Taboas-Colon et al v. Diaz-Gonzalez et al

Filing 228

OPINION AND ORDER. DENIED 205 Motion to Alter Judgment; GRANTED 206 Motion Joining Co-Defendants motion to alter judgment; DENIED 220 MOTION for Miscellaneous Relief filed by Angelo Diaz-Gonzalez; GRANTED 225 MOTION for extension of time unti l ruling from the court to file document filed by Angelo Diaz-Gonzalez. Hearing on Damages is SET for 11/10/2009 at 10:00 AM in SEC's Courtroom in Old San Juan, before Judge Salvador E Casellas. Signed by Judge Salvador E Casellas on 10/26/2009.(LB)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 T a b o a s Colón, et al Plaintiffs D ía z -G o n z á le z , et al Defendants

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF PUERTO RICO

CIVIL NO. 04-2371 (SEC)

O P I N I O N AND ORDER O n February 24, 2009, Angelo Díaz-González ("Díaz") filed a Motion to Alter Judgment. D o c k e t # 205. Co-defendant Angel De-Jesús, his wife, and their conjugal partnership ("DeJ e sú s" ) filed a motion joining the arguments set forth in Díaz's request for reconsideration. D o c k e t # 206. Plaintiffs William R. Taboas-Colón ("Taboas"), his wife, and their conjugal p a rtn e rs h ip (collectively "Plaintiffs"), opposed. Docket # 217. Díaz replied, and Plaintiffs filed a sur-reply. Dockets ## 219 & 227. After reviewing the filings, and the applicable law, D e f e n d a n ts ' motion for reconsideration is DENIED. Factual and Procedural Background T h e facts of the instant case are set forth in our previous Opinions and Orders of N o v e m b e r 6, 2007 (Docket # 48), January 10, 2008 (Docket # 73), February 5, 2008 (Docket # 80), January 23, 2009 (Docket # 193), and February 19, 2009 (Dockets ## 200 & 201). On D e c e m b e r 14, 2004, Plaintiffs filed the instant action against Díaz, DeJesús (collectively " D e f e n d a n ts " ), their respective wives and conjugal partnerships, and various unnamed cod e f e n d a n ts , under Sections 12(a)(2) of the Securities Act of 1933 ("Section 12"), 15 U.S.C. 7 7 l(a )(2 ), Section10(b) of the Securities Act of 1934 (Section 10(b)"), 15 U.S.C. 77j(b), and R u le 10b-5 of the Securities and Exchange Commission, 17 C.F.R. 240.10b-5. Plaintiffs seek

1 2

CIVIL NO. 04-2371 (SEC)

Page 2

to rescind an investment contract (the "viatical settlement" or "the security")1 , to which they 3 a lle g e d ly entered, moved by the Defendants' investment advice. They also seek restitution of 4 th e monies paid in furtherance of said contract, as well as interest computed therein, damages, 5 a tto rn e y's fees and costs. 6 Per Plaintiffs' allegations, Mutual Benefits Corporation ("MBC"),2 which is not a party 7 to this action (see Docket # 34), was a viatical settlement provider, who used to emgage in the 8 s a le of said products through sales agents or representatives. According to the complaint, Díaz 9 a n d De Jesús sold the aforementioned investment to Plaintiffs as agents/representatives of 10 M B C . Plaintiffs allege that the sale violated various federal and local securities laws. 11 O n January 10, 2008, this Court entered default against Díaz for his unexcused and 12 re p e a te d failure to comply with discovery, notwithstanding this Court's orders. Docket # 73. 13 T h e re a f te r, upon Plaintiffs' motion for contempt, and Díaz's motion to set aside the default, this 14 C o u rt, on February 5, 2008, denied both motions and ordered Díaz to appear with new counsel 15 a n d file an amended Rule 26 Report by February 19, 2008, in order to agree on how to provide 16 th e owed discovery, and to file a notice of compliance with this Court's order by said date. See 17 D o c k e t # 80. On February 15, 2008, Díaz appeared with new counsel (Docket # 81) and on 18 F e b ru a ry 19, 2008, through his new counsel, filed another Motion to Set Aside the Default 19 (D o c k e t # 85). In its March 28, 2008 Opinion and Order, this Court denied, for the second time, 20 21 22 23 24 25 26
A viatical settlement is considered a security under the law, and consists of a transaction in which a holder of a life insurance policy (the viator) sells the policy to a third party at a discount, which in turn sells it to various customers who w o u ld receive the benefit of a lump sum upon the viator's death. See Docket # 1, at p. 4; see also, Black's Law Dictionary 1 4 0 5 (8th Ed. 2004)("a transaction in which a terminally ill or chronically ill person sells the benefits of a life insurance p o lic y to a third party in return for a lump-sum cash payment equal to a percentage of the policy's face value.") MBC is currently a defendant in an action initiated by the SEC in the Florida District Court for securities laws v io la tio n s . SEC v. MBC, Civil No. 04-60473 (D. Fla.). MBC cannot be joined in this action because it has been placed u n d e r a TRO and Assets Freeze and is under the direction of a Receiver.
2 1

