throbber
United States Court of Appeals
`For the First Circuit
`
`
`
`
`No. 19-2006
`
`SECURITIES AND EXCHANGE COMMISSION,
`
`Plaintiff, Appellee,
`
`v.
`
`JONATHAN MORRONE, individually and d/b/a JM International, Inc.,
`
`Defendant, Appellant,
`
`Z. PAUL JURBERG, individually and d/b/a Brookline Capital
`Partners, Inc.; ANTHONY ORTH, individually and d/b/a Grand
`Traverse Equities, Inc.; MAY'S INTERNATIONAL CORPORATION,
`
`Defendants,
`
`BRETT HAMBURGER, d/b/a JCBH Consulting, LLC,
`
`Defendant/Third-Party Plaintiff,
`
`BIO DEFENSE CORPORATION; MICHAEL LU, individually and d/b/a
`May's International Corporation,
`
`Defendants/Third-Party Defendants,
`
`DAVID SMITH; ONEIGHTY C TECHNOLOGIES,
`
`Third-Party Defendants.
`
`
`
`
`
`
`No. 19-2007
`
`
`SECURITIES AND EXCHANGE COMMISSION,
`
`Plaintiff, Appellee,
`
`v.
`
`Z. PAUL JURBERG, individually and d/b/a Brookline Capital
`
`
`
`

`

`Partners, Inc.,
`
`Defendant, Appellant,
`
`JONATHAN MORRONE, individually and d/b/a JM International, Inc.;
`ANTHONY ORTH, individually and d/b/a Grand Traverse Equities,
`Inc.; MAY'S INTERNATIONAL CORPORATION,
`
`Defendants,
`
`BRETT HAMBURGER, d/b/a JCBH Consulting, LLC,
`
`Defendant/Third-Party Plaintiff,
`
`BIO DEFENSE CORPORATION; MICHAEL LU, individually and d/b/a
`May's International Corporation,
`
`Defendants/Third-Party Defendants,
`
`DAVID SMITH; ONEIGHTY C TECHNOLOGIES,
`
`Third-Party Defendants.
`
`
`
`
`
`APPEALS FROM THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MASSACHUSETTS
`
`[Hon. Douglas P. Woodlock, U.S. District Judge]
`
`
`
`
`
`Before
`
`Lynch, Lipez, and Thompson,
`Circuit Judges.
`
`
`
`
`Steven M. Kaplan, with whom Rosenfeld & Kaplan, L.L.P. was on
`
`brief, for appellants.
`
`Theodore Weiman, Senior Litigation Counsel, Securities and
`Exchange Commission, with whom Michael A. Conley, Acting General
`Counsel, Securities and Exchange Commission, and Tracey A. Hardin,
`Assistant General Counsel, Securities and Exchange Commission,
`were on brief, for appellee.
`
`
`
`

`

`
`May 10, 2021
`May 10, 2021
`
`
`
`
`
`
`
`
`
`
`

`

`LYNCH, Circuit Judge. Appellants Jonathan Morrone and
`
`Z. Paul Jurberg were senior officers at Bio Defense Corporation,
`
`a United States company whose stated purpose was to develop and
`
`sell a machine to clean and decontaminate mail. The United States
`
`Securities and Exchange Commission ("SEC") alleged that Morrone
`
`and Jurberg solicited investments in Bio Defense from investors in
`
`violation of the federal securities laws. The district court
`
`granted in part summary judgment in the SEC's favor. SEC v. Bio
`
`Def. Corp., No. CV 12-11669-DPW, 2019 WL 7578525, at *35 (D. Mass.
`
`Sept. 6, 2019). On appeal, Morrone and Jurberg argue that the
`
`district court erred in applying the U.S. federal securities laws
`
`to their solicitation of foreign investors in light of the Supreme
`
`Court's decision in Morrison v. National Australia Bank Ltd., 561
`
`U.S. 247 (2010). Alternatively, they argue that genuine issues of
`
`fact precluded entry of summary judgment in favor of the SEC on
`
`some of its claims. We find no error and affirm.
`
`A. Bio Defense
`
`Bio Defense is a Delaware corporation with its principal
`
`I. Facts
`
`place of business in Massachusetts. It was founded in 2001 by
`
`Michael Lu in response to the widely publicized mailing of letters
`
`containing anthrax after the September 11, 2001 terrorist attacks.
`
`Lu said that he wanted Bio Defense to manufacture a machine, the
`
`- 4 -
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`

