S.E.C. v. PLATFORMS WIRELESS INTERN. CORP

9th Cir. 1990) (en banc).

On appeal, the defendants challenge the summary judgment on the SEC's Section 10(b) and Rule 10b-5 claim based on the August 2000 press release. They contend that there are genuine issues of material fact whether the press release was materially misleading and whether it was issued with reckless scienter.

1

The parties dispute what degree of subjective recklessness is necessary to establish scienter under Section 10(b) and Rule 10b-5. Both agree that some degree of subjective understanding of the risk of misleading others is required. The SEC argues that the defendants need only have been aware that the misleading statement was made and have knowledge of the facts that made it "objectively obvious" that the statement was misleading. The defendants argue that liability further requires that the defendant have been subjectively aware of the risk that the statement could be misleading, i.e. that the defendant must have acted "deliberately."

In Hollinger, 914 F.2d 1564, we adopted "the standard of recklessness articulated by the Seventh Circuit in Sundstrand Corp. v. Sun Chem. Corp." Id. at 1569. That definition states:

Reckless conduct may be defined as a highly unreasonable omission, involving not merely simple, or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers or sellers that is either known to the defendant or is so obvious that the actor must have been aware of it. . . . [T]he danger of misleading buyers must be actually known or so obvious that any reasonable man would be legally bound as knowing, and the omission must derive from something more egregious than even `white heart/empty head' good faith.

Hollinger, 914 F.2d at 1569 (citations omitted).

In Sundstrand, the Seventh Circuit sub-divided its recklessness definition into two parts: (1) an objective test, analyzed according to whether the misrepresentation was "known or so obvious that any reasonable man would be legally bound as knowing," and (2) a subjective test, requiring more than "white heart/empty head" good faith. 553 F.2d 1033, 1045 nn. 19-20 (7th Cir. 1977). The Seventh Circuit elaborated on the subjective test as follows:

This is a subjective test with the requirement of something more than `inexcusable negligence'. . . . Thus if a trial judge found, for example, that a defendant genuinely forgot to disclose information or that it never came to his mind, etc., this prong of the [recklessness test] would defeat a finding of recklessness even though the proverbial `reasonable man' would never have forgotten.

Id. at 1045 n. 20.

We revisited Hollinger in In re Silicon Graphics Inc. Securities Litigation, 183 F.3d 970 (9th Cir. 1999), while addressing the standard for pleading under the Private Securities Litigation Reform Act of 19915 ("PSLRA"). Silicon Graphics concluded that Hollinger had adopted a "deliberate recklessness" standard:

Our definition of recklessness, as taken from Sundstrand, strongly suggests that we continued to view it as a form of intentional or knowing misconduct. We used the words "known" and "must have been aware," which suggest consciousness or deliberateness. Indeed, we expressly acknowledged our own prior statement that "recklessness is a form of intent rather than a greater degree of negligence."

Id. at 976-77 (citing Hollinger, 914 F.2d at 1569). We have since observed, however, that "[b]ecause the PSLRA did not alter the substantive requirements for scienter under § 10(b), . . . the standard on summary judgment or JMOL remains unaltered by [ Silicon Graphics]." Howard v. Everex Sys., Inc., 228 F.3d 1057, 1064 (9th Cir. 2000).

In Gebhart v. SEC, 595 F.3d 1034 (9th Cir. 2010), our most recent case to address the issue of reckless scienter, we concluded that scienter requires "either knowledge of falsity or conscious recklessness." Id. at 1041 n. 10. "Scienter . . . is a subjective inquiry. It turns on the defendant's actual state of mind." Id. at 1042. Thus, "although we may consider the objective unreasonableness of the defendant's conduct to raise an inference of scienter, the ultimate question is whether the defendant knew his or her statements were false, or was consciously reckless as to their truth or falsity." Id.

These precedents lead us inescapably to two conclusions. First, Gebhart, interpreting Silicon Graphics and Hollinger, makes it clear that scienter requires either "deliberate recklessness" or "conscious recklessness," and that it includes "a subjective inquiry" turning on "the defendant's actual state of mind." 595 F.3d at 1041-42. Evidence showing that the defendants did not appreciate the gravity of the risk of misleading others is relevant to such a determination. See id. at 1042 n. 11 (holding that "the factfinder must consider the direct and circumstantial evidence as a whole" to determine whether the defendant "consciously disregarded the risk" that the statements were false).

