Securities And Exchange Commission v. Wu et al, No. 4:2011cv04988 - Document 129 (N.D. Cal. 2016)

Court Description: ORDER GRANTING 113 MOTION for Terminating Sanctions Against Defendant Thomas S. Wu filed by Plaintiff Securities And Exchange Commission; Setting Case Management Conference; and Ordering Parties to File Joint Case Management Statement. Case Management Statement due by 9/30/2016. Further Case Management Conference set for 10/7/2016 11:00 AM in Courtroom 5, 2nd Floor, Oakland. Signed by Judge Jeffrey S. White on September 16, 2016. (jswlc1, COURT STAFF) (Filed on 9/16/2016)
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Securities And Exchange Commission v. Wu et al Doc. 129 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 SECURITIES AND EXCHANGE COMMISSION, Plaintiff, 8 9 v. 10 THOMAS S. WU, United States District Court Northern District of California 11 Defendant. ORDER GRANTING MOTION FOR TERMINATING SANCTIONS; SETTING CASE MANAGEMENT CONFERENCE; AND ORDERING PARTIES TO FILE JOINT CASE MANAGEMENT STATEMENT Re: Dkt. No. 113 12 13 Case No. 11-cv-04988-JSW Now before the Court is the motion of Plaintiff Securities and Exchange Commission 14 (“SEC”) for terminating sanctions against Defendant Thomas S. Wu. The Court has carefully 15 considered the parties’ papers, relevant legal authority, and the record in this case, and has had the 16 benefit of oral argument at the hearing on December 11, 2015. For the reasons that follow, the 17 Court hereby GRANTS the SEC’s motion for terminating sanctions. BACKGROUND 18 19 In October 2011, the SEC filed a Complaint against Defendant Thomas S. Wu and three 20 other former executives of United Commercial Bank, alleging that Defendants engaged in a 21 scheme to understate the bank’s loan losses in its 2008 year-end financial statements. (Compl., 22 Dkt. No. 1 ¶ 1.) Final judgment has since been entered as to Wu’s three co-defendants. (Dkt. 23 Nos. 21, 56, 89.) 24 Wu answered the Complaint on December 13, 2011, asserting his rights under the Fifth 25 Amendment and declining to respond to the factual allegations in the Complaint on that ground 26 and others. (Dkt. No. 18.) On June 18, 2015, the parties submitted a joint discovery letter brief, 27 setting forth a dispute over a notice of deposition issued to Wu. (Dkt. No. 83.) The SEC noticed 28 the deposition of Wu for July 20, 2015 in San Francisco, California. (Id.) Wu objected to the 1 timing and the location of the deposition. (Id.) With regard to location, Wu was alleged to be a 2 resident of Hillsborough, California at the time of the underlying events alleged in the Complaint. 3 (Compl., Dkt. No. 1 ¶ 12.) A substantial part of the events giving rise to this action allegedly took 4 place in San Francisco, California. (Id. ¶ 11.) Wu, however, now resides in Hong Kong, and 5 contends that his deposition should be taken there. (Dkt. No. 83 at 4; see also Dkt. No. 112 at 9 6 (suggesting that Wu may have moved to Hong Kong between the time his investigative testimony 7 was taken in April 2011 and the filing of this action in October 2011).) 8 This Court referred the case to a randomly-assigned magistrate judge for discovery 9 purposes. (Dkt. No. 84.) Magistrate Judge Elizabeth D. Laporte subsequently ordered the deposition of Wu to proceed as noticed on July 20, 2015 in San Francisco, California. (Dkt. Nos. 11 United States District Court Northern District of California 10 86, 87.) Wu sought leave to file a motion for reconsideration under Civil Local Rule 7-9(b)(1), 12 contending that new factual information had emerged regarding the risk that, upon entering the 13 United States to participate in a deposition, Wu could be arrested and face criminal charges. (Dkt. 14 No. 90; see also Dkt. No. 95 ¶¶ 3, 6-8.) Magistrate Judge Laporte granted leave for Wu to file a 15 motion for reconsideration, but subsequently denied the motion for reconsideration. (Dkt. Nos. 16 92, 105.) Wu did not file a motion to this Court for relief from Magistrate Judge Laporte’s orders. 17 See N.D. Cal. Civil L. R. 72-2. However, he declined to appear for his noticed deposition. 18 (Habermeyer Decl. ¶¶ 5-7, Dkt. No. 114 (declaration re deposition notices); Sims Decl. Exh. K, 19 Dkt. No. 117-11 (letter declining to return to California for deposition).) 