Ramiro Giron et al., v. Hong Kong and Shanghai Bank Company et al

Filing 180

ORDER DENYING PLAINTIFFS MOTION TO CERTIFY CLASS 126 ; DENYING, AS MOOT, DEFENDANTS MOTION FOR SANCTIONS 135 ; GRANTING DEFENDANTS MOTION FOR SUMMARY JUDGMENT 137 ; AND DENYING, AS MOOT, PLAINTIFFS MOTION TO STRIKE AND EXCLUDE 142 by Judge Otis D. Wright, II (lc) Modified on 11/15/2017 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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RAMIRO GIRON, NICOLAS J.

Case No. 2:15-cv-08869-ODW(JC)

12 HERRERA, ORLANDO ANTONIO
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MENDEZ

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ORDER DENYING PLAINTIFFS’
MOTION TO CERTIFY CLASS
[126]; DENYING, AS MOOT,
DEFENDANT’S MOTION FOR
SANCTIONS [135]; GRANTING
DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT [137]; &
DENYING, AS MOOT,
PLAINTIFFS’ MOTION TO STRIKE
& EXCLUDE [142]

Plaintiffs,
v.

16 HONG KONG AND SHANGHAI BANK

COMPANY, LTD., a foreign company,
17 HSBC BANK USA, N.A., a national
banking association; and DOES 1-100,
18 inclusive
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Defendants.

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I.

INTRODUCTION

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Plaintiffs Ramiro Giron, Nicholas J. Herrera, and Orlando Antonio Mendez

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(“Plaintiffs”) allege that they wired money to the bank accounts of a Ponzi scheme

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they refer to as “WCM777.” WCM777 held accounts at Hong Kong and Shanghai

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Bank Company, Ltd. (“HSBC Hong Kong”). The Court previously dismissed HSBC

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Hong Kong from this action for lack of personal jurisdiction. (ECF No. 72.) The only

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remaining defendant is HSBC Bank USA, N.A. (“HSBC USA”).
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Plaintiffs seek to represent a putative class of individuals who “invested and lost

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money with any of the WCM777 entities by transferring or having their money

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transferred to one of the WCM777 accounts at HSBC Hong Kong.” (Third Amended

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Complaint (“TAC”) ¶ 80, ECF No. 54.) The named plaintiffs did not own an account

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with HSBC USA, and did not wire transfer any money through HSBC USA. Instead,

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they allege HSBC USA is liable because it wire transferred other people’s money to

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WCM777’s HSBC Hong Kong bank accounts. Plaintiffs argue that because HSBC

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USA provided a way for other victims to wire money to the fraudulent scheme, they

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aided and abetted WCM777’s fraudulent activities.

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Before the Court are four motions: Plaintiffs’ Motion to Certify Class (ECF No.

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126); Defendant’s Motion to Strike and Exclude Evidence in support of Plaintiffs’

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Motion to Certify Class (ECF No. 135); Defendant’s Motion for Summary Judgment

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(ECF No. 137); Plaintiffs’ Motion to Strike & Exclude Evidence in support of

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Defendant’s Motion for Summary Judgment.1 (ECF No. 147.) For the reasons set

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forth below, the Court DENIES Plaintiffs’ Motion to Certify Class (ECF No. 126),

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DENIES, AS MOOT, Plaintiffs’ and Defendant’s motions to exclude evidence (ECF

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Nos. 135, 147), and GRANTS Defendant’s Motion for Summary Judgment. (ECF

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No. 137.)
II.

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FACTUAL BACKGROUND

Plaintiffs Giron, Herrera, and Orlando Mendez2 wired money to the Hong Kong

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bank accounts of a Ponzi scheme they refer to as “WCM777.”

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Separate Statement of Uncontroverted Facts (“UF”) 1, ECF No. 137.) Plaintiffs claim

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that HSBC USA “served as the intermediary bank for numerous wire transfers from

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investor-victims of WCM777 to accounts at HSBC Hong Kong.” (UF 2.) Plaintiffs’

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theory of liability is that by wiring money that supported WCM777’s fraudulent

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operations to HSBC Hong Kong, HSBC USA aided and abetted WCM777 in

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(HSBC USA’s

On November 9, 2017, the Court held a hearing on all four motions. (ECF No. 174.)
Orlando Mendez’s father, Demetrio, is also discussed herein, so the Court refers to the Mendezes
by their first name for clarity.
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perpetuating its scheme, and should be held liable for Plaintiffs’ losses, even if they

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did not have any direct contact with HSBC USA. (UF 3; Opp’n 16–17 “Plaintiffs

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argue that the law allows for causation as to any victim who invested after [HSBC

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USA allegedly knew of the scheme], not just those whose money flowed through

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HSBC USA.”)
Plaintiffs do not hold accounts with HSBC USA, and none of them wired

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money through HSBC USA. (UF 64–67.)3

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A.

Procedural Background

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On January 11, 2016, Plaintiffs filed an Amended Class Action Complaint

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alleging five claims for relief against HSBC USA and HSBC Hong Kong, including:

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(1) aiding and abetting fraud; (2) aiding and abetting breach of fiduciary duty; (3)

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aiding and abetting an endless chain scheme; (4) violations of the Racketeer

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Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c); and (5)

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violations of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code

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§§ 17200, et seq. (Amended Complaint (“AC”) ¶¶ 88–129, ECF No. 15.) Plaintiffs

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subsequently filed additional amended complaints, and Defendants filed responsive

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pleadings challenging the sufficiency of Plaintiffs’ allegations. (ECF Nos. 25, 34.)

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On June 29, 2016, the Court granted HSBC USA’s Motion to Dismiss, with

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prejudice, as to Plaintiffs’ claims for aiding and abetting an endless chain scheme and

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RICO violations. (ECF No. 46.) The Court also dismissed Plaintiffs’ UCL claim with

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leave to amend, and held that Plaintiffs had sufficiently alleged claims for aiding and

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abetting fraud and breach of fiduciary duty. (Id.)

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Plaintiffs dispute these facts, but on the basis of inadmissible evidence and attorney argument. (See
HSBC USA’s Reply Separate Statement 66–73, ECF No. 158.) The Court addresses these
objections in Section II.D. In any event, each Plaintiff testifies in their respective declarations that
they wired money to WCM777’s account from their own bank accounts, not through HSBC USA.
(Decl. of Ramiro Giron (“Giron Decl.”) ¶ 5, ECF No. 143-29; Decl. of Nicolas Herrera (“Herrera
Decl.”) ¶¶ 2, 5, 7, ECF No. 143-30; Decl. of Orlando Mendez (“Orlando Decl.”) ¶ 2, ECF No. 14331.) The evidence Plaintiffs submit to oppose these facts does not create a genuine dispute whether
the named plaintiffs wired money through HSBC USA in light of their own declarations establishing
they wired their money through their own personal bank accounts.

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On July 28, 2016, Plaintiffs filed their Third Amended Complaint (“TAC”),

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which is the operative complaint. (ECF No. 54.) Plaintiffs moved for leave to file a

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fourth amended complaint on November 23, 2016. (ECF No. 82.) Plaintiffs did not

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seek to replace the class representatives at this time.4 (Id.) Instead, they sought to add

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a claim for violation of California Penal Code section 496, which they had “recently

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learned, allows any person who has been injured by a violation of section 496(a) to

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recover three times the amount of actual damages, costs of suit and attorney’s fees in a

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civil suit.” (Not. of Mot. 2, ECF No. 82.) The Court denied Plaintiffs’ request on

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January 31, 2017. (ECF No. 90.)

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On August 18, 2016, HSBC Hong Kong moved to dismiss Plaintiffs’ TAC for

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insufficient service of process, and lack of personal jurisdiction. (See generally ECF

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No. 34.) After the parties briefed the motion, the Court dismissed HSBC Hong Kong,

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and held that Plaintiffs had not established HSBC Hong Kong was subject to personal

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jurisdiction, and denied Plaintiffs leave to conduct jurisdictional discovery. (ECF No.

