United States Commodity Futures Trading Commission v. Paron Capital Management, LLC et al

Filing 247

ORDER DENYING MOTION TO DISQUALIFY JUDGE, TO COMPEL, AND TO EXTEND DISCOVERY re 165 Request for Judicial Notice filed by James Devlin Crombie, 162 MOTION to Compel Paron, extend discovery and for magistrate judge to recuse filed by James Dev lin Crombie, 166 Exhibits, filed by James Devlin Crombie, 173 Statement filed by James Devlin Crombie, 164 Letter Brief, filed by James Devlin Crombie, 163 MOTION to Compel, extend discovery and for magistrate judge to recuse filed by James Devlin Crombie, 175 Proposed Order, filed by James Devlin Crombie. Signed by Judge Nathanael M. Cousins on 11/5/2012. (nclc1S, COURT STAFF) (Filed on 11/5/2012)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 SAN FRANCISCO DIVISION 9 10 UNITED STATES COMMODITY FUTURES TRADING COMMISSION, 11 Plaintiff, 12 13 14 v. PARON CAPITAL MANAGEMENT, LLC, and JAMES D. CROMBIE, Case No. 11-cv-04577 CW (NC) ORDER DENYING CROMBIE’S MOTION TO DISQUALIFY JUDGE, TO COMPEL, AND TO EXTEND DISCOVERY Re: Doc. Nos. 162, 163, 164, 165, 166, 173, and 175 Defendants. 15 16 Pro se defendant James Crombie moves to disqualify the magistrate judge from 17 18 further participation in this case due to an alleged conflict of interest; to compel the 19 production of documents by co-defendant Paron Capital Management; and to extend the 20 time period for discovery to December 31, 2012. Doc. Nos. 162, 163.1 Crombie supplemented his motion with three requests for judicial notice of more 21 22 than 700 pages of materials. Doc. Nos. 164, 165, 166. Those requests included a 23 request to dismiss this case with prejudice and to sanction Paron for alleged “privacy 24 ethics offenses.” Doc. No. 164 at 13. 25 Plaintiff CFTC responded to Crombie’s motion and objected to Crombie’s 26 requests for judicial notice. Doc. Nos. 167, 174. Crombie replied. Doc. No. 168. Paron 27 1 28 Documents 162 and 163 are each 101 pages long, were filed on the same day, and appear to be identical. I will rule on document 162, as it was filed first, and deny document 163 as a duplicate filing. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 1 objected to Crombie’s requests to compel and to extend discovery. Doc. No. 180. 2 Crombie also filed two documents titled as “requests for ruling.” Doc. Nos. 173, 175. 3 For the reasons that follow, I deny the motion for disqualification, grant in part 4 and deny in part the requests for judicial notice, deny the motion to compel, and deny the 5 motion to extend discovery.2 6 I. Procedural History This Dispute 3 7 A. 8 Plaintiff, the U.S. CFTC, charges that Paron Capital Management, LLC, by and 9 through Crombie, made fraudulent statements to the National Futures Association (NFA) 10 during an audit of Paron conducted by the NFA under the Commodities Exchange Act. 11 See Complaint, Doc. No. 1, filed Sept. 15, 2011, and Amended Complaint, Doc. No. 12 111, filed March 28, 2012. CFTC alleges that Crombie was in control of Paron and 13 failed to act in good faith or knowingly induced the acts constituting Paron’s violations 14 and is therefore liable for them. 15 On December 21, 2011, Crombie filed a third-party complaint against Peter 16 McConnon and Timothy Lyons. McConnon and Lyons co-founded Paron with Crombie 17 and now are its sole remaining members. In his third-party complaint, Crombie alleges 18 that McConnon and Lyons were responsible for the misrepresentations of Paron and that 19 they had made various false statements to the NFA, CFTC, the Delaware court, and this 20 Court. 21 On April 6, 2012, Judge Wilken granted McConnon and Lyons’ motion to dismiss 22 23 24 25 26 2 On August 9, Crombie filed a motion requesting “charges of contempt and obstruction of justice” against CFTC and the National Futures Association, and on August 10, he filed a similar request seeking contempt against CFTC and Paron. Doc. Nos. 176, 177. I denied these motions. Doc. No. 179. On October 14, Crombie filed a separate motion to compel. Doc. No. 239. I will address this, and later filings, in separate orders. 27 3 28 A more detailed procedural history of the case was set forth by Judge Wilken in her order denying Crombie’s motion for leave to file an amended third-party complaint. Doc. No. 157, filed June 25, 2012. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 2 1 Crombie’s complaint against them. Doc. No. 117, filed April 6, 2012. The Court 2 permitted Crombie to move for leave to amend his complaint if he could remedy the 3 problems identified in the dismissal order. Then, after Crombie moved for leave to filed 4 an amended complaint, the Court denied Crombie’s request and denied leave for further 5 amendments. Doc. No. 157, filed June 25, 2012. 6 CFTC and Paron settled their dispute, resulting in a permanent injunction against 7 Paron. Doc. No. 190, filed Sept. 5, 2012. Accordingly, the claims that remain at issue in 8 the case are those by CFTC against Crombie. 9 The District Court has referred all discovery in this case to me. Doc. No. 30. 10 B. 11 The resolution of the present motions requires reference to three other lawsuits in 12 13 Other Disputes three different courts: 1. In Delaware Chancery Court, Paron Capital sued Crombie for fraud and 14 breach of fiduciary duty in April 2011. That case resulted in a $35 million award against 15 Crombie, which he has challenged in a motion for reconsideration and vows to appeal. 16 Paron Capital Management, LLC, et al. v. Crombie, Del. Chancery, Case No. 6380- 17 VCP. See generally, Joint Case Management, Doc. No. 56, discussing Delaware case. 18 2. Crombie is a debtor in an adversarial Chapter 7 bankruptcy proceeding, 19 Case No. 12-bk-10389, pending in the U.S. Bankruptcy Court, Northern District of 20 California. Crombie submitted to this Court a Joint Discovery Plan filed in the 21 Bankruptcy Court. Doc. No. 162-1. 22 3. Paron Capital is a plaintiff and cross-defendant in a dispute with Rothstein, 23 Kass & Company, an accounting firm. That case is pending in San Francisco County 24 Superior Court, Case No. CGC-11-510203. Crombie is not a party to that dispute, but 25 submitted copies of a motion for leave to file a cross-complaint (Doc. No. 162-2), and 26 the proposed cross-complaint and portions of depositions transcripts for Peter 27 McConnon and Timothy Lyons from that case (Doc. No. 162-3). 28 Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 3 1 II. Motion to Disqualify 2 I first address Crombie’s request that I disqualify myself under 28 U.S.C. 3 § 455(a). A magistrate judge “shall disqualify himself in any proceeding in which his 4 impartiality might reasonably be questioned.” 28 U.S.C. § 455(a). 5 The standard for determining whether a judge’s “impartiality might reasonably be 6 questioned” is “whether a reasonable person with knowledge of all the facts would 7 conclude that the judge’s impartiality might reasonably be questioned . . . .” United 8 States v. Holland, 519 F.3d 909, 913 (9th Cir. 2008). What matters under § 455(a) “is 9 not the reality of bias or prejudice but its appearance.” Liteky v. United States, 510 U.S. 10 540, 548 (1994). This inquiry is an objective one, made from the perspective of a 11 reasonable person who is informed of all the surrounding facts and circumstances. 12 Microsoft Corp. v. United States, 530 U.S. 1301, 1302 (2000). The reasonable person is 13 not “hypersensitive or unduly suspicious” but is a “well-informed, thoughtful observer.” 14 Holland, 519 F.3d at 913. 15 A judge should not disqualify himself when the facts do not warrant 16 disqualification, as there is an equally compelling obligation not to recuse where it is not 17 appropriate. Id. at 912 (“We are as bound to recuse ourselves when the law and facts 18 require as we are to hear cases when there is no reasonable factual basis for recusal.”). 19 Finally, although there is no statutory time limit on motions to disqualify under 20 § 455, courts scrutinize motions to disqualify that are filed after the party seeking 21 disqualification has sustained an adverse ruling. E.g., Miles v. Ryan, --- F.3d ---, 2012 22 WL 4465606, at *2 (9th Cir. Sept. 28, 2012) (statement in support of order denying 23 motion for recusal) (finding that motion for recusal made after case was decided was 24 “inappropriate”); United States v. Sierra Pacific Industries, 759 F. Supp. 2d 1198, 1205- 25 06 (E.D. Cal. 2010) (denying disqualification). “Granting a motion to recuse many 26 months after an action has been filed wastes judicial resources and encourages 27 manipulation of the judicial process.” Willner v. University of Kansas, 848 F.2d 1023, 28 1029 (10th Cir. 1988). Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 4 1 Here, Crombie contends that my impartiality might reasonably be questioned 2 under two theories. First, Crombie contends that I have a “long personal and 3 professional relationship history” with Mark Fickes, counsel for Paron. Doc. No. 162 at 4 15. In this, Crombie’s charge is exaggerated and mostly incorrect. It is correct that Mr. 5 Fickes and I were classmates in law school at the University of California, Hastings 6 College of Law, from 1992-1995. Yet we have had neither a personal nor a professional 7 connection since 1995. Crombie asserts that we “worked on related or same cases in the 8 recent years” but provides no examples. Mr. Fickes previously worked at the U.S. 9 Securities and Exchange Commission. Immediately before becoming a magistrate judge, 10 I was employed by the U.S. Department of Justice (in the U.S. Attorney’s Office, and 11 before that, for the Antitrust Division) from 2003 to 2011. I have never worked for the 12 SEC. To my knowledge, I have never worked with Mr. Fickes, and we have never 13 worked on the same case. If we ever worked on “related” cases, I am not aware of it. 14 Crombie has not provided evidence of the cases he thinks connect me with Mr. Fickes. 15 At worst, it can be said that I have had similar educational and employment 16 experiences with one of the attorneys appearing before me. Having similar experiences 17 and interests as a lawyer appearing before me does not disqualify me from being a judge 18 in the case. See Miles, 2012 WL 4465606, at *1. 19 Second, Crombie contends that because he has not prevailed on various discovery 20 motions, then I must not be impartial. Adverse rulings, without more, do not create the 21 appearance of bias. Liteky, 510 U.S. at 555 (“Judicial rulings alone almost never 22 constitute a valid basis for a bias or partiality motion.”). And here, contrary to 23 Crombie’s assertions, I have granted some of Crombie’s disputed discovery requests. 24 For example, on January 26, 2012, I permitted his request to seek discovery from eleven 25 non-parties. Doc. No. 75. On February 16, 2012, I expanded the discovery to three 26 more non-parties. Doc. No. 81. On March 30, 2012, I ordered Paron to file a summary 27 of all categories of documents it had produced to Crombie and CFTC. Doc. No. 113. 28 Paron complied, identifying 173,000 pages of documents in various categories. Doc. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 5 1 No. 115. Also on March 30, I required Paron to produce to Crombie exemplars of 2 marketing documents that were sent to and from a Paron email address, 3 info@paroncap.com, and to explain the procedure it used in selecting the exemplars. Id. 4 In sum, a reasonable person, who is informed of all the surrounding facts and 5 circumstances in this case, would not reasonably question my impartiality in this case. 6 Therefore, I decline Crombie’s request that I disqualify myself. 7 III. 8 9 10 Requests for Judicial Notice I turn next to Crombie’s requests for judicial notice under Federal Rule of Evidence 201. Doc. Nos. 164, 165, 166. Under Rule 201, the court “may judicially notice a fact that is not subject to 11 reasonable dispute because it: (1) is generally known within the trial court’s territorial 12 jurisdiction; or (2) can be accurately and readily determined from sources whose 13 accuracy cannot reasonably be questioned.” See United States v. Howard, 381 F.3d 873, 14 876 n.1 (9th Cir. 2004); Botelho v. U.S. Bank, N.A., 692 F. Supp. 2d 1174, 1177-78 15 (N.D. Cal. 2010). The Ninth Circuit has traditionally interpreted Rule 201 as allowing 16 courts to “take notice of proceedings in other courts, both within and without the federal 17 judicial system, if those proceedings have a direct relation to matters at issue.” United 18 States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 19 (9th Cir. 1992). In Botelho, the Court denied a contested request for judicial notice, and 20 the Court noted that the objection by one party was an indication that a document’s 21 authenticity was not so clear “that only an unreasonable person would insist on 22 disputing” it. Botelho, 692 F. Supp. 2d at 1177 (citations omitted). 