Second, despite our first conclusion, a defendant ordinarily will not be able to defeat summary judgment by the mere denial of subjective knowledge of the risk that a statement could be misleading. Summary judgment requires a statement that is materially misleading such that no reasonable jury could conclude otherwise. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Moreover, the statement must present a danger of misleading buyers or sellers "that is either known to the defendant or is so obvious that the actor must have been aware of it." Hollinger, 914 F.2d at 1569. When the defendant is aware of the facts that made the statement misleading, "he cannot ignore the facts and plead ignorance of the risk." Makor Issues Rights, Ltd. v. Tellabs Inc., 513 F.3d 702, 704 (7th Cir. 2008); see also Vucinich v. Paine, Webber, Jackson Curtis, Inc., 739 F.2d 1434, 1436 (9th Or. 1984) ("Summary judgment is generally inappropriate when mental state is an issue, unless no reasonable inference supports the adverse party's claim." (emphasis added)). Stated another way, if no reasonable person could deny that the statement was materially misleading, a defendant with knowledge of the relevant facts cannot manufacture a genuine issue of material fact merely by denying (or intentionally disregarding) what any reasonable person would have known.

2

With this scienter standard in mind, we turn to the merits of the summary judgment on the Section 10(b) and Rule 10b-5 claim based on the August 2000 press release.

In their motion for reconsideration, the defendants submitted twenty-eight new evidentiary exhibits and a new declaration by Martin. The district court declined to consider this evidence because it was not before it during the original summary judgment proceeding. On appeal, the defendants argue that Ninth Circuit Rule of Appellate Procedure 30-1.4(a)(xi) permits us to consider this new evidence. We disagree. Rule 30-1.4(a)(xi) establishes criteria for the inclusion of record evidence in the excerpts of record. It does not authorize us to consider extra-record evidence.

First, the district court concluded that the press release was materially misleading because it "only permits the conclusion that Platforms was announcing it had actually developed a viable ARC system." It is undisputed that at the time of the press release, Platforms had only a design of the system, had no operational prototype, and did not have the money to build a prototype. On appeal, the defendants argue that a genuine issue of material fact exists because the press release could be interpreted in a manner consistent with the nascent state of the ARC System and of Platforms' finances.

We reject the defendants' argument. No reasonable person could read the press release and infer anything other than that a functioning ARC System existed. The press release is titled "Platforms Unveils New Airborne Wireless Communications `ZeroGravity AeroStructures.'" It speaks in the present tense, stating, for example, that "the ZeroGravity AeroStructure is a large, manned, helium-filled, aerodynamically-shaped airship structure," and that "[t]he Aerodynamic shape and skin of the AeroStructure are resistant to inclement weather conditions." It makes performance assertions about the ARC System, stating that it resists winds "of up to 90 MPH," and that "[t]his important new development has enabled Platforms to: (i) improve System operational efficiency and cost-effectiveness, reducing ARC System fixed-wing operating costs by W percent." The release is nine pages long in small font and discusses, in detail, five specific models of AeroStructure, describing their particular performance characteristics, including their service coverage areas and maximum service capacities. Considered as a whole, the press release leaves the unmistakable impression that the ARC System exists. By contrast to the true facts, this press release was deceptive, an absolute and unequivocal falsehood.

The defendants' alternative interpretation of the press release is not plausible. The statements relied on by defendants, read in context, do not dampen the clear impression that a functioning ARC System exists and has been tested. The defendants analogize the press release's description of the ARC System to Boeing's practice of issuing press releases about a new model of airliner. However, the defendants are not Boeing and the ARC System is not an airplane. Unlike Boeing, defendants had not successfully launched prior aircraft models. Unlike Boeing, defendants did not have ample capital available to further their ends. Whatever Boeing's practices may be, the comparison between Platforms' ARC System and a well-known company producing a new model with proven technology is inapt and irrelevant. Nor do Platforms' subsequent press releases correct, or even attempt to correct, the misleading statements and material omissions in the August 2000 press release.