1 2

CIVIL NO. 04-2371 (SEC)

Page 3

D ía z 's motion to set aside the default. Docket # 94. This Court also denied Díaz's motion for 3 re c o n sid e ra tio n . Docket # 98. 4 T h e re a f te r, the parties engaged in limited discovery and filed their respective motions 5 f o r summary judgment. On September 19, 2008, Díaz filed his third motion requesting that 6 d e f a u l t be set aside, and Plaintiffs opposed. Dockets ## 137 & 157. In the January 23, 2009 7 O p in io n and Order, this Court once again denied Díaz's request to set aside default. Docket # 8 1 9 3 . His request for reconsideration was also denied. Docket # 199. Finally, on February 19, 9 2 0 0 9 , this Court partially granted Plaintiffs' motions for summary judgment against De Jesús 10 a n d Díaz, and denied Díaz's request for summary judgment. Dockets ## 200 and 201. As a 11 re su lt, Plaintiffs were awarded $80,000, plus interest, reasonable attorney's fees and costs under 12 S e c tio n 12(a)(2), their breach of contract claims were dismissed, punitive damages were denied, 13 a n d Plaintiffs' request for summary judgment on the amount of damages under Section 10(b) 14 a n d Rule 10-b was held in abeyance pending a hearing on damages. 15 O n February 24, 2009, Díaz filed a motion for reconsideration, and De-Jesús joined the 16 a rg u m e n ts set forth therein. Dockets ## 205 & 206. Plaintiffs filed an opposition, Defendants 17 re p lie d , and Plaintiffs filed a sur-reply. Dockets ## 217, 219 & 227. 18 S ta n d a r d of Review 19 F ED. R. CIV. P. 59(e) allows a party, within ten (10) days of the entry of judgment, to file 20 a motion seeking to alter or amend said judgment. The rule itself does not specify on what 21 g ro u n d s the relief sought may be granted, and courts have ample discretion in deciding whether 22 to grant or deny such a motion. Venegas-Hernández v. Sonolux Records, 370 F.3d 183, 190 (1 st 23 C ir. 2004) (citations omitted). In exercising that discretion, courts must balance the need for 24 g iv in g finality to judgments with the need to render a just decision. Id. (citing Edward H. Bolin 25 C o . v. Banning Co., 6 F.3d 350, 355 (5th Cir. 1993)). Despite the lack of specific guidance by 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 4

