Securities & Exchange Commission v. BIH Corporation et al

Filing 168

OPINION AND ORDER granting 159 Plaintiff's Renewed Motion to Strike Declaration of Wayne Burmaster and Affidavit of Christian Gallo from the Defendants Response to the Commission's Statement of Undisputed Facts in Support of its Motion fo r Summary Judgment; denying as moot 139 plaintiff's Motion to Strike; denying 160 defendant Edward Hayter's Cross-Motion for Leave to Submit Supplemental Evidence in Opposition to Plaintiff's Motion for Summary Judgment. The Declaration of Wayne Burmaster and Affidavit of Christian Gallo attached to 137 defendants' Response are stricken. See Opinion and Order for details. Signed by Judge John E. Steele on 12/13/2013. (AAA)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
vs.

Case No.

2:10-cv-577-FtM-29DNF

BIH CORPORATION, WAYNE A.
BURMASTER, EDWARD A. HAYTER, NORTH
BAY SOUTH CORPORATION, BIMINI REEF
REAL ESTATE, INC., RIVERVIEW
CAPITAL INC., CHRISTPHER L. ASTROM,
DAMIAN B. GUTHRIE, BARON
INTERNATIONAL INC., THE CADDO
CORPORATION, BEAVER CREEK FINANCIAL
CORPORATION,
Defendants.
___________________________________
OPINION AND ORDER
This matter comes before the Court on Plaintiff Securities and
Exchange Commission’s Renewed Motion to Strike Declaration of Wayne
Burmaster and Affidavit of Christian Gallo from the Defendants
Response to the Commission’s Statement of Undisputed Facts in
Support of its Motion for Summary Judgment (Doc. #159) filed on
July 19, 2013.

Defendant Edward W. Hayter (Hayter) filed an

Opposition (Doc. #160) on August 13, 2013.
plaintiff filed its Reply (Doc. #164).

On October 11, 2013,

On October 18, 2013, the

Court deferred its ruling on the motion and reopened discovery for
the limited purpose of allowing depositions for defendant Wayne A.
Burmaster Jr. (Burmaster) and non-party Christian Gallo (Gallo).
(Doc. #165.)

After the depositions were taken, on November 21,

2013, plaintiff filed a Notice of Filing Supplemental Authority and
Evidence in Further Support of its Renewed Motion (Doc. #166). For
the reasons set forth below, the motion is granted.
I.
Some procedural history is warranted.

Plaintiff filed a

Motion for Summary Judgment (Doc. #67) against defendants Burmaster
and Hayter on March 2, 2012.

After discovery concluded and after

a number of extensions granted by the Court, nearly a year later,
on February 14, 2013, Hayter and Burmaster filed an Opposition to
the

Securities

and

Exchange

Commission’s

Motion

for

Summary

Judgment (Doc. #136) and Response to the Securities and Exchange
Commission’s Statement of Undisputed Facts in Support of its Motion
for Summary Judgment (Doc. #137). In their response to plaintiff’s
statement of undisputed facts, Hayter and Burmaster submitted a
declaration by Burmaster and an affidavit by non-party Gallo, which
included testimony on subjects that Burmaster and Gallo refused to
testify to in their investigative testimony and depositions by
invoking the Fifth Amendment privilege against self incrimination.
(Doc. #137, pp. 34-44.)

Plaintiff requested the Court strike

Burmaster’s declaration and Gallo’s affidavit.

(Doc. #139.)

its May 23, 2013 Order, the Court held that:
In order to balance the significant disadvantage to
plaintiff
the
late
withdrawal
would
cause
with
defendants’ pro se status, the Court will defer its
ruling on this motion and reopen discovery for the
limited purpose of allowing depositions for defendant
Burmaster and non-party Gallo. After the completion of
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In

the limited discovery, the parties will have an
opportunity to supplement their briefs as to plaintiff’s
Motion for Summary Judgment (Doc. #67).
(Doc. #157.)
On July 19, 2013, plaintiff filed a Renewed Motion to Strike
(Doc. #159), in which plaintiff asserted that Burmaster failed to
appear for his duly noticed deposition and that Gallo evaded
service. Because plaintiff failed to properly serve Burmaster with
a notice of deposition, the Court deferred its ruling on the motion
and again reopened discovery for thirty days for the limited
purpose of allowing depositions for defendant Burmaster and nonparty Gallo.

(Doc. #161.)

On November 21, 2013, plaintiff filed a Notice of Filing
Supplemental Authority and Evidence in Support of its Renewed
Motion (Doc. #166), in which plaintiff included the transcripts of
Burmaster and Gallo’s depositions.

During Burmaster’s deposition,

with the exception of testifying that “as far as the press releases
go, I had no knowledge before the press releases came out; nor did
I write any press releases for this,” Burmaster asserted his Fifth
Amendment privilege to plaintiff’s questions. (Doc. #166-1, p. 2.)
In

Gallo’s

deposition,

Gallo

stated:

“Anything

I

said

in

my

affidavit is the truth and any other question you ask me pertaining
to anything, I am going to plead the Fifth.”

(Doc. #166-2, p. 1.)