23 Here, Crombie asks the Court to take judicial notice of more than 700 pages of 24 materials. Attached to his motion to compel and to extend discovery (Doc. No. 162), 25 Crombie submitted: (1) a pleading (joint discovery plan) from his bankruptcy case in the 26 Northern District of California; (2) pleadings from the Paron Capital v. Rothstein, Kass 27 & Company lawsuit in San Francisco Superior Court; and (3) deposition transcripts of 28 McConnon and Lyons from the San Francisco Superior Court case. In documents Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 6 1 attached to notices numbered 164 and 166, Crombie attached pleadings, documents 2 produced through discovery, transcripts, and correspondence with counsel, from 3 arbitration proceedings and from the Delaware case between Paron Capital and 4 Crombie.4 CFTC objects to Crombie’s requests for judicial notice and asks the Court to 5 6 strike them as improper. Doc. No. 174. CFTC disagrees with Crombie that the 7 information he has submitted is undisputed. 8 In considering the materials submitted by Crombie under Federal Rule of 9 Evidence 201, I determine that only the pleadings from Crombie’s bankruptcy case in 10 this District are not subject to reasonable dispute and have a direct relation to matters at 11 issue. The bankruptcy pleadings can be accessed accurately and readily via PACER (an 12 internet, publicly-accessible court service), and I find that the discovery plan in the 13 bankruptcy case has a direct connection to this dispute. I therefore take judicial notice of 14 the discovery plan filed at document 162-1. As to the pleadings and transcripts from Delaware Chancery Court, the 15 16 authenticity of those materials cannot so easily be “accurately and readily determined.” 17 The materials are not available through PACER or the Chancery Court’s web page. 18 Furthermore, CFTC has objected to the request for judicial notice of these documents. I 19 decline the invitation to take judicial notice of the Delaware materials. 20 As to the pleadings from San Francisco Superior Court, I am not persuaded that a 21 lawsuit by Paron Capital against its accountant has a “direct relation” to this case, which 22 is a fraud case by CFTC against Paron Capital and Crombie. I therefore do not take 23 notice of the Superior Court case pleadings or the depositions from that case. Finally, the various other materials submitted—including emails among attorneys 24 25 and the parties, documents produced in discovery from other parties, pleadings from 26 arbitrations, and pleadings in the bankruptcy proceeding that appear to be repetitive of 27 28 4 There are no documents attached to document 165, which primarily repeats arguments made by Crombie in other submissions discussed in this Order. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 7 1 other pleadings in this case—are not appropriate for judicial notice either, as they are not 2 undisputed facts, and the Court cannot readily ascertain the accuracy and authenticity of 3 the documents. In sum, I take judicial notice of the bankruptcy discovery plan in document 162-1 4 5 and decline the request for judicial notice of all other documents submitted by Crombie 6 in documents 164, 165, and 166. 7 IV. 8 9 Requests to Dismiss Case, for Sanctions, and for Entry of Evidence Crombie, amid his requests for judicial notice, makes various demands for relief beyond the relief he requests in his motion to compel and to extend the discovery period. 10 In both documents 164 and 165, Crombie asks for an “entry of undisputable evidence” 11 and to “dismiss case with prejudice.” Underlying both requests are Crombie’s apparent 12 desire for this court to review and correct litigation events that took place in Delaware 13 Chancery Court. See Doc. No. 165 at p. 1. 14 Although the Court must afford pro se litigants’ pleadings liberal construction, 15 pro se litigants are nevertheless “bound by the rules of procedure” the same as other 16 litigants. Siemion v. Stewart, No. cv-11-120-BLG-RFC-CSO, 2012 WL 1424736, at *20 17 (D. Mont. April 24, 2012) (quoting Ghazali v. Moran, 46 F.3d 52, 53 (9th Cir. 1995)). 18 Pro se litigants like Crombie “must follow the same rules of procedure that govern other 19 litigants.” King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987). And, based on its inherent 20 powers, a court may strike material from the docket, including portions of a document, 21 reflecting procedural impropriety or lack of compliance with court rules or orders. Jones 22 v. Metro Life Ins. Co., No. 08-cv-03971 JW (DMR), 2010 WL 4055928, at *6 (N.D. Cal. 23 Oct. 15, 2010) (collecting cases). 