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72.) Accordingly, HSBC USA is the only defendant. (Id.)

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Plaintiffs’ only remaining claims against HSBC USA are: 1) aiding and abetting

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fraud (TAC ¶¶ 89–95); 2) aiding and abetting breach of fiduciary duty (Id. ¶¶ 96–105);

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and 3) violation of California Business & Professions Code § 17200 et seq. (Id.

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¶¶ 106–15.)

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B.

WCM777’s Ponzi Scheme & Plaintiffs’ Roles

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WCM777 represented itself as a highly profitable multi-level marketing

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platform based on “cloud” services. (Plaintiff’s Additional Material Facts “PAMF” 1,

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ECF No. 143-1.) WCM777 claimed that investors could earn exorbitant rates of

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return by referring new members, or by earning passive income based on the purchase

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This is relevant because, at the hearing on the Motion to Certify Class, Plaintiffs’ counsel
represented that one of the reasons they had not amended their complaint to include better suited
class representatives was because the Court had issued a scheduling order precluding amendment of
their complaint. However, even when they moved to amend the complaint in November 2016, they
did not seek to change the class representatives. (See ECF No. 82.)

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of “units.” (See UF 10.) Plaintiffs claim that WCM777 targeted individuals using

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“Christian imagery and high-tech buzzwords.” (Opp’n 2, ECF No. 143.) In March

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2014, the Securities Exchange Commission filed an action in federal court against

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WCM777 and related companies, which ultimately led to the downfall of the

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WCM777 Ponzi scheme. (See Plaintiffs’ Request for Judicial Notice (“PRJN”) ¶¶ 1–

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3, Exs. 1-3, ECF No. 143-3, 143-4, 143-5.)5

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While the three named Plaintiffs all came to invest in WCM777 in slightly

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different ways, there are a few important and undisputed facts that they all have in

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common:

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Ramiro Giron: After deciding to invest in WCM777, Giron “wired from [his]

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Bank of America account $8,000 to WCM777’s bank account held at HSBC Bank

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Hong Kong, account number 817677826838.”

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Decl.”) ¶ 5, ECF No. 143-29 (emphasis added).) Giron received a remittance transfer

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receipt that identified Bank of America, N.A. as the transferring institution, WCM777

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as the recipient, and HSBC Hong Kong as the recipient bank. (Id. Ex. A.) When

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Giron went to his bank to wire the money, his personal banker asked him “[i]f [he]

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was sure [he] wanted to send the money, because once the money was sent [Bank of

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America was] not responsible.” (UF 16.6) He wired the money despite his suspicions,

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and the banker’s warning, because he had been shown earnings related to a WCM777

(Decl. of Ramiro Giron (“Giron

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Plaintiffs request that the Court take judicial notice of pleadings in an action by the Securities
Exchange Commission against WCM777, and several other documents. HSBC USA objects to the
Court taking notice of these documents. (HSBC USA’s Mem. of Evid. Obj. in Resp. to Plaintiffs’
Statement of Genuine Issues in Opp’n to Mot. for Summary Judgment, ECF No. 156-1.) The Court
addresses these objections, to the extent relevant, in Section II.D.
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Plaintiffs claim to dispute this fact, and many others, by stating, “[i]t is disputed that Mr. Giron
risked money in an investment. One cannot invest in a Ponzi scheme.” See, e.g., Statement of
Genuine Issues in Opposition to Motion for Summary Judgment 8, ECF No. 143-1.) While this is
Plaintiffs’ argument, it does not create a triable issue of disputed fact, and, in any event, it is not
material. See British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978) (“[L]egal
memoranda and oral argument are not evidence, and they cannot by themselves create a factual
dispute sufficient to defeat a summary judgment motion where no dispute otherwise exists.”).

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investment by the individuals who introduced WCM777 to him weeks earlier in a bar.

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(See UF 4–10,7 17.)
Giron does not have an account with HSBC USA, and there are no records of

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him ever transferring any money to WCM777 from HSBC USA. (UF 64–66.)

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Nicolas Herrera: Herrera decided to invest $2,000 with WMC777, and “wire

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transferred the money through [his] account with Wells Fargo bank on or about

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November 12, 2013[,] to HSBC Hong Kong account 817697832838.” (Decl. of

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Nicolas Herrera (“Herrera Decl.”) ¶¶ 2, 5, 7, ECF No. 143-30 (emphasis added); UF

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55.) He also received a “Combined Disclosure for Outgoing Consumer International

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Wire Transfers” form that identified Wells Fargo as the transferring bank, Agape

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Technology Limited as the recipient,8 and HSBC Hong Kong as the beneficiary bank.

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(Herrera Decl. ¶ 7, Ex. A.) When wiring the money, Herrera’s banker asked him

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things like, “Where are you sending the money?” and “What is this? Do you know

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what it is?” (UF 56.)
Herrera admits to not having any contact with HSBC USA in the past ten years.

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(UF 62.)

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Orlando Antonio Mendez: Orlando invested $10,000 of his own money, and

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$30,000 of his father’s savings (collectively “Family Money”), in WCM777, after

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being convinced by his father, Demetrio Mendez, to invest.9

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Mendez (“Orlando Decl.”) ¶ 2, ECF No. 143-31.)

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[Orlando] to be a named Plaintiff in this matter because [he] spoke good English and

(Decl. of Orlando

Demetrio also “convinced

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Plaintiffs dispute these facts, but only to the extent that each fact “implies that Mr. Giron was not
presented the WCM777 sales pitch….” Whether Giron was presented the WCM777 sales pitch is
not material to the Court’s finding that Plaintiffs have not connected HSBC USA’s actions to the
harm they suffered. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (explaining that an
issue is “material” where the resolution of that issue might affect the outcome of the suit under the
governing law).
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Agape Technology Limited is a company name used by the WCM777 enterprise.
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The Court refers to the Mendezes by their first names for clarity. In Demetrio’s declaration, he
refers to his son as “Antonio Mendez.” (Demetrio Decl. ¶ 2, ECF No. 143-28.) The Court interprets
“Antonio Mendez” and “Orlando Antonio Mendez” as the same person.

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introduced [him] to his lawyer Julio J. Ramos.” (Id.) Orlando “wire transferred the

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[F]amily [M]oney through [his] account with Tri-counties bank on or about December

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11, 2013[,] to HSBC Hong Kong account 817677826838.” (Id. (emphasis added);

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UF 33.)

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transfer, and identified WCM777 as the beneficiary, and HSBC Hong Kong as the

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beneficiary bank. (Orlando Decl. ¶ 8, Ex. A.)

Orlando received an “Outgoing FED Message” that memorialized the

Orlando does not know what HSBC USA is, and has never communicated with

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anyone at HSBC USA. (Orlando Dep. 32:22-33:11, ECF No. 137-2.)

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C.

HSBC USA’s Alleged Role10

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In December 2012, HSBC USA entered into a deferred prosecution agreement

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with the United States relating to its money-laundering-prevention policies. (PAMF

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8.) As part of this agreement, HSBC USA implemented a computer system that

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monitors thousands of wire transfers a day for suspicious activity. (UF 68–69.)

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Plaintiffs contend that HSBC USA had actual knowledge of the fraudulent

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nature of WCM777’s business as a result of HSBC USA’s monitoring activities.

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(Opp’n 4–5.) In August 2013, HSBC USA identified a suspicious wire transfer of

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approximately $120,000 from New Better Life Foundation to WCM777’s account at

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HSBC Hong Kong. (UF 69.) The word “foundation” triggered the alert because it is

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often associated with money laundering activities. (UF 70.)

