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U.S. SECURITIES AND EXCHANGE COMMISSION v. KIRCH

June 20, 2003

UNITED STATES SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF,
v.
TERRY L. KIRCH, DEFENDANT.



The opinion of the court was delivered by: Milton Shadur, United States District Senior Judge

MEMORANDUM OPINION AND ORDER

United States Securities and Exchange Commission ("SEC") hag sued Terry Kirch ("Kirch"), charging him with a violation of the "insider trading" prohibitions of the federal securities laws. As counsel for the litigants had told this Court they would do, they have filed cross-motions for summary judgment in compliance with Fed.R.Civ.P. ("Rule") 56 and this District Court's LR 56.1 implementing that Rule. Each side has not only submitted memoranda by which each has supported its or his own motion and has responded to the other party's cross-motion, but has also filed a reply relating to its or his own motion. Those memoranda, together with some other filings by the litigants, have brought the case into a posture ripe for judicial resolution.

When Kirch's counsel advised during the course of a January 14, 2003 status hearing that a cross-motion under Rule 56 was in the offing, this Court cautioned counsel for the parties that strict adherence to Rule 56 principles sometimes resulted in a court's perception that one or more potentially outcome-determinative facts was or were in dispute even though the litigants had not thought so, in which event both sides' hopes of a disposition short of trial would be defeated. In response to this Court's inquiry whether the parties would be amenable to this Court's resolution of any such factual issues if that were to develop, Kirch's counsel immediately responded in the affirmative, and SEC's counsel have since provided their consent to such treatment.

What follows then in the Facts section of this opinion and in the analysis that follows is in accordance with that joint agreement. For example, where there are some divergences between Kirch's characterizations of events and those of Jack Noonan ("Noonan") — another member of the Roundtable referred to in the Facts — this Court has credited Noonan's sworn version as that of an unbiased witness with no self-interest and with no reason to shape the facts to favor one side or the other.*fn1

Facts

Kirch is now a senior vice president of a publicly-traded company, Trizetto Group, Inc. ("Trizetto"). In the fall of 1999, when the operative events at issue in this litigation took place,*fn2 he was the President, owner and founder of a privately-held company, Resource Information Management Systems. At that time he and a handful of others (some ten or so in number) who were also key officers in companies engaged in the computer software business*fn3 were members of an unincorporated group calling itself the "CEO Roundtable" or "Software Executives Roundtable" ("Roundtable") that met twice a year for sessions lasting two, three or four days.

Although some part of those meeting days are spent in social or recreational activities, their fundamental purpose (and that of the Roundtable itself) is business-oriented: About six hours each day are spent in members-only meetings (to the exclusion of spouses, other family members and friends). Because the very nature of the meetings — to exchange information and ideas that are or could be of utility to the members in their respective businesses — is such as to call for imparting information of a sensitive and confidential nature, the Roundtable and its members had an express policy and understanding that such matters were indeed to be kept confidential. As Noonan Decl. ¶ 4 states:

It is a definite and fundamental understanding of the Software Executive Roundtable that matters of a confidential or sensitive nature are to be kept confidential. This has always been the definite and fundamental understanding of the Software Executive Roundtable.

To the identical effect, President-CEO of ShowCase Corporation ("ShowCase") Kenneth Holec ("Holec") states in Paragraph 3 of his February 21, 2001 sworn declaration, which this Court also credits:

It is a definite policy and fundamental understanding of the software roundtable that matters of a confidential or sensitive nature are to be kept confidential. When I make a presentation before the software roundtable that included confidential information, it is my practice to remind the group of the sensitive and confidential nature of the material I am about to present and the need to keep the information confidential.*fn4

As just indicated, Holec was another member of the Roundtable during 1999. Here is how he described his critical presentation at the October 1 Roundtable meeting (his Decl. ¶ 9), an account that this Court credits as accurate in all respects;

Indeed, Noonan's account of that presentation (Noonan Decl. ΒΆ 6) is entirely consistent with Holec's version, with the addition (also credited by this Court) that Kirch had himself taken part in the discussion of the business issue that was invited by Holec (and was the reason that Holec ...


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