Second, the district court concluded that because Martin knew Platforms did not have an operating prototype, there was no genuine issue of material fact that Martin acted with deliberate recklessness by issuing the August 2000 press release. We agree. Martin admitted in his deposition that when the press release was given, Platforms did not have the ARC System but rather only "the description and definition of how the system would operate"; that Platforms had never produced a "commercial version" of the antenna pay-load; that Platforms had not purchased an aerostat; and that it had never manufactured the completed product. A finished, tested product is almost certainly the single most important piece of information for an investor deciding whether to invest in a start-up company. The defendants cannot plausibly argue that omitting the fact that the ARC System did not exist was not a "highly unreasonable omission." See Hollinger, 914 F.2d at 1569. Martin argues that he nonetheless subjectively believed that the press release was not misleading, but for the reasons stated above, we have concluded that no reasonable juror could credit that assertion. If such a self-serving assertion could be viewed as controlling, there would never be a successful prosecution or claim for fraud. Similarly, the defendants argue that "companies in related industries typically tailor products for customers over the course of months" and that Platforms personnel "considered acquisition of an aerostat to be reasonably simple." But even if Martin had these things in mind, it doesn't negate that Martin knew that Platforms had not produced a complete, field-tested ARC System, and that he authorized the materially misleading press release suggesting that Platforms had in fact done so. Because no reasonable juror could conclude that Martin was not conscious of the risk that the press release would be misinterpreted, we conclude that Martin was deliberately reckless in issuing this press release.

We hold that there is no genuine issue of material fact that the August 2000 press release was materially misleading and issued with deliberate recklessness. The summary judgment as to the August 2000 press release is affirmed.

IV

Platforms and Martin next challenge the district court's order holding them jointly and severally liable for disgorgement of about $1.75 million in proceeds from the sales of unregistered Platforms securities in violation of Section 5. We review orders of disgorgement for an abuse of discretion. SEC v. JT Wallenbrock Assocs., 440 F.3d 1109, 1113 (9th Cir. 2006).

A

"[A] district court has broad equity powers to order the disgorgement of ill-gotten gains obtained through the violation of the securities laws. Disgorgement is designed to deprive a wrongdoer of unjust enrichment, and to deter others from violating securities laws by making violations unprofitable." SEC v. First Pac. Bancorp, 142 F.3d 1186, 1191 (9th Cir. 1998) (quotation marks and citations omitted). "[T]he amount of disgorgement should include all gains flowing from the illegal activities." JT Wallenbrock, 440 F.3d at 1114 (quotation marks omitted). Disgorgement need be "only a reasonable approximation of profits causally connected to the violation." First Pac. Bancorp, 142 F.3d at 1192 n. 6.

The SEC "bears the ultimate burden of persuasion that its disgorgement figure reasonably approximates the amount of unjust enrichment." SEC v. First City Fin. Corp., 890 F.2d 1215, 1232 (D.C. Cir. 1989); see also First Pac. Bancorp, 142 F.3d at 1192 n. 6. Once the SEC establishes a reasonable approximation of defendants' actual profits, however, we join our sister circuits and hold that the burden shifts to the defendants to "demonstrate that the disgorgement figure was not a reasonable approximation." First City Fin., 890 F.2d at 1232; see also SEC v. Happ, 392 F.3d 12, 31 (1st Cir. 2004); SEC v. Lorin, 76 F.3d 458, 462 (2d Cir. 1996) (per curiam). We place this burden on the defendants because information is not "obtainable at negligible cost." First City Fin., 890 F.2d at 1231. The defendants are more likely than the SEC to have access to evidence establishing what they paid for the securities, if anything, to whom the proceeds from the sales were distributed, and for what purposes the proceeds were used. And although "[p]lacing the burden on the defendants of rebutting the SEC's showing of actual profits . . . may result . . . in actual profits becoming the typical disgorgement measure," we conclude that "the risk of uncertainty should fall on the wrongdoer whose illegal conduct created that uncertainty." Id. at 1232.

The district court did not abuse its discretion in adopting the SEC's disgorgement figure. The SEC calculated the amount of proceeds obtained from the illegal sale of 17.45 million unregistered securities: $1,756,861. The calculations were a precise sum of all of the proceeds from the sales, and the SEC provided spreadsheets illustrating, the sales, dates, and totals. The defendants do not dispute that these were the total proceeds. We conclude that this was a reasonable approximation of the profits obtained from the unlawful sales.

The defendants attempt to distinguish "profits" from "proceeds" and contend that the SEC should have attempted a "more reasonable approximation of profits." But they do not explain what, if anything, was not "profit" in the $1.75 million in proceeds received from the sales of unregistered securities. There is no evidence in the record, and the defendants do not contend, that they paid cash value for the newly-issued shares. To the extent that any cash value was paid, the defendants could have easily produced that evidence to rebut the SEC's proposed disgorgement amount. Assuming that the securities were paid as compensation for services rendered, we do not see evidence of substantial value: Platforms was a low-priced penny-stock, the securities were unregistered and could not be sold to the public at all, and Platforms did not have any source of income or assets, rendering any such value speculative and small. Nor, and importantly, did the defendants produce any evidence of such a valuation of stock given in compensation for services. Accordingly, and given this failure of proof from defendants, it was not an abuse of discretion for the district court to conclude that the entire proceeds from the sale were a "reasonable approximation" of the profits from the transactions.