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As part of its investigation, HSBC USA researched both New Better Life

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Foundation and WCM777. (UF 71.) The investigators conducted internet research,

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and concluded that WCM777 had a “high risk nature.” (UF 74.) Plaintiffs point to

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internal documents that state that WCM777 “pretty much resembles that of your

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typical Ponzi scheme,” (Decl. of Paul Khareyn (“Khareyn Decl.”) ¶ 11, Ex. 3 (Bates

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The parties dispute some of the facts discussed in this section—mainly those facts regarding
HSBC USA’s actual knowledge of the fraud. However, because the Court finds summary judgment
is appropriate because Plaintiffs present no evidence of causation, these disputes are not material to
the Court’s ruling. Accordingly, the Court recites these facts to provide a fulsome discussion of the
parties’ arguments.

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Stamped HBUS000648–650), ECF No. 136-3) and that it “reasonably appeared that

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[WCM777 is] engaged in pyramid/Ponzi scheme as they offer no concrete underlying

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products/services while offering guaranteed ‘daily’ profit/returns by buying multi-

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level shares.” (Khareyn Decl. ¶ 11, Ex. 1 (Bates Stamped HBUS000615), ECF No.

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136-3.) As a result of this investigation, HSBC USA determined that it acted as an

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intermediary bank for wire transfers to WCM777’s HSBC Hong Kong account

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totaling approximately $15 million between October 2013 and January 2014. (PAMF

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13.) None of these transfers, however, relate to Plaintiffs. (UF 64–66.)

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During this same period, the California Department of Business Oversight (the

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“Department”) subpoenaed HSBC USA in relation to its independent investigation of

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WCM777. (ECF No. 145-5.) The subpoena requested “[a]ny and all bank records

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concerning WCM777 and World Capital Market Inc. bank accounts with [HSBC

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USA]….” (ECF No. 145-5 at 9.) HSBC USA responded that it did not have any

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responsive documents. (Letter from HSBC Corporations Counsel 11, ECF No. 145-

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5.) HSBC USA claims that because WCM777 did not have any bank accounts at

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HSBC USA, there were no such documents. (Reply 4, ECF No. 156; Annunziata

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Decl. ¶ 3, ECF No. 137-3.)

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HSBC USA ultimately determined that it should not continue to act as an

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intermediary for wire transfers to WCM777’s account at HSBC Hong Kong because it

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considered it too risky.

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knowledge of WCM777’s fraudulent scheme, however.

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D.

(UF 77.)

HSBC USA contends it did not have actual

Requests for Judicial Notice & Evidentiary Issues

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Both parties submitted voluminous objections to evidence submitted in support

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of, and in opposition to, the four motions at issue. The Court addresses the objections

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that are pertinent to its ruling below.

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1.

Plaintiffs’ Objections to Declaration of Nicole Annunziata (ECF No.
143-32)

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Annunziata is a Legal Paper Regulatory Specialist, and is employed by HSBC

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Technology & Services (USA) Inc., which is an affiliate of HSBC USA. (Annunziata

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Decl. ¶ 1, ECF No. 137-3.) She is familiar with HSBC USA’s books and records, and

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regularly relies on them. (Id. ¶ 2.) She searched HSBC USA’s records to determine

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whether Plaintiffs or WCM777 had any accounts with HSBC USA within the last five

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years, and did not find any such accounts. (Id. ¶ 3.) She also regularly searches and

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relies on records of wire transfers. (Id. ¶¶ 5–6.) She conducted searches for wire

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transfers involving certain account numbers provided by Plaintiffs to determine

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whether Plaintiffs made any wire transfers to those accounts. (Id. ¶¶ 7–15.) She did

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not find any records of transfers. (Id. ¶ 15.)

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Plaintiffs assert several objections to Annunziata’s declaration in its entirety:

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Best Evidence Rule:

Plaintiffs argue that because Annunziata relies on

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reviewing documents in coming to the conclusion that there were no wire transfer

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records, then she must introduce those records into evidence. (ECF No. 143-32, at

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¶ 1.) The best evidence rule “applies when the contents of a writing are sought to be

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proved, not when records are searched and found not to contain any reference to the

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designated matter.” United States v. Valdovinos-Mendez, 641 F.3d 1031, 1035 (9th

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Cir. 2011) (citing Fed. R. Evid. 1002). The Court OVERRULES Plaintiffs’ objection

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on these grounds.

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Relevance: Plaintiffs state that they “have never alleged to be customers of

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HSBC USA.” (ECF No. 143-32, at ¶ 4.) Whether Plaintiffs are customers of HSBC

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USA is probative of causation, and the Court OVERRULES this objection.

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Authentication, Foundation, & Hearsay: Plaintiffs object that Annunziata

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has no personal knowledge to testify that “a document not attached to the declaration

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is what she declares it to be and contains the information she declares it to contain.”

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(ECF No. 143-23, at ¶¶ 5, 6.) Annunziata’s declaration is being used to prove the

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absence of a record, not the contents of one. It is her testimony that establishes the

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absence of the record, and she may obtain personal knowledge from business records.

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See, e.g., Banga v. First USA, N.A., 29 F. Supp. 3d 1270, 1274 n.2 (N.D. Cal. 2014)

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(“[P]ersonal knowledge can come from the review of the contents of business records

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and an affiant may testify to acts that she did not personally observe but which have

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been described in business records[.]”). Annunziata also lays proper foundation

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establishing the records she reviewed as business records. (Annunziata Decl. ¶¶ 1–6,

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9, 11.) Accordingly, the Court OVERRULES this objection.

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Plaintiffs also object to specific paragraphs of Annunziata’s declaration:

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Objection to Paragraphs 9–14: Plaintiffs argue that these statements are

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hearsay or double hearsay because they are all based on information told to her by the

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“Data Payment Warehouse,” and the “Payments Regional Development Team.” (ECF

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No. 143-32, at ¶ 2.) Annunziata laid proper foundation to establish the records she

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reviewed are business records, and thus not excluded by the hearsay rule. (See ECF

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No. 137-3, at ¶¶ 1–6, 9, 11); Fed. R. Evid. 803(6). She relied on her review of those

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business records, and a declarant may review business records to establish personal

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knowledge of a particular issue. Banga, 29 F. Supp. 3d at 1274 n.2; Deleon v. Time

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Warner Cable LLC, No. CV 09-2438-AG (RNBx), 2010 WL 115152279, at *2 (C.D.

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Cal. Apr. 12, 2010) (overruling hearsay and personal knowledge objections where

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declarant reviewed business records to prepare her declaration). Accordingly, the

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Court OVERRULES this objection.

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Objection to Paragraphs 14–15: Plaintiffs object that these statements are

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“misleading,” and discuss the fact that the name “Jurado” appears in a document

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purporting to reflect all transactions to WCM777’s account, despite Annunziata’s

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testimony that there were no such transactions. (ECF No. 143-32, at ¶ 3.) To the

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extent this is a factual argument disputing the veracity of Annunziata’s declaration,

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Plaintiffs provide no citation to evidence contradicting Annunziata’s declaration.

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Accordingly, the Court OVERRULES this improper evidentiary objection.

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Furthermore, the Court is not required to scour the record to discover a disputed fact.

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Gordon v. Virtumundo, Inc., 575 F.3d 1040, 1058 (9th Cir. 2009) (quoting Carmen v.

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San Francisco Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (“[T]he

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reviewing court is ‘not required to comb through the record to find some reason to

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deny a motion for summary judgment….’”).

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2.

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Plaintiffs request that the Court take judicial notice of several documents.

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Plaintiffs’ Requests for Judicial Notice

(Plaintiffs’ Request for Judicial Notice (“PRJN”), ECF No. 143-2.)
a. Exhibits One through Eight

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The Securities Exchange Commission (“SEC”) filed an action against several

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WCM777 entities and Ming Xu aka Phil Ming Xu, the mastermind behind the Ponzi

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scheme. Exhibits one through six include documents related to that case, United

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States District Court, Central District of California, Case No. 2:14-cv-02334 (“SEC

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Action”). (Id.) In a similar vein, Plaintiffs request that the Court take judicial notice

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of a deferred prosecution agreement executed by HSBC USA and HSBC Holdings

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PLC in an action in the United States District Court for the Eastern District of New

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York. (PRJN Ex. 7, ECF No. 143-9.) For all these exhibits, Plaintiffs claim they “are

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a proper subject for judicial notice pursuant to Federal Rules of Evidence, Rule

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201(b)(1) and (2) as documents published within the United States District Courts and

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State Administrative bodies, [and] the locations of these documents are facts

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‘generally known within the trial court’s jurisdiction’ and/or ‘can be accurately and

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readily determined from sources whose accuracy cannot reasonably be questioned.’”

