Securities and Exchange Commission v. Blackburn et al

Filing 86

ORDER & REASONS denying 74 Defendants' Rule 56 Motion for Summary Judgment. Signed by Judge Carl Barbier on 8/12/15. (sek)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

SECURITIES AND EXCHANGE
COMMISSION

CIVIL ACTION

VERSUS

NO: 15-2451

RONALD L. BLACKBURN, ET AL

SECTION: “J”(1)

ORDER & REASONS
Before the Court is a Rule 56 Motion for Summary Judgment
(Rec. Doc. 74) filed by Defendants Ronald Lee Blackburn, Andrew
V. Reid, Bruce Gwyn, and Michael A. Mulshine (“Defendants”) and
an opposition thereto (Rec. Doc. 82) filed by Plaintiff, the
Securities and Exchange Commission. Having considered the motion
and legal memoranda, the record, and the applicable law, the
Court finds that the motion should be DENIED.
FACTS AND PROCEDURAL BACKGROUND
On

December

Commission
various

15,

(“SEC”)

claims

filed

under

Securities

Exchange

widespread

scheme

2014,
a

the
Act

by

the

Securities

Complaint
Securities

of

the

1934.

against
Act

The

individual

of

and

Exchange

Defendants
1933

Complaint
Defendants

and
alleges

to

for
the
a

defraud

investors and violate the antifraud, registration, and reporting
provisions

of

the

federal

securities

laws

with

respect

to

Defendant Treaty Energy Corporation, a publicly traded oil and
gas company. According to the SEC, Defendants Blackburn, Reid,

Gwyn, Mulshine, Schlesinger, and Whitley carried out this scheme
between

2009

convicted

and

felon,

2013

by

(1)

controlled

concealing

Treaty

as

that

de

Blackburn,

facto

officer

a

and

director; (2) engaging in a false promotional campaign intended
to artificially inflate Treaty’s stock price, including issuing
a January 2012 press release falsely claiming a major oil strike
in

Belize;

involving

(3)
the

perpetuating
issuance

unrestricted

Treaty

millions

dollars

of

unwitting

unregistered
Complaint

offering

alleges

and

stock

investors;

a

transfer

through

selling
and
of

that

fraudulent

(4)
oil

as

gas

result

worthless
an

working
of

scheme

restricted
Defendants

conducting

and
a

of

which

virtually

trading

raised

stock

illegal
interests.

their

and

to
and
The

misconduct,

Defendants reaped illicit profits of over $4.9 million.
On June 30, 2105, this case was transferred to this Court
from the Eastern District of Texas after Defendants, all but one
of whom reside in the Eastern District of Louisiana, moved to
transfer venue. Defendants filed the instant Rule 56 Motion for
Summary Judgment (Rec. Doc. 74) on July 28, 2015.
PARTIES’ ARGUMENTS
In support of their motion for summary judgment, Defendants
argue

that

the

SEC’s

claim

is

not

about

violations

of

the

Securities Act or the Securities Exchange Act, but rather “[i]t
is about the abuse of the SEC’s investigative functions and the

2

failure of the SEC to disassociate itself from persons who were
knowingly

abusing

its

process,”

namely

a

group

of

people

referred to by Defendants as “tdbowkieknife bloggers” or “Treaty
malcontents.” (Rec. Doc. 74-1, p. 1) Although Defendants move
for summary judgment, they spend approximately eight pages of
their memorandum arguing that the Court should strike various
paragraphs and captions in the SEC Complaint pursuant to Federal
Rule

of

Civil

Procedure

12(f),

because

they

are

immaterial,

impertinent, and scandalous. (Rec. Doc. 74-1, pp. 10-18) The
remainder of Defendants’ memorandum argues that the Complaint
“woefully fails the test for specificity under Rule 9(b),” that
the allegations are nothing more than a “parroting of slander,”
and

that

the

SEC

staff

attorney

who

initiated

this

matter

subjected the Defendants to humiliation in violation of Rule of
Evidence 404 as well as “the rules of life.” (Rec. Doc. 74-1, p.
21)
The substance of Defendants’ argument in support of their
motion for summary judgment begins on the last page of their
memorandum, after noting that they “will not belabor the issue.”
Defendants address the SEC’s claims in three paragraphs, each
essentially

restating

the

claim

and

ending

simply

with

the

phrase “That did not happen.” (Rec. Doc. 74-1, p. 25)
Rather

than

respond

with

evidence

of

specific

facts

creating a genuine issue for trial, the SEC argues in opposition

3

that Defendants failed to meet their burden as movants because
they merely deny that the alleged violation occurred. (Rec. Doc.
82, p. 4) Furthermore, the SEC asks the Court to “disregard all
uncited

allegations

accompanying

contained

‘Statement

of

in

Defendants’