20 This motion followed. The SEC seeks case-terminating sanctions against Wu on the 21 ground that he failed to appear for his deposition as ordered by Magistrate Judge Laporte. 22 Defendant opposes the motion. The Court heard oral argument on the motion on December 11, 23 2015, at which the parties addressed questions that the Court had propounded in writing before the 24 hearing. (Dkt. Nos. 121, 125, 127.) The Court explicitly warned Wu of the possibility of 25 terminating sanctions if he failed to comply with the order to appear for his deposition in the 26 Northern District of California. (Dkt. Nos. 121, 127 at 26, 31.) The Court further provided Wu 27 with one final opportunity to comply with the Court’s order, requiring Wu to file a written notice 28 by December 28, 2015, to inform the Court whether Wu would comply with the order to appear 2 1 for his deposition in the United States. (Dkt. Nos. 125, 127 at 31-32.) On December 28, 2015, 2 Wu filed a notice confirming that he would not comply with the Court’s order because he “cannot 3 travel to the United States at this time.” (Dkt. No. 128.) The Court shall address additional facts as necessary in its analysis. 4 ANALYSIS 5 The Ninth Circuit has fashioned a set of five factors for district courts to apply in 6 7 considering whether the entry of a default judgment is appropriate as a sanction under Federal 8 Rule of Civil Procedure 37. This Court therefore considers: (1) the public’s interest in 9 expeditious resolution of litigation; (2) the Court’s need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their 11 United States District Court Northern District of California 10 merits; and (5) the availability of less drastic sanctions. Wanderer v. Johnston, 910 F.2d 652, 956 12 (9th Cir. 1990) (quoting Malone v. United States Postal Service, 833 F.2d 128, 130 (9th Cir. 13 1987). Moreover, in order to warrant imposition of terminating sanctions, the Court must find that 14 the failure to comply was “due to willfulness, bad faith, or fault of the party.” Wyle v. R.J. 15 Reynolds Indus., 709 F.2d 585, 589 (9th Cir. 1983). 16 A. 17 The Public’s Interest in Expeditious Resolution of Litigation. The first factor is the public’s interest in expeditious resolution of litigation. This factor 18 weighs heavily in favor of the SEC. The public’s interest in prompt resolution of litigation 19 “always favors dismissal.” Pagtalunan v. Galaza, 291 F.3d 639, (9th Cir. 2002) (quoting Yourish 20 v. California Amplifier, 191 F.3d 983, 990 (9th Cir.1999)); see also Fed. R. Civ. P. 1 (Federal 21 Rules of Civil Procedure “should be construed, administered, and employed by the court and the 22 parties to secure the just, speedy, and inexpensive determination of every action and proceeding”). 23 This case was filed on October 11, 2011, almost five years ago. Much of the delay, 24 however, was not caused solely by Wu, but by the parties’ stipulated decision to postpone 25 discovery while criminal proceedings were pending against Wu’s co-defendants. (Dkt. Nos. 31, 26 37, 39, 41, 44, 50, 62, 65, 66, 70.) Now, however, Wu is the last remaining defendant in this case. 27 (Dkt. Nos. 21, 56, 89.) The SEC contacted Wu’s counsel regarding the scheduling of Wu’s 28 deposition more than a year ago, on or about April 2, 2015. (Habermeyer Decl. ¶ 5, Dkt. No. 3 1 114.) On September 14, 2015, Magistrate Judge Laporte denied reconsideration of her order for 2 Wu to appear in the Northern District of California for his deposition. (Dkt. No. 105.) In the 3 Court’s written Notice of Questions for Hearing on November 24, 2015, and orally at the hearing 4 on December 11, 2015, the Court explicitly warned Wu of the possibility of terminating sanctions 5 if he failed to comply with the order to appear for his deposition in the Northern District of 6 California. (Dkt. Nos. 121, 127 at 26, 31.) Yet Wu has refused to comply with the Court’s orders 7 and appear for his deposition. (E.g., Dkt. No. 128.) As the Court will discuss further below, 8 having considered the parties’ arguments, the Court finds that under the circumstances of this case, 9 more protracted proceedings will not promote the truth-finding process, and would only result in further delay. 11 United States District Court Northern District of California 10 B. The Court’s Need to Manage Its Dockets. 