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(PRJN 3–4, ECF No. 143-2.) HSBC USA objects that the Court may not take judicial

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notice of the facts contained within the documents, that the documents are hearsay not

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falling within an exception, and that they are not authenticated. (See HSBC USA’s

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Mem. of Evid. Obj. in Resp. to Plaintiffs’ Statement of Genuine Issues in Opp’n to

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Mot. for Summary Judgment, ECF No. 156-1.)

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Throughout their Opposition to Defendant’s Motion for Summary Judgment,

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Plaintiffs seek to use the facts contained within the various pleadings to prove the

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truth of the matter asserted. For example, they seek to use the facts of the Complaint

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and Consent to Judgment in the SEC Action because they claim Xu did not “even

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deny that he and [WCM777] ‘falsely represented that WCM777 is and was a

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profitable enterprise, when in fact it [was] a pyramid scheme….” (Opp’n 13, ECF No.

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143.) However, the Consent Judgment specifically states: “Without admitting or

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denying the allegations of the Complaint (except as to [the paragraph affirming there

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were no representations by the government outside of the agreement] and except as to

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personal and subject matter jurisdiction, which Defendant admits), Defendant hereby

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consents to an entry of judgment….’” (PRJN Ex. 2, ECF No. 143-4.) These facts,

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and the others in the pleadings Plaintiffs submit, are subject to dispute, and the Court

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cannot take judicial notice of the contents of the documents. Lee v. City of Los

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Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (holding judicial notice improper where

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the contents of the document may reasonably be subject to dispute); see also Leonard

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Roofing, Inc. v. Ironshore Specialty Ins. Co., No. EDCV 12–00156-VAP (DTBx),

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2013 WL 12129653, at *5 (C.D. Cal. Mar. 29, 2013) (quoting Peel v. BrooksAmerica

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Mortg. Corp., 788 F. Supp. 2d 1149, 1158 (C.D. Cal. 2011)) (explaining that when

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taking judicial notice of documents, “the Court may not…accept as true the facts

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found or alleged in such documents…”). Plaintiffs also fail to lay any foundation

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establishing that the documents fall within any exception to the hearsay rule. The

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Court takes judicial notice of the fact that the events discussed in Exhibits one through

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eight occurred, but does not take judicial notice of the contents of the documents. See

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Lee, 250 F.3d at 689. Accordingly, the Court SUSTAINS HSBC USA’s objections to

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Plaintiffs’ Request for Judicial Notice exhibits one through eight.

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b. Exhibits Nine and Ten

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Exhibit nine is an “instruction sheet for wire transfers to [HSBC Hong Kong’s]

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clients.” (PRJN ¶ 9, ECF No. 143-2.) Plaintiffs claim they obtained this document

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from HSBC Hong Kong’s website. (Id.) Exhibit ten is a Patriot Act Certification for

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HSBC Hong Kong for which they provide a “Google pathway” to access the

3

document. (Id. ¶ 10.) The Patriot Act Certification identifies HSBC USA as a

4

correspondent account for HSBC Hong Kong. (Id., Ex. 10.) HSBC USA objects to

5

these documents on the same grounds they object to Exhibits one through eight. It

6

also asserts that Exhibit nine is not relevant because whether HSBC Hong Kong has

7

one or more correspondent banks in the United States does not affect whether HSBC

8

USA can be held liable.

9

Plaintiffs claim these documents are judicially noticeable because “they are

10

information posted on the Website of the HSBC Group.” (PRJN 4 (citing Von Saher

11

v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 960 (9th Cir. 2010).) In

12

Von Saher, the court took judicial notice of newspaper articles “as an indication of

13

what information was in the public realm at the time.” Von Saher, 592 F.3d at 960.

14

Plaintiffs, however, rely on Exhibit ten for the truth of the matter asserted—that

15

HSBC USA was the only correspondent bank for HSBC Hong Kong. (See Plaintiffs’

16

Additional Material Facts (“PAMF”) 22.) Similarly, Plaintiffs rely on Exhibit nine to

17

prove that “HSBC Hong Kong told all customers to have payments in U.S. Dollars for

18

accounts held in U.S. Dollars [sic] to send them through HSBC USA.” (PAMF 23.)

19

The Court cannot take judicial notice of these exhibits for the purposes Plaintiffs seek

20

to use them. See Lee, 250 F.3d at 689. Accordingly, the Court SUSTAINS these

21

objections.

22

Although Plaintiffs fail to make this argument, to the extent that these

23

documents could be construed as a party-opponent admission pursuant to Federal Rule

24

of Evidence 801(d)(2), they are still insufficient to create a genuine disputed material

25

fact. That HSBC USA was one way to wire money to HSBC Hong Kong does not

26

create a triable issue of material fact, especially where Plaintiffs wired their money

27

through their own banks.

28

13

III.

1

DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

2

HSBC USA moves for summary judgment on several grounds: 1) Plaintiffs fail

3

to establish causation because HSBC USA did not wire their money; 2) Plaintiffs’

4

claims are displaced by Article 4A of the UCC, which sets forth the liability scheme

5

for electronic funds transfers; 3) Plaintiffs failed to submit evidence of HSBC USA’s

6

actual knowledge of WCM777’s fraudulent activities; 4) Plaintiffs cannot prove their

7

underlying tort claims, which they claim HSBC USA aided and abetted; and 5)

8

Plaintiffs are not eligible for injunctive relief or restitution to support their UCL claim.

9

(Notice of Mot., ECF No. 136-7.)
Because the Court finds that the issue of causation is dispositive, it focuses its

10
11

discussion on the parties’ causation arguments.

12

A.

Legal Standard on Summary Judgment

13

Summary judgment is appropriate under Federal Rule of Civil Procedure 56 if the

14

moving party demonstrates the absence of a genuine issue of material fact and

15

entitlement to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317,

16

322 (1986). A fact is material when, under the governing law, the resolution of that

17

fact might affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute is

18

genuine if “the evidence is such that a reasonable jury could return a verdict for the

19

nonmoving party.” Id. at 249.

20

A party seeking summary judgment bears the initial burden to establish the

21

absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. To satisfy this

22

burden, the moving party may simply point to portions of pleadings, admissions,

23

answers to interrogatories and depositions which, along with affidavits, show the

24

absence of a genuine issue of material fact. See id. If the moving party satisfies its

25

burden, the nonmoving party must produce specific evidence to show that a genuine

26

dispute exists. Fed. R. Civ. P. 56(e). The Court draws all inferences in the light most

27

favorable to the nonmoving party. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors

28

Ass’n, 809 F.2d 626, 630–31 (9th Cir. 1987). However, the nonmoving party “must

14

1

do more than simply show that there is some metaphysical doubt as to the material

2

facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)

3

(footnote omitted).

4

probative, summary judgment may be granted.”

5

(citations omitted).

“If the evidence is merely colorable, or is not significantly
Anderson, 477 U.S. at 249–50

6

The “‘party opposing summary judgment must direct [the court’s] attention to

7

specific, triable facts,’ [citation], and the reviewing court is ‘not required to comb

8

through the record to find some reason to deny a motion for summary judgment.”

9

Gordon, 575 F.3d at 1058 (citations omitted); see also Orr v. Bank of America, NT &

10

SA, 285 F.3d 764, 775 n.14 (9th Cir. 2002) (holding a court may disregard evidence

11

submitted in opposition to a motion for summary judgment where opposing party does

12

not adequately cite specific pages of the evidence).

