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Securities and Exchange Commission v. North Star Finance LLC

United States District Court, D. Maryland, Southern Division

October 11, 2017

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
NORTH STAR FINANCE, LLC, et al., Defendants.

          MEMORANDUM OPINION

          GEORGE J. IIAZEL United States District Judge.

         Plaintiff Securities & Exchange Commission ("SRC") brought the present enforcement action against Defendant Michael K. Martin ('"Martin") on May 11, 20] 5. and has been attempting to obtain Martin's emails via discovery since September 29. 2016. when Martin filed a Motion to Stay Discovery. ECF No. 211. Presently pending before the Court is Martin's Motion to Reconsider this Court's September 25. 2017 Order holding Martin in contempt for failing to consent to the release of his emails by his service provider by sending an email granting authorization (the "Consent Email"). ECF No. 336. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2016). For the following reasons. Defendants' Motion for Reconsideration is denied.

         I. BACKGROUND

         On December 29, 2016. the Court issued an Order directing Martin to send a Consent Email to Yahoo. Inc.. his email service provider, authorizing Yahoo to release Martin's account information and certain of Martin's emails to the SEC: specifically, the Yahoo email account with the Yahoo [D ""capitalsourcelending@yahoo.com." ECF No. 235. Martin did not comply with this Order, and on February 3, 2017. the Court issued another Order, directing Martin to show cause why he should not be held in contempt. ECF No. 252. Plaintiff SEC has since endeavored to subpoena Martin's emails from Yahoo directly, an effort which Yahoo has opposed. See ECF No. 275. ECF No. 291. The Court held a motions hearing on June 30. 2017 to hear argument on the administrative subpoena issue, and Martin did not appear. See ECF No. 307. On August 4, 2017. this Court again ordered Martin to sign the Consent Email set forth in ECF No. 235. a copy of which was attached to that Order. ECF No. 321. The Court warned Martin that:

If Martin fails to do so within ten (10) days of this Order, the Court will hold Martin in contempt pursuant to Fed.R.Civ.P. 37(b)(2)(vii). Further, because Defendants' funds have been frozen by the Court for the benefit of the alleged victims, a monetary fine would not effectively compel production in this case. Therefore, if the Court holds Martin in contempt, it will also issue an arrest warrant and direct that Martin be held by the U.S. Marshals until he complies with this Order.

Id. at 2.[1]

         On August 16. 201 7. during a telephone status call with the parties. Martin stated that he would comply with this Court's Order and send the Consent Email. ECF No. 323. However, on August 18, 2017. the SEC provided this Court with a copy of an "Amended Authorization for the Release of Yahoo Emails." which Martin had sent to the SEC. Exhibit A. The SEC takes the position that the document "fails to comply with the Court's Order." and relayed to the Court that Yahoo's counsel "confirmed that Yahoo does not deem the so-called authorization sufficient to permit it to release the emails sought by the Commission." Indeed, despite the Court's explicit instruction that Martin send the Consent Email contained in ECF No. 235. Martin made a number of significant changes before returning the document. Specifically. Martin's "Amended

         Authorization" gives his "protested signature" rather than his "express consent." Compare Exhibit A with Exhibit B. Furthermore, he gives Yahoo permission to "disclose onlv logs, containing names and addresses received and sent without attachments" rather than "[a]ll emails, including deleted emails, together with their attachments." Compare Exhibit A with Exhibit B. Finally. Martin states that he "do[es] not hold harmless Yahoo for the disclosure." whereas the Consent Email provided that he should "agree to hold harmless . . . Yahoo for the disclosure." Compare Exhibit A with Exhibit B.

         On September 25. 2017. the Court held Martin in contempt of court and ordered that an arrest warrant would be issued for Martin, to be held in abeyance until 12 noon on October 2. 2017; the Court ordered that if Martin complied with the Court's order and signed the Consent Email prior to that time, the court would indefinitely stay the arrest warrant. ECF No. 335 at 3. Rather than complying with this Order, however, on September 26, 2017. Martin filed a Motion for Reconsideration. ECF No. 336. In his Motion for Reconsideration. Martin generally asks the Court to "deny the . . . |SEC]'s application for mandated/compelled disclosure of Defendant Martin's Yahoo email account." Id. at 1. Specifically. Martin makes a litany of arguments -which are at times difficult to parse through - including that the compelled production of his emails violates his Fourth and Fifth Amendment rights, along with his Attorney-Client Privilege. See Id. at 4. 6-16. On September 27. 2017. the SEC tiled an Opposition to Martin's Motion, arguing that Martin "merely rehashes arguments that this Court previously rejected." and that Martin is not entitled to a reconsideration of the Court's prior orders. ECF No. 338 1. 4.

         II. STANDARD OF REVIEW

         Although Martin does not cite to a particular Federal Rule permitting reconsideration of the Court's prior decision, because no final judgment has been entered in this case. Martin's Motion is controlled by Rule 54(b) of the Federal Rules of Civil Procedure. That rule provides. in relevant part:

[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . .may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties" rights and liabilities.

Fed. R. Civ, P. 54(b); see also Cezair v. JP Morgan Chase Bank. N.A., No. CIV.A. DKC 13- 2928. 2014 WL 4955535. at *1 (D. Md. Sept. 30. 2014) (citing Fayetteville Investors v. Commercial Builders. Inc.. 936 F.2d 1462. 1469-70 (4th Cir. 1991)) ("It is well-established that the appropriate Rule under which to file motions for reconsideration of an interlocutory order is Rule 54(b)"). The power to grant relief under Rule 54(b) "is committed to the discretion of the district court." Am. (anoe Ass'n v. Murphy Farms, inc., 326 F.3d 505. 515 (4th Cir. 2003) (citing Moses H. Com Mem. Hasp. v. Mercury Const. C 'orp.. 460 U.S. 1. 12. 103 S.Ct. 927 (1983)).

         The United States Court of Appeals for the Fourth Circuit has not defined the precise standard governing a motion for reconsideration under Rule 54(b). See Fayetteville. 936 F.2d at 1472. Courts in this district have, however, frequently looked toward the standards articulated in Rules 59(e) and 60(b) for guidance in considering such motions. See C 'ezair. 2014 WL 4955535, at *1 (citing Akeva. LLC v. Adidas Am., Inc.,385 F.Supp.2d 559. 565-66 (M.D. N.C. 2005)). Thus, "[m]ost courts have adhered to a fairly narrow set of grounds on which to reconsider their interlocutor) orders and opinions. Courts will reconsider an interlocutory order in the following situations: (1) there has been an intervening change in controlling law: (2) there is additional evidence that was not previously available; or (3) the prior decision was based on clear error or would work manifest injustice.".Ikera. 385 F.Supp.2d at 565-66: see also Innes v. Bd. of Regents of the Univ. Sys. of Md.121 F.Supp.3d 504. 506-07 (I). Md. 2015) (applying this three-part test when evaluating a motion for reconsideration under Rule 54(h)). importantly, "a motion to reconsider is not proper where it only asks the Court to rethink its prior decision, or presents a better or more compelling argument that the party could have presented ...


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