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Securities and Exchange Commission v. Queri

January 26, 2009

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF(S),
v.
JOSEPH J. QUERI, JR., JAMES L. JEROME, BRANDT A. ENGLAND, KYLE D. KACZOWSKI, FRANKO J. MARRETTI, DEFENDANT(S).



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

ELECTRONICALLY FILED

MEMORANDUM AND ORDER DENYING MOTION TO DISMISS

The plaintiff in this case, the Securities and Exchange Commission ("SEC"), brought this action against a number of defendants alleging insider trading and seeking injunctive relief, disgorgement of profits obtained as result of the alleged insider trading, civil penalties, and other relief. The SEC's complaint sets out the following summary:

1. This is an insider trading case. Defendant Joseph J. Queri, Jr., the Senior Vice President of Real Estate at Dick's Sporting Goods, Inc., misappropriated material, nonpublic information from his company about its plans to acquire Galyan's Trading Company, Inc. On or about June 10, 2004, Queri Jr. tipped defendant Joseph J. Queri, Sr. about the acquisition. Queri Sr. then tipped his friends, defendants James L. Jerome, Kyle D. Kaczowski, Gino Ferraro, Felix Crisafulli and Thomas Heller, who all bought shares of Galyan's stock. Jerome, in turn, tipped defendant Brandt A. England, who also traded. Kaczowski tipped two friends, who traded. Ferraro tipped his son-in-law, defendant Franko J. Marretti, who traded and tipped a business colleague.

2. About one week later, on June 21, 2004, Dick's publicly announced its intention to acquire Galyan's for $16.75 per share in cash via a tender offer. The day after the announcement, Galyan's stock closed at $16.68, a 50% increase from the previous day's closing price of $11.10. Defendant Queri Sr.'s friends and their colleagues sold their shares of Galyan's stock after the public announcement, collectively profiting in the amount of $161,208.22. Defendant Ferraro then wrote a check to Queri Sr. for $2,600.

3. Defendants Queri Jr., Queri Sr., Jerome, England, Kaczowski, Ferraro, Marretti, Crisafulli and Heller, directly and indirectly, engaged in and, unless enjoined, will continue to engage in transactions, acts, practices, and courses of business which violate Sections 10(b) and 14(e) of the Securities and Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b) and 78n(e)] and Rules 10b-5 and 14e-3 thereunder [17 C.F.R. §§ 240.10b-5 and 240.14e-3].

4. The Commission brings this action pursuant to Sections 21(d), 21(e) and 21A of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and 78u-1] seeking a permanent injunction, disgorgement of trading profits, plus prejudgment interest, and civil penalties.

Complaint (doc. no. 1), ¶¶ 1-4.

Before the Court is defendant Brandt A. England's "Special Appearance of Defendant England and Motion to Dismiss Pursuant to Rule 12(b)(6), and for Lack of Personal Jurisdiction."*fn1 Although defendant England does not specify the rule of procedure he invokes in challenging personal jurisdiction, this aspect of his motion is construed as having been made pursuant to Fed.R.Civ.P. 12(b)(2). Defendant James Jerome has joined England's motion to dismiss for want of personal jurisdiction but not the Rule 12(b)(6) motion. See Order of January 22, 2009 (doc. no. 46) granting joinder.

All defendants, including Jerome and England, are alleged to be residents of Nevada, except for Joseph Queri, Jr. a resident of Pittsburgh, Pennsylvania, and Thomas Heller, a resident of California. As to England, the Complaint alleges that defendant Queri, Sr. tipped Jerome, who in turn tipped his friend, England. Specifically, the Complaint alleges:

42. As set forth more fully below, defendant Jerome also tipped his friend, defendant England. Jerome knew or should have known that he was passing on information that had been obtained in breach of a fiduciary duty.

2. Brandt England

43. England and Jerome are friends or business colleagues, who spoke to each other regularly by telephone during June 2004.

44. On Friday, June 11, 2004, after Jerome spoke to Queri Sr., Jerome spoke to England on the telephone three times. During those conversations or others, Jerome disclosed material, nonpublic information about the acquisition to England. England knew or should have known ...


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