13

B.

Plaintiffs’ Claims All Require Proof of Causation

14

In California, a party may be liable for the aiding and abetting of an intentional

15

tort where the party “knows the other’s conduct constitutes a breach of duty and gives

16

substantial assistance or encouragement to the other to so act.” Casey v. U.S. Bank

17

National Ass’n, 127 Cal. App. 4th 1138, 1144 (2005) (quoting Fiol v. Doellstedt, 50

18

Cal. App. 4th 1318, 1325–26 (1996)). Courts typically require a plaintiff to prove

19

“actual knowledge” and substantial assistance. See id.at 1144–46.

20

“[C]ausation is an essential element of an aiding and abetting claim, i.e.,

21

plaintiff must show that the aider and abettor provided assistance that was a

22

substantial factor in causing the harm suffered.” Neilson v. Union Bank of Cal., N.A.,

23

290 F. Supp. 2d 1101, 1135 (C.D. Cal. 2003) (citing Metge v. Baehler, 762 F.2d 621,

24

624 (8th Cir.1985)); Impac Warehouse Lending Grp. v. Credit Suisse First Boston

25

LLC, 270 F. App’x 570, 572 (9th Cir. 2008) (“Substantial assistance requires that the

26

defendants’ actions be a ‘substantial factor’ in causing the plaintiff’s injury.”).

27
28

15

1

Plaintiffs’ UCL claim also requires proof of causation. Kwikset Corp. v. Super.

2

Ct., 51 Cal. 4th 310, 326 (2011) (discussing causation requirement derived from “as a

3

result of” language in UCL statute).

4

C.

Plaintiffs Do Not Submit Evidence of Causation

5

“Plaintiffs argue that the law allows for causation as to any victim who invested

6

[in WCM777] after September 30, 2013, [the date HSBC USA allegedly was aware of

7

the scheme], not just those whose money flowed through HSBC USA.” (Opp’n 16–

8

17.) To the extent the Court disagrees, Plaintiffs request leave pursuant to Federal

9

Rule of Civil Procedure 56(d) to conduct further discovery to “obtain the underlying

10

documents upon which Defendant basis [sic] its assertion that none of the Plaintiffs’

11

money went through HSBC USA.” (Id.)

12

Plaintiffs argue that HSBC USA is liable under three possible factual scenarios:

13

1. HSBC USA aided and abetted WCM777 because it assisted in wiring funds to

14

HSBC Hong Kong for individuals other than the named plaintiffs, but who may

15

be included in the class. The transfer of the funds of other unnamed individuals

16

substantially assisted WCM777 in perpetuating its scheme because it could not

17

continue without continued infusion of capital. Had HSBC USA not continued

18

to transfer other people’s money, the named plaintiffs never would have been

19

sucked into the scheme.

20

2. While not the named plaintiffs here, there may be some individuals

21

encompassed in the proposed class who wire transferred money through HSBC

22

USA to WCM777’s account in Hong Kong.

23

3. Finally, HSBC USA obstructed the investigation of the authorities when it

24

improperly responded to the Department’s subpoena stating that it did not have

25

any documents related to accounts held by WCM777.

26

truthfully responded to the subpoena, the authorities could have shut down the

27

scam sooner, and Plaintiffs would not have fallen victim to the scheme.

28

16

Had HSBC USA

i. Plaintiffs’ First Theory of Aiding & Abetting Causation

1
2

Plaintiffs premise HSBC USA’s liability on the Ninth Circuit’s holding in In re

3

First Alliance Mortgage Co., 471 F.3d 977, 986 (9th Cir. 2006). In First Alliance, the

4

Ninth Circuit upheld a jury verdict finding that Lehman Brothers aided and abetted

5

First Alliance in its mortgage origination fraud. Id. at 995. The court reviewed the

6

district court’s denial of judgment as a matter of law, and, under a deferential standard,

7

analyzed whether there was sufficient evidence of Lehman’s “actual knowledge” of

8

the fraud. Id. at 994. The plaintiffs presented the jury with evidence that Lehman

9

received detailed reports explaining First Alliance’s fraudulent scheme. Id. The court

10

held that, “[w]hile the evidence supporting Lehman’s ‘actual knowledge’ [was] not

11

overwhelming, deference must be accorded the jury’s factual findings at this state of

12

review.” Id.

13

Next, the court evaluated whether the plaintiffs submitted evidence warranting

14

the jury’s finding that Lehman substantially assisted First Alliance’s fraud. The court

15

explained that “ordinary business transactions a bank performs for a customer can

16

satisfy the substantial assistance element of an aiding and abetting claim if the bank

17

actually knew those transactions were assisting the customer in committing a specific

18

tort.” Id. at 995 (quoting Casey, 127 Cal. App. 4th at 1145.)

19

The plaintiffs presented evidence to the jury that Lehman provided all of First

20

Alliance’s financing needs, and that other investment banks stopped doing business

21

with First Alliance after learning of their fraudulent lending practices. Id. Lehman

22

admitted to providing assistance to First Alliance’s business, but not to the fraud. The

23

court upheld the jury’s finding on these facts and noted that, “[i]n a situation where a

24

company's whole business is built like a house of cards on a fraudulent enterprise, this

25

is a distinction without a difference.” Id.

26

Here, Plaintiffs do not submit any evidence that HSBC USA was the only bank

27

funding WCM777’s fraudulent enterprise. In fact, it is the exact opposite. Every

28

named plaintiff wired money to WCM777’s account at HSBC Hong Kong through

17

1

their own separate bank accounts, not HSBC USA. (Giron Decl. ¶ 5, ECF No. 143-

2

29; Herrera Decl. ¶¶ 2, 5, 7, ECF No. 143-30; Orlando Decl. ¶ 2, ECF No. 143-31, UF

3

55.) HSBC USA provides evidence that noneof the named plaintiffs wire transfers to

4

WCM777’s Hong Kong account went through HSBC USA. (UF 64–66.) Plaintiffs

5

attempt to dispute HSBC USA’s showing by citing to inadmissible evidence.11 (See

6

Section II.D.) Furthermore, Plaintiffs’ own declarations state that they wired the

7

money through their own bank accounts, which supports the facts they claim are in

8

dispute. (Giron Decl. ¶ 5, ECF No. 143-29; Herrera Decl. ¶¶ 2, 5, 7, ECF No. 143-30;

9

Orlando Decl. ¶ 2, ECF No. 143-31, UF 55.) Plaintiffs’ attempt to create a triable

10

issue on this point is not sufficient. See British Airways Bd. v. Boeing Co., 585 F.2d

11

946, 952 (9th Cir. 1978) (holding that a plaintiff must point to specific evidence

12

creating a triable issue of material fact).

13

Furthermore, in First Alliance, Lehman provided financing for the product First

14

Alliance was selling—predatory loans. Here, Plaintiffs’ theory is that because HSBC

15

USA wired other people’s money to WCM777’s accounts in Hong Kong the fraudulent

16

enterprise was allowed to continue and eventually dupe Plaintiffs. Plaintiffs do not

17

have any claims remaining against HSBC Hong Kong—the entity with a direct

18

relationship with WCM777. Plaintiffs never connect HSBC USA’s conduct with the

19

harm allegedly suffered by Plaintiffs, which they must do to survive summary

20

judgment. See Mosier v. Stonefield Josephson, Inc., 815 F.3d 1161, 1167–68 (9th Cir.

21

2016) (affirming summary judgment of claims against accountants for aiding and

22

abetting Ponzi scheme); see also El Camino Res. LTD v. Huntington Nat’l Bank, 722

23

F. Supp. 2d 875, 914 (W.D. Mich. 2010) (“In the words of plaintiffs’ counsel, the bank

24

is liable if it helped to ‘perpetuate the enterprise.’ … One might as easily hold the

25

grocer liable for aiding and abetting Al Capone, on a showing that the grocer

26
11

27
28

Plaintiffs cite three documents that demonstrate HSBC USA was the “correspondent bank” for
HSBC Hong Kong, and argue that this creates a dispute as to whether HSBC USA was complicit in
WCM777’s fraud. Even if HSBC USA is the correspondent bank for HSBC Hong Kong, Plaintiffs
fail to address the fact that they have no relationship whatsoever with HSBC USA.

