Summary
holding that, "[b]y denying plaintiffs' motions for summary judgment and for judgment as a matter of law, Court necessarily held that there was a reasonable basis in fact and law for the SEC's position"
Summary of this case from Securities Exchange Commission v. WilsonOpinion
01 Civ. 3198 (LAK), 01 Civ. 3199 (LAK)
August 27, 2001
ORDER
The plaintiffs in these two cases seek to recover attorney's fees and expenses allegedly incurred by them in defending a civil insider trading case brought against them by the Securities and Exchange Commission. They rely on the Equal Access to Justice Act, 28 U.S.C. § 2412. The Commission moves to dismiss on a welter of procedural and jurisdictional grounds as well as for failure to state a claim upon which relief may be granted.
The undersigned presided over the underlying SEC action, which alleged insider trading by twenty-five defendants in securities of Lotus Development Corporation on the eve of the tender offer made for its shares by IBM. SEC v. Cassano, et al., 99 Civ. 3822 (LAK). Seventeen of the defendants settled. Eight, including the plaintiffs, went to trial. One of the eight settled during the trial. Four were found liable. Three, including the plaintiffs, were found by the jury not to be SEC v. Cassano, No. 99 Civ. 3822 (LAK), 2000 WL 1512617 (S.D.N.Y. Oct. 11, 2000). liable. Significantly, plaintiffs here moved unsuccessfully for summary judgment1 and, at trial, for judgment as a matter law. Both motions were denied.
There is no reason to wallow through the mass of ephemera raised by the Commission and, in their response, by plaintiffs. The bottom line here is that plaintiffs cannot prevail, absent special circumstances not present here, if the Commission's position "was substantially justified." 28 U.S.C. § 2412(d)(1)(A). That standard is satisfied if the government's position "had a reasonable basis in fact and law." See Federal Election Commission v. Political Contributions Data, Inc., 995 F.2d 383, 386 (2d Cir. 1993). By denying plaintiffs' motions for summary judgment and for judgment as a matter of law, this Court necessarily held that there was a reasonable basis in fact and law for the SEC's position. See Le-Blanc-Sternberg v. Fletcher, 143 F.3d 765, 771 (2d Cir. 1998) ("Nor may a claim properly be deemed [frivolous, groundless, or unreasonable] where the plaintiff has made a sufficient evidentiary showing to forestall summary judgment and has presented sufficient evidence at trial to prevent the entry of judgment against him as a matter of law."). While the SEC's case against these individuals was based largely on circumstantial evidence, the case not only was substantially justified, it was strong. Plaintiffs should consider themselves fortunate that the jury found in their favor.
Accordingly, defendant's motion in each case to dismiss the complaint is granted and the case dismissed on the merits and with prejudice.
SO ORDERED.