Similarly, the defendants's reliance on the Seventh Circuit's decision in SEC v. McNamee, 481 F.3d 451 (7th Cir. 2007), is misplaced. In McNamee, the Seventh Circuit vacated a contempt-of-court fine comprising the total proceeds earned from unlawful sales of unregistered securities in violation of a temporary restraining order. The Seventh Circuit concluded that because a contempt-of-court fine "compensates the complainant for losses sustained," full repayment of the proceeds would exceed the damage caused since the securities still retained some value, Id. at 456-58 (brackets omitted). Unlike the damages at issue in McNamee, however, the purpose of a disgorgement remedy is to prevent unjust enrichment and to make securities law violations unprofitable, not to compensate victims. Allowing the defendants to retain any money from the unlawful transactions would allow them to unjustly profit from exchanging unregistered securities for cash at public market prices.

Martin and Platforms next argue that the disgorgement amount should have been limited to the amount of proceeds that they personally received from the unlawful sales. They rely on Hateley v. SEC, 8 F.3d 653 (9th Cir. 1993). In Hateley, a broker dealer and two officers of a securities firm, were ordered to disgorge 100% of the profits obtained based on an illegal agreement, even though the agreement itself appropriated to them only 10% of the profits as a commission. Id. at 655-56. We held that it was error to order disgorged more than the amount the individuals ultimately received, because "the very agreement that [was] the source of their liability" also limited their ill-gotten gains, and we "must view the agreement as a whole and cannot single out the aspects of it that are favorable to the SEC's position and disregard the parts that are not." Id.

In contrast, in JT Wallenbrock Associates, 440 F.3d 1109, we distinguished Hateley and rejected an argument similar to the one now made by the defendants. In JT Wallenbrock, the defendants had raised more than $250 million through the fraudulent sale of unregistered promissory notes. See 440 F.3d at 1111-12. The district court held each of the defendants jointly and severally liable and ordered disgorgement of a substantial portion of that amount. Id. at 1113. On appeal, the defendants argued that Hateley required the district court to exclude from the amount of disgorgement amounts that they had reinvested and had not kept for themselves. Id. at 1116. We disagreed, distinguishing Hateley on the grounds that "there was no preexisting agreement limiting the defendants to only a share of the ill-gotten gain or requiring them to pay a portion of the proceeds to third parties." Id. "The manner in which [the defendant] chose to spend the illegally obtained funds has no relevance to the disgorgement calculation. . . ." Id.

The district court did not abuse its discretion by holding Martin and Platforms liable for all proceeds from the unlawful sales. A person who controls the distribution of illegally obtained funds is liable for the funds he or she dissipated as well as the funds he or she retained. See id. The defendants argue that the SEC "cited no evidence that Martin, Platforms, or Intermedia ever controlled the sales proceeds." But it is undisputed that the 17.45 million Platforms shares sold were beneficially owned by Intermedia, and we have determined that Martin controlled Intermedia. Unlike the defendants in Hateley, Martin had control over when and by whom the securities would be sold and hence how the proceeds would be used.

B

The. district court held Martin and Platforms jointly and severally liable for the full disgorgement amount. "[W]here two or more individuals or entities collaborate or have a close relationship in engaging in the violations of the securities laws, they have been held jointly and severally liable for the disgorgement of illegally obtained proceeds." First Pac. Bancorp, 142 F.3d at 1191. Martin does not dispute that he and Platforms had a "close relationship" and collaborated in the Section 5 violations. He argues, however, that the district court erred because he did not "personally benefit" from the violations by receiving money or other remuneration.

We hold that the district court did not abuse its discretion in holding Martin jointly and severally liable with Platforms. We have never held that a personal financial benefit is a prerequisite for joint and several liability. Rather, we have held defendants jointly and severally liable in cases where, for example, the defendants "used all of the investors' funds to operate their . . . scheme and invest in speculative business ventures, all to the defendants' benefit." JT Wallenbrock, 440 F.3d at 1117; see also id. at 1114 (holding the defendants liable for disgorging money they did not personally receive because "[r]ather than put their own money at risk, the defendants benefitted from the use of investors' money to spend at the defendants' discretion"). It is undisputed that the proceeds from the securities sales were used to pay Platforms' operating expenses and compensation to Platforms employees, and that at the time the securities were sold to the public, Martin had sunk over $2 million of his own money into Platforms. Martin therefore benefitted from the Section 5 violations by keeping Platforms afloat, defraying further investment of his own money, and protecting his substantial personal financial interest in the company. Even if some personal financial benefit to Martin were required, Martin's financial stake in Platforms' survival qualifies.

