Microbot Medical, Inc. v. Alliance Investment Management, Ltd.
- George Daniels
- 1:19-cv-03782
- U.S. District Court · Southern District of New York
- 8
In Microbot Medical v. Alliance, Judge Daniels granted Alliance summary judgment and denied both parties’ sanctions motions.
Alliance obtained summary judgment, and Microbot’s claims against Alliance were dismissed with prejudice. Both Microbot’s and Alliance’s Rule 11 sanctions motions were denied. The opinion does not state a disposition of the claims against Joseph Mona.
What happened
Microbot Medical, Inc. sued Alliance Investment Management, Ltd. and Joseph Mona, alleging that Alliance violated the securities law governing profits from stock purchases and sales within six months by certain large shareholders. Alliance argued it was not the stock’s beneficial owner during the relevant period.
The court reviewed a magistrate judge’s recommendation after the parties filed no objections. The evidence showed that Alliance’s ownership filings were erroneous, that the Securities and Exchange Commission removed them, and that Mona—not Alliance—was the beneficial owner during the relevant period. The court also considered both parties’ requests for sanctions for improper or unsupported filings.
Judge Daniels adopted the recommendation, granted Alliance’s motion for summary judgment, and dismissed Microbot’s claims against Alliance with prejudice. He denied both parties’ motions for sanctions under Rule 11. The opinion does not state a disposition of Microbot’s claims against Mona.
The detailed version
- Microbot Medical, Inc. v. Alliance Investment Management, Ltd. · No. 1:19-cv-03782
- George Daniels
- Sept. 17, 2020
Background
Microbot Medical, Inc. brought claims under Section 16(b) of the Securities Exchange Act of 1934, which allows recovery of certain “short-swing” profits from purchases and sales of a company’s stock within a six-month period by a person who owns more than 10% of the company’s stock. The defendants were Alliance Investment Management, Ltd. and Joseph Mona.
Alliance filed Securities and Exchange Commission forms reporting that it was the beneficial owner of 300,320 Microbot shares and reporting related trades. Alliance later stated that those filings were made under the wrong identification number and that Mona was the actual beneficial owner of the stock. The SEC removed Alliance’s filings from its electronic filing system. Mona later filed forms reporting ownership of the same number of shares and the same transactions that Alliance had reported.
Microbot added Mona as a defendant and continued litigating its claims against Alliance. Alliance moved for summary judgment, arguing that it was not a beneficial owner during the relevant period. Microbot and Alliance also filed cross-motions for sanctions under Federal Rule of Civil Procedure 11.
Report and Recommendation
Magistrate Judge Robert W. Lehrburger recommended granting Alliance’s summary-judgment motion and dismissing Microbot’s claims against Alliance with prejudice. He also recommended denying both parties’ Rule 11 sanctions motions. No party objected to the recommendation, so the district court reviewed it for clear error.
Summary Judgment
The court adopted the magistrate judge’s conclusion that Alliance established that it was not the beneficial owner of Microbot stock during the relevant period. The court relied on evidence that Alliance’s SEC ownership filings were erroneous, that the SEC expunged those filings, and that Mona’s later filings identified him as the owner and reported the same shares and trades. The court also noted that Alliance’s factual statements were unrefuted.
The court concluded that there was no genuine dispute of material fact about Alliance’s beneficial ownership and that additional discovery on that issue would be futile. It therefore granted Alliance’s motion for summary judgment.
Rule 11 Sanctions
Rule 11 permits sanctions for filings made for an improper purpose or claims lacking legal or evidentiary support. The court agreed that Alliance had a reasonable basis for seeking summary judgment because of the evidence identifying Mona as the beneficial owner and Alliance’s repeated position that it had never been the owner.
The court also agreed that Microbot’s factual assertions were not wholly unsupported when made. Although the court characterized Microbot’s continued legal contention as grossly negligent, it found that the conduct was not willful and was too inconsequential to warrant sanctions. The court therefore denied both cross-motions for Rule 11 sanctions.
Disposition
The court adopted Magistrate Judge Lehrburger’s Report and Recommendation. Alliance’s motion for summary judgment was granted, and Microbot’s claims against Alliance were dismissed with prejudice. The cross-motions for Rule 11 sanctions were denied. The opinion does not state a disposition of Microbot’s claims against Mona.
Read the full 8-page opinion on CourtListener, the free public archive maintained by the Free Law Project.