th e rule on that point, the First Circuit has stated that a Rule 59(e) motion "must either clearly 3 e s ta b lis h a manifest error of law or must present newly discovered evidence." F.D.I.C. v. World 4 U n iv ., Inc., 978 F.2d 10, 16 (1st Cir. 1992) (citing Fed. Deposit Ins. Corp. v. Meyer, 781 F.2d 5 1 2 6 0 , 1268 (7th Cir. 1986)). Rule 59(e) may not, however, be used to raise arguments that could 6 a n d should have been presented before judgment was entered, nor to advance new legal 7 th e o rie s . Bogosonian v. Woloohojian Realty Corp., 323 F.3d 55, 72 (1 st Cir. 2003). 8 A p p lic a b le Law and Analysis 9 I n their motion for reconsideration, Defendants argue that newly discovered evidence 10 s h o w s that Plaintiffs concealed evidence, made misrepresentations, and committed fraud against 11 th is Court. Docket # 205. In support thereof, Defendants argue that the allegations set forth in 12 th e complaint are not well-pleaded facts. Specifically, they allege that Plaintiffs no longer own 13 th e security, despite alleging ownership of the same in the complaint. Defendants aver that they 14 re c e n tly obtained evidence showing that Plaintiffs concealed the fact that they are no longer 15 o w n e rs of the security in question. They contend that because Plaintiffs no longer own the 16 s e c u rity in question, this Court's Judgment of rescission under Section 12 is not enforceable. 17 D e f e n d a n ts point out that Plaintiffs' only remedy is damages, however, since they requested 18 re sc is s io n in the complaint, they are impeded from changing the remedies sought in the instant 19 case. 20 Furthermore, according to Defendants, Plaintiffs did not satisfy the loss causation 21 re q u ire m e n t under Sections 12 and 10(b). They contend that Plaintiffs' loss is a direct 22 c o n s e q u e n c e of their failure to pay the administrative fees required by MBC's Receiver, 23 f o rf e itin g their interest in the investment. Finally, Defendants posit that they are not jointly and 24 s e v e ra lly liable. In light of Plaintiffs' alleged fraudulent conduct and failure to state their 25 c la im s , Defendants move this Court to set aside its award for attorney's fees, and dismiss the 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 5

in sta n t case, or in the alternative, allow them to file a supplemental motion for summary 3 ju d g m e n t. 4 Plaintiffs oppose, arguing that Díaz's search for the proffered "newly discovered 5 e v id e n c e " began after the conclusion of discovery, and the subpoenas sent to MBC's Receiver 6 w e re never notified to Plaintiffs. Moreover, Plaintiffs allege that Defendants knew that they 7 w e re not owners of the security prior to serving said subpoenas, and the filing of the motions 8 f o r summary judgement. Specifically, as of February, 2008, Díaz had obtained documentation 9 s h o w in g that failure to pay the administrative fees would entail forfeiture of the investment, and 10 a s of July, 2008, during Taboas' deposition, he learned that Taboas had not made any payments 11 to the Receiver. Thus, Plaintiffs deny concealing relevant evidence, or committing fraud against 12 th e opposing party or this Court. Plaintiffs further contend that insofar as loss causation under 13 S e c tio n 12(2) is an affirmative defense, and Díaz is in default, his request on this front should 14 b e denied. Lastly, according to Plaintiffs, this Court correctly held that Defendants are jointly 15 lia b le for damages pursuant to In re Del-Val Fin. Corp. Sec. Litig., 868 F. Supp. 547, 558 16 (S .D .N Y . 1994), and Musick, Peeler & Garrett v. Employers Ins., 508 U.S. 286, 292 (1993). 17 This Court will discuss each argument separately. 18 " N e w ly discovered Evidence" and Damages 19 A s previously stated, Defendants contend that since Plaintiffs do not own the security 20 a n ym o re , their only available remedy is for damages, and not rescission. They further allege that 21 P la in tif f s ' allegations in the complaint are not well pleaded facts, and that they improperly 22 re q u e ste d rescission. Based on the foregoing, Defendants contend that Plaintiffs have 23 m is re p re s e n te d the facts to this Court, and as a result, they move for the dismissal of Plaintiffs' 24 c la im s . However, this Court notes that at the date of the filing of the complaint, Taboas owned 25 th e security in question, had tendered the same to Defendants, and sought rescission 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 6