12 Where, as here, a court order is violated, the Court’s need to manage its docket favors 13 default. Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir. 1990) (“Where a court 14 order is violated, the first two factors support sanctions and the fourth factor cuts against a default. 15 Therefore, it is the third and fifth factors that are decisive.”). In addition, the Supreme Court has 16 recognized that dismissal “must be available to the district court in appropriate cases, not merely 17 to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who 18 might be tempted to such conduct in the absence of such a deterrent.” Nat’l Hockey League v. 19 Metro. Hockey Club, Inc., 427 U.S. 639, 643 (1976) (per curiam). Such a deterrent is appropriate 20 here, where Wu, despite multiple opportunities to comply and warnings of the possibility of 21 terminating sanctions, has knowingly violated the Court’s order to appear in this District for his 22 deposition. The Court finds that under the circumstances of this case, additional proceedings will 23 be “costly in money, memory, manageability, and confidence in the process” and that these costs 24 will not be outweighed by benefits in terms of this Court’s ability to resolve this case on its merits. 25 In re Phenylpropanolamine Prods. Liability Litig., 460 F.3d 1217, 1227 (9th Cir. 2006). 26 Accordingly, this factor also heavily favors terminating sanctions. 27 C. 28 The Risk of Prejudice to the Party Seeking Sanctions. The third Ninth Circuit factor is the risk of prejudice to the party seeking sanctions. This 4 factor is crucial; delay alone will not justify default. Wanderer, 910 F.2d at 656. The Court 2 examines whether Wu’s actions impaired the SEC’s ability to go to trial or threatened to interfere 3 with the rightful decision of the case. United States v. Kahaluu Construction Co., 857 F.2d 600, 4 604 (9th Cir. 1988) (citing Malone, 833 F.2d at 131). A party’s failure to appear for a deposition 5 may cause sufficient prejudice to warrant the sanction of dismissal. See The Stars’ Desert Inn 6 Hotel & Country Club, Inc,. v. Hwang, 105 F.3d 521, 525 (9th Cir. 1997) (“We also have no 7 difficulty concluding that Stars was prejudiced by Hwang’s reluctance to be deposed.”); Hyde & 8 Drath v. Baker, 24 F.3d 1162, 1167 (9th Cir. 1994) (finding prejudice where “this case is not 9 analogous to those cases involving delay but where depositions eventually occurred”); Adriana 10 Int’l Corp., 913 F.2d at 1412 (finding prejudice from failure to appear at scheduled depositions 11 United States District Court Northern District of California 1 combined with refusal to produce documents); Wanderer, 910 F.2d at 656 (same). 12 Wu contends that the SEC has not been prejudiced by Wu’s refusal to appear for his 13 deposition in the United States because it has other ways to develop the evidence that it needs to 14 go to trial, other than deposing him in this District. First, prior to filing the complaint in this 15 action, the SEC conducted an investigation, during which Wu appeared pursuant to a subpoena 16 and provided sworn investigative testimony, while represented by counsel. (Habermeyer Decl. ¶ 2 17 & Exh. A, Dkt. No. 114.) He provided answers to some questions, including a number of 18 background questions, but also invoked his Fifth Amendment privilege to refuse to answer 19 substantively other questions relevant to this litigation. (Id.) Wu appears to contend that the SEC 20 is not prejudiced because it may, at trial, use excerpts from this investigative testimony. But the 21 fact that the SEC interviewed Wu during its investigation does not mean that there is no prejudice 22 from Wu’s refusal to appear for his deposition. This Court finds that the “SEC’s motivation 23 during an early investigation, at which open-ended questions are typically asked without 24 expectation the witness will be needed at trial” is very different from “its motivation at an adverse 25 witness deposition, when battle lines have already been drawn and necessary witnesses identified.” 26 SEC v. Jasper, 678 F.3d 1116, 1128-29 (9th Cir. 2012); see also SEC v. Saul, 133 F.R.D. 115, 27 118-19 (N.D. Ill. 1990) (rejecting argument “that it is appropriate to limit the SEC’s right to take 28 discovery based upon the extent of its previous investigation into the facts underlying its case”). 