`

`MailDefender, capable of decontaminating letters of biological
`
`pathogens.
`
`Morrone joined Bio Defense1 in 2002 as its Senior
`
`Executive Vice President and as a member of the company's board of
`
`directors. He had previously worked as a licensed registered
`
`representative at various broker-dealers. Bio Defense paid
`
`Morrone through JM International, Inc., a corporation Morrone
`
`controlled.
`
`Jurberg joined Bio Defense around 2003 as a senior
`
`officer. Like Morrone, he had previously worked as a registered
`
`representative at various broker-dealers. Jurberg was also the
`
`president of Brookline Capital Partners, Inc., the entity through
`
`which Bio Defense paid him.
`
`In addition to Morrone and Jurberg, Bio Defense made two
`
`other hires relevant to this appeal. First, it hired Brett
`
`Hamburger in 2002 or 2003 as a consultant to help generate leads
`
`for prospective investors. Bio Def. Corp., 2019 WL 7578525, at
`
`*1. Hamburger had previously worked as a registered representative
`
`for various brokerage firms. Id. at *2-3. However, in 2000, he
`
`was barred by the National Association of Securities Dealers for
`
`acting as an unregistered broker, and in 2003, he was convicted of
`
`conspiracy to commit securities fraud for activities unrelated to
`
`
`1
`Bio Defense was previously called Life Max. Life Max
`became Bio Defense at some point in the early 2000s.
`
`- 5 -
`
`

`

`Bio Defense. Both Morrone and Jurberg knew of Hamburger's
`
`conviction.2 Id. at *31. Bio Defense paid Hamburger through JCBH
`
`Consulting, LLC, which he controlled. Second, Bio Defense hired
`
`Anthony Orth in 2005 or 2006 to assist with sales and marketing.
`
`Id. at *1. He eventually became a Vice President. Id. Orth was
`
`paid through Grand Traverse Equities, Inc., a company he
`
`controlled. Id. at *2 & n.2.
`
`Bio Defense never earned a profit and lost at least $2
`
`million each year. Id. at *2. In total, it sold around ten
`
`MailDefender machines and brought in only $430,000 from these sales
`
`over a six-year period. Id. In contrast, it raised almost $25
`
`million from stock sales to private investors over the same period.
`
`B. Domestic Fundraising (2004-2008)
`
`
`After joining Bio Defense, Morrone, Jurberg, and Orth
`
`solicited individual domestic investors to purchase Bio Defense
`
`stock and collected "consulting fees" for doing so. Id. Bio
`
`Defense stock was not registered with the SEC from 2004 to 2010.
`
`Id. at *2, *13. We limit our discussion to events that occurred
`
`after September 10, 2007.3
`
`
`2
`Jurberg disputed before the district court that there
`was evidence he knew of Hamburger's conviction. The district court
`found that he did, see Bio Def. Corp., 2019 WL 7578525, at *31,
`and Jurberg does not dispute this finding on appeal.
`
`3
`Citing the Supreme Court's decision in Kokesh v. SEC,
`137 S. Ct. 1635, 1642-45 (2017), the district court held that the
`SEC "may not seek monetary penalties, disgorgement, injunction, or
`
`- 6 -
`
`

`

`On October 3, 2007, Morrone, Jurberg, and Orth
`
`participated in a conference call for prospective investors and
`
`touted Bio Defense stock. Orth told investors that governmental
`
`interest in the MailDefender was growing exponentially and that
`
`Bio Defense had already sold units to the United Nations,
`
`Department of Defense, Reuters, and other organizations. Morrone
`
`told investors that various federal agencies had already committed
`
`to purchasing 300 units of the MailDefender and that the military
`
`wanted Bio Defense to be able to produce 250 units a month. Jurberg
`
`talked about the company's prospects abroad and said that Bio
`
`Defense was authorized to sell units in Italy. All three also
`
`said that Bio Defense would be an attractive acquisition target.
`
`Morrone and Jurberg specifically mentioned a well-known mailing
`
`equipment and technology company as a potential acquirer.
`
`Additionally, from December 2007 to February 2008, by
`
`phone, fax, and mail, Jurberg helped various investors transfer
`
`money from their existing Individual Retirement Accounts ("IRAs")
`
`
`an officer/director bar for any fraudulent conduct that occurred
`prior to September 10, 2007" because the SEC filed its complaint
`on September 10, 2012. Bio Def. Corp., 2019 WL 7578525, at *11.
`When the district court ruled, a five-year limitation period
`applied to the SEC's claims. On January 1, 2021, Congress extended
`the statute-of-limitations period to ten years. See National
`Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-
`283, § 6501, 134 Stat. 3388, 4625-26 (Jan. 1, 2021). The changed
`statute of limitations does not impact this case.
`
`- 7 -
`
`

