Securities and Exchange Commission v. Bivona et al

Filing 698

ORDER by Judge Edward M. Chen Denying 695 Nonparty Patrick Nicholson's Motion to Quash Subpoena. (emcsec, COURT STAFF) (Filed on 3/16/2023)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

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v.
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FELIX INVESTMENTS, LLC,

Case No. 16-cv-01386-EMC
ORDER DENYING NONPARTY
PATRICK NICHOLSON’S MOTION
TO QUASH SUBPOENA
Docket No. 695

United States District Court
Northern District of California

Defendant.
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Nonparty Patrick Nicholson filed a motion to quash the U.S. Securities and Exchange

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Commission’s subpoena on documents maintained by Mr. Nicholson at TD Bank. Docket No.

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695. Mr. Nicholson argues that his personal financial records are not relevant to the SEC’s

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judgment enforcement against the judgment debtors in this case. Id.

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The challenge procedures set forth in Chapter 35 of the Right to Financial Privacy Act

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(“RFPA”) “constitute the sole judicial remedy available to a customer to oppose disclosure of

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financial records” from a financial institution. 12 U.S.C. § 3410(e). RFPA subpoenas are to be

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enforced if the records sought “are relevant to a legitimate law enforcement inquiry.” Davidov v.

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SEC, 415 F. Supp. 2d 386, 387 (S.D.N.Y. 2006). “All such proceedings shall be completed and

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the motion or application decided within seven calendar days of the Government’s response.” Id.

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at 388 (citing 12 U.S.C. § 3410(b)).

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Here, the SEC’s investigation is a legitimate law enforcement inquiry. Per 12 U.S.C. §

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3401(8), a “law enforcement inquiry” is “a lawful investigation or official proceeding inquiring

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into a violation of, or failure to comply with, any criminal or civil statute or any regulation, rule,

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or order issued pursuant thereto.” In 2017, the Court entered final judgments in which, in relevant

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part, Defendant John Bivona and Defendant Frank Mazzola were jointly and severally liable with

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for $4,155,000. Docket No. 294. Mr. Mazzola was further ordered to pay a civil penalty of

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$200,000. Docket No. 295. All Defendants in the case were ordered to pay the disgorgement

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amounts within 30 days from the entry of final judgment. Mr. Mazzola has only made one

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payment towards the judgment and his personal accounts are funded in part by Mr. Nicholson.

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Docket No. 697 at 6. The SEC seeks to obtain information related to Mr. Mazzola’s failure to

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comply with these legal judgments arising from a securities fraud case, and it is thus a legitimate

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law enforcement inquiry. Inspection of third-party bank records is permissible when “inspection

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of the bank records . . . could lead to the discovery of concealed assets of the judgment debtors.”

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Falicia v. Advanced Tenant Servs., Inc., 235 F.R.D. 5, 10 (D.D.C. 2006).
Mr. Nicholson’s argument that he is only a friend and part owner of a company that

United States District Court
Northern District of California

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employed Defendant Mr. Mazzola, not a judgment debtor himself, does not defeat relevancy.

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“Subpoenaed information is relevant if it ‘touches a matter under investigation.’” John Doe, v.

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U.S. S.E.C., No. 22-MC-80301-LB, 2023 WL 2351653, at *8 (N.D. Cal. Mar. 4, 2023) (citing

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Nelson v. U.S. S.E.C., No. C08-80080MISCJFHRL, 2008 WL 2444794, at *2 (N.D. Cal. June 16,

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2008)). Mr. Nicholson appears to be deeply involved in Mr. Mazzola’s financial matters and

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means. As the government explains, Mr. Mazzola works at a towing company in-part owned by

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Mr. Nicholson; Mr. Nicholson wire transfers Mr. Mazzola’s paycheck into Mr. Mazzola’s

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personal account, but Mr. Mazzola’s company then reimburses Mr. Nicholson’s towing company

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for similar amounts. Docket No. 267 at 3–4, 6–7. The SEC is permitted to untangle this web via

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documents obtained through subpoena of Mr. Nicholson’s bank records.

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Thus, the Court DENIES Mr. Nicholson’s motion to quash the subpoena. Upon receipt of

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this order, the SEC is instructed to serve this order on Mr. Nicholson, and file a proof of service

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within three (3) court days.

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This order disposes of Docket No. 695.

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IT IS SO ORDERED.

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Dated: March 16, 2023
______________________________________
EDWARD M. CHEN
United States District Judge

United States District Court
Northern District of California

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