5 1 Second, Wu contends that the SEC is not prejudiced, because it has other means of 2 discovery available to it besides a deposition in this District. He suggests: “(i) a written 3 confirmation by Mr. Wu that he will invoke his constitutional rights, (ii) the filing of a stipulation 4 to that effect, (iii) the submission of responses to written questions individually with his 5 invocations, (iv) conducting the deposition by videoconference, or (v) conducting the deposition at 6 the U.S. Consulate General in Hong Kong subject to stipulated jurisdiction.” (Opp. at 7-8, Dkt. 7 No. 116; see also Sims Decl. Exhs. F, K, Dkt. No. 117.) This is an attempt to re-argue the 8 question previously presented to Magistrate Judge Laporte regarding whether Wu should be 9 required to appear for a deposition in this District. Wu did not file a motion for relief from Magistrate Judge Laporte’s order pursuant to Civil Local Rule 72-2, and the time has passed to ask 11 United States District Court Northern District of California 10 this Court to reconsider that order. At oral argument on this motion, Wu conceded that 12 reconsideration of Magistrate Judge Laporte’s order is not warranted under this Circuit’s standard, 13 and he does not seek this Court’s review of her order under Civil Local Rule 72-2. Yet, his 14 argument on this factor now boils down to the contention that it would not have prejudiced the 15 SEC had Magistrate Judge Laporte ruled in his favor. This Court disagrees. None of Wu’s 16 proposed alternatives is a true substitute for the oral deposition of the most significant witness in 17 this case, the Defendant, to which the SEC is entitled, and which the Court ordered. 18 Third, Wu appears to contend that, because he would assert his Fifth Amendment privilege 19 if deposed, the SEC will not be prejudiced if unable to depose him, because Wu would not in any 20 event provide relevant information at his deposition. However, Wu’s Fifth Amendment 21 protections against self-incrimination in this civil case must be “invoked on a question-by- 22 question basis, and therefore the assertion of the privilege necessarily attaches only to the question 23 being asked and the information sought by that particular question.” Doe ex rel. Rudy-Glanzer v. 24 Glanzer, 232 F.3d 1258, 1265 (9th Cir. 2000) (citation omitted); SEC v. Colello, 139 F.3d 674, 25 677-78 (9th Cir. 1998). As during the investigative testimony, Wu may not invoke the privilege in 26 response to each and every question. Only after going through this question-by-question process 27 would the Commission be entitled to an adverse inference from Wu’s refusal to answer. Glanzer, 28 232 F.3d at 1265-66. The Court finds, therefore, that the SEC would be prejudiced by the denial 6 1 of a deposition by oral examination, to take place in this District. A written deposition is no 2 substitute for an oral deposition, and the complicated legal and diplomatic issues that would be 3 entailed in trying to arrange Wu’s deposition in Hong Kong demonstrate that this, too, is not a 4 viable alternative to avoid prejudice to the SEC. (Dkt. No. 127 at 37-41.) The Court finds that this third factor weighs in favor of terminating sanctions, although not 5 6 as heavily as in cases where the moving party has been denied all methods of discovery. 7 D. 8 9 The Public Policy Favoring Disposition of Cases on Their Merits. The fourth factor of the Ninth Circuit’s test for determining whether dismissal or default is appropriate under Rule 37 of the Federal Rules of Civil Procedure is the public policy favoring disposition of cases on their merits. As mentioned above, this factor usually weighs against 11 United States District Court Northern District of California 10 dismissal. However, this factor is given little weight where a fair trial appears impossible in any 12 event due to the non-moving party’s failure to cooperate. Hyde & Drath, 24 F.3d at 1167; see 13 also, e.g., Eruchalu v. U.S. Bank, Nat’l Ass’n, No. 1:12-cv-1264-RFB-VCF, 2015 WL 3966023, at 14 *4 (D. Nev. 2015) (balancing public policy factor against party who failed to comply with court 15 order to sit for deposition). 