Source: https://case-law.vlex.com/vid/626-f-2d-633-596454566
Timestamp: 2020-07-04 02:20:07
Document Index: 683922569

Matched Legal Cases: ['§ 5', '§ 77', '§ 17', '§ 77', '§ 10', '§ 78']

626 F.2d 633 (9th Cir. 1980), 76-2299, S.E.C. v. Murphy - Federal Cases - Case Law - VLEX 596454566
Docket Nº: 76-2299, 78-3300.
Party Name: SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. Stephen MURPHY, Defendant-Appellant.
Case Date: July 23, 1980
626 F.2d 633 (9th Cir. 1980)
Before, MERRILL and FERGUSON, Circuit Judges, and SMITH, [*] District judge.
Stephen Murphy appeals from a district court decision permanently enjoining him from violating the registration and antifraud provisions of the securities laws and requiring him to mail copies of the court's order to present and future business associates and investors. 1 The court first granted summary judgment for the SEC on the registration violations; 2 then, after a trial on the fraud counts in which defendant put on no evidence, the court entered judgment for the SEC on those counts. Murphy contends that there were disputed material facts which made the grant of summary judgment improper and that the entry of that judgment invalidated the fraud judgment as well. He also argues that the court erred in granting an injunction against registration violations without hearing testimonial evidence and that the court deprived him of due process when it denied his Fed.R.Civ.P. 41(b) motion for dismissal. We affirm.
Intertie took no steps to assure that the offering and sale were directed only to a small number of sophisticated, informed investors; in fact, it did not even number its memoranda so that it could monitor the
volume of offers made. Moreover, Murphy in his deposition stated that he felt that information on qualifications of investors was often inadequate. Intertie relied on ISC to comply with the securities laws and agreed by letter to take whatever steps ISC requested for compliance. There was no written contract allocating this responsibility to ISC, however. Neither Intertie nor ISC assured that offeree representatives that the investors used were capable of providing informed advice, even though Murphy doubted the competence of many of the offeree representatives he met. 3 Some of the representatives were salesmen for ISC and a few acted as both salesman and general partner for a partnership.
Offering memoranda represented that Intertie had "only a limited history of operations" and did not reveal that Intertie had sold cable systems to at least eight or nine partnerships by January, 1974, and at least twenty by August, 1974. The memoranda also projected that sale and lease-back arrangements would generate from six to ten percent cash flow, but they did not reveal that this flow depended upon Intertie's ability to generate new funds through marketing additional systems, since the early revenues were sometimes inadequate to meet costs. 4 Often, projections for subscriber revenue significantly exceeded the amounts that Intertie later took in from a system.
(S)ome guys called up particularly early in '74 and said, "I have a potential investor and want to see Intertie's financial statement," and they were told, "if that is a condition, we are not going to furnish it."
(After June, 1974) (w)e generally answered their request by indicating that we did not feel . . . the Intertie statement was . . . required under Rule 146 and that we did not have the financial strength to be the guarantor of the lease or give the investor any place . . . where they would be able to look for some degree of security and if that did not solve the problem and they pushed for it, generally we would comply with it. But only after that process. Frankly, we didn't want to give the thing out.
In 1975, the SEC brought suit against Murphy and other defendants, charging violations of the registration and fraud provisions of the securities laws, and seeking injunctive relief. On March 6, 1978, the district court granted summary judgment for the SEC on the registration count, § 5(a) and (c) of the Securities Act of 1933, 15 U.S.C. § 77e(a), (c) (1971). The court issued a permanent injunction against acts in violation of the registration provisions of the 1933 Act. The SEC then proceeded to trial on the fraud counts, § 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) (1970); § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1970) and Rule 10b-5, 17 C.F.R. 240.10b-5 (1979), promulgated thereunder. Murphy moved for dismissal of the action under Fed.R.Civ.P. 41(b), arguing that the Commission had not shown a reasonable likelihood of future violations, a prerequisite to entry of an injunction against...