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SEC v. Berger

United States Court of Appeals for the Second Circuit

October 25, 2002, Argued ; February 27, 2003, Decided

Docket No. 01-6254

Opinion

 [*188]  JOSE A. CABRANES, Circuit Judge:

The Securities and Exchange Commission ("SEC") filed this action against Michael W. Berger in the United States District Court for the Southern District of New York, alleging that Berger violated numerous anti-fraud provisions of the federal securities laws. The District Court (Denise Cote, Judge) granted summary judgment in favor of the SEC. On appeal, Berger challenges only the District Court's ruling that it had subject matter jurisdiction over the claims against him. The SEC asserts that Berger, who has fled the United States and is now a fugitive from justice, should be estopped from bringing the instant appeal by the fugitive disentitlement doctrine.

BACKGROUND

We assume familiarity with the District Court's opinion, which sets forth the factual background in detail. SEC v. Berger, 244 F. Supp. 2d 180, 2001 U.S. Dist. LEXIS 18448, No. 00 Civ. 333 (DLC), 2001 WL 1403028, at *1-4 (S.D.N.Y. Nov. 13, 2001).  [**3]  Accordingly, we need only restate those facts particularly relevant to this appeal.

Defendant Michael W. Berger, along with two close friends as partners, formed an offshore investment company known as the Manhattan Investment Fund, Ltd. ("the Fund"), which was organized under the laws of the British Virgin Islands and commenced trading operations in the Spring of 1996. The Fund was designed for foreign investors and tax-exempt domestic investors; its investment objective was to achieve capital appreciation by investing primarily in publicly-traded securities. Berger is the Fund's only active director.

At the time the complaint was filed, the Fund had approximately 280 investors, only a small percentage having addresses in the United States. Manhattan Capital Management, Inc. ("MCM") served as the investment advisor to the Fund and was paid an annual management fee of 1% of the Fund's net asset value as well as an incentive fee equal to 20% of the Fund's net gains. At all relevant times, Berger was the sole officer of and shareholder in MCM, a Delaware corporation headquartered in New York.

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322 F.3d 187 *; 2003 U.S. App. LEXIS 3562 **; Fed. Sec. L. Rep. (CCH) P92,288

SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. MICHAEL W. BERGER, Defendant-Appellant, MANHATTAN INVESTMENT FUND LTD. and MANHATTAN CAPITAL MANAGEMENT, INC., Defendants.

Subsequent History:  [**1]  As Amended March 7, 2003.

Prior History: The Securities and Exchange Commission filed this action against Michael W. Berger in the United States District Court for the Southern District of New York (Denise Cote, Judge), alleging that Berger violated numerous anti-fraud provisions of the federal securities laws. The District Court granted summary judgment in favor of the Commission. On appeal, Berger only challenges the District Court's ruling with respect to subject matter jurisdiction. Berger claims that the District Court lacked subject matter jurisdiction over the dispute because it involved extraterritorial conduct that did not directly result from acts occurring within the United States and that did not have an effect on U.S. residents or U.S. markets. The Commission claims that Berger should be estopped from bringing the instant appeal based on the fugitive disentitlement doctrine. Without reaching the issue of fugitive disentitlement, we hold that the fraud was primarily perpetrated in the United States, and accordingly, that the District Court properly determined that it had subject matter jurisdiction over this action.

 SEC v. Berger, 244 F. Supp. 2d 180, 2001 U.S. Dist. LEXIS 18448 (S.D.N.Y. Nov. 13, 2001)

Disposition: Affirmed.

CORE TERMS

investors, fugitive, subject matter jurisdiction, fraudulent, losses, conduct test, disentitlement, stocks, financial statement, securities fraud, offshore, courts, calculations, preparatory, allocution, exchanges, preparing

Civil Procedure, Appeals, Dismissal of Appeals, Involuntary Dismissals, Criminal Law & Procedure, Reviewability, Discretionary Review, Appellate Jurisdiction, State Court Review, General Overview, Subject Matter Jurisdiction, Jurisdiction Over Actions, International Law, Authority to Regulate, Securities, International Trade Law, Dispute Resolution, Antitrust & Trade Law, International Aspects, International Application of US Law, Securities Law, Scope of Provisions, Covered Transactions, Foreign Transactions, Fraud, Securities Fraud, Elements, Postoffering & Secondary Distributions, Federal Jurisdiction, US Securities & Exchange Commission, Authorities & Powers, Special Powers