16 As a preliminary matter, the Court rejects Wu’s suggestion that imposing sanctions against 17 him violates public policy because the “DOJ and the SEC coordinated with each other during the 18 investigation of this matter and the SEC has sued Mr. Wu for alleged conduct that could form the 19 basis for criminal charges. . . .” (Opp. at 10; see also Hearing Tr., Dkt. No. 127 at 47-48.) The 20 SEC has represented to this Court that the SEC has “not coordinated about Mr. Wu’s deposition 21 with DOJ” and that the SEC has no more information about Wu’s “indictment or criminal status” 22 than does Wu himself. (CMC Tr., Dkt. 112 at 15-16.) Moreover, “[t]here is nothing improper 23 about the government undertaking simultaneous criminal and civil investigations” as long as it 24 does not act in bad faith. United States v. Stringer, 535 F.3d 929, 933, 936-37 (9th Cir. 2008) 25 (citing United States v. Kordel, 397 U.S. 1, 11 (1970)). Wu does not suggest that the SEC seeks 26 his deposition in this case solely for the purposes of a criminal prosecution. See id. at 937 (citing 27 SEC v. Dresser Indus., Inc., 628 F.2d 1368, 1376-77 (D.C. Cir. 1980) (en banc)). On the current 28 record, the Court finds that SEC seeks Wu’s deposition in good faith for appropriate use in this 7 1 civil action. 2 The Court asked the parties at oral argument whether there is any realistic possibility that 3 the Court will ever be able to dispose of this case on the merits. In other words, if the Court does 4 not order terminating sanctions at this time, will the Court be confronted with the same question at 5 the time of trial? (Dkt. Nos. 121, 127 at 3-10). The Court has considered the parties’ responses 6 and concludes that there is no realistic possibility in this case that the Court will be able to dispose 7 of the case on the merits, at least not without the significant prejudice to the SEC of denying it the 8 right to depose Wu and call him adversely at trial. There is every indication that Wu would refuse 9 to comply with a subpoena or order to appear at trial, just as he has refused to comply with the Court’s order to appear in this District for his deposition. As discussed above, requiring the SEC 11 United States District Court Northern District of California 10 to go to trial without having the opportunity to depose Wu is no solution to this problem. It is Wu, 12 not the SEC, who has failed to comply with the Court’s order, and requiring the SEC to go to trial 13 without a full opportunity to conduct discovery and present its case would not advance public 14 policy. For this reason, the Court finds that this factor does not weigh in favor of either party. 15 E. 16 The Availability of Less Drastic Sanctions. The fifth factor of the Ninth Circuit’s test is the availability of less drastic sanctions. The 17 Ninth Circuit has set forth the following questions for consideration with regard to this 18 determination: “(1) Did the court explicitly discuss the feasibility of less drastic sanctions and 19 explain why alternative sanctions would be inadequate? (2) Did the court implement alternative 20 methods of sanctioning or curing the malfeasance before ordering [terminating sanctions]? (3) Did 21 the court warn the [non-moving party] of the possibility of [terminating sanctions] before actually 22 ordering [such sanctions]?” Malone, 833 F.2d at 132. However, the Ninth Circuit has found it is 23 “not always necessary for the court to impose less serious sanctions first, or to give any explicit 24 warning.” Valley Eng’rs Inc. v. Elec. Eng’g Co., 158 F.3d 1051, 1057 (9th Cir. 1998) (citation 25 omitted). 26 Here, the Court has heard argument on the question of possible alternative sanctions and it 27 is plain that no alternative sanction exists that would induce Wu to comply with the Court’s order. 