Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-06423/USCOURTS-cand-3_07-cv-06423-23/pdf.json

Parties Involved:
Argyle Capital Management Corp
Defendant
Robert Olins
Defendant
Securities and Exchange Commission
Plaintiff
Spatialight, Inc
Defendant

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 By order dated October 28, 2009, the previously scheduled hearing on the motions

was vacated.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

 v.

ROBERT OLINS, et al.,

Defendants

 /

No. C-07-6423 MMC

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFF’S

MOTION FOR PARTIAL SUMMARY

JUDGMENT; DENYING DEFENDANTS’

MOTION FOR PARTIAL SUMMARY

JUDGMENT

Before the Court are two motions: (1) plaintiff Securities and Exchange

Commission’s (“Commission”) Motion for Partial Summary Judgment, filed August 12,

2009, and (2) defendants Robert Olins (“Olins”) and Argyle Capital Management

Corporation’s (collectively, “defendants”) Motion for Partial Summary Judgment, filed

September 25, 2009. Each motion has been fully briefed.1 Having read and considered

the papers submitted in support of and in opposition to the motion, the Court rules as

follows.

A. The Commission’s Motion

1. With respect to the First, Eleventh, and Twelfth Claims for Relief, by which the

Commission alleges, respectively, violations of Sections 5(a) and (c) of the Securities Act of

Case 3:07-cv-06423-MMC Document 117 Filed 11/02/09 Page 1 of 4
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 See, e.g., Long Decl. Ex. 4 at 74, Ex. 7 at 18, Ex. 9 at SEC 020295; Long Reply

Decl. Ex. 1 at 14:19-21 & 93:3-93:12, Ex. 2 at 33:2-19 & 95:19-96:7; Weiss Decl. Ex. A)

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 The Court finds unpersuasive defendants’ argument that a Rule 144 exemption is

available to affiliates who fail to file a Form 144. As the Commission points out, Rule 144

requires the subject sale to be “made in accordance with all of the provisions of the

section,” see 17 C.F.R. § 230.144 (2005). Consequently, even assuming, arguendo, Olins

held the subject securities for the requisite length of time, he is not entitled to an exemption

under Rule 144. 

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1933 (“Securities Act”), 15 U.S.C. § 77e(a) and (c); Section 13(d) of Securities Exchange

Act of 1934 (“Exchange Act”), 15 U.S.C. § 78m(d); and Section 16(a) and Rule 16a-3 of the

Exchange Act, 15 U.S.C. § 78(p), 17 C.F.R. § 240.16a-3, the Commission, for the reasons

stated in the papers filed in support of its motion, is entitled to summary judgment. 

Specifically, defendants concededly did not comply with the requirements of the abovereferenced statutes and regulations, and defendants have failed to raise a triable issue as

to their entitlement to any exemption. In that regard, the undisputed facts demonstrate, as

a matter of law, that Olins was an affiliate of SpatiaLight, Inc.,2 see Rule 144, 17 C.F.R. §

230.144 (2005) (“An ‘affiliate’ of an issuer is a person that . . . controls, or is controlled by,

or is under common control with, such issuer”); Olins held the subject securities less than

one year, see 17 C.F.R. § 230.144(d)(1) (2005) (setting forth holding-period requirement);

and Olins admittedly did not file a Form 144, see SEC v. M & A West, Inc., 538 F.3d 1043,

1050-53 & n. 7 (9th Cir. 2008) (holding affiliate not eligible for exemption other than under

Rule 144); 17 C.F.R. § 230.144 (2005) (requiring affiliate to file Form 144 to satisfy Rule

144 exemption).3

2. With respect to the relief sought, the Court finds defendants have raised a triable

issue as to the Commission’s entitlement to an injunction and prejudgment interest and

finds the issue of disgorgement is appropriate for resolution on a more complete record. In

particular, liability under Sections 5, 13(d), and 16(a) is predicated upon defendants’

commission of the proscribed acts, see, e.g., S.E.C. v. Phan, 500 F.3d 895, 906 (noting

“strict liability” applicable to Section 5), whereas imposition of an injunction and/or an award

of prejudgment interest implicates additional considerations. See, e.g., M & A West, Inc.,

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 See, e.g., Vazquez Decl. in Supp. Defs’ Mot. Ex. 7 at 178, 191; Ex. 10; Ex. 11 at

19-20.

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538 F.3d at 1054 (holding finding as to likelihood of future violation dependent in part on

scienter as well as assessment of credibility); Osternek v. Ernst & Whinney, 489 U.S. 169,

176 (1989) (noting determination of prejudgment interest requires consideration of factors

such as “the degree of personal wrongdoing on the part of the defendant, . . . and other

fundamental considerations of fairness”). While an analysis as to disgorgement does not

necessarily include such additional considerations, see, e.g., SEC v. First City Financial

Corp., 890 F.2d 1215 (D.C. Cir. 1989) (upholding order of disgorgement; rejecting

argument that violation constituted “‘technical’ transgression of reporting rules”), a court’s

determination nonetheless may be informed thereby, see SEC v. Universal Express, Inc.,

475 F. Supp. 2d 412, 434 (S.D. N.Y. 2007) (noting “decision to order any particular amount

of disgorgement is best made on the fullest possible understanding of the scope of

wrongdoing”).

B. Defendants’ Motion

With respect to the First Claim for Relief, the Commission, as discussed above, is

entitled to summary judgment; accordingly, defendants’ motion for judgment on said claim

will be denied. With respect to the Second through Sixth and Tenth Claims for Relief,

defendants, for the reasons stated in the Commission’s opposition, have failed to show

they are entitled to summary judgment. In particular, a triable issue of fact exists as to both

materiality and scienter.4

 See, e.g., SEC v. Phan, 500 F.3d at 907-08 (noting “[m]ateriality

typically cannot be determined as a matter of summary judgment because it depends on

determining a hypothetical investor’s reaction to the alleged misstatement’”); In re Apple

Computer Securities Litigation, 886 F.2d 1109, 1113 (9th Cir. 1989) (observing “[m]ateriality

and scienter are both fact-specific issues which should ordinarily be left to the trier of fact”).

//

//

CONCLUSION

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For the reasons stated above:

1. To the extent the Commission seeks summary judgment of liability on its First,

Eleventh, and Twelfth Claims for Relief, the Commission’s motion is hereby GRANTED; in

all other respects, the Commission’s motion for partial summary judgment is hereby

DENIED.

2. Defendants’ motion for partial summary judgment is hereby DENIED.

IT IS SO ORDERED.

Dated: November 2, 2009 

MAXINE M. CHESNEY

United States District Judge

Case 3:07-cv-06423-MMC Document 117 Filed 11/02/09 Page 4 of 4