Securities and Exchange Commission v. Present

Filing 240

District Judge Leo T. Sorokin: ORDER entered denying 223 Plaintiff's Motion in Limine (Montes, Mariliz)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
__________________________________________
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SECURITIES AND EXCHANGE COMMISSION, )
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Plaintiff,
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v.
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Case No. 14-cv-14692-LTS
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HOWARD B. PRESENT,
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Defendant.
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ORDER ON MOTION IN LIMINE (DOC. 223)
July 31, 2017
SOROKIN, D.J.
Plaintiff Securities and Exchange Commission (SEC) has filed a Motion in Limine “to
exclude evidence and testimony that lawyers reviewed and approved F-Squared’s advertising
and marketing material for its AlphaSector models, strategies, products, or indexes, or blessed
[Defendant] Howard Present’s disclosure of a backtested performance record as ‘not backtested,’
unless Present can make out the elements of an advice of counsel defense.” Doc. 223 at 1.
Defendant states, once again, that “he does not intend to pursue” an advice-of-counsel defense at
trial, Doc. 228 at 2, which would require him to show “that he (1) made a complete disclosure to
counsel; (2) requested counsel’s advice as to the legality of the contemplated action; (3) received
advice that it was legal; and (4) relied in good faith on that advice.” Zacharias v. SEC, 569 F.3d
458, 467 (D.C. Cir. 2009) (citation and internal quotation marks omitted). Nevertheless,
Defendant still wishes to present evidence that he “engaged top counsel to ensure compliance
with legal requirements, including specifically regarding the marketing of the AlphaSector
indexes.” Doc. 228 at 1.
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The Court finds such evidence is admissible to the extent it is relevant to whether
Defendant acted in good faith and/or with due care in making the alleged misrepresentations
about AlphaSector. See Doc. 216 at 3 (“Each of Plaintiff’s legal claims requires showing either
scienter or negligence on Defendant’s part.”) (citations omitted); see also Howard v. SEC, 376
F.3d 1136, 1147 (D.C. Cir. 2004) (stating that reliance on the advice of counsel “is not really a
defense at all but simply some evidence tending to support a defense based on due care or good
faith”) (citation, internal quotation marks, and footnote omitted); United States v. Gorski, 36 F.
Supp. 3d 256, 268 (D. Mass. 2014). 1
The SEC argues that even if evidence about Defendant’s consultations with counsel about
F-Squared’s marketing materials is relevant, the evidence should be precluded under Federal
Rule of Evidence 403 because of “the likelihood of confusing the jury and unfairly prejudicing
the SEC.” Doc. 224 at 22 (citations omitted). The Court disagrees and believes that appropriate
instruction will prevent undue prejudice and guide the jurors’ consideration of this and all other
evidence. 2
The SEC also suggests that because no attorneys have stated they approved the alleged
misrepresentations in this case, the Court should exclude all evidence concerning lawyers’
review of AlphaSector’s marketing materials. Doc. 233 at 2. The Court respectfully disagrees.
Again, such evidence is relevant to whether Defendant acted with scienter or negligence.
Moreover, it is the jury’s role, not the Court’s, to decide whether to believe any allegation that is
not corroborated by F-Squared’s former lawyers. See Musacchio v. United States, 136 S. Ct.

1

If Defendant intends to offer evidence of consultations with counsel about a subject other than the marketing of
AlphaSector, he must first receive permission from the Court outside the presence of the jury.
2
Of course, this instruction will be very different than an advice-of-counsel instruction. See United States Courts
for the Ninth Circuit, Model Jury Instructions: Advice of Counsel, http://www3.ce9.uscourts.gov/juryinstructions/node/376.

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709, 715 (2016) (noting it is “the jury’s role to resolve conflicts in the testimony, to weigh the
evidence, and to draw reasonable inferences from basic facts to ultimate facts”) (citation and
internal quotation marks omitted).
For the foregoing reasons, the Motion in Limine (Doc. 223) is DENIED.

SO ORDERED.
/s/ Leo T. Sorokin
Leo T. Sorokin
United States District Judge

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