Securities and Exchange Commission v. Johnson et al

Filing 80

OPINION & ORDER re: 41 MOTION to Strike Document No. 32 Eighth and Ninth Affirmative Defenses by Defendant AGF II and Johnson filed by Securities and Exchange Commission. Plaintiff's motion to strike is GRANTED. This Opinion and Order resolves Docket Entry 41. SO ORDERED. (Signed by Judge Kimba M. Wood on 2/22/2017) (anc)

USDSSDNY
DOCUMENT
ELECTRONICALLY FILED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

DOC#:~~~-.~--r--:

DATE FILED:

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SECURITIES AND EXCHANGE COMMISSION,

OPINION AND ORDER

Plaintiff
-againstNo. 16 CV 0828 (KMW)
AMERICAN GROWTH FUNDING II, LLC,
PORTFOLIO ADVISORS ALLIANCE, INC.,
RALPH C. JOHNSON, HOWARD J. ALLEN III,
and KERRI WASSERMAN,
Defendants.

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KIMBA M. WOOD, District Judge:
I have reviewed de novo Magistrate Judge Freeman's thorough and fairly-reasoned Report
and Recommendation ("R&R") that the Plaintiff Securities and Exchange Commission's ("SEC")
motion to strike the Defendants' eighth and ninth affirmative defenses be granted. I adopt the R &
R in full.

The Court notes Defendants' objections to the Report and Recommendation-particularly,
that striking Defendants' eighth and ninth affirmative defenses would result in a violation of
Defendants' constitutional rights. (Def. Mcm. at 6). The Court does not agree. Defendants do not
produce sufficient evidence to prove that any alleged misconduct by the Securities and Exchange
Commission would rise to the level of constitutional violation necessary to allow for an affirmative
defense that would otherwise be barred by law. (R & R at 6-7). Furthermore, the Court agrees with

Judge Freeman's conclusion that Defendants cannot prove the kind of prejudice necessary to
sustain their ninth affirmative defense, predicated on the "unclean hands" doctrine. (R & Rat 12).
The Court also remains unpersuaded by Defendants' argument that the S.E.C. 's motion
should be denied as untimely. (Def. Mem. at 10-12). The Court is well within its power to consider
the motion at this time. (R & Rat 8). The public interest counsels in favor of consideration of the
merits of the S.E.C.'s motion. The public interest also counsels in favor of allowing the S.E.C. to
investigate securities claims free from "irrelevant, prolonged, and intrusive discovery." (R & Rat
13 (citing SEC Mem. at 22)). The Court thus agrees with Magistrate Judge Freeman's finding that
the SEC would be unduly prejudiced if forced to respond to Defendants' eighth and ninth
affirmative defenses. (R & R at 13 ).
Plaintiffs motion to strike is GRANTED. This Opinion and Order resolves Docket Entry
41.
SO ORDERED.
DATED:

New York, New York
FebruaryJZ 2017

KIMBA M. WOOD
United States District Judge