a c c o rd in g ly. Thus the facts, and the remedies sought in the complaint, were appropriate at the 3 tim e . In short, Plaintiffs have not misrepresented facts to this Court. Notwithstanding, in light 4 o f the events that have occurred since the filing of the complaint in 2004, Plaintiffs no longer 5 o w n the security in question. The remedy of rescission is not viable at this time but this does 6 n o t entail the dismissal of Plaintiffs' claims, insofar as Defendants' liability has been duly 7 e s ta b lis h e d , and Plaintiffs are still entitled to damages. 8 In discussing Section 12, the Supreme Court held that the remedy of rescission seeks to 9 re sto re Plaintiff to his position before the purchase of the security while serving as a measure 10 o f deterrence. Randall v. Loftsgaarden, 478 U.S. 647, 659 (1986). However, when the plaintiff 11 n o longer owns the security, he is only entitled to damages, albeit the Court noted that "damages 12 a re to be measured so as to result in the substantial equivalent of rescission." Id. at 655-656. 13 In Randall, the Supreme Court also held that a defendant is responsible for any decline in the 14 v a lu e of the security after plaintiff tenders the same, whether or not that decline was actually 15 c a u s e d by the fraud. Randall, 478 U.S. at 659. 16 This Court first addresses Defendants' allegation that the 1995 Private Litigation 17 S e c u ritie s Act ("PLSA") repealed Randall's finding that a defendant is responsible for a decline 18 in value of the security. Upon reviewing the record, this Court notes that Defendants fail to 19 p ro v id e any citation in support of said assertion. Furthermore, it lacks support in securities case 20 la w , since Randall is a leading case in this arena. Moreover, Randall's holding is not 21 in c o n sis te n t with the amendments to Section 12(a)(2) under the PLSA. Contrary to Defendants' 22 a s se rtio n s , sub-section (b) does not impose a loss causation requirement for claims under 23 24 25 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 7

S e c tio n 12, instead it creates an affirmative defense.3 Thus, Randall has not been superseded 3 b y said statute. 4 Defendants' also erroneously argue that this case is not about a security's decline in 5 v a lu e , therefore, Randall does not apply. Defendants completely miss the point of Randall's 6 h o ld in g . The Supreme Court sought to protect victims of prospective fraud, by allowing them 7 to demand rescission upon tender of the security, and if defendants refused, they would be liable 8 f o r plaintiff's loss. According to the uncontested facts of this case, Plaintiffs were told that a 9 v ia tic a l settlement was not a security, despite the fact that Defendants had received 10 d o c u m e n ta tio n stating otherwise. They also assured Plaintiffs, through oral presentations and 11 p ro s p e c tu s , that they would receive fixed returns of 12-72% on their investment, and that it was 12 lo w risk, despite the public information regarding the fraudulent sale of viaticals in Puerto Rico 13 a n d the United States. Moreover, Defendants never told Plaintiffs when they originally made 14 th e ir investment that, in addition to the original investment of $80,000, they might have to pay 15 a d d itio n a l sums for premiums in order to receive the promised benefits. Given these 16 m is re p re se n ta tio n s , Plaintiffs had no obligation to pay any additional amount of money, 17 e s p e c ia l l y when paying said amount would not ensure a return on his investment. Most 18 im p o rta n tly, prior to filing this suit, Plaintiffs tendered the security to Defendants first in May 19 2 0 0 4 , and then again in December 2004, and Defendants refused to accept the same. As a result, 20 D e f e n d a n ts cannot argue that Plaintiffs' actions after the tendering of the security is the 21 p ro x im a te cause of Plaintiffs' losses. Pursuant to Randall, any decline in value is attributable 22 to Defendants. In a procedural side, Díaz's argument for dismissal on these grounds were 23 a lre a d y denied by this Court. See Docket # 202. 24 25 26
3

This issue will be addressed in the next section.