`

`into new accounts so that they could purchase Bio Defense stock.
`
`Id. at *14 n.22.
`
`An enforcement attorney at the Texas State Securities
`
`Board participated in the October 2007 conference call as part of
`
`an investigation into Bio Defense's offering and sale of securities
`
`in Texas. The Texas State Securities Board contacted Bio Defense.
`
`Lu, Morrone, and Jurberg agreed to the entry of a cease and desist
`
`order against them and Bio Defense for offering unregistered shares
`
`through unregistered agents. Morrone and Jurberg admitted to the
`
`findings of fact and conclusions of law in the cease and desist
`
`order.
`
`In 2008, Massachusetts also opened an investigation into
`
`Bio
`
`Defense's
`
`offering
`
`of
`
`unregistered
`
`securities
`
`in
`
`Massachusetts. Partially as a result of this investigation, and
`
`on the advice of legal counsel, Bio Defense decided to stop selling
`
`its securities to U.S.-based investors.
`
`C. International Fundraising (2008-2010)
`
`
`In 2008, Hamburger introduced Bio Defense to Agile
`
`Consulting ("Agile"). Agile ran call centers targeting investors
`
`in Europe, and Hamburger told Lu, Morrone, and Jurberg that Agile
`
`could help them raise money from foreign investors. He said it
`
`would be "very expensive" and that Agile charged a 75% fee for any
`
`investor funds that it raised. Hamburger acted as an intermediary
`
`- 8 -
`
`

`

`between Agile and Bio Defense. Bio Defense entered into an
`
`agreement with Agile on August 1, 2008.
`
`Shortly thereafter, Lu, Morrone, and Jurberg met with
`
`Bio Defense's outside counsel, Barbara Jones. Jones says that Lu,
`
`Morrone, and Jurberg explained the agreement to her without telling
`
`her that Bio Defense had already entered into it and without
`
`showing the agreement to her. Based on this conversation, she
`
`said she advised the company not to enter the agreement. She said
`
`she told Lu, Morrone, and Jurberg that the fact that Bio Defense
`
`would receive such a small portion of any investment was an
`
`"absolutely critical disclosure that would need to be made to any
`
`potential investor."
`
`On August 6, 2008, after reviewing the agreement, Jones
`
`sent an email to Lu, Morrone, and Jurberg saying that "the cost of
`
`[Agile's] funding is exorbitantly high" and that "no legitimate,
`
`professional consulting group would charge" such a high fee.4 She
`
`called Agile's fee "usurious" and said that "[f]uture investors
`
`would reasonably question the judgment of management and the Board
`
`in permitting the Company to undertake such an obligation."
`
`Meanwhile, Morrone, Jurberg, Orth, and Hamburger
`
`prepared to work with Agile. In July 2008, Orth emailed Morrone
`
`
`4
`The agreement itself does not mention the 75% fee. Jones
`says she learned the amount of the fee at her meeting with Lu,
`Morrone, and Jurberg.
`
`- 9 -
`
`

`

`and Jurberg a call script for soliciting investors, which Morrone
`
`and Jurberg both forwarded to Hamburger. Hamburger said that the
`
`script "was given to [him] by Paul Jurberg at the company to give
`
`to [Agile]" and that the script was "also sent to me from Jonathan
`
`Morrone as well." Hamburger sent Agile the script, which did not
`
`mention the 75% fee Bio Defense agreed to pay to Agile.
`
`In August 2008, Morrone sent a bullet-point list of "Key
`
`Corporate Updates" and a stock subscription agreement to
`
`Hamburger, who at the time was meeting with Agile in Spain. The
`
`stock subscription agreement did not mention Agile's fee. It also
`
`said that "[t]he Company shall have no obligation hereunder until
`
`the Company shall execute and deliver to the Purchaser an executed
`
`copy of this Subscription Agreement and until the closing
`
`conditions . . . have been satisfied."
`
`Additionally, Morrone sent Hamburger a cover letter,
`
`signed by Morrone, to accompany any subscription agreement. He
`
`discussed edits to the letter with Hamburger and sent him
`
`instructions on how investors could send payments to Bio Defense.
`
`In what became known as the "EU Project," Agile began
`
`soliciting investors through its call centers using the documents
`
`Morrone and Jurberg provided from the U.S. to Hamburger. Once
`
`Agile found investors interested in Bio Defense, it would send
`
`their names and contact information to an email account Hamburger
`
`could access. The information was then sent to both Morrone and
`
`- 10 -
`
`