18

1

suspected Capone was a hoodlum but sold him food anyway, allowing him to live

2

another day to commit his crimes.”).

3

Plaintiffs allege that HSBC USA was the only “correspondent” bank of HSBC

4

Hong Kong in the United States, and cite a Patriot Act Certification that identifies

5

HSBC USA as the correspondent bank for HSBC Hong Kong.12 (PAMF 22.) The

6

document defines a “correspondent account” as “any account to receive deposits from,

7

make payments or other disbursements on behalf of a foreign bank, or handle other

8

financial transactions related to the foreign bank.” (PRJN Ex. 10, ECF No. 143-14.)

9

Plaintiffs’ attempt to analogize to First Alliance on the grounds that HSBC USA was

10

fully supporting WCM777, like Lehman was for First Alliance, is unavailing because

11

Plaintiffs themselves did not use HSBC USA as the “correspondent account” in

12

transferring their funds to WCM777. (Giron Decl. ¶ 5, ECF No. 143-29; Herrera

13

Decl. ¶¶ 2, 5, 7, ECF No. 143-30; Orlando Decl. ¶ 2, ECF No. 143-31, UF 55.) This

14

completely erodes their theory because there were other banks, and investors in the

15

Ponzi scheme, that equally contributed to funding WCM777.

16

Plaintiffs also rely on In re Equity Funding Corporation of America Securities

17

Litigation, 416 F. Supp. 161 (C.D. Cal. 1976). (Opp’n 8.) At the pleading stage, the

18

Equity court accepted plaintiffs’ theory that inside traders could be liable to plaintiffs

19

who purchased stock on the open market during the period of alleged fraud, under

20

Section 10(b) and Rule 10b-5. In re Equity Funding, 416 F. Supp. 185–86. The court

21

reasoned that the defendants “[could] also be liable for breach of the duty they owed

22

to all persons who during the same period purchased [securities] on the open market

23

without knowledge of the material information which was in the possession of

24

defendants.” Id. at 185 (quotations omitted).

25
26
12

27
28

Plaintiffs request judicial notice of this document, which is inadmissible for the purpose they seek
to use it, as discussed in Section II.D. In any event, it does not matter whether HSBC USA was a
correspondent bank for HSBC Hong Kong because none of the Plaintiffs had an account with, or
wired money from, HSBC USA. (UF 64–66.)

19

1

Here, Plaintiffs do not bring any claims pursuant to securities law. In Equity,

2

the court relied, in part, on “the purpose of the federal securities laws.” Id. The fraud

3

on the market theory addressed in Equity is also not at issue here. Accordingly, the

4

Court does not find Equity persuasive in light of the theory of liability and facts that

5

Plaintiffs present.

6

At the hearing, Plaintiffs raised an additional case that was in Defendant’s

7

Motion for Summary Judgment as supporting their theory of liability. Neilson, 290 F.

8

Supp. 2d at 1129. In Neilson, the plaintiffs brought a putative class action against

9

several banks. Id. at 1110. The plaintiffs alleged generally that the banks “knew or

10

should have known that [the fraudster] was operating a Ponzi scheme, and that,

11

without the assistance provided by the Banks, [the fraudster’s] Ponzi scheme could

12

not have succeeded.” Id. The banks moved to dismiss, claiming that the plaintiffs had

13

not satisfactorily alleged claims for aiding and abetting the fraudster. See id. at 1110–

14

11. In discussing the “substantial assistance” requirement, the court held that the

15

plaintiffs had alleged sufficient facts to survive a motion to dismiss because “the

16

Banks substantially assisted [the fraudster] by giving him access to large sums of

17

money that kept his scheme afloat for a significant period of time.” Id. at 1129. This

18

case, however, is distinguishable.

19

First, the Court is presented with a motion for summary judgment, not a motion

20

to dismiss, and thus must evaluate the evidence Plaintiffs present, not the allegations.

21

Like in Neilson, the Court here allowed Plaintiffs’ allegations to survive a motion to

22

dismiss, but now their allegations must be supported by evidence—they are not.

23

Plaintiffs allege that HSBC USA’s funds assisted in keeping WCM777 afloat, but, as

24

discussed above, provide no evidence that it was the sole bank acting as a conduit for

25

funds from unsuspecting investors. Indeed, Plaintiffs all wired their money through

26

three different banking institutions.

27

regarding how much money WCM777 needed to continue functioning vis a vis when

28

HSBC USA provided money to the enterprise, or how the timing of that infusion of

Moreover, Plaintiffs do not submit evidence

20

1

capital would have affected Plaintiffs’ decisions to invest in WCM777. Plaintiffs’

2

reliance on Neilson does not assist in their efforts to avoid summary judgment.

3

ii. Plaintiffs’ Second Theory of Aiding & Abetting Causation

4

Plaintiffs’ second theory is not grounded in fact. Plaintiffs present no evidence

5

that the named plaintiffs had an account with HSBC USA, nor that they wired their

6

funds through HSBC USA. Plaintiffs also have not presented evidence that HSBC

7

USA opened any accounts for WCM777. If there are other individuals who did wire

8

transfer money through HSBC USA to WCM777’s Hong Kong account, they may

9

have stronger grounds for a claim. But, those are not the named plaintiffs in this

10

lawsuit, and Plaintiffs may not proceed on a theory that is not supported by the facts in

11

front of the Court.
iii. Plaintiffs’ Third Theory of Aiding & Abetting Causation

12
13

Plaintiffs’ final argument is that HSBC USA caused their harm by failing to

14

accurately respond to the Department’s subpoena. (Opp’n 9–10.) Plaintiffs claim that

15

HSBC USA’s response “clearly inhibited the authorities” from “preventing all banks

16

from allowing wire transfers to WCM777’s accounts in HSBC Hong Kong.” (Opp’n

17

10.) This theory does not create a triable issue for at least two reasons.

18

First, Plaintiffs do not submit any evidence rebutting HSBC USA’s showing

19

that it did not have any accounts open in WCM777’s name. (UF 67.) The subpoena

20

specifically asked for “[a]ny and all bank records concerning WCM777 and World

21

Capital Market Inc. bank accounts with [HSBC USA]….” (ECF No. 145-5 at 9

22

(emphasis added).) Because WCM777 did not have any bank accounts with HSBC

23

USA, the bank’s response indicating it did not have any responsive documents

24

appears accurate, and Plaintiffs do not present any evidence otherwise. (ECF No.

25

145-5 at 11.) Accordingly, there are no triable issues of fact regarding whether HSBC

26

USA was withholding information from the authorities such that it was impeding the

27

investigation.

28

21

1

Second, Plaintiffs must submit evidence that creates more than speculation to

2

create a triable issue. British Airways Bd., 585 F.2d at 952 (“A mere scintilla of

3

evidence will not do, for a jury is permitted to draw only those inferences of which the

4

evidence is reasonably susceptible; it may not resort to speculation.”). The chain of

5

causation Plaintiffs argue should create a triable issue is nothing more than

6

speculation. Plaintiffs’ argument goes something like this: had HSBC USA provided

7

the information it had regarding WCM777’s potentially fraudulent business, the

8

Department would have been able to stop WCM777 before Plaintiffs wired their

9

money through their own bank accounts.

No reasonable jury would make this

10

inferential leap based on the facts Plaintiffs present. Accordingly, the Court finds that

11

there is no triable issue of fact as to this theory of causation.

12

D.