1 2

CIVIL NO. 04-2371 (SEC)

Page 8

In sum, the remedies provided to the buyer under Section 12(a)(2) are limited to 3 re c o v e r i n g the consideration paid for the security with interest, less any amount of income 4 re c e iv e d , upon tender of the security, or for damages if the buyer no longer owns the security. 5 S e e Pinter, 486 U.S. at 661. Randall held that "even in the latter situation ... a rescissory 6 m e a s u re of damages will be employed; the plaintiff is entitled to a return of the consideration 7 p a id , reduced by the amount realized when he sold the security and by any `income received' 8 o n the security." Randall, 478 U.S. at 656. As rescission is not at present possible, this Court's 9 J u d g m e n t is amended to award Plaintiffs damages in the amount of the consideration paid, that 10 is , $80,000, plus interest. 11 Loss Causation 12 A s previously discussed, Defendants also aver that Plaintiff failed to show loss causation 13 u n d e r Section 12(a)(2) and Rule 10(b). This Court notes that albeit Plaintiff must show loss 14 c a u s a tio n in order to state a claim under Section 10(b), that is not the case under Section 12. 15 T a m b o n e , 550 F.3d at 130; see Stoneridge,128 S. Ct. at 768; Cf. In re Merrill Lynch & Co. 16 R e s e a rc h Reports Sec. Litig., 272 F. Supp. 2d 243, 254 (S.D.N.Y. 2003) (finding that loss 17 c a u s a tio n does not have to be pled in a Section 11 claim, as it must be in a Section 10b claim, 18 s in c e the absence of loss causation is an affirmative defense to a Section 11 claim); Bastian v. 19 P e tre n Resources Corp., 892 F.2d 680, 685 (7th Cir. 1990) (in actions under section 11 of the 20 1 9 3 3 Act, 15 U.S.C. § 77k, absence of loss causation is an explicit defense); In re Adams Golf, 21 In c . Secs. Litig., 381 F.3d 267 (3d Cir. 2004) (loss causation may be used as an affirmative 22 d e f e n s e against Section 11 claims). After reviewing the clear language of Section 12 (b), this 23 C o u rt notes that loss causation under said section is an affirmative defense, not a pleading 24 re q u ire m e n t. See Arkansas Public Employee Retirement System et al. v. GT Solar International, 25 In c ., No. 08-312, slip. op. at 17 (D.N.H. Oct 7, 2009); see also Lalor v. Omtool, No. 99-469, slip 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 9

o p at 8-9 (D.N.H. Dec. 14, 2000) (finding that "as to claims under § 11 and 12 of the Securities 3 A c t, `loss causation' is not an essential element of a viable cause of action. It is, however, an 4 a f f irm a tiv e defense that may be raised by a defendant.") Díaz is in default, therefore he cannot 5 a s se rt affirmative defenses. Notwithstanding, since Plaintiffs tendered the security, and 6 D e f e n d a n ts refused to accept the same, they cannot argue that Plaintiffs are responsible for their 7 lo ss on this front, pursuant to Randall. 8 Defendants repeatedly fail to recognize that Plaintiffs tendered the security, and 9 D e f e n d a n ts refused to accept the tender of the security, which is precisely what led to this suit. 10 D e f e n d a n ts cannot reasonably persuade this Court to conclude that Plaintiff must be held 11 re sp o n s ib le for the loss of the security, when he tendered the same to Defendants twice in 2004, 12 a n d has not profited from the investment. Even if Plaintiffs had made the payments to the 13 re c e iv e r, which they were never warned about prior to buying the viatical, they would not have 14 b e e n guaranteed a return on their investment. Moreover, if Defendants were willing to assume 15 th e costs, and the risk of the investment, they should have accepted it when tendered in 2004, 16 a n d avoided this protracted litigation. 17 A s to Section 10(b) claims, in Dura Pharm, Inc. v. Broudo, 544 U.S. 336, 341-342 18 (2 0 0 5 ), the Supreme Court held that the element of loss causation under said section requires 19 a proximate cause inquiry. See In re Credit Suisse-AOL Sec. Litig., Fed. Sec. L. Rep. (CCH) 20 P 9 4 ,1 3 5 , 2006 U.S. Dist. LEXIS 86363, Civil No. 02-12146, *29-30 (D. Mass. 2006). Namely, 21 to satisfy the final "loss" element, a plaintiff must show both economic loss and loss causation, 22 i.e . a causal connection between the material misrepresentation or omission and the loss. 23 A lv a ra d o v. Morgan Stanley Dean Witter, Inc., 448 F. Supp. 2d 333, 336 (D.P.R. 2006). Despite 24 P la in tif f s ' burden of proof, the loss causation pleading requirements should be interpreted so 25 a s not to impose a significant burden on plaintiffs. In re Credit Suisse, Civil No. 02-12146 at 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 10

