UNITED STATES SECURITIES AND EXCHANGE COMMISSION v. IMPERIAL PETROLEUM, INC. et al

Filing 98

ENTRY ON PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT - This cause is before the Court on the motion for partial summary judgment filed by Plaintiff United States Securities and Exchange Commission ("SEC") against Defendant Jeffrey Wilson Dkt. No. 70 . The motion is fully briefed, and the Court, being duly advised, GRANTS IN PART AND DENIES IN PART the motion. Signed by Judge William T. Lawrence on 5/18/2018. (JDC)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION,
Plaintiff,
vs.
IMPERIAL PETROLEUM, INC.,
ET AL.,
Defendants.

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) Cause No. 1:13-cv-1489-WTL-MJD
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ENTRY ON PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT
This cause is before the Court on the motion for partial summary judgment filed by
Plaintiff United States Securities and Exchange Commission (“SEC”) against Defendant Jeffrey
Wilson (Dkt. No. 70). The motion is fully briefed, and the Court, being duly advised, GRANTS
IN PART AND DENIES IN PART the motion for the reasons set forth below.
I.

STANDARD

Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate “if
the movant shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” In ruling on a motion for summary judgment, the
admissible evidence presented by the non-moving party must be believed, and all reasonable
inferences must be drawn in the non-movant’s favor. Zerante v. DeLuca, 555 F.3d 582, 584 (7th
Cir. 2009) (“We view the record in the light most favorable to the nonmoving party and draw all
reasonable inferences in that party’s favor.”). However, a party who bears the burden of proof on
a particular issue may not rest on its pleadings, but must show what evidence it has that there is a
genuine issue of material fact that requires trial. Johnson v. Cambridge Indus., Inc., 325 F.3d

892, 901 (7th Cir. 2003). Finally, the non-moving party bears the burden of specifically
identifying the relevant evidence of record, and “the court is not required to scour the record in
search of evidence to defeat a motion for summary judgment.” Ritchie v. Glidden Co., 242 F.3d
713, 723 (7th Cir. 2001).
II.

BACKGROUND

In 2016, a jury found Wilson guilty of (a) fraud in connection with the purchase or sale of
securities (15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5); (b) fraud in the offer or sale of
securities (15 U.S.C § 77q(a)); (c) false statements in required filings with the SEC (15 U.S.C. §
78ff); (d) falsely certifying annual reports filed with the SEC (18 U.S.C. § 1350(c)(1)); (e)
falsely certifying quarterly reports filed with the SEC (18 U.S.C. § 1350(c)(1)); and (f) false
statements and omissions to an auditor (15 U.S.C. § 78m(b)(5) and 17 C.F.R. §§ 240.13b2-2(a)
and 240.13b2-2(b)). The trial court sentenced Wilson to 120 months imprisonment and ordered
him to pay restitution of $16.4 million. The Seventh Circuit affirmed the district court’s
judgment.
This parallel civil proceeding was brought by the SEC one day after Wilson was indicted.
The SEC alleges that Wilson committed civil violations of the Securities and Exchange Acts of
1933 and 1934 (collectively, the “Securities Acts”), in particular, Section 17(a) of the Securities
Act, 15 U.S.C. § 77q(a); Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5;
Section 13(a) of the Exchange Act, 15 U.S.C. § 78m(a) and Rules 12b-20, 13a-1, 13a-11, and
13a-13; Section 13(b)(2)(A) of the Exchange Act, 15 U.S.C. § 78m(b)(2)(A); Section 13(b)(5) of
the Exchange Act, 15 U.S.C. § 78m(b)(5) and Rule 13b2-1; Rule 13b2-2 of the Exchange Act;
Rule 13a-14 of the Exchange Act; and Section 20(a) of the Exchange Act.

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The SEC requested that the Court (1) issue an injunction permanently restraining and
enjoining Wilson from violating Sections 17(a) and 10(b) and Rule 10b-5; (2) issue an injunction
permanently restraining Wilson from violating Sections 13(a), 13(b)(2)(A), 13(b)(5) and 20(a) of
the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13a-14, 13b2-1 and 13b2-2; (3)
order Wilson to disgorge all ill-gotten gains derived from his unlawful activities with
prejudgment interest; (4) order Wilson to pay civil penalties pursuant to the Securities Acts; and
(5) prohibit Wilson from acting as an officer or director pursuant to the Securities Acts. The SEC
now seeks summary judgment on Counts I, III, VI, and X of its Complaint.1
III.

DISCUSSION

The crux of the SEC’s argument in support of its motion for partial summary judgment is
straightforward: the jury’s verdict in the criminal trial against Wilson should be given preclusive
collateral effect to establish that Wilson violated the Securities Acts and the rules promulgated
thereunder. With regard to Counts I, III, and X of the Complaint, the SEC argues that the charges
on which Wilson was convicted are identical to those alleged in the Complaint. With regard to
Count VI of the Complaint, the SEC argues that the criminal conviction required findings that
satisfy the elements of the civil claim.
The doctrine of collateral estoppel (also known as issue preclusion) holds that “once an
issue is actually and necessarily determined by a court of competent jurisdiction, that
determination is conclusive in subsequent suits based on a different cause of action involving a
party to the prior litigation.” Our Country Home Enters., Inc. v. Comm’r of Internal Revenue,
855 F.3d 773, 782 (7th Cir. 2017) (internal citations omitted). Issue preclusion is appropriate
when the following four elements are met:

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The SEC does not seek summary judgment on Counts VIII, IX, XII, and XIII.
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(1) the issue sought to be precluded is the same as an issue in the prior litigation;
(2) the issue must have been actually litigated in the prior litigation; (3) the
determination of the issue must have been essential to the final judgment; and (4)
the party against whom estoppel is invoked must have been fully represented in
the prior action.
Adams v. City of Indianapolis, 742 F.3d 720, 736 (7th Cir. 2014) (citation omitted). Collateral
estoppel “may be applied in civil trials to issues previously determined in a criminal
conviction.” Appley v. West, 832 F.2d 1021, 1025-26 (7th Cir. 1987). There does not appear to
be any disagreement between the parties that Wilson’s conviction establishes liability in this civil
case as to Counts I, III, VI, and X.
However, as to damages—specifically, the Government’s requests for disgorgement and
civil penalties—Wilson asks the Court, pursuant to Federal Rule of Civil Procedure 56(d)(1), to
defer considering the motion to permit him to conduct discovery and obtain affidavits and
declarations. The Court agrees that Wilson is entitled to conduct discovery before he is required
to respond to the SEC’s motion with regard to damages. Wilson can hardly be expected to offer
evidence, as the SEC suggests he should, without being able to conduct discovery, obtain
affidavits or declarations, and, if he so desires, obtain his own expert to rebut the SEC’s
assertions regarding damages.
IV. CONCLUSION
For the foregoing reasons, the SEC’s motion for partial summary judgment is
GRANTED IN PART and DENIED IN PART. Specifically, it is granted as to liability on
Counts I, III, VI, and X and denied without prejudice pursuant to Federal Rule of Civil
Procedure 56(d)(1) as to the issue of damages. The parties are directed to confer and submit a
proposed schedule for the necessary discovery, after which the SEC may renew its motion for
summary judgment with regard to damages if it wishes to do so. The schedule also shall provide

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for any discovery and for dispositive motions with regard to the remaining counts in the SEC’s
complaint.
SO ORDERED: 5/18/18

_______________________________
Hon. William T. Lawrence, Judge
United States District Court
Southern District of Indiana

Copies to all counsel of record via electronic communication.

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