Plaintiffs’ Request to Conduct Additional Discovery

13

Plaintiffs request that the Court provide them leave, pursuant to Federal Rule of

14

Civil Procedure 56(d), to conduct additional discovery to oppose Defendant’s Motion

15

for Summary Judgment. (Opp’n 17.) Rule 56(d) allows courts to provide a party

16

opposing a motion for summary judgment an opportunity to conduct additional

17

discovery where the party makes a sufficient showing, via affidavit, of the facts it

18

seeks to discover, and why those facts would preclude summary judgment. See Tatum

19

v. City & Cty. of San Francisco, 441 F.3d 1090, 1100–01 (9th Cir. 2006) (applying the

20

standard under former Rule 56(f)). “In order to gain the benefit of Rule 56(d), the

21

party opposing summary judgment must make a sufficient proffer: ‘the proffer should

22

be authoritative; it should be advanced in a timely manner; and it should explain why

23

the party is unable currently to adduce the facts essential to opposing summary

24

judgment.’” In re PHC, Inc. S’holder Litig., 762 F.3d 138, 143 (1st Cir. 2014)

25

(quoting Resolution Trust Corp. v. N. Bridge Assocs., Inc., 22 F.3d 1198, 1203 (1st

26

Cir. 1994)).

27

Here, Plaintiffs chose to oppose Defendant’s Motion for Summary Judgment

28

substantively, instead of immediately filing a Rule 56(d) declaration seeking

22

1

additional time to obtain the evidence they now claim was necessary to oppose the

2

Motion. See id. at 144 (discussing the fact that promptly filing an affidavit after

3

receiving motion for summary judgment satisfied timeliness requirement). Further,

4

Plaintiffs filed this action in 2015, and have had the opportunity to conduct discovery

5

for close to two years. In addition to discovery to oppose the summary judgment,

6

Plaintiffs wish to substitute in new class representatives. Plaintiffs wish they had

7

prosecuted this action differently. The Court finds that under these circumstances,

8

Plaintiffs have not made a sufficient showing under Rule 56(d) to warrant deferral of

9

the Court’s ruling on Defendant’s Motion for Summary Judgment.

10

Further, Plaintiffs’ position with regard to their request for additional discovery

11

indicates it is more of a last-ditch effort to stave off summary judgment, than a

12

genuine and calculated request to obtain necessary evidence.

13

Plaintiffs seek additional discovery to identify documents that would show that the

14

named Plaintiffs’ money went through HSBC USA, while, on the other, they “argue

15

that the law allows for causation as to any victim who invested after September 30,

16

2013, not just those whose money flowed through HSBC USA.”

17

(emphasis added).) With respect to their first assertion, Plaintiffs have had many

18

opportunities to obtain the evidence they seek, but have not been able to connect the

19

dots. On their second point, as explained above, the Court does not agree that the law

20

allows for liability under Plaintiffs’ proffered theory with the plaintiffs and evidence

21

presented here.

22

conduct additional discovery, and GRANTS Defendant’s Motion for Summary

23

Judgment.13
IV.

24

On the one hand,

(Opp’n 16–17

Accordingly, the Court DENIES Plaintiffs’ request for leave to

PLAINTIFFS’ MOTION TO CERTIFY CLASS

Plaintiffs seek to certify a class defined as:
All individuals or entities who [sic] invested and lost money
with any of the WCM777 entities by transferring or having

25
26
27
28

13

HSBC USA also moves for summary judgment on several other grounds. Because the Court finds
the issue of causation dispositive, the Court declines to address HSBC USA’s other arguments.

23

their money transferred to one of the WCM777 accounts at
HSBC Hong Kong. For purposes of this class definition, an
individual or entity lost money only if the amount of money
that the individual or entity received from WCM777,
including any return on investment, commissions, fees or
any other payments, was less than the amount of the
individual’s or entity’s money invested with WCM777.
Excluded from the Class are governmental entities, any
judge, justice or judicial officer presiding over this matter
and the members of his or her immediate family, the
Defendants, along with their respective parents, subsidiaries
and/or affiliates. Also excluded from this class are the legal
representatives, heirs, successors and attorneys of any
excluded person or entity, and any person acting on behalf
of any excluded person or entity.

1
2
3
4
5
6
7
8
9
10
11
12

(TAC ¶ 80; Mot. 13, ECF No. 126.)
While there are multiple reasons for the Court to deny Plaintiffs’ Motion to

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Certify Class, the Court finds the analysis of “typicality” and “adequacy” most
problematic. See Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992)
(holding that plaintiffs failed to satisfy typicality where focus of litigation will be on
defenses unique to named plaintiffs).
A.

Legal Standard on Motion to Certify Class Action
Class certification is appropriate only if “each of the four requirements of Rule

23(a) and at least one of the requirements of Rule 23(b)” are met. Zinser v. Accufix
Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Under Rule 23(a), the
plaintiff must show that: “(1) the class is so numerous that joinder of all members is
impracticable; (2) there are questions of law and fact common to the class; (3) the
claims or defenses of the representative parties are typical of the claims or defenses of
the class; and (4) the representative parties will fairly and adequately protect the
interests of the class.” Fed. R. Civ. P. 23(a). These requirements are colloquially
referred to as numerosity, commonality, typicality, and adequacy.
Honda Motor Co., 666 F.3d 581, 588 (9th Cir. 2012).

24

Mazza v. Am.

1

Next, the proposed class must meet the requirements of at least one of the three

2

types of class actions listed in Rule 23(b). Wal-Mart Stores, Inc. v. Dukes, 564 U.S.

3

338, 345 (2011). A class action may be maintained under Rule 23(b)(3) as long as (1)

4

“questions of law or fact common to class members predominate over any questions

5

affecting only individual members,” and (2) a class action is “superior to other

6

available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ.

7

P. 23(b)(3). “Failure to prove any one of Rule 23’s requirements destroys the alleged

8

class action.” Schwartz v. Upper Deck Co., 183 F.R.D. 672, 675 (S.D. Cal. 1999).

9

Plaintiffs must establish the Rule 23 requirements by a preponderance of the

10

evidence. Dugan v. Ashley Furniture Indus., Inc., No. SA CV 16-1125 PA (FFMx),

11

2016 WL 9173459, at *2 (C.D. Cal. Nov. 29, 2016). “To obtain class certification,

12

‘actual, not presumed, conformance with Rule 23(a) [is]…indispensable.’”

13

(quoting Gen. Tel. Co. v. Falcon, 457 U.S. 147, 160 (1982)). A class action “may only

14

be certified if the trial court is satisfied, after a rigorous analysis, that the prerequisites

15

of Rule 23(a) have been satisfied.” Gen. Tel. Co., 457 U.S. at 161.

16

B.

Id.

Typicality

17

Rule 23(a) requires Plaintiffs to prove “typicality.” Id. “Typicality refers to the

18

nature of the claim or defense of the class representative, and not to the specific facts

19

from which it arose.” Hannon, 976 F.2d at 508 (quoting Weinberger v. Thornton, 114

20

F.R.D. 599, 603 (S.D. Cal. 1986)). A motion for class certification should not be

21

granted where the named plaintiff will be preoccupied with a unique defense. Id.

22

Here, Plaintiffs’ class definition includes individuals who wire transferred their money

23

through HSBC USA, and individuals, such as the named plaintiffs, who wire

24

transferred money to WCM777 through their personal bank accounts. As discussed

25

above, Plaintiffs have not submitted evidence of causation sufficient to generate a

26

triable issue of material fact, and thus their claims are subject to a unique defense as

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compared to other putative class members, who may have transferred their money

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through HSBC USA, and, therefore, might be able to demonstrate causation. See

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1

Quezada v. Loan Ctr. of Cal., Inc., No. 08-177, 2009 WL 5113506, at *5 (E.D. Cal.

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Dec. 18, 2009) (“Plaintiff’s fraud claim is therefore subject to a unique defense of

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non-reliance that defeats her showing of typicality.”); Jordan v. Paul Fin., LLC, No.