`

`Jurberg, who would send subscription agreements from the U.S. to
`
`the potential investors. When the investors signed the
`
`subscription agreements and sent them to either Morrone or Jurberg
`
`in Boston, they processed the documents, brought the agreements to
`
`Lu, who was also in Boston, so that he could counter-sign them,
`
`then mailed Bio Defense stock certificates from Boston to the
`
`investors. Bio Def. Corp., 2019 WL 7578525, at *4. After paying
`
`Agile a 75% commission, Bio Defense paid Hamburger an additional
`
`12.5% commission from the remaining funds (about 3% of the total
`
`amount received from investors) and made commission payments to
`
`Morrone, Jurberg, and Lu. Id. Bio Defense was left with less
`
`than 25% of the funds invested. Bio Defense would pay Agile and
`
`Hamburger weekly, and its financial controller would send a weekly
`
`report detailing these payments to Hamburger, Lu, Morrone, and
`
`Jurberg. The EU Project ran from August 2008 to February 2009.
`
`Bio Defense raised around $3.3 million and paid around $2.5 million
`
`to Agile.
`
`Bio Defense also engaged in three other similar schemes,
`
`including the payment of fees of either 70% or 75%, with companies
`
`other than Agile. In addition to the EU Project, Hamburger managed
`
`the "PT Project," which ran from December 2008 to October 2010 and
`
`raised approximately $3.3 million. Id. at *5. Orth managed the
`
`"CA Project" and the "GH project," which operated from March 2009
`
`to July 2010 and April 2010 to September 2010, respectively. Id.
`
`- 11 -
`
`

`

`The CA Project raised about $5 million, while the GH project raised
`
`about $118,000. Like for the EU Project, Lu, Orth, Morrone, and
`
`Jurberg all received weekly updates on the subscription agreements
`
`entered into as part of these projects.
`
`An SEC forensic accountant submitted a declaration
`
`saying that Bio Defense paid $607,928 in commissions to Morrone
`
`and $576,798 in commissions to Jurberg within the statute-of-
`
`limitations period. Based on the timing of these payments, some
`
`of the commissions were related to their domestic fundraising
`
`activities and some were related to their international
`
`fundraising activities.
`
`While these projects were ongoing, Morrone, Jurberg,
`
`Orth, and Hamburger received numerous complaints from investors
`
`about Bio Defense's solicitation practices. The chairman of Bio
`
`Defense's advisory board also alerted Morrone to numerous
`
`complaints he had received about Bio Defense's "boiler room
`
`tactics" related to the call centers.
`
`
`
`II. Procedural History
`
`The SEC filed a complaint against Bio Defense, Lu,
`
`Morrone, Jurberg, Hamburger, and Orth alleging violations of the
`
`Securities Act of 1933 ("Securities Act"), the Securities Exchange
`
`Act of 1934 ("Exchange Act"), and SEC Rule 10b-5. Relevant to
`
`this appeal, it alleged that Morrone and Jurberg (1) violated
`
`§§ 5(a) and 5(c) of the Securities Act by offering and selling
`
`- 12 -
`
`