* 29-30. Pursuant to the complaint, and the uncontested facts set forth in the prior Opinion and 3 O rd e r, Plaintiffs demonstrated that they suffered a loss as a result of Defendants' fraudulent 4 a c tio n s , and are entitled to damages under said section. Specifically, Plaintiffs showed that they 5 p a id $80,000 induced by false and misleading information provided by Defendants, and that did 6 n o t receive any income from their investment. But for Defendants' equivocations, Plaintiffs 7 w o u ld not have invested in the viatical settlement. 8 Lastly, this Court finds that Defendants allegations regarding "newly discovered 9 e v id e n c e " fail. Specifically, in their "Motion Requesting Dismissal for Obstruction of Justice 10 a n d Concealment of Evidence and Potential Perjury Committed by the Plaintiff," filed on 11 N o v e m b e r 24, 2008, Defendants did not include the document which they now allege shows 12 th a t Plaintiffs "knew" that they no longer owned the security. The letter sent by MBC's receiver 13 to Díaz's counsel is dated November 13, 2009, that is, prior to the filing of said motion, and 14 m o re than three months prior to the Opinion and Order Defendants seek to set aside. Thus 15 D e f e n d a n ts could have informed this Court about said document much sooner, and cannot now 16 a s se rt that it constitutes new evidence for purposes of this motion. Furthermore, said motion was 17 d e n ie d , therefore, the arguments therein set forth have already been addressed by this Court, and 18 a s such, do not constitute newly discovered evidence. After reviewing the record, this Court 19 f in d s that Defendants knew that Plaintiffs had not paid the receiver fees, and that failure to do 20 s o would entail forfeiture of their interest. 21 Joint and Several Liability 22 D e f e n d a n ts in this case are not merely aiders or abettors. In the case at bar, Defendants 23 a re being held liable for their own actions, not for the actions of a third party. As such, contrary 24 to Defendants' assertions, the instant case is about primary liability, not secondary liability. 25 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 11