Gallo then proceeded to assert his Fifth Amendment privilege to
plaintiff’s questions.

(Doc. #166-2.)

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II.
Plaintiff again seeks to strike Burmaster’s declaration and
Gallo’s affidavit.

Under Fed. R. Civ. P. 12(f), “the Court may

order stricken from any pleading any insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.”
As stated in the Court’s earlier Order:
In filing Gallo’s affidavit and Burmaster’s declaration,
which included testimony on subjects that Burmaster and
Gallo refused to respond to in their investigative
testimony and depositions, Burmaster and Gallo have now
withdrawn their assertion of the Fifth Amendment
privilege. The issue before the Court is whether they
should be allowed to do so at this late stage in the
proceedings.
(Doc. #157, p. 2.)
“Withdrawal

‘is

dependent

circumstances of each case.’”

on

the

particular

facts

and

SEC v. Smart, 678 F.3d 850, 855

(10th Cir. 2012)(quoting Davis-Lynch, Inc. v. Moreno, 667 F.3d 539,
546 (5th Cir. 2012)).
Generally, “[t]he court should be especially inclined to
permit withdrawal of the privilege if there are no
grounds for believing that opposing parties suffered
undue prejudice from the litigant's later-regretted
decision to invoke the Fifth Amendment.”
Conversely,
withdrawal is not permitted if the litigant is trying to
“abuse, manipulate or gain an unfair strategic advantage
over opposing parties.”•
Davis-Lynch, Inc., 667 F.3d at 547 (footnote and citation omitted).
An example of impermissible withdrawal is “when [a party] invoked
the privilege throughout discovery and then sought to withdraw the
privilege either to support or defend against a motion for summary

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judgment.” Id. (collecting cases). Under those circumstances, the
opposing party is often placed “at a significant disadvantage
because

of

increased

costs,

delays,

investigation.”• Id. at 548.

and

the

need

for

a

new

“On the other hand, factors that

favor permitting withdrawal include the pro se status of the party
who asserted the privilege and now seeks its withdrawal, coupled
with a lack of awareness of the consequences of taking the Fifth,
and possession by the opposing party of sufficient substitute
evidence from the invoking party.”

Smart, 678 F.3d at 855 (citing

Davis-Lynch, Inc., 667 F.3d at 548)).
Here, Burmaster and Gallo withdrew their assertion of the
Fifth Amendment privilege well after the discovery period ended and
in an attempt to defend against plaintiff’s motion for summary
judgment.

The

Court

attempted

to

“balance

the

significant

disadvantage to plaintiff the late withdrawal would cause with
defendants’ pro se status” by reopening discovery for the limited
purpose of allowing depositions; however, at their depositions,
Burmaster

and

Gallo

attempted

to

again

reassert

their

Fifth

Amendment privilege.
In light of Burmaster and Gallo’s depositions, the Court has
no doubt that their attempt to withdraw their Fifth Amendment
privilege was to “abuse, manipulate or gain an unfair strategic
advantage over opposing parties.”

Therefore, the Court will grant

plaintiff’s motion and the Declaration of Wayne Burmaster and

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Affidavit of Christian Gallo will be stricken.
III.
Within his opposition to plaintiff’s motion, defendant Hayter
filed, in the alternative, a Cross-Motion for Leave to Submit
Supplemental Evidence in Opposition to Plaintiff’s Motion for
Summary Judgment.

(Doc. #160.)

Hayter requests that the Court

allow him to replace Gallo’s affidavit with his own declaration or
a declaration of a third-party with direct knowledge of Gallo’s
identity and his position as an officer of BIH Corporation.

(Id.,

pp. 1, 2.)
The Court will deny Hayter’s request.

Hayter had nearly a

year to file an opposition to plaintiff’s motion for summary
judgment and the Court will not allow Hayter to file another
declaration at this late stage in the proceedings.
Accordingly, it is now
ORDERED:
1.

Plaintiff Securities and Exchange Commission’s Renewed

Motion to Strike Declaration of Wayne Burmaster and Affidavit of
Christian Gallo from the Defendants Response to the Commission’s
Statement of Undisputed Facts in Support of its Motion for Summary
Judgment

(Doc.

#159)

is

GRANTED.

The

Declaration

of

Wayne

Burmaster (Doc. #137, pp. 34-37) and Affidavit of Christian Gallo
(Doc. #137, pp. 38-44) attached to defendants’ Response (Doc. #137)
are stricken.

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2.

Plaintiff Securities and Exchange Commission’s Motion to

Strike Declaration of Wayne Burmaster and Affidavit of Christian
Gallo from the Defendants Response to the Commission’s Statement of
Undisputed Facts in Support of its Motion for Summary Judgment
(Doc. #139) is DENIED as moot.
3. Defendant Edward Hayter’s Cross-Motion for Leave to Submit
Supplemental Evidence in Opposition to Plaintiff’s Motion for
Summary Judgment (Doc. #160) is DENIED.
DONE AND ORDERED at Fort Myers, Florida, this 13th day of
December, 2013.

Copies:
Counsel of record
Pro se parties

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