`

`unregistered securities through interstate commerce and the mails,
`
`see 15 U.S.C. § 77e(a), (c); (2) violated § 15(a) of the Exchange
`
`Act by offering and selling securities without registering as
`
`brokers, see 15 U.S.C. § 78o(a)(1); (3) violated § 17(a)(1) of the
`
`Securities Act, § 10(b) of the Exchange Act, and Rule 10b-5 by
`
`substantially participating in a scheme to defraud investors, see
`
`15 U.S.C. § 77q(a)(1); 15 U.S.C. § 77j(b); 17 C.F.R. § 240.10b-
`
`5(b); (4) violated § 17(a)(2) of the Securities Act, § 10(b) of
`
`the Exchange Act, and Rule 10b-5 by making materially false and
`
`misleading statements in the offer or sale of securities; and (5)
`
`violated § 17(a)(3) of the Securities Act by "engag[ing] in any
`
`transaction, practice, or course of business which operates . . .
`
`as a fraud or deceit upon the purchaser," 15 U.S.C. § 77q(a)(3).
`
`Additionally, the SEC alleged that Morrone had control over Bio
`
`Defense and was liable under § 20(a) of the Exchange Act for Bio
`
`Defense's § 10(b) violation. It moved for summary judgment against
`
`Morrone, Jurberg, Hamburger, and Orth.5 Bio Def. Corp., 2019 WL
`
`7578525, at *1. The district court issued an order ruling on these
`
`motions on September 6, 2019. Id.
`
`Before turning to the summary judgment motion, the
`
`court's order decided two preliminary issues. First, it held that
`
`
`5
`Default judgment was entered against Bio Defense, Lu,
`and May's International Corporation. Bio Def. Corp., 2019 WL
`7578525, at *35.
`
`- 13 -
`
`

`

`it would draw adverse inferences requested by the SEC against
`
`Jurberg and Orth, who had asserted their Fifth Amendment rights
`
`against self-incrimination during discovery, "to the extent there
`
`is other evidence to support [them]." Id. at *8. Next, it held
`
`that the federal securities laws applied to the defendants' conduct
`
`targeting international investors because "Bio Defense received
`
`the proposed subscription agreements from overseas investors,
`
`. . . Lu counter-signed them in Bio Defense's Boston office before
`
`mailing the stock certificates to the investors[,] . . . [and] Bio
`
`Defense . . . incurred irrevocable liability within the United
`
`States." Id. at *12.
`
`The court then granted partial summary judgment to the
`
`SEC. It held the SEC was entitled to summary judgment on its
`
`registration claims under § 5 and § 15 and its fraudulent or
`
`deceptive practices claim under § 17(a)(3) against Morrone and
`
`Jurberg. Id. at *17-20, *25.
`
`On the SEC's fraudulent or deceptive scheme claim under
`
`§ 17(a)(1), § 10(b), and Rule 10b-5, the court ruled in the SEC's
`
`favor with respect to Morrone. Id. at *22. As to Jurberg, it
`
`found that there was "a genuine issue whether Jurberg's involvement
`
`- 14 -
`
`

`

`was so substantial that it exposes him to liability under § 10(b)
`
`and § 17(a)(1)."6 Id.
`
`The court denied summary judgment in the SEC's favor on
`
`its materially false and misleading statement claims against
`
`Morrone and Jurberg under § 17(a)(2), § 10(b), and Rule 10b-5.
`
`Id. at *25-29. It also held that the SEC was not entitled to
`
`summary judgment against Morrone on its § 20(a) control liability
`
`claim. Id. at *29-30.
`
`The court permanently enjoined Morrone and Jurberg from
`
`violating the federal securities laws in the future, ordered
`
`disgorgement of their commission payments, imposed civil monetary
`
`penalties, and barred them from serving as officers or directors
`
`of public companies. Id. at *31-34.
`
`Morrone and Jurberg timely appealed the entry of summary
`
`judgment against them on some of the SEC's claims.
`
`
`
`III. Analysis
`
`Summary judgment is appropriate if the movant shows
`
`"there is no genuine dispute as to any material fact" and is
`
`"entitled to judgment as a matter of law." Mitchell v. Miller,
`
`790 F.3d 73, 76-77 (1st Cir. 2015) (quoting Bos. Prop. Exch.
`
`Transfer Co. v. Iantosca, 720 F.3d 1, 10 (1st Cir. 2013)). We
`
`
`6
`The district court stated that, unlike for the
`§ 17(a)(1) claim, "[Jurberg's] participation need not have been
`substantial" to expose him to § 17(a)(3) liability. Id. at *25.
`
`- 15 -
`
`

