Securities and Exchange Commission v. Gallagher

Background

Defendant Steven M. Gallagher sought to amend his answer to add the defense of improper venue. The court treated Gallagher’s February 6, 2025 letter motion as a motion to amend. The Securities and Exchange Commission responded, and Gallagher replied.

Reasoning

Under Rule 12(b)(3) of the Federal Rules of Civil Procedure, improper venue may be raised by motion or in a responsive pleading. Rule 12(h)(1) provides that the defense is waived if it is not raised in a motion, omitted from a Rule 12 motion asserting another ground, or excluded from a responsive pleading or an amendment allowed automatically under Rule 15(a)(1).

Gallagher had filed a motion to dismiss the Second Amended Complaint on October 26, 2022, but did not assert improper venue. He later answered the complaint on January 22, 2024, asserting 10 affirmative defenses that did not include improper venue. The 21-day period in which he could amend his pleading automatically had expired nearly a year before his motion.

The court rejected Gallagher’s argument that improper venue had not been available to him earlier. The court noted that a defense can sometimes become legally available later—for example, after a new plaintiff is joined on a new claim—but found that Gallagher had not shown such circumstances. Instead, the court concluded that the defense had been legally available earlier, that Gallagher had not asserted it, and that he had admitted the allegation that venue was proper.

Disposition

The court denied Gallagher’s motion to amend his answer to assert improper venue. The order addressed waiver of the defense and did not decide the underlying question of whether venue was proper.

Judge P. Castel entered the order on February 20, 2025.