28 Moreover, no alternative sanction exists that would mitigate, much less cure, the prejudice to the 8 1 SEC. In the briefing on his motion, Wu proposes a single alternative: “an evidentiary sanction 2 whereby the SEC would be permitted to admit the sworn testimony that Mr. Wu provided during 3 the agency’s investigation.” (Opp. at 11.) This proposal, however, suffers from two crucial 4 defects. First, it would penalize the SEC by inappropriately limiting its use of Wu’s testimony at 5 trial to the questions asked during its investigation. See Jasper, 678 F.3d at 1128-29; Saul, 133 6 F.R.D. at 118-19. Second, this purported sanction may not prove to be a sanction at all. Although 7 the Court has not yet had occasion to rule on this issue, the SEC responds that it is already entitled 8 to use the investigative transcript as evidence in this case. (Repl. at 7-8, Dkt. No. 118.) At the hearing on this motion, Wu cited The Stars’ Desert Inn Hotel & Country Club, Inc,. 10 v. Hwang, 105 F.3d 521 (9th Cir. 1997). In that case, when the defendant refused to return from a 11 United States District Court Northern District of California 9 foreign country for his deposition, the Court first ordered him either to return to the United States 12 for his deposition or to prepay the moving party’s expenses to have his deposition taken in 13 Taiwan. Id. at 523. Only after the defendant refused to comply with either alternative did the 14 Court grant a default judgment against him. Id. at 523-25. The Ninth Circuit held that this was 15 not an abuse of discretion. Id. at 525. This Court asked the parties whether a similar procedure 16 could be feasible in this case. (Notice of Questions, Dkt. No. 121.) The Court concludes, 17 however, that the complicated legal and diplomatic issues that would be entailed in trying to 18 arrange Wu’s deposition in Hong Kong prevents this alternative from being viable in this case. 19 (See Hearing Tr., Dkt. No. 127 at 37-41.) Like the district court in The Stars’ Desert Inn, this 20 Court finds that because it is Wu who is defying the Court order to return to the United States for 21 his deposition, it is incumbent upon Wu to demonstrate that his proposed alternative sanction is 22 viable. 105 F.3d at 523. This he has not done. Even if the SEC bears the burden to show that no 23 possible alternative sanction exists, however, the SEC has met this burden, both in its briefing and 24 in the hearing on this motion. 25 Because the Court has concluded that no lesser or alternative sanction is reasonably 26 available in this case, the Court has not imposed such sanctions. The Ninth Circuit has explained, 27 however, that “the case law suggests that warning a plaintiff that failure to obey a court order will 28 result in dismissal can suffice to meet the ‘consideration of alternatives’ requirement.” Malone, 9 1 833 F.2d at 132. In addition to the notice that Wu has received from the SEC and from the text of 2 Federal Rule of Civil Procedure 37, the Court has twice explicitly warned Wu of the possibility of 3 terminating sanctions if he fails to comply with the order to appear for his deposition in the 4 Northern District of California. The Court included this warning in its November 24, 2015 notice 5 of questions for hearing. (Dkt. No. 121.) The Court also warned Wu, through his counsel, of this 6 possibility on the record at the December 11, 2015 hearing. (Dkt. No. 127 at 26, 31.) The Court 7 further provided Wu with one final opportunity to comply with the Court’s order. (Dkt. Nos. 125, 8 127 at 31-32.) However, on December 28, 2015, Wu confirmed that he would not travel to the 9 United States to attend a deposition in the Northern District of California. (Dkt. No. 128.) Significant time has elapsed since the hearing on this motion, and the Court has received no 11 United States District Court Northern District of California 10 indication from Wu that he has changed his mind and decided to come to this District for his 12 deposition. The Court therefore finds that this factor weighs heavily in favor of the imposition of 13 14 terminating sanctions. 15 F. 16 Willfulness, Bad Faith, or Fault. The five factors set forth by the Ninth Circuit balance in favor of an order granting the 17 SEC’s motion for terminating sanctions. However, the Court also expressly considers whether 18 Wu’s failure to comply with the Court’s order for him to appear for his deposition in the Northern 19 District of California was the result of willfulness, bad faith, or fault. See Wyle v. R.J. Reynolds 20 Indus., 709 F.2d 585, 589 (9th Cir. 1983). “Disobedient conduct not shown to be outside the 21 control of the litigant is sufficient to demonstrate willfulness, bad faith or fault warranting 22 default.” The Stars’ Desert Inn, 105 F.3d at 525. 