FILED
UNITED STATES COURT OF APPEALS MAY 23 2011
MOLLY C. DWYER, CLERK
FOR THE NINTH CIRCUIT U.S. COURT OF APPEALS
UNITED STATES OF AMERICA, No. 08-50519
Plaintiff - Appellee, D.C. No. 2:05-cr-00198-VBF-1
Central District of California,
v. Los Angeles
STEPHEN C. SAYRE, AKA Seal A,
ORDER
Defendant - Appellant.
Before: B. FLETCHER, REINHARDT, and WARDLAW, Circuit Judges.
The memorandum disposition filed on April 4, 2011 is withdrawn. A new
disposition is filed herewith. No petitions for rehearing will be entertained.
IT IS SO ORDERED.
FILED
NOT FOR PUBLICATION MAY 23 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 08-50519
Plaintiff - Appellee, D.C. No. 2:05-cr-00198-VBF-1
v.
MEMORANDUM*
STEPHEN C. SAYRE, AKA Seal A,
Defendant - Appellant.
Appeal from the United States District Court
for the Central District of California
Valerie Baker Fairbank, District Judge, Presiding
Argued and Submitted March 8, 2011
Pasadena, California
Before: B. FLETCHER, REINHARDT, and WARDLAW, Circuit Judges.
Stephen Sayre appeals his conviction on one count of securities fraud in
violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. §
21. We have jurisdiction under 28 U.S.C. § 1291. We affirm.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
I.
The district court did not abuse its discretion in declining to give Sayre’s
proposed “total mix” materiality instruction. See United States v. Hofus, 598 F.3d
1171, 1174 (9th Cir. 2010). The court instructed the jury that “an act, statement or
omission is material if there is a substantial likelihood a reasonable investor would
have considered it important in deciding whether to buy, sell or hold the security.”
This definition is an accurate statement of the law and is supported by both
Supreme Court and Ninth Circuit case law. See, e.g., Basic Inc. v. Levinson, 485
U.S. 224 (1988); TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976); Zweig v.
Hearst Corp., 594 F.2d 1261 (9th Cir. 1979). The “total mix” definition is an
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alternative means of expressing the materiality concept,1 see TSC Indus., 426 U.S.
at 449, which it “further explain[s],” see Basic, 485 U.S. at 231-32.2
That the court did not define “misleading” at the jury’s request is irrelevant,
because by the time the jury asked for the definition, it had already voted on (and
the court had already sealed) its guilty verdict on the count of conviction.
II.
Nor did the district court abuse its discretion by declining to instruct the jury
as to the meaning of “reasonable investor” and by rejecting Sayre’s proposed
1
In Matrixx Initiatives, Inc. v. Siracusano, --- U.S. ----, No. 09-1156, 2011
WL 977060 (March 22, 2011), the Supreme Court addressed the question of
whether the materiality of scientific data hinges on its statistical significance.
Although the Court employed the “total mix” standard for materiality, it did not
address – much less decide – whether the alternative articulation of the standard in
Basic was inapplicable.
2
In Zweig, 594 F.2d at 1266, which presented similar facts, we defined
materiality in a similar fashion. Contrary to Sayre’s argument, Zweig’s definition
was not overruled by Chiarella v. United States, 445 U.S. 222 (1980), because
Zweig relied on United States v. Chiarella, 588 F.2d 1358 (2d Cir. 1978), only in
considering who has a fiduciary duty to the market. See Zweig, 594 F.2d at 1267,
1267 n.9; see also S.E.C. v. Murphy, 626 F.2d 633, 652 n.23 (9th Cir. 1980). The
Zweig materiality definition remains good law. See, e.g., United States v. Jenkins,
--- F.3d ----, 2011 WL 208357, at *10 (9th Cir. Jan. 25, 2011); United States v.
Laurienti, 611 F.3d 530, 541 (9th Cir. 2010). Indeed, the current Ninth Circuit
model jury instructions resemble the Zweig definition. Ninth Circuit Manual of
Model Criminal Instructions (2010) at § 9.9 (“A fact is material if there is a
substantial likelihood that a reasonable investor would consider it important in making the
decision to [purchase] [sell] securities.”).
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instruction 34, which defined a “reasonable investor” as one who “practices due
diligence before making an investment.” See Hofus, 598 F.3d at 1174. The term
“reasonable investor” is a concept within the jury’s ordinary experience and
understanding. See United States v. Tirouda, 394 F.3d 683, 688-89 (9th Cir. 2005)
(holding that concepts within a jury’s ordinary experience need not be defined);
United States v. Somsamouth, 352 F.3d 1271, 1275-76 (9th Cir. 2003) (same); see
also United States v. Dixon, 201 F.3d 1223, 1231 (9th Cir. 2000) (holding that
“commercial advantage” and “private financial gain” are terms within a jury’s
comprehension).