Uncontested

Facts,’

brief
which

and

the

are

not

supported by a single citation to the evidence.” (Rec. Doc. 82,
p. 2)
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.
R. Civ. P. 56(c)); Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, the Court considers “all of the evidence
in

the

record

but

refrains

from

making

credibility

determinations or weighing the evidence.” Delta & Pine Land Co.
v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir.
2008).

All

reasonable

inferences

are

drawn

in

favor

of

the

nonmoving party, but a party cannot defeat summary judgment with
conclusory allegations or unsubstantiated assertions. Little, 37
F.3d

at

1075.

A

court

ultimately

4

must

be

satisfied

that

“a

reasonable jury could not return a verdict for the nonmoving
party.” Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1263-64 (5th
Cir.

1991)

(citation

omitted).

The

nonmoving

party

can

then

defeat the motion by either countering with sufficient evidence
of its own, or “showing that the moving party’s evidence is so
sheer that it may not persuade the reasonable fact-finder to
return a verdict in favor of the moving party.” Id. at 1265.
If

the

dispositive

issue

is

one

on

which

the

nonmoving

party will bear the burden of proof at trial, the moving party
must “‘demonstrate the absence of a genuine issue of material
fact,’

but

need

not

negate

the

elements

of

the

nonmovant's

case.” Little, 37 F.3d at 1075 (quoting Celotex, 477 U.S. at
323). “If the moving party fails to meet this initial burden,
the

motion

must

be

denied,

regardless

of

the

nonmovant's

response. If the movant does, however, meet this burden, the
nonmovant must go beyond the pleadings and designate specific
facts showing that there is a genuine issue for trial.” Id.
nonmovant’s

burden

“is

not

satisfied

with

some

The

metaphysical

doubt as to the material facts, by conclusory allegations, by

5

unsubstantiated assertions, or by only a scintilla of evidence.”
Id. (citations omitted) (internal quotation marks omitted).
DISCUSSION
The
satisfied

Court
their

must

first

initial

determine

burden.

whether

Simply

Defendants

filing

a

motion

have
for

summary judgment does not immediately compel the party opposing
the motion to come forward with evidence demonstrating material
issues of fact as to every element of its case. Russ v. Int'l
Paper Co., 943 F.2d 589, 591 (5th Cir. 1991). “Celotex makes
clear that before the nonmoving party is required to produce
evidence

in

opposition

to

the

motion,

the

moving

party

must

first satisfy its obligation of demonstrating that there are no
factual issues warranting trial.” Russ, 943 F.2d at 592.
Of course, a party seeking summary judgment always
bears the initial responsibility of informing the
district court of the basis for its motion, and
identifying
those
portions
of
“the
pleadings,
depositions,
answers
to
interrogatories,
and
admissions on file, together with the affidavits, if
any,” which it believes demonstrate the absence of a
genuine issue of material fact.
Id. (quoting

Celotex,

477

U.S.

at

323).

This

initial

burden

remains with the moving party even when the issue involved is
one on which the non-movant will bear the burden of proof at
trial. Id. Thus, “the movant must discharge the burden the Rules
place upon him: It is not enough to move for summary judgment
without supporting the motion in any way or with a conclusory

6

assertion that the plaintiff has no evidence to prove his case.”
Celotex, 477 U.S. at 328 (White, J., concurring); see also Ashe
v. Corley, 992 F.2d 540, 543 (5th Cir. 1993).
Rule 56(c) sets out the procedures for supporting factual
positions in a motion for summary judgment. A party asserting
that

a

fact

cannot

be

genuinely

disputed

“must

support

the

assertion by: (A) citing to particular parts of materials in the
record[;

or]

(B)

showing

that

the

materials

cited

do

not

establish the . . . presence of a genuine dispute, or that an
adverse party cannot produce admissible evidence to support the
fact.” Fed. R. Civ. P. 56(c). Although the court may consider
other materials in the record, it need only consider the cited
materials. Id.
In

the

instant

case,

Defendants

cite

to

six

exhibits

attached to their motion for summary judgment: a petition for
damages filed in St. Tammany Parish against Blackburn, Treaty,
and

four

other

defendants

(Rec.