Martin relies on First Pacific Bancorp, but that decision rejects a defendant's argument that he received no personal financial benefit from the transaction without ever addressing whether a personal financial benefit is required. See 142 F.3d at 1192.

Moreover, 15 U.S.C. § 77o by its express terms holds all controlling persons jointly and severally liable for violations of Section 5, without regard to their degree of personal benefit. Martin orchestrated the unlawful transactions and had control of the proceeds via his control of Platforms and Intermedia. It is not inequitable to require Martin jointly to share the burden of restoring the illegally obtained monies, even if he did not allocate them to himself. See SEC v. First Jersey Sec, Inc., 101 F.3d 1450, 1475 (2d Cir. 1996) (holding that where a firm's owner and chief executive officer collaborated in unlawful conduct leading to securities law violations, "it is within the discretion of the court to determine that the owner-officer too should be subject, on a joint and several basis, to the disgorgement order"); see also First Pac. Bancorp, 142 F.3d at 1191-92. The district court did not abuse its discretion by imposing joint and several liability on Martin and Platforms.

V

The defendants next challenge the district court's award of $974,586 in prejudgment interest. We review prejudgment interest awards for an abuse of discretion. Simeonoffv. Miner, 249 F.3d 883, 894 (9th Cir. 2001).

The defendants contest the district court's decision to calculate interest based on the rate provided in 26 U.S.C. § 6621 for tax underpayment, rather than the treasury-bill rate provided in 28 U.S.C. § 1961 for post-judgment interest on money judgments in civil cases. Ordinarily, 28 U.S.C. § 1961 "is to be used for the calculation of prejudgment interest unless the equities of a particular case demand a different rate." In re Nucorp Energy, Inc., 902 F.2d 729, 734 (9th Cir. 1990) (quotation marks omitted).

Courts in our circuit have, on occasion, calculated prejudgment interest in SEC enforcement actions using the Section 1961 rate. See, e.g., SEC v. M A West, No. C-01-3376 VRW, 2005 WL 2988963, at *2 (N.D.Cal. Oct.31, 2005), rev'd, SEC v. M A West, Inc., 538 F.3d 1043 (9th Cir. 2008).

The district court did not abuse its discretion by calculating prejudgment interest based on the tax-underpayment rate. The SEC has adopted the tax underpayment rate for prejudgment interest on orders of disgorgement in all administrative proceedings. See SEC Rules and Regulations, 60 Fed.Reg. 32,738, 32,788 (June 23, 1995) (codified at IT C.F.R. § 201.600(b)). We conclude that the SEC's reasoning on this issue is persuasive. The defendants unlawfully received money from investors by distributing unregistered securities to the public in violation of Section 5. This was the rough equivalent of receiving "an interest free loan" from investors. See id. The proper measurement of the benefit of the "loan" is the interest rate the defendants would have otherwise paid to finance their business operations with a comparable, unsecured loan. Id. The interest rate reflected in Section 6621, "a widely published, floating rate based on a fixed margin above the rate for treasury bills," is a reasonable proxy for the interest rate that would ordinarily be charged on an unsecured loan. Id.

The defendants also argue that the SEC has not shown equitable reasons for departing from the 28 U.S.C. § 1961 rate. We conclude, however, that Section 1961 provides an inappropriate interest rate in this case. The treasury-bill rate in Section 1961 reflects the interest rate paid for lending money to the U.S. Government, not for borrowing money. First Jersey Sec, 101 F.3d at 1476-77. It is therefore "not an appropriate measure of prejudgment interest to charge in remedial proceedings, where the purpose of the prejudgment interest is to deny a wrongdoer any economic benefit from his violations." SEC Rules and Regulations, 60 Fed.Reg. at 32,788. By imposing a lower interest rate than the one reflected in Section 6621, the defendants would benefit from their unlawful conduct by obtaining their $1.75 million "loan" from investors at a below-market rate.

