Unpublished Disposition, 841 F.2d 1129 (9th Cir. 1988)

MEMORANDUM^* 

INTRODUCTION

Michael Gusick appeals from a default judgment entered against him after he failed to comply with discovery orders and neglected to pay a sanction. Gusick challenges personal jurisdiction and venue. He also argues that fraud was not pleaded with particularity and that, therefore, plaintiff's RICO and fraud claims should have been dismissed. Finally, he contends that the district court abused its discretion when it entered a default judgment against him without making a finding that his behavior involved willfulness, bad faith or fault. We affirm the judgment of the district court.

DISCUSSION

Gusick first argues that the court lacked jurisdiction over him, and that the allegations of the complaint never properly showed venue in Oregon. Gusick's arguments thoroughly confuse the concepts of jurisdiction and venue.

Venue under Sec. 27 of the Securities Exchange Act of 1934 is proper in a district where "any act or transaction constituting the violation occurred." 15 U.S.C. § 78aa. The complaint alleged that the securities sales in issue took place in Oregon. Venue in Oregon was accordingly proper.

Gusick concedes that venue for some case was proper in Oregon, but not venue for a case against him. As the district court pointed out, however, the complaint alleged that Gusick made material misrepresentations to plaintiff in Oregon. It also set forth Gusick's role as president and sole shareholder of corporations involved in the securities program. A conspiracy between Gusick and those selling the securities was alleged. Gusick's attack on venue is spurious.

Much of Gusick's argument purports to be jurisdictional. He asserts that he has had insufficient contacts with Oregon to support the district court's jurisdiction over him. What Gusick overlooks, and the district court did not, is that the Securities Exchange Act authorizes nationwide service of process. 15 U.S.C. § 78aa. Gusick's arguments over personal jurisdiction are therefore misguided. To some degree, they are merely a recharacterization of his venue argument, which fails for reasons already stated. In another respect, they are simply contentions that Gusick was not part of the conspiracy to sell securities to plaintiff in Oregon. That argument goes to the merits, not to jurisdiction. The district court did not err in entertaining this action against Gusick.

Gusick argues that the particularity requirement of Fed. R. Civ. P. 9(b) was not satisfied by plaintiff's pleading and that the RICO and fraud claims accordingly should have been dismissed. Plaintiff's amended complaint contains the following allegations against Gusick:

Michael S. Gusick ... at all times material hereto, was president of Accord Record Corporation. He was also the sole shareholder. He signed the distribution agreement on behalf of defendant Accord, and thereby sold, participated in, and materially aided and abetted the sale of the leasing program to plaintiff. He is a controlling person of Accord. After defendant Accord was sold to Indigo, he was retained by Indigo as a consultant. Defendant Gusick was also, at times material to this complaint, president, sole shareholder and controlling person of defendant Edan. Defendant Gusick misrepresented to plaintiff, in Oregon, by mail and telephone, the status of the distribution agreements, the services being performed or to be performed by Accord, the underlying transactions whereby Edan acquired the masters and sold them to Audio Leasing. Gusick failed to tell plaintiff that the masters were valueless, that no products were to be produced by Accord from the masters, and that the master purchase documents were shams. These misstatements and omissions were made to plaintiff with full knowledge of the true facts, with full knowledge that plaintiff was unaware of the true facts, and with the intent to deceive plaintiff.

We have no difficulty in concluding that these allegations of fraud are sufficient. The particularity requirement of Rule 9(b) is satisfied because the pleading "identifies 'the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations.' " Deutsch v. Flannery, 823 F.2d 1361, 1365 (9th Cir. 1987) (citations omitted). The allegations informed Gusick "of particular misconduct which is alleged to constitute the fraud charged." Id. In this securities fraud case, the plaintiff is not required to "set forth such facts which, because no discovery has yet occurred, are in the exclusive possession of the defendants." Id. at 1366 (citations omitted). The amended complaint clearly enabled Gusick to know what fraudulent acts were claimed, and to draw his answer. Rule 9(b) was satisfied.

Rule 37 sanctions are reviewed for an abuse of discretion. United States v. National Medical Enterprises, Inc., 792 F.2d 906, 912 (9th Cir. 1986).

The history of this case reveals that Gusick's behavior has indeed been, as the district court noted, contumacious. Plaintiff filed his action in November of 1983 and by late 1985 the court was still trying to induce Mr. Gusick to comply with court-ordered discovery. Three separate motions to compel discovery were filed. The court initially sanctioned Gusick the modest sum of $250. Gusick nevertheless willfully disregarded each order.

Finally, in July of 1985, after Gusick had frustrated discovery for well over two years, the court had plaintiff send Gusick copies of the earlier orders and a letter informing him that he had 20 days to comply with the discovery request. Gusick was also made aware that plaintiff's motion for default had been taken under advisement. Gusick still did not comply with the discovery order or appear to contest the default motion. Only then did the court resort to the entry of a default judgment. Gusick, in other words, was given one last clear chance to mend his ways, and failed to do so.

Gusick moved for relief under Fed. R. Civ. P. 60(b) (1). He still did not comply fully with the discovery order and still failed to pay the modest $250 sanction. In denying Gusick's motion for relief, the court noted that he had failed to "provide any excuse for his misconduct or any reason justifying relief."

Gusick now contends that the court failed to make a finding of willfulness, fault or bad faith and that this failure alone constitutes an abuse of discretion. Sigliano v. Mendoza, 642 F.2d 309, 310 (9th Cir. 1981) (the range of discretion is narrowed for default, and non-compliance must be due to willfulness, fault or bad faith). The state of this record, however, precludes any suggestion that Gusick acted without fault or willfulness. Sigliano, 642 F.2d at 310 (repeated failure to comply with discovery requests and court orders manifests requisite intent). The district court's actions make clear that it so concluded. No formal finding was needed. See Rainbow Pioneer v. Hawaii-Nevada Investment Corp., 711 F.2d 902, 906 (9th Cir. 1983) (suggesting that such findings are not required). We conclude that the record amply supports the district court's use of Rule 37 sanctions.

Lesser sanctions than default were tried and failed. Gusick's partial but inadequate response, once judgment was entered, did not require the Rule 37 sanction to be withdrawn. See United States v. Sumitomo Marine & Fire Ins. Co., 617 F.2d 1365, 1370 (9th Cir. 1980). We conclude that the district court did not abuse its discretion. The judgment is AFFIRMED.