Securities And Exchange Commission v. Murray
Filing
156
ORDER by Judge Edward M. Chen Denying 143 De Francisci's Motion to Intervene. (Attachments: # 1 Certificate/Proof of Service)(emcsec, COURT STAFF) (Filed on 2/3/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SECURITIES AND EXCHANGE
Case No. 12-cv-01288-EMC
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COMMISSION,
ORDER DENYING INTERVENOR DE
FRANCISCI’S MOTION TO
INTERVENE
Plaintiff,
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JAMES MICHAEL MURRAY, et al.,
Defendants.
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For the Northern District of California
United States District Court
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Docket No. 143
v.
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On March 15, 2012, the Securities and Exchange Commission filed this lawsuit against
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Defendant James Michael Murray for defrauding potential and actual investors of Market Neutral
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Trading, LLC, an investment fund he controlled. Docket Nos. 1, 15, 63. In July 2012, Murray
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placed trades in a brokerage account in the name of MNT Master Fund, Ltd. at Oppenheimer &
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Co., and the trades resulted in profits of more than $410,000. Docket No. 63 at ¶¶ 34-35. Murray
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wired approximately $260,000 of these profits to an account at Interactive Brokers held in the
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name of Event Trading, which is controlled by Murray. Id. at ¶¶ 36-38. On January 8, 2013, this
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Court froze the Event Trading proceeds, which totaled approximately $363,000 with subsequent
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trading. Docket No. 58. Pending before the Court is a motion to intervene by Joseph Gianluca de
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Francisci, who claims ownership interest in the Event Trading proceeds. Docket No. 143.
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Rule 24(a) of the Federal Rules of Civil Procedure provides the right to intervene as
follows:
(a) Intervention of right. Upon timely application anyone shall be
permitted to intervene in an action: . . . (2) when the applicant
claims an interest relating to the property or transaction which is the
subject of the action and he is so situated that the disposition of the
action may as a practical matter impair or impede his ability to
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protect that interest, unless the applicant’s interest is adequately
represented by existing parties.
The Ninth Circuit clarified the requirements of Rule 24(a) as follows:
(1) [T]he [applicant’s] motion must be timely; (2) the applicant must
have a “significantly protectable” interest relating to the property or
transaction which is the subject of the action; (3) the applicant must
be so situated that the disposition of the action may as a practical
matter impair or impede its ability to protect that interest; and (4) the
applicant’s interest must be inadequately represented by the parties
to the action.
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Freedom from Religion Found., Inc. v. Geithner, 644 F.3d 836, 841 (9th Cir. 2011) (citation
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omitted). The would-be intervenor must meet all four criteria; “[f]ailure to satisfy any one of the
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requirements is fatal to the application.” Perry v. Proposition 8 Official Proponents, 587 F.3d
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Here, the Court need not address the first three requirements because it finds that de
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For the Northern District of California
United States District Court
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947, 950 (9th Cir. 2009).
Francisci’s interests, if any, in the frozen assets are adequately represented by the existing Relief
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Defendant Event Trading.
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In determining the adequacy of representation, the Ninth Circuit considers three factors:
(1) whether the interest of a present party is such that it will
undoubtedly make all of a proposed intervenor’s arguments; (2)
whether the present party is capable and willing to make such
arguments; and (3) whether a proposed intervenor would offer
any necessary elements to the proceeding that other parties
would neglect.
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Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003), as amended (May 13, 2003) (citation
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omitted). “The most important factor in determining the adequacy of representation is how the
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interest compares with the interests of existing parties.” Id. (citing 7C Wright, Miller & Kane, §
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1909, at 318 (1986)). “When an applicant for intervention and an existing party have the same
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ultimate objective, a presumption of adequacy of representation arises.” Id. (citing League of
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United Latin Am. Citizens v. Wilson, 131 F.3d 1297, 1305 (9th Cir. 1997)).
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A presumption of adequacy attaches here because the existing Relief Defendant Even
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Trading has the same ultimate objective as de Francisci. De Francisci himself admits in his reply
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brief that his claim that he is the actual owner of the frozen assets is “a claim supported by Event
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Trading.” Docket No. 149 at 6. Event Trading also agrees that the frozen assets belong to de
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Francisci, as follows:
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[R]elief defendant Event Trading contends that the Netflix trades
were conducted by Mr. Murray in his role as a fund manager for
MNT Master Fund, Ltd. on behalf of a single client, Joseph
Gianluca de Francisci (hereinafter, Gianluca de Francisci), and that
the proceeds of the Netflix trade were therefore the property of
Gianluca de Francisci, and not MNT Master Fund, Ltd. When these
funds were transferred to relief defendant Event Trading (a
California limited liability company solely owned by Giovanni de
Francisci, Gianluca de Francisci’s son), ownership of these funds
did not change, Gianluca de Francisci became a client of relief
defendant Event Trading.
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Docket No. 109 at 4. Moreover, the counsel for Event Trading and de Francisci conceded during
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the hearing on February 2, 2017 that their arguments would be essentially the same. Indeed, if
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the freeze order, and de Francisci will be able to collect the money via Event Trading in
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For the Northern District of California
Event Trading successfully defeats the Commission’s claim for disgorgement, the Court will lift
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United States District Court
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accordance with his and Event Trading’s assertions herein.
De Francisci argues that his interests are not adequately represented because Event Trading
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does not have the same personal stake in the outcome that he does: he alleges that, for Event
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Trading, a loss would result in a significant loss of business, whereas a loss for de Francisci would
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deprive him of the actual assets in question. Docket No. 143 at 4. This argument fails to rebut the
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presumption of adequacy, however. Even though the nature of Event Trading’s interest may be
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different from that of de Francisci, this does not change the fact that they have the same objective.
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De Francisci fails to show how he would litigate the issue of SEC’s claim to disgorgement
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differently from Event Trading. Indeed, de Francisci and Event Trading are represented by the
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same counsel.
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Thus, the Court DENIES de Francisci’s motion to intervene.
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The parties shall meet and confer the means to resolve the dispute over the ownership of
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the frozen assets, e.g., a motion for summary judgment under Rule 56 or a motion for judgment
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under Rule 52 with or without live witnesses. A joint letter of the result of the meet and confer
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shall be filed by February 9, 2017. The Court will either issue an order or schedule a telephonic
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conference call if necessary.
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This order disposes of Docket No. 143.
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IT IS SO ORDERED.
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Dated: February 3, 2017
______________________________________
EDWARD M. CHEN
United States District Judge
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For the Northern District of California
United States District Court
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