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Securities and Exchange Commission v. Durham

United States District Court, S.D. Indiana, Indianapolis Division

June 29, 2018



          Hon. Jane Magnus-Stinson, Chief Judge

         Over seven years ago, a jury found now-pro se Defendant Timothy S. Durham[1] guilty of wire fraud, securities fraud, and conspiracy to commit wire and securities fraud. Mr. Durham has since exhausted his criminal appellate rights, and the Court reopened this parallel civil proceeding, brought by the Securities and Exchange Commission (the “Commission”) in 2016.[2] In August 2017, this Court denied the Commission's Motion for Summary Judgment as it related to civil disgorgement.

         On April 13, 2018, pursuant to an order from the Magistrate Judge, [Filing No. 106], the Commission filed a Motion to Determine Disgorgement, which Mr. Durham opposes. That Motion is now ripe for the Court's review.


         Standard of Review

         At the outset, the Court must determine the procedural vehicle for the Motion that is now pending before this Court. One option would be to treat the Commission's Motion as a motion for judgment pursuant to Federal Rule of Civil Procedure 52(a). See Fontaine v. Metro. Life Ins. Co., 800 F.3d 883, 885-86 (7th Cir. 2015) (explaining that an entry of judgment pursuant to Rule 52(a) is “essentially a trial on the papers”). However, in this case, there is no indication that Mr. Durham has stipulated or otherwise consented to this method of resolving the remaining issues in the case. See, e.g., Tran v. Minnesota Life Ins. Co., 2018 WL 1156326, at *5 (N.D. Ill. Mar. 5, 2018) (deciding a case based on Rule 52(a) where the parties had “stipulated that the case should be decided based on the administrative record”); Marshall v. Blue Cross Blue Shield Ass'n, 2006 WL 2661039, at *21 (N.D. Ill. Sept. 13, 2006) (permitting the application of Rule 52 “[w]here parties have agreed, as they have in this case, to review based on a defined set of documentary/evidentiary materials”). Accordingly, the Court will apply the standard that is most favorable to the non-moving party - in this case, Mr. Durham - and will analyze the Commission's Motion as a motion for summary judgment under Federal Rule of Civil Procedure 56.

         A motion for summary judgment asks the Court to find that a trial is unnecessary because there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment as a matter of law. SeeFed. R. Civ. P. 56(a). As the current version of Rule 56 makes clear, whether a party asserts that a fact is undisputed or genuinely disputed, the party must support the asserted fact by citing to particular parts of the record, including depositions, documents, or affidavits. Fed.R.Civ.P. 56(c)(1)(A). A party can also support a fact by showing that the materials cited do not establish the absence or presence of a genuine dispute or that the adverse party cannot produce admissible evidence to support the fact. Fed.R.Civ.P. 56(c)(1)(B). Affidavits or declarations must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on matters stated. Fed.R.Civ.P. 56(c)(4). Failure to properly support a fact in opposition to a movant's factual assertion can result in the movant's fact being considered undisputed, and potentially in the grant of summary judgment. Fed.R.Civ.P. 56(e).

         In deciding a motion for summary judgment, the Court need only consider disputed facts that are material to the decision. A disputed fact is material if it might affect the outcome of the suit under the governing law. Hampton v. Ford Motor Co., 561 F.3d 709, 713 (7th Cir. 2009). In other words, while there may be facts that are in dispute, summary judgment is appropriate if those facts are not outcome determinative. Harper v. Vigilant Ins. Co., 433 F.3d 521, 525 (7th Cir. 2005). Fact disputes that are irrelevant to the legal question will not be considered. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         On summary judgment, a party must show the Court what evidence it has that would convince a trier of fact to accept its version of the events. Johnson v. Cambridge Indus., 325 F.3d 892, 901 (7th Cir. 2003). The moving party is entitled to summary judgment if no reasonable fact-finder could return a verdict for the non-moving party. Nelson v. Miller, 570 F.3d 868, 875 (7th Cir. 2009). The Court views the record in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. Darst v. Interstate Brands Corp., 512 F.3d 903, 907 (7th Cir. 2008). It cannot weigh evidence or make credibility determinations on summary judgment because those tasks are left to the fact-finder. O'Leary v. Accretive Health, Inc., 657 F.3d 625, 630 (7th Cir. 2011). The Court need only consider the cited materials, Fed.R.Civ.P. 56(c)(3), and the Seventh Circuit Court of Appeals has “repeatedly assured the district courts that they are not required to scour every inch of the record for evidence that is potentially relevant to the summary judgment motion before them, ” Johnson, 325 F.3d at 898. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party. Ponsetti v. GE Pension Plan, 614 F.3d 684, 691 (7th Cir. 2010).



         As set forth in this Court's 2017 Order, this case involves Mr. Durham's dealings with Fair Finance Company (“Fair”), [Filing No. 68-7], where Mr. Durham formerly served as President and Chief Executive Officer, [Filing No. 68-1 at 95-96]. The Seventh Circuit summarized Mr. Durham and his business partners' dealings with Fair as follows:

They used money invested in Fair to support their lavish lifestyles and to fund loans to related parties that would never be repaid. When the company's auditors raised red flags about its financial status, the auditors were fired. When Fair experienced cash-flow problems, it misled investors and regulators so it could keep raising capital.
Eventually the scheme began to unravel. One of the company's directors, himself under investigation in a separate matter, alerted the FBI that Fair was being operated as a Ponzi scheme. After an investigation, the FBI seized Fair's computer servers and arrested Durham, Cochran, and Snow. A jury ...

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