                                                       [DO NOT PUBLISH]


           IN THE UNITED STATES COURT OF APPEALS

                  FOR THE ELEVENTH CIRCUIT            FILED
                    ________________________ U.S. COURT OF APPEALS
                                                       ELEVENTH CIRCUIT
                           No. 08-14551                 FEBRUARY 9, 2009
                     ________________________           THOMAS K. KAHN
                                                            CLERK
                D.C. Docket No. 02-02984-CV-MHS-1

SECURITIES AND EXCHANGE COMMISSION,


                                                         Plaintiff-Appellant,

                                versus

MERCHANT CAPITAL, LLC,
STEVEN C. WYER,
KURT V. BEASLEY,


                                                      Defendants-Appellees,

NEW VISION FINANCIAL, LLC,

                                                                 Defendant.


                     ________________________

              Appeal from the United States District Court
                 for the Northern District of Georgia
                   _________________________

                          (February 9, 2009)
Before BARKETT, PRYOR, and FARRIS,* Circuit Judges.

PER CURIAM:

       The Securities and Exchange Commission (“SEC”) appeals from the final

judgment dismissing its civil law enforcement action which alleged that Steven C.

Wyer and Kurt V. Beasley and their company, Merchant Capital, LLC

(“Merchant”), violated registration and anti-fraud provisions of federal securities

laws by selling, to members of the general public, investment contracts in a debt-

collection enterprise organized as twenty-eight individual registered limited

liability partnerships (“RLLP”).1

       This is the SEC’s second appeal in this case. In the prior appeal, we

determined that the RLLP interests were investment contracts subject to federal

securities laws which the defendants violated by selling such interests without

filing a registration statement. SEC v. Merchant Capital, LLC, 483 F.3d 747, 766

(11th Cir. 2007) (hereinafter “Merchant Capital I”). We also held that the

defendants made material omissions in marketing the RLLP interests by failing to



       *
         Honorable Jerome Farris, United States Circuit Judge for the Ninth Circuit, sitting by
designation.
       1
        The specific provisions of federal securities law that the SEC alleges the defendants
have violated are Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (“Securities Act”),
15 U.S.C. §§ 77e(a), 77e(c) and 77q(a); Section 10(b) of the Securities Exchange Act of 1934
(“Exchange Act”), 15 U.S.C. § 78j(b); and Rule 10b-5 promulgated thereunder, 17 C.F.R. §
240.10b-5; and Section 15(a) of the Exchange Act, 15 U.S.C. § 78o(a).

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disclose (1) the poor performance of the existing RLLPs after June 2002; (2)

defendant Wyer’s personal bankruptcy in connection with a prior business venture;

and (3) a cease and desist order that prohibited Merchant from selling identical

unregistered securities in California. Id. at 772.

      Because we reversed the district court’s finding that defendants had not

made any misrepresentations or omissions of material fact with regard to the sale

of the RLLP interests, we remanded the case for an assessment of whether the

defendants had acted with scienter or acted only negligently, and what remedies, if

any, were warranted. Id. We instructed the district court to consider several

matters in making its determinations, including:

      the nature of defendants’ omissions and misrepresentations; whether
      the defendants had any business reason, apart from evading the
      securities laws, for adopting a business form that divided investors
      into twenty-eight separate partnerships, when they admitted intending
      to pool the money all along; whether the defendants had a reason to
      employ the sham balloting procedure, apart from evading the
      securities laws; whether the advice of counsel they received was based
      on a full and complete disclosure of the nature of the RLLP interests;
      whether the promoters had an incentive to prolong the business past
      the point of viability in order to continue collecting fees; and whether
      that incentive helped explain why they failed to disclose known
      performance information for interests sold between June and
      November 2002, as well as why they failed to disclose the cease and
      desist order and the prior bankruptcy.

Id. (footnote omitted).

      Upon remand, the district court considered the same record before us in the

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prior appeal. Based on that record, the district court simply found that there was

no scienter because, in its view, the omissions were made in good faith. Based on

the record before us, it is clear that the omissions found by this court were

committed either with the requisite scienter or negligently. Given that the

existence of scienter or negligence is a question of fact that is within the province

of the district court in the first instance, we find it necessary to remand this case

again for a resolution of these questions. Given our prior opinion in this case, the

district court is not at liberty to find that the omissions were made neither with

scienter nor negligently.

      Additionally, the district court must order the appropriate remedies in light

of its determination of whether the defendants acted with scienter or only

negligently as the availability of remedies differs with reference to each culpable

mental state. The district court is instructed to order the appropriate disgorgement

and appropriate civil penalties for violations of the anti-fraud statutes.

      Although based on the record before us, we would be inclined to order the

district court to issue a permanent injunction, we find that the issuance of an

injunction involves questions of fact of whether scienter or negligence was

involved as well as the other factors mandated by this circuit in SEC v. Carriba

Air, Inc., 681 F.2d 1318, 1322 (11th Cir. 1982), and SEC v. Calvo, 378 F.3d 1211,



                                            4
1216 (11th Cir. 2004). The district court is directed to assess these questions of

fact and determine whether the SEC is entitled to the issuance of a permanent

injunction.

       The district court also is directed to enter a judgment for the SEC on the

defendants’ violation of the registration requirements of §§ 5(a) and (c) of the

Securities Act and § 15(a) of the Securities Exchange Act. Because these

violations are strict-liability violations, the district court is instructed to order

appropriate disgorgement and appropriate civil penalties.

REVERSED AND REMANDED WITH INSTRUCTIONS.




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