The defendants still further argue that the district court improperly calculated prejudgment interest from the date of the sales of securities to the public, rather than from the date the SEC filed its complaint. We hold that the district court did not abuse its discretion by imposing prejudgment interest from the date the securities were sold in violation of Section 5. "Even if defendants were correct that the present litigation was protracted through some fault of the SEC, defendants plainly had the use of their unlawful profits for the entire period. . . . Given the remedial purpose of the statute, the goal of depriving culpable defendants of their unlawful gains, and the lack of any unfairness to defendants, we see no abuse of discretion in the court's order." First Jersey Sec, 101 F.3d at 1477.

VI

Platforms contends that the district court improperly denied its motion for reconsideration under Federal Rules of Civil Procedure 59(e) and 60(b). We review the denial of a motion for reconsideration for an abuse of discretion. United Nat'l Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 780 (9th Cir. 2009). Reconsideration under Rule 59(e) is appropriate "if (1) the district court is presented with newly discovered evidence, (2) the district court committed clear error or made an initial decision that was manifestly unjust, or (3) there is an intervening change in controlling law." Id. (quotation marks omitted). Rule 60(b) allows a district judge to provide relief from a final judgment on the grounds of, inter alia, "mistake, inadvertence, surprise, or excusable neglect," "newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b)," or "any other reason that justifies relief." Id.

Platforms first urges that the district court abused its discretion by stating that "scienter is not an element of a § 5 violation" when in fact scienter can be considered when granting or denying injunctive relief. We reject this argument. Platforms admits in the same paragraph in its brief that the district court included a scienter finding in its original ruling.

Platforms next argues that the district court abused its discretion by denying defendants an opportunity to respond to the new evidence of Intermedia's affiliate status submitted in the SEC's reply brief during the Section 5 summary judgment proceeding. However, as earlier explained, the district court did not err by considering the SEC's new evidence, and the defendants had an adequate opportunity to respond but did not do so. Nor have the defendants pointed to any "newly discovered evidence" that was previously unknown to them or unavailable during the original summary judgment proceeding. See Frederick S. Wyle Prof I Corp. v. Texaco, Inc., 764 F.2d 604, 609 (9th Cir. 1985).

Platforms also contends that the district court abused its discretion in denying its Rule 60(b) motion based on former counsel Rebecca Wilson's "excusable neglect" — namely her failure to submit evidence on the issue of Intermedia's affiliate status or move to amend their answer to correct the admission prior to the SEC's summary judgment motion. "The determination of whether neglect is excusable is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Lemoge v. United States, 587 F.3d 1188, 1192 (9th Cir. 2009) (quotation marks omitted). At least four factors are considered: "(1) the danger of prejudice to the opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the reason for the delay; and (4) whether the movant acted in good faith." Id. In some circumstances, the prejudices denial would cause to the movant must also be considered, but it is not a factor that must be assessed "in each and every case." Id. at 1195.

The district court did not abuse its discretion in rejecting the claim of excusable neglect. The district court concluded that prejudice to the parties was in equipoise, but questioned the defendants' good faith because the evidence of Intermedia's affiliate status was available to the defendants, and because the defendants' own admission was the cause of the SEC's failure to raise the issue sooner. It also concluded that the proffered reason for the delay — a change in counsel and new counsel's reliance on the SEC's framing of the issues — was not a reasonable excuse. These conclusions are not "illogical, implausible, or without support in inferences that may be drawn from facts in the record." See United States v. Hinkson, 585 F.3d 1247, 1251 (9th Cir. 2009) (en banc). Wilson had four months before the SEC's summary judgment motion to submit evidence or retract the admission and did not do so. Wilson was not entitled to rely on the SEC's "framing" of Intermedia's affiliate status given that it was the defendants' own admission that led to such "framing." "[C]lients must be held accountable for the acts and omissions of their attorneys," and Platforms "cannot now avoid the consequences of the acts or omissions" of its counsel. Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd., 507 U.S. 380, 396-97, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993).

We hold that the district court did not abuse its discretion by denying the motion for reconsideration.

VII

We affirm the summary judgment on the SEC's Section 5 claim and on the Section 10(b) and Rule 10b-5 claim based on the August 2000 press release, the order of disgorgement and prejudgment interest, and the denial of the motion for reconsideration. Because the SEC has elected to abandon its challenge to the denial of summary judgment on its other Section 10(b) and Rule 10b-5 claims, we dismiss the SEC's cross appeal as moot.

JUDGMENT AFFIRMED. CROSS-APPEAL DISMISSED.