23 Wu contends that his decision not to return to the United States for his deposition is not 24 due to willfulness, bad faith, or fault because he has no specific intention to disrupt discovery in 25 this litigation. Rather, he fears return to the United States because of the possibility that he will 26 face arrest and criminal indictment. (Opp. at 3, 11-12.) He “seeks to preserve his right to contest 27 any criminal charges brought against him in an extradition proceeding in Hong Kong.” (Opp. at iv 28 (Summary of Argument).) Magistrate Judge Laporte considered a closely related issue in her 10 1 2 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 order denying Wu’s motion for reconsideration, and held: The issue, then, is what relevance, if any, the risk of arrest upon entry has to the Court’s decision regarding the location of a deposition. The Court is persuaded by the reasoning in Mill-Run Tours, Inc. v. Khasshoggi, 124 F.R.D. 547 (S.D.NY 1989), that “[i]to would be inappropriate for this Court to act as a prosecutor and order [defendant] to be deposed here as a means of apprehending him,” and “[b]y the same token, it would be anomalous if the indictment were to give [defendant] an advantage in this civil litigation by being considered as a factor making it ‘inconvenient’ for him to appear here for deposition. Accordingly, [defendant]’s criminal difficulties have not been taken into account in connection with the instant motions.” Id. at 551 (citing Farquhar v. Shelden, 116 F.R.D. 70, 73 (E.D. Mich. 1987)). The court in S.E.C. v. Banc de Binary, 2014 W.L. 1030862 at *9 (D. Nevada 2014) also followed this approach. Accordingly, this Court has no basis to revisit its previous Order that Mr. Wu’s deposition take place in San Francisco. (Dkt. No. 105, at 5.) 12 This Court concurs with Magistrate Judge Laporte’s analysis of this question. 13 The Court is further persuaded by the reasoning of SEC v. Razmilovic, 738 F.3d 14, 25-27 14 (2d Cir. 2013), in which the Second Circuit concluded that terminating sanctions against the 15 defendant were not an abuse of discretion where the defendant failed to comply with an order to 16 appear for deposition in New York. In that case, the defendant, Tomo Razmilovic, had been 17 indicted for violations of the securities laws, but refused to return from Europe to face the charges 18 and was considered a fugitive by the United States Department of Justice. Id. at 20. The SEC 19 brought a civil enforcement action against Razmilovic, in which it noticed his deposition to be 20 taken in New York City, United States. Id. at 19-20. Razmilovic informed the SEC that he would 21 not come to the United States for his deposition, but proposed various alternatives such as, “for 22 example, that he instead be barred from disputing certain facts or asserting certain defenses, or be 23 required to appear for his deposition in Sweden and to pay for the expenses of the deposition.” Id. 24 at 20-21. Razmilovic also argued that imposing a default judgment “for the sole discovery 25 transgression of failing to attend an in-person deposition in the United States as ordered” would be 26 improper because it would be the same as automatic fugitive disentitlement, which the Supreme 27 Court rejected in civil cases in Degen v. United States, 517 U.S. 820 (1996). Razmilovic, 738 F.3d 28 at 21. The district court imposed a default judgment on Razmilovic, finding that his failure to 11 1 appear was “willful and intentional,” and noting that the default judgment was imposed “not 2 because Razmilovic was a fugitive from the criminal case but solely because he had willfully 3 violated the court’s October 2009 Order to appear for his deposition.” Id. The Second Circuit 4 affirmed, holding that the entry of a default judgment “because of Razmilovic’s refusal to comply 5 with the district court’s legitimate discovery order plainly did not run afoul of Degen.” Id. at 26. 