Washington Submission Deferred December 6, 2019 Resubmitted June 29, 2020

2 Before: D.W. NELSON, RAWLINSON, and BEA, Circuit Judges.

Appellants1 challenge the district court order granting summary judgment in

favor of the Securities and Exchange Commission (Commission). We have

jurisdiction under 28 U.S.C. § 1291. We review summary judgment rulings de

novo, see S.E.C. v. Stein, 906 F.3d 823, 828 (9th Cir. 2018), and orders imposing

disgorgement for abuse of discretion, see S.E.C. v. Feng, 935 F.3d 721, 737 (9th

Cir. 2019).

1. No genuine issue of material fact existed regarding the status of the

agreements to pool funds as investment contracts, which are securities under the

Securities Act of 1933 (Securities Act). See S.E.C. v. Rubera, 350 F.3d 1084, 1090

(9th Cir. 2003) (describing an investment contract as (1) an investment of money

(2) in a common enterprise (3) with an expectation of profits derived solely from

the efforts of a third party); see also 15 U.S.C. § 77b(a)(1). The agreements to

pool funds for the purchase and resale of spectrum licenses satisfied the first two

prongs. See id. at 1091. The investors’ heavy reliance on Janus to apply for,

1 Appellants are Janus Spectrum LLC (Janus), David Alcorn (Alcorn), David Alcorn Professional Corporation, Bobby Dean Jones (Jones), and Premier Premier Spectrum Group PMA (Premier). We will not address any arguments related to Premier, because a pro se individual may not represent a corporation. See D-Beam Ltd. P’ship v. Roller Derby Skates, Inc., 366 F.3d 972, 973-74 (9th Cir. 2004). 3 purchase, and resell the spectrum licenses satisfied the expectation-of-profits

prong. See id. at 1091-92.

2. Appellants failed to raise a genuine issue of material fact as to

violations of the registration provisions of the Securities Act. The Commission

was required to show that: (1) Appellants failed to register the securities; (2)

Appellants directly or indirectly sold or offered to sell securities; and (3) the sale

utilized interstate commerce. See S.E.C. v. CMKM Diamonds, Inc., 729 F.3d 1248,

1255 (9th Cir. 2013). The first and third factors are undisputed. As discussed,

Appellants either directly sold or, at a minimum, indirectly sold the securities by

acting as conduits for the sales transactions, thereby satisfying the second factor.

See S.E.C. v. Phan, 500 F.3d 895, 906 (9th Cir. 2007).

3. Further, no genuine issue of material fact existed as to the antifraud

violations of the Securities Act and the Securities Exchange Act of 1934. The

Commission was required to establish generally that Appellants (1) engaged in a

scheme to defraud (2) with scienter or negligence, as appropriate, (3) by means of

interstate commerce. See Stein, 906 F.3d at 830. The Commission presented

evidence that Appellants engaged in a fraudulent scheme by representing to

investors that major wireless carriers would lease the spectrum licenses for a

significant premium to operate broadband services. Appellants failed to raise a

4 material issue of fact regarding Alcorn’s and Jones’s knowledge that these

statements were false.

4. We are not persuaded by Jones’s argument based on freedom of

association. The First Amendment does not immunize fraudulent communications.

See Erotic Serv. Provider Legal Educ. & Research Project v. Gascon, 880 F.3d

450, 460 (9th Cir. 2018).

5. “[A] disgorgement award that does not exceed a wrongdoer’s net

profits and is awarded for victims is equitable relief permissible under [15 U.S.C.]

§ 78u(d)(5).” Liu v. Sec. & Exch. Comm’n, 591 U.S. ___ Slip. Op. at 1 (2020).

Further, the imposition of joint and several liability for a disgorgement award is

permissible so long as it is “consistent with equitable principles.” Id. at 18. The

district court’s disgorgement award did not exceed Appellants’ net profits, but the

district court did not address whether such award would be for “the benefit of

investors” or whether its imposition of joint and several liability is consistent with

equitable principles. Id. at 14-18. Accordingly, we remand for the district court to

make these determinations in the first instance, consistent with the guidelines

articulated in Liu. See id. Finally, as the Commission acknowledged that the

prejudgment interest amount was miscalculated, the district court should also

recalculate that amount on remand.

5 AFFIRMED in part and REMANDED in part.