`

`review an order granting summary judgment de novo, "drawing all
`
`reasonable inferences in the light most favorable to the nonmoving
`
`party." Id. at 76.
`
`A. The District Court Did Not Err in Applying the Federal
`Securities Laws to Morrone and Jurberg
`
`
`
`Appellants argue that the district court erred when it
`
`applied United States law to "foreign transactions involving
`
`foreign investors solicited by foreign brokerage firms." They
`
`argue that Morrison, 561 U.S. at 273, prevented it from doing so.
`
`We disagree.
`
`Morrison held that § 10(b) of the Exchange Act does not
`
`apply extraterritorially and articulated a transactional test to
`
`determine "which transnational frauds it applie[s] to." Id. at
`
`267 & n.9. Under this test, the federal securities laws apply to
`
`only two types of transnational transactions: (1) "transactions in
`
`securities listed on domestic exchanges," and (2) "domestic
`
`transactions in other securities." Id. at 267. Because Bio
`
`Defense was not listed on a domestic exchange, the federal
`
`securities laws apply to the transactions at issue here if they
`
`are "domestic transactions in other securities."
`
`The First Circuit has not previously applied Morrison to
`
`determine whether a transaction is domestic. Other circuits have
`
`held that a transaction is domestic under Morrison if "irrevocable
`
`liability" occurs in the United States. See Absolute Activist
`
`- 16 -
`
`

`

`Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 67 (2d Cir. 2012)
`
`("[W]e hold that transactions . . . are domestic if irrevocable
`
`liability is incurred or title passes within the United States.");
`
`United States v. Georgiou, 777 F.3d 125, 137 (3d Cir. 2015) (same);
`
`Stoyas v. Toshiba Corp., 896 F.3d 933, 949 (9th Cir. 2018) (same).
`
`Under this standard, parties to a transaction incur "irrevocable
`
`liability" if the "purchaser incurred irrevocable liability within
`
`the United States to take and pay for a security, or . . . the
`
`seller incurred irrevocable liability within the United States to
`
`deliver a security." Absolute Activist, 677 F.3d at 68. The
`
`circuits adopting the "irrevocable liability" test in this context
`
`have reasoned that, because "the point at which the parties become
`
`irrevocably bound is used to determine the timing of a purchase
`
`and sale," it "can [also] be used to determine the locus of a
`
`securities purchase or sale." Id. (emphasis added); see Georgiou,
`
`777 F.3d at 136; Stoyas, 896 F.3d at 948; see also Riseman v. Orion
`
`Rsch., Inc., 749 F.2d 915, 918-19 (1st Cir. 1984) (applying the
`
`irrevocable liability test to determine the timing of a
`
`transaction).
`
`We agree with the reasoning of the Second, Third, and
`
`Ninth Circuits and hold that a transaction is domestic under
`
`Morrison if irrevocable liability occurs in the United States.7
`
`
`7
`We note that Morrison's transactional test only governs
`conduct occurring before July 22, 2010. Shortly after Morrison
`
`- 17 -
`
`

`

`Applying that test here, it is clear that Bio Defense "incurred
`
`irrevocable liability within the United States to deliver a
`
`security." Absolute Activist, 677 F.3d at 68. The subscription
`
`agreements for Bio Defense stock said that the company had "no
`
`obligation" under them until Bio Defense "execute[s] and
`
`deliver[s] to the Purchaser an executed copy" of the agreement.
`
`It is undisputed that these subscription agreements were executed
`
`on behalf of Bio Defense by Lu in Boston, and that either Morrone
`
`or Jurberg then issued shares from Boston to the investors. Bio
`
`Def. Corp., 2019 WL 7578525, at *4. Because Bio Defense became
`
`irrevocably liable to deliver the shares in Boston, the federal
`
`securities laws apply.
`
`Appellants argue that the analysis does not end here.
`
`They say that even if a transaction is domestic because irrevocable
`
`liability occurred in the United States, we should adopt the Second
`
`Circuit's holding in Parkcentral Global Hub Ltd. v. Porsche
`
`Automobile Holdings SE, 763 F.3d 198, 215 (2d Cir. 2014), that "a
`
`domestic securities transaction" under Morrison is "not alone
`
`sufficient to state a properly domestic claim under the statute."
`
`They argue that, under Parkcentral, the federal securities laws do
`
`
`was decided, Congress amended the federal securities laws to "apply
`extraterritorially when the [newly-added] statutory conduct-and-
`effects test is satisfied." SEC v. Scoville, 913 F.3d 1204, 1218
`(10th Cir. 2019); see 15 U.S.C. § 77v(c); 15 U.S.C. § 78aa(b). At
`oral argument, the SEC represented to us that there are "very few"
`cases left that will be governed by Morrison.
`
`- 18 -
`
`