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07-4496, 2009 WL 192888, at *5 (N.D. Cal. Jan. 27, 2009) (holding typicality not met

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where named plaintiff was subject to unique defense).

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Plaintiffs do not address typicality in their Reply, despite HSBC USA’s

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arguments in opposition. (See generally Reply, ECF No. 138.) Plaintiffs have not

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satisfactorily demonstrated typicality, and the Motion to Certify Class should be

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denied on that ground alone.

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C.

Adequacy

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That the named plaintiffs here may be willing to pursue a theory that is not

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legally tenable to the detriment of the remaining class members also sheds light on

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their adequacy as class representatives. See, e.g., Eisenberg v. Gagnon, 766 F.2d 770,

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786 (3d Cir. 1985) (noting that typicality largely overlaps with the adequacy

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requirement). There are also several issues with the named plaintiffs’ knowledge of

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the case, and motives for representing the class, which further erode their adequacy as

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representatives of the class.

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“[A] party who is not familiar with the basic elements of its claim is not

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considered to be an adequate representative for the class.” Burkhalter Travel Agency

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v. Macfarms Int’l, Inc., 141 F.R.D. 144, 153 (N.D. Cal. 1991); see also Bodner v.

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Oreck Direct, LLC, No. C 06-4756 MHP, 2007 WL 1223777, at *2 (N.D. Cal. Apr. 25,

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2007) (“In light of plaintiff’s undeniable and overwhelming ignorance regarding the

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nature of this action…the court cannot conclude that he has met the…adequacy

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requirements of Rule 23(a).”). Plaintiffs argue in Reply that HSBC USA attacks the

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financial sophistication of the named plaintiffs. (Reply 8–9.) However, Plaintiffs

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ignore the inherent conflict of interest between the named class representatives, who

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did not wire money through HSBC USA, and the remaining putative class members

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who may have. Furthermore, HSBC USA submits evidence that rebuts Plaintiffs’ bald

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assertion that the named plaintiffs are adequate:
 Orlando’s father told him to participate in this lawsuit and Orlando didn’t
ask any questions. (Korman Decl. ¶ 3, Ex. B, ECF No. 134-1, Orlando Dep.
13:4-13, ECF No. 134-2 (“I don’t know why. I never asked him. He’s like
just ‘Do It.’ I was ‘All right.’”) Orlando’s knowledge of WCM777’s scheme
also comes from his father. (Id. 11:13-12:25.)
 Giron thinks he sued the fraudster, never saw the complaints filed, does not
know the difference between HSBC USA and HSBC Hong Kong, and
believes that HSBC Hong Kong is the defendant. (Korman Decl. ¶ 2, Ex. A,
Giron Dep. 10:5-9; 15:4-8; 16:14-23; 31:13-32:8; 33:10-13; 42:17-22, ECF
No. 134-2.)
 Herrera could not remember whether his lawyer provided anything more
than the signature page to his English-language declaration, despite only
reading Spanish. (Korman Decl. ¶ 4, Ex. C, Herrera Dep. 84:11-88:25; 90:491:21.)

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Plaintiffs do not rebut these facts, and do not meet their burden under the Court’s

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rigorous analysis at this stage. Accordingly, the Court DENIES Plaintiffs’ Motion to

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Certify Class. (ECF No. 126.)

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D.

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5
6
7
8
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Plaintiffs’ Request to Substitute with New Class Representatives

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At the hearing on Plaintiffs’ Motion to Certify Class, counsel indicated that he

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could identify different potential class representatives who might be better suited to

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represent the interests of the class, given the Court’s concerns. However, courts are

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generally reluctant to provide plaintiffs with multiple opportunities to move for class

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certification, absent some compelling change in circumstance. See, e.g., David v.

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Bankers Life & Cas. Co., No. C14-744RSL, 2016 WL 2610246, at *3 (W.D. Wash.

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May 6, 2016) (refusing to grant motion to reconsider first order denying class

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certification); c.f. English v. Apple Inc., No. 14-cv-01619-WHO, 2016 WL 1108929, at

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*3 (N.D. Cal. Mar. 22, 2016) (denying motion for reconsideration where the party

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could not demonstrate the evidence “was not reasonably available at the time of the

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original class certification decision, or that [the evidence] could not have been

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obtained earlier in the exercise of reasonable diligence”).

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Here, the Court has provided Plaintiffs several extensions to the Central

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District’s Local Rule 23-3, which requires a party to seek class certification “[w]ithin

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90 days after service of a pleading purporting to commence a class action….” C.D.

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L.R. 23-3; (ECF Nos. 45, 81, 94) (granting extensions of time to file motion for class

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certification)).

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identify plaintiffs that they thought would be typical of, and adequately represent, the

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class. However, despite adequate opportunity to identify and propose different class

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representatives, they chose to file their Motion to Certify Class, and only raised the

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possibility of different class representatives when substantively challenged regarding

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their typicality and adequacy. Furthermore, at the hearing, Plaintiffs’ counsel admitted

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that Defendant raised the issue of typicality early in the case. Yet, the Court is still left

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performing its rigorous analysis of Plaintiffs’ Motion to Certify Class with three

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plaintiffs who admittedly did not wire any money through HSBC USA. To the extent

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the Court were to grant Plaintiffs additional time to locate and substitute new class

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representatives, the parties would then need to conduct discovery regarding the new

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class representatives, which is unacceptable given the Court’s prior extensions

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allowing Plaintiffs to obtain the evidence they deemed necessary prior to moving for

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class certification. Accordingly, the Court DENIES Plaintiffs’ request for leave to

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substitute different, more adequate class representatives.

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V.

Plaintiffs have had significant time to conduct discovery, and to

THE PARTIES’ MOTIONS TO STRIKE & EXCLUDE

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HSBC USA seeks to exclude the declaration of third-party witness, Basilia

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Ayala, and exhibits thereto (ECF No. 126-7), (ii) the Massachusetts Securities

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Division documents (ECF No. 126-4, Ex. B), and (iii) the California Department of

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Business Oversight documents (ECF No. 126-4, Ex. C) (collectively, the “Undisclosed

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Evidence”), in support of Plaintiffs’ Motion for Class Certification (ECF No. 126).

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Similarly, Plaintiffs seek to strike and exclude: 1) the Declaration of Steven

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Mulligan (ECF No. 136); 2) the Declaration of Paul M. Khareyn (Id.); and 3) “any

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previously undisclosed transaction reports relied upon by Mr. Mulligan and Mr.

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1

Khareyn in making their declarations, all offered in support of Defendant’s Motion for

2

Summary Judgment.” (Not. of Mot. 2, ECF No. 142.) Plaintiffs claim HSBC USA

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failed to timely disclose this evidence, and that the Court should exclude it pursuant to

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Federal Rule of Civil Procedure 37(c). (Mot. 4, ECF No. 142.)

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The Court reviewed the parties’ motions, and confirmed at the hearing that none

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of the evidence that is the subject of either party’s motion addresses the issue of

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causation as it pertains to the named plaintiffs. Accordingly, the Court declines to rule

8

on these motions because they do not have an effect on the primary issue here, which

9

is whether Plaintiffs submitted any evidence establishing a causal connection between

10

HSBC USA and the named plaintiffs.

Thus, the Court DENIES, AS MOOT,

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Plaintiffs’ Motion to Strike and Exclude (ECF No. 142), and Defendant’s Motion to

12

Strike and Exclude. (ECF No. 135.)

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VI.

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CONCLUSION

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For the reasons discussed above, the Court GRANTS Defendant’s Motion for

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Summary Judgment. (ECF No. 137.) The Court DENIES Plaintiffs’ Motion to

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Certify Class. (ECF No. 126.) And, in light of the discussion above, the Court

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DENIES, AS MOOT, Defendant’s Motion for Sanctions (ECF No. 135), and

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Plaintiffs’ Motion to Strike and Exclude (ECF No. 142.)

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8

IT IS SO ORDERED.

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November 15, 2017

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____________________________________
OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

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