The opinion of the court was delivered by: Gladys Kessler United States District Judge
Plaintiff Securities and Exchange Commission ("SEC") filed this action against four individual Defendants (John Tuli, Kent Wakeford, Christopher Benyo, and Michael Kennedy, collectively "Defendants") on January 10, 2005, alleging a fraudulent scheme to materially and improperly inflate the announced and reported revenues of PurchasePro.com, Inc. ("PurchasePro"). On April 24, 2008, an eleven-member jury found Defendant Christopher Benyo liable on Count Three of this Complaint, for aiding and abetting PurchasePro's violations of Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5.*fn1 On May 2, 2008, Defendant Benyo filed the instant Motion for Judgment as a Matter of Law or in the Alternative for a New Trial [Dkt. No. 505]. Upon consideration of the Motion, Opposition, Reply, and the entire record herein, and for the reasons stated below, Defendant Benyo's Motion for Judgment as a Matter of Law or in the Alternative for a New Trial [Dkt. No. 505] is denied.
A. Benyo's Role in the Scheme
Defendant Christopher Benyo was PurchasePro's Senior Vice President for Marketing and Network Development during the relevant time period. The SEC alleged in its Complaint that Benyo violated four sections of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78a et seq. Specifically, the SEC alleged that Benyo aided and abetted PurchasePro's violations of Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 (Count Three); falsified books and records and circumvented internal controls in violation of Exchange Act Section 13(b)(5), 15 U.S.C. § 78m(b)(5), and Rule 13b2-1 (Count Four); misled an accountant or auditor in violation of Exchange Act Rule 13b2-2 (Count Six); and aided and abetted PurchasePro's falsification of books and records and circumvention of its system of internal controls in violation of Exchange Act Sections 13(b)(2)(A) and (B), 15 U.S.C. § 78m(b)(2)(A) and (B) (Count Nine).
The SEC alleged in particular that Benyo helped orchestrate the creation of the fraudulent Statement of Work ("SOW").*fn3 The Statement of Work was executed after the close of the First Quarter of 2001, but was back-dated in an effort to lead auditors and investors into believing that the revenue referenced therein was recognized in the First Quarter. The SEC presented evidence at trial that PurchasePro never completed the project documented in the Statement of Work, and that Benyo was involved in concealing that fact. Among other evidence presented, Matthew Sorensen, a PurchasePro employee, testified that Benyo proposed the creation of an Internet hyperlink designed to generate the false appearance, for the benefit of PurchasePro's auditors, that the services described in the Statement of Work had actually been performed.
Prior to PurchasePro's announcement of its First Quarter earnings in an April 26, 2001 analyst call, PurchasePro executives held a number of meetings to discuss what revenue could be recognized in the First Quarter. According to Dale Boeth, PurchasePro's Senior Vice President for Strategic Development, when the revenue associated with AuctioNet and the SOW were discussed, Benyo voiced no opposition to including this revenue in PurchasePro's quarterly earning announcement. Benyo was an active participant on the April 26, 2001 analyst conference call. He made a number of references to revenue related to PurchasePro's relationship with AOL. The SEC presented evidence at trial that Benyo failed to disclose any facts relating to the fraudulent nature of the SOW during the call.
The SEC also presented evidence at trial that Benyo stood to personally gain from PurchasePro's performance. Benyo held options to purchase company stock and received an additional grant of options on April 10, 2001. Like other PurchasePro executives, he also received $100,000 as a retention bonus during the First Quarter.
PurchasePro included $3.65 million in revenue from this contract in its April 26, 2001 earnings announcement. PurchasPro did not include it in the revenue figure reported in the Form 10-Q filed with the SEC on May 29, 2001, because the auditors subsequently became aware of information raising concerns about the authenticity of the contract.
Defendant Benyo's trial before this Court began on March 6, 2008, and lasted nearly seven weeks. An eleven-member jury began its deliberations on April 22, 2008, and returned a verdict on April 24, 2008. The jury found Defendants Wakeford and Kennedy not liable on all counts against them. Defendant Benyo, too, was found not liable as to Count Four (falsifying books and records and circumventing internal controls), Six (misleading an accountant or auditor), and Nine (aiding and abetting the falsification of records and circumvention of internal controls). As to Count Three, however, the jury found Defendant Benyo liable for aiding and abetting PurchasePro's violations of Exchange Act Section 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5.*fn4
District courts may grant judgment as a matter of law only if "there is no legally sufficient evidentiary basis for a reasonable jury to find for" the nonmoving party. Holbrook v. Reno, 196 F.3d 255, 259 (D.C. Cir. 1999)(quoting Fed. R. Civ. P. 50(a)(1)). In making this determination, all evidence is viewed in the light most favorable to the nonmoving party, and all conflicts are resolved in that party's favor. Id. at 259-60. A district court has a duty to "draw all reasonable inferences in the nonmoving party's favor without making credibility determinations or weighing the evidence." Gasser v. District of Columbia, 442 F.3d 758, 762 (D.C. Cir. 2006)(internal quotation marks omitted)(quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)).
Our Court of Appeals has stated that "the grant of judgment as a matter of law is rarely appropriate," Martin v. Howard Univ., 2008 WL 1885434, at *3 (D.C. Cir. May 20, 2008), and that "[i]ntrusion upon the rightful province of the jury is highly disfavored." The Court of Appeals has also "repeatedly emphasized that the jury's verdict must stand unless the evidence, together with all inferences that can reasonably be drawn therefrom is so one-sided that reasonable people could not disagree on the verdict." Smith v. District of Columbia, 413 F.3d 86, 97 (D.C. Cir. 2005) (alterations and quotation marks omitted).
A slightly lower, but still onerous, standard applies to a motion requesting that a jury verdict be overturned in favor of a new trial. Lewis v. Elliott, 628 F. Supp. 512, 515-16 (D.D.C. 1986) (citations omitted). Generally, "a new trial may only be granted when a manifest error of law or fact is presented." Long v. Howard Univ., 512 F. Supp. 2d 1, 6 (D.D.C. 2007)(quotation marks and citation omitted). As with granting judgment as a matter of law, district courts "should be mindful of the jury's special function in our legal system and hesitate to disturb its finding." Id. As this Court has long-recognized, a trial court is not supposed to supplant the jury's view with that of its own and order a new trial simply because the court would have weighed the evidence differently from the jury. Rather the court's discretion to order a new trial is limited to those situations where the verdict represents a miscarriage of justice.
Martinez v. District of Columbia, 503 F. Supp. 2d 353, 355 (D.D.C. 2007)(citations omitted). Indeed, a court should only grant a motion for new trial "where the court is convinced that the jury verdict was a seriously erroneous result and where denial of the motion will result in a clear miscarriage of justice." Bowie v. ...