M a n y courts have held that "[j]oint and several liability applies when there has been a 3 ju d g m e n t against multiple defendants." In re Del-Val Fin Corp. Sec. Litig., 868 F. Supp 547, 4 5 5 7 (S.D.N.Y 1994)(citing McDermott, Inc. v. AmClyde, 511 U.S. 202, (1994); Edmonds v. 5 C o m p a g n ie Generale Transatlantique, 443 U.S. 256 (1979)). In Musick, 508 U.S. at 292, the 6 S u p re m e Court held that "parties against whom contribution is sought are, by definition, persons 7 o r entities alleged to have violated existing securities laws and who share joint liability for that 8 w ro n g under a remedial scheme established by the federal courts." The basic rule in securities 9 a c tio n s is that defendants against whom judgment is entered are jointly and severally liable to 10 p la in tif f s . In re Del-Val Fin Corp. Sec. Litig., 868 F. Supp 547, 558 (S.D.N.Y. 1994)(citing 11 M u s ic k , Peeler & Garrett v. Employers Insurance of Wausau, 508 U.S. 286, 291 (1993)). Part 12 o f its principle is that, "[w]hen limitations on the plaintiff's recovery arise from outside forces, 13 jo in t and several liability makes the other defendants, rather than an innocent plaintiff, 14 re sp o n s ib le for the shortfall." McDermott, 511 U.S. at 221. 15 Moreover, in 15 U.S.C. §78u-4(f), Congress clearly established the guidelines for 16 a p p lyin g joint and several, or proportional liability to multiple Defendants found to have 17 v io la te d securities laws. Section 78u-4(f)(1) states that it is not meant to "create, affect, or in 18 a n y manner modify the standard for liability" already set in a particular securities law. Section 19 7 8 u -4 (f ) is merely meant to delineate how liability is to be shared amongst multiple covered 20 p e rs o n s found to be liable for violating securities laws. Section 78u-4(f)(2)(A) then goes on to 21 s ta te that if the trier of fact finds against a covered person, then that person is jointly and 22 s e v e ra lly liable... but "only if the trier of fact specifically determines that [they] knowingly 23 c o m m itte d a violation." In the absence of this specific intent, § 78u-4(f)(2)(B), which instead 24 c a lls for proportional liability, would apply. 25 26

1 2

CIVIL NO. 04-2371 (SEC)

Page 12

In the case at bar, this Court has already held that the requisite scienter was present for 3 S e c tio n s 12(a)(2), 10(b), and Rule 10b-5 violations. Therefore, the additional hurdle for § 78u4 4 (f )(2 )(A )'s applicability has already been met. As such, the only question that remains is 5 w h e th e r or not § 78u-4(f)'s guidelines for shared liability "create, affect, or in any manner 6 m o d if y the standard[s] of liability" that might already be delineated in § 12(2)(a) or § 10(b), 7 R u le 10b-5. If yes, then the governing standard will be the one found in the actual statute. If 8 n o , then the standard set in § 78u-4(f)(2)(A) for joint and several liability will govern. 9 Albeit Section (a)(2) states that a Defendant shall be liable (1) to the person who 10 p u rc h a s e d the security from him, (2) for the consideration paid, (3) plus interest, (4) less the 11 a m o u n t of income received, (5) upon tender of the security, or (6) for damages if the person no 12 lo n g e r owns the security, there is no reference to how liability is to be shared amongst multiple 13 d e f e n d a n ts . As such, applying § 78u-4(f)'s guidelines for dividing liability amongst multiple 14 D e f e n d a n ts does not "create, affect, or in any manner modify the [existing § 12(a)(2)] standard 15 o f liability." Accordingly, applying § 78u-4(f)(2)(A)'s standard of joint and several liability is 16 p ro p e r for Section 12(a)(2) violations. Since Section 10(b), and Rule 10b-5 do not establish a 17 s ta n d a rd of liability, Section 78u-4(f)(2)(A)'s standard of joint and several liability is also 18 p ro p e r as to these claims. 19 C o n c lu s io n 20 B a s e d on the foregoing, Defendants' motion for reconsideration is DENIED. However, 21 th is Court's previous Opinion and Order, and Judgment, are amended as follows: Plaintiffs are 22 e n title d to damages in the amount of $80,000, plus interest, reasonable attorney's fees and 23 c o s ts , under their Section 12(a)(2) claim. The amount of damages under Section 10(b) will be 24 d e te rm in e d at a hearing to be held on November 10, 2009 at 10:00 am. 25 I T IS SO ORDERED. 26

1 2

CIVIL NO. 04-2371 (SEC) S a n Juan, Puerto Rico, this 26 th day of October, 2009.

Page 13

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 S /S a lv a d o r E. Casellas S a lv a d o r E. Casellas U .S . District Judge