`

`not apply to claims where the transactions meet the irrevocable
`
`liability test but "the claims . . . are so predominantly foreign
`
`as to be impermissibly extraterritorial." Id. at 216; see also
`
`Cavello Bay Reinsurance Ltd. v. Shubin Stein, 986 F.3d 161, 165-
`
`68 (2d Cir. 2021) (applying Parkcentral).
`
`Like the Ninth Circuit, we reject Parkcentral as
`
`inconsistent with Morrison. See Stoyas, 896 F.3d at 950 ("[T]he
`
`principal reason that we should not follow the Parkcentral decision
`
`is because it is contrary to . . . Morrison itself."). Morrison
`
`says that § 10(b)'s focus is on transactions. 561 U.S. at 266
`
`("[T]he focus of the Exchange Act is not upon the place where the
`
`deception originated, but upon purchases and sales of securities
`
`in the United States."). Section 10(b) "seeks to 'regulate'"
`
`transactions and protect "parties or prospective parties to those
`
`transactions." Id. at 267 (quoting Superintendent of Ins. of N.Y.
`
`v. Bankers Life & Cas. Co., 404 U.S. 6, 12 (1971)). The Court
`
`explicitly said that, if a transaction is domestic, § 10(b)
`
`applies. Id. at 267 ("[I]t is in our view only transactions in
`
`securities listed on domestic exchanges, and domestic transactions
`
`in other securities, to which § 10(b) applies."). The existence
`
`of a domestic transaction suffices to apply the federal securities
`
`laws under Morrison. No further inquiry is required.
`
`Regardless, even if we were to apply Parkcentral, the
`
`claims here are not "so predominantly foreign as to be
`
`- 19 -
`
`

`

`impermissibly extraterritorial." 763 F.3d at 216. Parkcentral
`
`itself cautioned that it "cannot . . . be perfunctorily applied to
`
`other cases based on the perceived similarity of a few facts."
`
`Id. at 217. Here, Bio Defense incurred irrevocable liability in
`
`the United States, but there were also significantly more U.S.
`
`connections rendering the fraud domestic. Morrone and Jurberg
`
`were both based in the United States. They conducted nearly all
`
`of their activities in furtherance of the fraud from the U.S.
`
`Further, Bio Defense was a U.S.-based company and was not traded
`
`on a foreign exchange. In contrast, Parkcentral involved
`
`significantly more foreign conduct, including transactions in a
`
`foreign company's securities traded on a foreign exchange. Id. at
`
`215-16.
`
`There was no error in applying the federal securities
`
`laws to Morrone and Jurberg.
`
`B. The District Court Did Not Err in Granting Partial Summary
`Judgment in the SEC's Favor
`
`
`
`The appellants next argue that alleged issues of fact
`
`precluded entry of summary judgment in the SEC's favor with respect
`
`to its § 15 unregistered brokers claim and its § 17(a)(3) anti-
`
`fraud claim under the Securities Act. Morrone also argues that
`
`the district court erred as to the SEC's § 5 claim against him and
`
`- 20 -
`
`

`

`its § 17(a)(1), § 10(b), and Rule 10b-5 claims against him. We
`
`find no error.
`
`On the § 15 claim, the appellants argue that they had
`
`merely an administrative role in Bio Defense's unregistered
`
`offering of securities to overseas investors and did not act as
`
`brokers.8 Section 15 makes it unlawful "for any broker or dealer
`
`. . . to make use of the mails or any means or instrumentality of
`
`interstate commerce to effect any transactions in, or to induce or
`
`attempt to induce the purchase or sale of, any security . . .
`
`unless such broker or dealer is registered . . . ." 15 U.S.C.
`
`§ 78o(a)(1). A broker is "any person engaged in the business of
`
`effecting transactions in securities for the account of others."
`
`Id. § 78c(a)(4). According to SEC rules, "a person may 'effect
`
`transactions,' among other ways, by assisting an issuer to
`
`structure prospective securities transactions, by helping an
`
`issuer to identify potential purchasers of securities, or by
`
`soliciting securities transactions."
`
` Strengthening the
`
`Commission's Requirements Regarding Auditor Independence, Exchange
`
`Act Release No. 34-47265, 79 SEC Docket Nos. 1284, 1571, at *18
`
`
`8
`Appellants also say that "[t]he flaw in the District
`Court's analysis is that it used the conduct engaged in by Jurberg
`and Morrone prior to September 10, 2007 to find that they acted as
`brokers." This argument ignores the solicitation of domestic
`investors both Morrone and Jurberg were actively engaged in after
`September 10, 2007 on which the district court relied. We have
`already detailed that involvement and do not repeat it here.
`
`- 21 -
`
`

