United States Securities and Exchange Commission v. Miller
- David Doty
- 0:21-cv-01445
- U.S. District Court · District of Minnesota
- 12
In SEC v. Miller, Judge Wright denied the SEC’s motion as moot for Miller and denied it for Jaberian.
The SEC’s motion to strike was denied as moot as to Mark A. Miller and denied as to Saeid Jaberian, leaving Jaberian’s challenged defenses in place at this stage. The order did not decide the SEC’s underlying securities-fraud claims or address Christopher J. Rajkaran’s defenses.
What happened
In United States Securities and Exchange Commission v. Miller, the SEC asked the court to remove three defenses that Saeid Jaberian had asserted in response to the SEC’s securities-fraud lawsuit. The SEC also sought to remove a defense asserted by Mark A. Miller.
Miller later filed an answer that omitted all affirmative defenses, and the SEC withdrew its request as to him. Jaberian, who was representing himself, asserted defenses involving causation, responsibility for other parties’ conduct, and collateral or equitable estoppel. The SEC filed its motion nearly eight months after Jaberian’s answer.
The court denied the motion as moot as to Miller and denied it as to Jaberian. It concluded that the motion was untimely and that Jaberian’s defenses should not be removed at this stage, including because causation could matter in deciding civil penalties and the estoppel defenses were not legally barred. Judge Elizabeth Cowan Wright signed the order.
The detailed version
- United States Securities and Exchange Commission v. Miller · No. 0:21-cv-01445
- David Doty
- July 29, 2024
Background
The SEC sued Mark A. Miller under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act concerning an alleged “pump and dump” stock scheme. An amended complaint later added Saeid Jaberian and Christopher J. Rajkaran as defendants. The case had been stayed while related criminal proceedings ended. The SEC later notified the court that Jaberian and Miller had pleaded guilty and been sentenced in that criminal matter.
Miller initially asserted collateral estoppel—also called issue preclusion, a rule that can prevent a party from relitigating an issue already conclusively decided. He later filed an answer that omitted all affirmative defenses, and the SEC withdrew its motion as to him.
Jaberian, who was appearing without a lawyer, asserted five affirmative defenses. The SEC’s motion sought to strike defenses two, three, and five: (2) that unforeseeable intervening or superseding causes produced the alleged losses; (3) that other parties caused the losses and that responsibility should be apportioned; and (5) collateral or equitable estoppel.
Legal standard
Federal Rule of Civil Procedure 12(f) permits a court to strike an insufficient, redundant, immaterial, irrelevant, or scandalous matter from a pleading. The court explained that striking a pleading is an extreme remedy and that motions to strike are generally disfavored. A defense should not be stricken if it is legally sufficient or fairly presents a legal or factual issue that the court should consider.
The Rule generally gives a party 21 days after service of a pleading to move to strike. The court noted that the SEC waited nearly eight months after Jaberian’s answer and gave no explanation for the delay.
Rulings
Miller. Because Miller’s later answer omitted affirmative defenses and the SEC withdrew its motion as to him, the court denied the motion as moot with respect to Miller.
Timeliness. The court held that the SEC’s motion was untimely under Rule 12(f). Although courts may sometimes consider an untimely motion to strike, the court found that the SEC had waited too long and was effectively seeking early summary judgment after the pleading stage, with discovery nearing its end. The court therefore denied the motion on timeliness grounds.
Defenses two and three. The SEC argued that causation and responsibility for other parties’ conduct did not apply because the SEC was not seeking damages and did not need to prove causation to prevail on its securities claims. The court noted, however, that the SEC also sought civil penalties. The amount and appropriateness of civil penalties can involve factors such as the seriousness of the conduct, the defendant’s intent, and whether the conduct caused substantial losses or a substantial risk of losses. The court therefore concluded that causation presented a legal or factual question that should be heard, at least regarding the requested civil penalties. It denied the motion to strike defenses two and three.
Defense five. The court declined to strike Jaberian’s collateral-estoppel defense because it could not conclude at this stage that the defense was legally insufficient. The SEC intended to rely on Jaberian’s guilty plea and convictions in support of its case, and the court recognized uncertainty about how Jaberian might use those matters in his defense.
The court also declined to strike the equitable-estoppel defense. Equitable estoppel against the government is available only in rare circumstances and requires proof of affirmative misconduct by the government in addition to the usual estoppel elements. But the defense was not legally unavailable, and the court concluded that Jaberian should have an opportunity to develop facts and arguments about it. The court denied the motion to strike defense five.
Disposition
The order states that the SEC’s Motion to Strike the Affirmative Defenses of Miller and Jaberian was DENIED as moot as to Miller and DENIED as to Jaberian. The order was signed by United States Magistrate Judge Elizabeth Cowan Wright.
Read the full 12-page opinion on CourtListener, the free public archive maintained by the Free Law Project.