Doc.

74-3);

an

email

chain

between an SEC staff attorney and two Immigration and Customs
Enforcement agents (Rec. Doc. 74-4); various comments posted on
an online blog referred to as InvestorHUB (Rec. Docs. 74-5, 746, 74-7); and an email chain between the Defendants’ attorney
and the SEC staff attorney (Rec. Doc. 74-8). Defendants also
quote multiple paragraphs of the SEC Complaint, mainly seeking
to have these portions stricken. (Rec. Doc. 74-1, pp. 10-18)

7

None

of

the

supported

by

Defendants’
citation

to

“Uncontested
the

record

or

Material
any

Facts”

other

are

materials.

(Rec. Doc. 74-2)
In

addition,

Defendants

cite

SEC

v.

Wheeling-Pittsburgh

Steel Corp., a Western District of Pennsylvania case vacated by
the United States Court of Appeals for the Third Circuit, for
the proposition that “the [SEC] owes a duty to the public . . .
to disassociate itself from persons who are knowingly abusing
its

process.”

482

F.

Wheeling-Pittsburgh,
subpoena
allowed

Supp.

the

555,

district

565
court

(W.D.

Pa.

refused

duces

tecum

because

it

believed

that

biased

third

parties

to

influence

the

1979).

to

In

enforce

the

SEC

a

had

investigative

process improperly. Id. at 566. On appeal, the Third Circuit
remanded the case because it was unclear from the district court
opinion whether it focused on the motives of the SEC, which is
the proper focus in a challenge to an administrative subpoena,
or whether the motives of third parties were relied upon. SEC v.
Wheeling-Pittsburgh
1981).

However,

Steel

Corp.,

Defendants’

648

reliance

F.2d
on

118,

the

128

(3d

district

Cir.

court’s

vacated opinion in Wheeling-Pittsburgh is misplaced; it provides
no support for the assertion that there is no genuine issue as
to any material fact and that the movant is entitled to judgment
as a matter of law.

8

Rather

than

support

their

motion

for

summary

judgment,

Defendant’s devote a substantial portion of their brief to a
detailed discussion of “the need to purge the complaint,” in
which Defendants ask the Court to strike certain allegations
under Rule 12(f). A motion for summary judgment is the entirely
improper vehicle in which to raise this issue. Accordingly, the
Court will not consider this argument.
It is apparent that Defendants totally failed to satisfy
the movant’s burden as set out in Rule 56, Celotex, and Russ.
The Defendants’ motion for summary judgment failed to point out
an absence of proof on any factual issue. Similar to the motion
before the court in Ashe v. Corley, “the motion failed to raise
any factual issues at all, other than in the most conclusory
terms.” 992 F.2d at 544. A mere conclusory statement that the
allegations in the Complaint “did not happen” does not satisfy
the movant’s burden. As a result, the burden never shifted to
the

SEC

to

go

beyond

the

pleadings

to

show

specific

facts

creating a genuine issue for trial, 1 and the Court must deny the
motion.
CONCLUSION
Accordingly,

1

It should be noted, however, that the SEC “truly walked the razor's edge with
their response to the [Defendants’] motion.” Ashe, 992 F.2d at 544 n.5. If
the Defendants’ had satisfied their burden with respect to any essential
element of the SEC’s claims, the SEC’s response would have been completely
inadequate to prevent summary judgment. See id.

9

IT IS HEREBY ORDERED that Defendants’ Rule 56 Motion for
Summary Judgment (Rec. Doc. 74) is DENIED.
New Orleans, Louisiana this 12th day of August, 2015.

CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

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