FILED
NOT FOR PUBLICATION FEB 26 2013
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
SECURITIES AND EXCHANGE No. 11-16956
COMMISSION,
D.C. No. 3:09-cv-05883-SI
Plaintiff - Appellee,
v. MEMORANDUM *
VINAYAK S. GOWRISH,
Defendant - Appellant,
and
ADNAN S. ZAMAN; PASCAL S.
VAGHAR; SAMEER N. KHOURY;
ELIAS N. HOURY,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Susan Illston, District Judge, Presiding
Argued and Submitted February 12, 2013
San Francisco, California
Before: SCHROEDER, NOONAN, and MURGUIA, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
The Securities and Exchange Commission (“SEC”) brought a civil
enforcement action against Vinayak Gowrish alleging three counts of insider
trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and
SEC Rule 10b-5. The jury returned a verdict in favor of the SEC and the district
court imposed civil penalties. We have jurisdiction pursuant to 12 U.S.C. § 1291
and affirm.
1. Due process
Gowrish argues that due process requires a new trial because (1) he was
denied access to the medical file of an SEC witness, Pascal Vaghar; (2) the SEC
elicited impermissible testimony from another witness, Adnan Zaman; and (3) the
SEC vouched for Vaghar during closing arguments.
Gowrish did not make a timely request for Vaghar’s medical records, and
the district court’s enforcement of the discovery schedule is reviewed for abuse of
discretion. Nascimento v. Dummer, 508 F.3d 905, 909 (9th Cir. 2007). Gowrish
provides no excuse for failing to meet the deadline and the district court did not
abuse its discretion by denying his untimely request. See id. After the district
court ordered production of the documents prior to the remedy phase, it concluded
that the evidence was merely cumulative and there was no reason to cross-examine
Vaghar again with the new material. See United States v. Kohring, 637 F.3d 895,
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908 (9th Cir. 2011) (explaining that cumulative impeachment evidence would not
alter the result).
Contrary to Gowrish’s assertion that Zaman was called only for an improper
purpose, the SEC obtained valuable testimony from Zaman and cited to his
testimony numerous times during closing argument. Even assuming that some
evidence elicited from Zaman was inadmissible, Gowrish has not shown that
Zaman was called for “the primary purpose of placing before the jury substantive
evidence which is otherwise inadmissible.” United States v. Gilbert, 57 F.3d 709,
711 (9th Cir. 1995). Even more, Gowrish has failed to show that Zaman’s
testimony resulted in a “miscarriage of justice” necessary to overcome his burden
on plain error review. Hemmings v. Tidyman’s Inc., 285 F.3d 1174, 1193 (9th Cir.
2002).
The SEC’s statement during closing argument that “I’m not asking you to
believe Mr. Vaghar without corroborating evidence” was not vouching. See
United States v. Rudberg, 122 F.3d 1199, 1204 (9th Cir. 1997) (stating that
vouching is implication that the government has “extra-record” evidence
supporting credibility or emphasis of a prosecutor’s personal opinion). Again,
even assuming that the statement was improper, Gowrish fails to establish that it
resulted in plain error. See Hemmings, 285 F.3d at 1193.
Page 3 of 6
2. Scienter
It is well established that deliberate recklessness is sufficient to establish a
violation of Section 10(b). See SEC v. Platforms Wireless Int’l Corp., 617 F.3d
1072, 1093 (9th Cir. 2010); Hollinger v. Titan Capital Corp., 914 F.2d 1564,
1568–69 (9th Cir. 1990) (en banc) (“Our circuit, however, along with ten other
circuits, has held that recklessness may satisfy the element of scienter in a civil
action for damages under § 10(b) and Rule 10b-5.”); see also Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 319 n.3 (2007) (noting that every court
of appeals has found recklessness sufficient for a violation of §10(b)). The fact
that this case involves Rule 10b-5(a) and (c) rather than Rule 10b-5(b) does not
change the level of scienter required because recklessness is a form of intentional
conduct that can deceive or defraud. See, e.g., Hollinger, 914 F.2d at 1569;
Platforms Wireless, 617 F.3d at 1093. In fact, recklessness has been applied to
Rule 10b-5(a) and (c) in prior cases. WPP Lux. Gamma Three Sarl v. Spot Runner,
Inc., 655 F.3d 1039, 1056 (9th Cir. 2011) (applying recklessness to insider trading
claim); Mihara v. Dean Witter & Co., Inc., 619 F.2d 814, 821 (9th Cir. 1980)
(applying recklessness to churning claim).
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3. Remedies
The decision to enjoin future violations of Section 10(b) “rests within the
sound discretion of the trial court.” SEC v. Fehn, 97 F.3d 1276, 1295 (9th Cir.
1996); SEC v. Goldfield Deep Mines Co. of Nev., 758 F.2d 459, 465 (9th Cir.
1985). The district court properly considered the five-factor test identified in
Fehn, and Gowrish must show that the application of that test was “illogical,
implausible, or without support in inferences that may be drawn from facts in the
record.” United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).
Gowrish cannot make such a showing because, at best, he argues that the record
may have supported not imposing an injunction.
Gowrish did not waive his Seventh Amendment argument that his civil fine
should have been submitted to the jury. See Solis v. County of Los Angeles, 514
F.3d 946, 953 (9th Cir. 2008). Gowrish’s agreement that the judge would impose
the civil fine is consistent with his argument that the judge can only impose a fine
based on facts found by the jury.
The SEC argues that Tull v. United States, 481 U.S. 412, 427 (1987), is
dispositive because it holds that the Seventh Amendment right to a jury trial does
not extend to the determination of facts necessary to support a civil fine in a
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government enforcement action. Despite the potential vulnerability of Tull, it
remains the law and controls in this case.1
In any event we affirm because any error was harmless. At best, the jury
should have determined the total profits of the scheme and the district court could
have exercised its discretion to impose a fine up to three times that profit. See
United States v. Booker, 543 U.S. 220, 233 (2005) (“For when a trial judge
exercises his discretion to select a specific sentence within a defined range, the
defendant has no right to a jury determination of the facts that the judge deems
relevant.”). To guarantee a fine lower than the $100,000 imposed by the district
court, the jury would have to find that the scheme generated less than $33,333.33
in illegal profits. Such a finding would be practically impossible given that Vaghar
alone stipulated to illegal profits of $318,784. See Fuller v. City of Oakland, 47
F.3d 1522, 1533 (9th Cir. 1995) (Seventh Amendment violation is harmless if “no
reasonable jury” could have came to a different result).
AFFIRMED.
1
Tull has not been overruled, however, Gowrish argues that more recent
Supreme Court cases cast doubt on Tull. See Feltner v. Columbia Pictures
Television, Inc., 523 U.S. 340, 354–55 (1998); Southern Union Co. v. United
States, 132 S. Ct. 2344, 2349 (2012).
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