Court Opinion

ID: 4395085
Source: CourtListenerOpinion
Date Created: 2019-05-08 20:00:27.479939+00
Date Added: 2024-06-11T14:23:57.050110
License: Public Domain

FILED
                            NOT FOR PUBLICATION
                                                                            MAY 08 2019
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

U.S. SECURITIES & EXCHANGE                       No.   17-56423
COMMISSION,
                                                 D.C. No.
              Plaintiff-Appellee,                2:15-cv-08921-SVW-MRW

 v.
                                                 MEMORANDUM*
WAYNE S.P. WEAVER,

              Defendant-Appellant,

 and

JAMMIN JAVA CORP; et al.,

              Defendants.

                    Appeal from the United States District Court
                        for the Central District of California
                    Stephen V. Wilson, District Judge, Presiding

                       Argued and Submitted April 15, 2019
                            San Francisco, California

Before: D.W. NELSON, BEA, and N.R. SMITH, Circuit Judges.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      Wayne Weaver appeals the district court’s order granting summary

judgment in favor of the Securities and Exchange Commission (“SEC”) on its

claim that Weaver committed securities fraud under Rule 10b-5(a) and/or (c). See

15 U.S.C. § 78j(b), 17 C.F.R. § 240.10b-5. Weaver also appeals the district court’s

disgorgement order. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

                                           I.

      In support of its motion for summary judgment, the SEC produced

admissible, inculpatory evidence.1 This shifted the burden of production to

Weaver. See Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir.

2007). Weaver produced no evidence to contradict the inculpatory evidence

produced by the SEC. Instead, Weaver invoked his Fifth Amendment rights and

remained silent throughout the course of these proceedings. Because Weaver

invoked his right to remain silent, the district court determined that it would (in its

discretion) grant summary judgment if it found that the SEC had produced

“admissible evidence which, construed in the light most favorable to the SEC,

      1
        Much of the evidence produced by the SEC came in the form of a report
prepared by an SEC investigator and an email chain wherein Weaver describes the
trades of Jammin Java shares he conducted through a series of holding companies
he owned. Weaver argued below that the report and the emails were inadmissible,
but his objection was overruled. Weaver has waived any challenge to that ruling
on appeal by failing to argue it in his briefs, see Greenwood v. FAA, 28 F.3d 971,
977 (9th Cir. 1994), and thus we may consider those materials.
                                           2
establishes Weaver’s liability.” See SEC v. Colello, 139 F.3d 674, 677 (9th Cir.

1998). The district court concluded that the SEC had adduced such evidence and

granted summary judgment to the SEC.

       We assume without deciding that this inverted articulation of the summary

judgment standard was error. Reviewing the evidence de novo and in the light

most favorable to Weaver, we affirm.

       Weaver contends that the materials produced by the SEC, and particularly

the deposition testimony of Jammin Java’s former CEO, Ahn Tran, raised triable

issues of fact concerning (1) the deceptive nature of the Straight Path agreement

and (2) Weaver’s involvement with Straight Path. We disagree. To be sure, Tran

testified that he thought the Straight Path agreement was a legitimate business deal

when it was executed and announced. However, Tran also testified that he was

unaware that Straight Path did not exist at that time, and that he wouldn’t have

executed the agreement if he had known that fact. At most, this shows that

Jammin Java was also a victim of Weaver’s deceptive use of Straight Path. It is

difficult to see how a jury could reasonably conclude from this testimony that the

Straight Path agreement was not deceptive. The undisputed facts shows that the

Straight Path agreement indicated that the offered financing was coming from an

“institutional investor.” It is undisputed that, in fact, the institutional investor did

                                            3
not exist at that time. The payments due under that agreement were instead made

by Weaver himself or by a series of shell corporations and affiliates owned by

Weaver and his co-defendants.

      Tran’s testimony also does not create a triable issue concerning Weaver’s

participation in the Straight Path financing agreement. Tran’s testimony does not

rebut the SEC’s admissible evidence showing that: (1) Weaver directed an

associate to create Straight Path months after the Straight Path financing agreement

had been announced; (2) some of the payments due under that agreement were

made by Weaver himself or by a company Weaver owned; (3) the share certificates

promised to Straight Path under the agreement were sent to Weaver’s nominee; (4)

Weaver directed trading of Jammin Java shares through companies he owned

shortly after the Straight Path agreement was announced; and (5) Weaver and

entities he controlled made millions of dollars in profits through their sales of

Jammin Java stock after the Straight Path agreement was announced. Accordingly,

the undisputed facts show that Weaver’s “own conduct contributing to the

transaction or overall scheme . . . had a deceptive purpose and effect.” Simpson v.

AOL Time Warner, Inc., 452 F.3d 1040, 1048 (9th Cir. 2006), vacated on other

                                           4
grounds, Simpson v. Homestore.com, Inc., 519 F.3d 1041 (9th Cir. 2008).2

                                           II.

      The district court did not abuse its discretion when it ordered Weaver to

disgorge the sum requested by the SEC ($26,371,585.20), an amount the court

found was a reasonable approximation of the profits retained by Weaver or entities

he controlled. SEC v. JT Wallenbrock & Assocs., 440 F.3d 1109, 1113-14 (9th Cir.

2006). Indeed, Weaver does not challenge the amount of disgorgement ordered;

instead, Weaver argues that the Supreme Court’s decision in Kokesh v. SEC, 137 S.

Ct. 1635 (2017), bars the SEC’s request for disgorgement. However, Kokesh

specifically declined to consider that issue, id. at 1642 n.3, so that case is not

“clearly irreconcilable” with our longstanding precedent on this subject. Miller v.

Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc).

      AFFIRMED.

      2
         We reject Weaver’s argument that he cannot be held liable under Rule 10b-
5(a) or (c) because he is not a “maker” of a false statement. See Lorenzo v. SEC,
587 U.S. __ (2019) (slip op. at 5). We have considered the remainder of Weaver’s
arguments regarding the district court’s liability finding, and we find them to be
without merit.
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