III.
The district court did not abuse its discretion in excluding testimony from
the defense expert witness regarding who qualifies as a “reasonable investor” and
what sorts of information the “reasonable investor” relies upon. The expert told
the court that he based his testimony on his “experience as a teacher and as
someone working in this field as to what it is that makes prices rise.” When the
court asked whether the expert had relied upon any empirical data or any
methodology, he repeated that he was “relying on [his] knowledge and
experience.” The district court correctly applied Federal Rule of Evidence 702 in
excluding testimony it judged would not be both reliable and relevant. See United
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States v. Redlightning, 624 F.3d 1090, 1111 (9th Cir. 2010). Hangarter v.
Provident Life and Accident Ins. Co., 373 F.3d 998, 1016 (9th Cir. 2004), is
inapposite because the expert witness there actually demonstrated the basis for his
specialized knowledge of insurance industry standards. See also Gen. Elec. Co. v.
Joiner, 522 U.S. 136, 146 (1997) (“[N]othing in either Daubert [v. Merrell Dow
Pharms., 509 U.S. 579 (1993)] or the Federal Rules of Evidence requires a district
court to admit opinion evidence that is connected to existing data only by the ipse
dixit of the expert.”).
IV.
The court properly admitted the testimony of Sayre’s brother and sister-in-
law. Ordinarily, we review evidentiary rulings for abuse of discretion. United
States v. Hollis, 490 F.3d 1149, 1152 (9th Cir. 2007). Because Sayre did not object
at trial, we review for plain error. United States v. Webster, 623 F.3d 901, 905 (9th
Cir. 2010). Any opinions Sayre’s brother and sister-in-law offered regarding their
concerns about Sayre’s trading fall within Federal Rule of Evidence 701: their
testimony was based on their experience and set the context for the messages Sayre
left for his brother.
V.
5
Viewed in the light most favorable to the prosecution, the evidence was
sufficient to allow any rational trier of fact to find that there is a substantial
likelihood that a reasonable investor would have considered Sayre’s omissions
important in deciding whether to buy, sell, or hold eConnect stock. See United
States v. Nevils, 598 F.3d 1158, 1163-64 (9th Cir. 2010) (citing Jackson v.
Virginia, 443 U.S. 307, 319 (1979)). As Sayre failed to renew his motion for
acquittal at the close of evidence, we “may review his . . . claim only to prevent a
manifest miscarriage of justice or for plain error.” United States v. Gonzalez, 528
F.3d 1207, 1210 (9th Cir. 2008).3
Viewed in the light most favorable to the prosecution, the evidence shows
that the government’s witness was a “reasonable investor.” While she testified that
she knew nothing about the stock market when she began investing in January of
2000, she had learned about investing by the time she relied on Sayre’s March 8,
2000, investment opinion to purchase eConnect stock. She testified that, as she
became interested in particular stocks, she researched them online, learning about
3
Sayre argues that we should review under the less deferential Jackson
standard, as it would have been futile for him to renew his motion. Unlike in
United Esquivel-Ortega, 484 F.3d 1221, 1225 (9th Cir. 2007), however, where the
defendant had just moved for acquittal and argued extensively a few minutes
earlier, in this case Sayre put on numerous witnesses over five days after raising
and losing his first motion for a judgment of acquittal.
6
the companies, the companies’ products, and what others in the marketplace were
saying. She was savvy enough to be wary of posts on Raging Bull, and to look to
opinions from analysts who do not have a financial interest in the stocks they are
analyzing. The witness was mistaken in thinking that her market order would be
fulfilled immediately, but that mistake by itself does not render her an
unreasonable investor. Through her testimony, the government presented evidence
that the witness had researched the information publically available about
eConnect, and had concluded that the IFR opinions were important and significant
because IFR represented it had no financial interest in eConnect.
Sayre’s reports were the only opinions about eConnect that both touted
eConnect’s stock and purported to be entirely independent. Unlike in United
States v. Bingham, 992 F.2d 975, 976 (1993) (per curiam), here the evidence
demonstrated a substantial likelihood that the disclosure of Sayre’s trading, and
especially his sale of shares while he was touting the stock, would have been
viewed by the reasonable investor as having significantly altered that “total mix,”
as Sayre argued, or as important in deciding whether to buy, sell, or hold eConnect
stock, see Basic, 485 U.S. at 231-32. Certainly there was no plain error or manifest
miscarriage of justice, see Gonzalez, 528 F.3d at 1210.
VI.
7
Because the district court did not commit any of the errors Sayre alleges,
Sayre was not denied due process by the cumulative effect of multiple errors. See
Montana v. Egelhoff, 518 U.S. 37, 53 (1996); United States v. Wright, 625 F.3d
583, 619 (9th Cir. 2010).
AFFIRMED.
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