6 The Second Circuit further held that Razmilovic’s refusal to comply with the discovery order 7 “made plain that his disobedience was willful and intentional” and that “[n]one of Razmilovic’s 8 proposed alternative sanctions was likely to lead to his compliance with the court’s order for his 9 deposition as noticed by the SEC or to provide the SEC with the discovery methods to which it 10 United States District Court Northern District of California 11 was entitled.” Id. Wu does not dispute that terminating sanctions in Razmilovic were not entered because 12 Razmilovic was a fugitive, but rather, because Razmilovic did not comply with the court’s order to 13 appear in the United States for his deposition. (Hearing Tr., Dkt. No. 127 at 32.) He contends, 14 however, that Razmilovic is distinguishable from this case because Razmilovic was a fugitive, and 15 because there is no indication in the Razmilovic decision that Razmilovic had expressed an 16 intention to assert his Fifth Amendment privilege. (Id. at 32-33.) The Court finds that these 17 distinctions are irrelevant to the question of whether Wu’s defiance of the order for his deposition 18 was willful. As the Supreme Court explained in Degen, a defendant’s absence from the forum, 19 while it does not expose him to fugitive disentitlement in a civil case, also “entitles him to no 20 advantage. If his unwillingness to appear in person results in non-compliance with a legitimate 21 order of the court respecting pleading, discovery, the presentation of evidence, or other matters, he 22 will be exposed to the same sanctions as any other uncooperative party. A federal court has at its 23 disposal an array of means to enforce its orders, including dismissal in an appropriate case.” 24 517 U.S. 820, 827 (1996). A defendant who is not a fugitive is not immunized from these same 25 means of enforcement of a court order. 26 This case is very different from Zhi Yang Zhou v. David, cited by Wu, in which the 27 plaintiff failed to appear at a deposition because she was temporarily in China caring for a sick 28 relative “at both the time of the order and the deposition.” No. 09-cv-06059-JSC, 2012 WL 12 1 1458180, *2 (N.D. Cal. Apr. 26, 2012). In that case, the plaintiff returned to the United States, 2 and the Court concluded that her conduct was not willful and that monetary sanctions would 3 suffice, and ordered her to appear for her deposition. The facts of this case are wholly different. 4 Defendant concedes that he is unaware of any case that holds that fear of indictment and 5 arrest constitutes good cause for failure to appear at a deposition. (Hearing Tr., Dkt. No. 127 at 6 27, 42.) Additionally, as discussed above, Defendant’s intention to assert his Fifth Amendment 7 privilege does not obviate the SEC’s right to depose him. Cf. Keating v. Office of Thrift 8 Supervision, 45 F.3d 322, 326 (9th Cir. 1995) (“defendant has no absolute right not to be forced to 9 choose between testifying in a civil matter and asserting his Fifth Amendment privilege.”). The Court concludes that Wu’s considered, express refusal to comply with the Court’s 10 United States District Court Northern District of California 11 order to appear at his noticed deposition in the Northern District of California is willful. CONCLUSION 12 For the foregoing reasons, the Court GRANTS the SEC’s motion for terminating sanctions 13 14 against Defendant Thomas S. Wu. The Court shall hold a case management conference in this case on Friday, October 7, 15 16 2016 at 11:00 a.m. in Courtroom 5, 2nd Floor, Federal Courthouse, 1301 Clay Street, Oakland, 17 California. The parties shall meet and confer and file a supplemental joint case management statement 18 19 no later than Friday, September 30, 2016. In addition to any other issues the parties may address 20 in the case management statement, the parties shall address: (1) the next procedural steps to be 21 taken in this case to determine damages and other relief and enter judgment; (2) what role, if any, 22 Defendant shall have in the remainder of this case; (3) a description of prospects for settlement, 23 ADR efforts to date, and a specific ADR plan for the case; and (4) a proposed schedule, which 24 /// 25 /// 26 /// 27 /// 28 /// 13 1 sha include pr all roposed dead dlines for th briefing of any dispute legal issu and a pro he f ed ues oposed date 2 for an evidentia hearing, if necessary r ary y. 3 IT IS SO ORDER S RED. 4 Da ated: Septem mber 16, 2016 6 5 __ ___________ __________ ____ JE EFFREY S. W WHITE Un nited States D District Judg ge 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 4