`

`n.82 (Jan. 28, 2003). A person can be "engaged in the business"
`
`of doing so "by receiving transaction-related compensation or by
`
`holding itself out as a broker-dealer." Id.
`
`Morrone and Jurberg's involvement in the offering and
`
`scheme to defraud investors was far from minimal. They were
`
`instrumental in the scheme's planning and execution and there is
`
`no genuine dispute that they were engaged in the business of
`
`effecting transactions in Bio Defense stock. They were in the
`
`room when Hamburger first presented the scheme with Agile to Bio
`
`Defense. They were there when Bio Defense's counsel advised
`
`against the arrangement and said that if the company did proceed
`
`it would be crucial to disclose Agile's exorbitant commission.
`
`They helped Hamburger provide call scripts to Agile. They received
`
`weekly reports on the scheme's progress. They mailed subscription
`
`agreements to investors found by the call centers. Whenever an
`
`investor signed a subscription agreement, that investor mailed the
`
`agreement back to either Morrone or Jurberg. They handled the
`
`funds, gave the subscription agreement to Lu for his
`
`countersignature, and mailed the stock certificates to investors.
`
`Bio Def. Corp., 2019 WL 7578525, at *4. They also received
`
`commissions based on the value of investments made by these
`
`investors. The district court was correct to conclude that they
`
`acted as brokers for the purposes of § 15 liability. See id. at
`
`*18.
`
`- 22 -
`
`

`

`Based on these same undisputed facts, there is also no
`
`genuine dispute as to whether Morrone and Jurberg "engage[d] in
`
`[a] transaction, practice, or course of business which operates .
`
`. . as a fraud or deceit upon the purchaser" of a security in
`
`violation of § 17(a)(3). See 15 U.S.C. § 77q(a)(3). Appellants
`
`do not dispute that Bio Defense's solicitation of investors was
`
`fraudulent. Entry of summary judgment on this claim in favor of
`
`the SEC was proper.9
`
`Finally, Morrone argues that the district court erred
`
`because there were issues of fact as to whether he was a "necessary
`
`participant" or "substantial factor" in the scheme to sell
`
`unregistered securities overseas in violation of § 5 of the
`
`Securities Act. He makes similar arguments against the SEC's
`
`§ 17(a)(1), § 10(b), and Rule 10b-5 claims and argues that there
`
`is an issue of fact as to whether he acted with the requisite
`
`scienter.
`
`
`9
`Jurberg argues that it was inconsistent for the district
`court to find that (1) there was a genuine issue of fact as to
`whether he "employed" a fraudulent scheme or deceptive device under
`§ 17(a)(1) and Rule 10b-5 but (2) there was no genuine issue of
`fact as to whether he "engaged in a practice or course of business"
`operating as a fraud under § 17(a)(3). We see no inconsistency,
`as "employing" a fraud and "engaging" in one are not necessarily
`the same. Cf. Lorenzo v. SEC, 139 S. Ct. 1094, 1102 (2019) (noting,
`when discussing Rule 10b-5, that "at least some conduct . . .
`amounts to 'employ[ing]' a 'device, scheme, or artifice to
`defraud'" as well as "'engag[ing] in a[n] act . . . which operates
`. . . as a fraud'" (alterations in original)).
`
`- 23 -
`
`

`

`Morrone's main argument is that the court erred in
`
`holding that there was no genuine dispute that he had substantially
`
`participated in the fraud while also holding that there was a
`
`genuine dispute as to whether Jurberg substantially participated.
`
`There is ample evidence specific to Morrone showing that he was
`
`integral to the fraud and acted with scienter. Morrone recognized
`
`that he had a responsibility to ensure that people soliciting
`
`investors made proper disclosures. He knew about the exorbitant
`
`fee the call centers were charging and was warned by counsel that
`
`it should have been disclosed. Neverth

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