24 Here, I strike Crombie’s documents 164 and 165 to the extent those filings 25 request dismissal, summary judgment, sanctions, or for this court to intervene in the 26 Delaware Chancery dispute. Federal Rule of Civil Procedure 7(b)(1) mandates that 27 requests for a court order must be made by motion. All motions “must state with 28 particularity” the grounds for seeking the order, and state the relief sought. Fed. R. Civ. P. 7(b)(1). Civil Local Rules of the Northern District of California mandate additional Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 8 1 requirements for motions. Local Rule 7-4(a)(3) requires a motion to include a statement 2 of issues to be decided; 7-4(a)(4) requires a succinct statement of relevant facts; 7-3(d) 3 provides that once a reply brief is filed, no additional submissions are permitted without 4 leave of court; 7-5(a) requires that “factual contentions” made in support of a motion 5 “must be supported by a declaration and by appropriate references to the record”; and 7- 6 8(a) requires that a motion for sanctions must be separately filed. Contrary to what is required by the rules, Crombie’s submissions in documents 7 8 164 and 165 are not specific as to the grounds for seeking relief, the alleged facts are not 9 succinct and are not supported by a reference to record evidence, and Crombie has mixed 10 requests for relief in this case, in Delaware Chancery Court, and in bankruptcy court. Under Local Rule 1-4, if a party fails to follow the local court rules, the court may 11 12 impose any authorized sanction. Crombie has a responsibility to participate in the 13 proceedings in accordance with the rules. His failure to do so strains the court and, more 14 significantly, works unfair prejudice on other parties and witnesses in this dispute, who 15 are compelled to defend themselves. I therefore strike documents 164 and 165, except 16 the portions requesting judicial notice. 17 V. Motion to Compel 18 In document 162, Crombie moves to compel Paron to produce documents to him. 19 Many of the assertions are ones that were addressed during earlier discovery hearings in 20 the case. And most of the assertions concern the Delaware case and Crombie’s 21 bankruptcy case. For example, at page 3 of his motion, Crombie challenges Paron’s pre- 22 trial disclosures in the Delaware case. Yet, as summarized by Paron, Paron has produced 23 to Crombie in this case the deposition transcripts, trial exhibits, all documents produced 24 to or from Crombie, and all documents received from the NFA in the Delaware action. 25 Doc. No. 115 at 2. 26 Similarly, at page 6 of his motion, Crombie seems to invite my intervention in the 27 discovery process in the bankruptcy court. This Court, however, lacks jurisdiction over 28 the bankruptcy action, and to be clear, I am not empowered to supervise discovery in the bankruptcy proceeding. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 9 At bottom, having considered the evidence submitted by Paron as to the 1 2 documents it has produced in this case (Doc. No. 115), and the assertions by Crombie as 3 to his need for additional documents from Paron, I find that Crombie has not 4 demonstrated that Paron has failed to make disclosures or to provide discovery under 5 Federal Rule of Civil Procedure 37. Crombie’s motion to compel is denied. 6 VI. Motion to Extend Discovery 7 Finally, Crombie seeks to extend the fact discovery period from July 13 to 8 December 31, 2012. Doc. No. 162 at p. 8. A discovery schedule may be modified “only 9 for good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). 10 Here, Crombie asserts that more time is needed for discovery because on July 12, 11 the day before the end of discovery, CFTC produced additional documents to him. Doc. 12 No. 162 at p. 8. CFTC, in opposing the request, notes that it earlier produced documents 13 on January 4, 2012, February 28, 2012, and April 30, 2012, and that it has produced 14 nearly every non-confidential written communication in its files, whether requested by 15 the defendants or not. Doc. No. 167 at n.3. 16 The particular documents that Crombie received on July 12 from CFTC were 17 pleadings from the San Francisco Superior Court case between Paron and accounting 18 firm Rothstein, Kass & Company. The significance of the Rothstein Kass case to 19 Crombie is that a judge in that case has permitted discovery from McConnon and Lyons, 20 whereas in this case Crombie asserts he has been denied that same discovery. This, 21 however, does not evidence good cause. The key distinction between the two cases is 22 that in this case, the Court dismissed Crombie’s claim against McConnon and Lyons, 23 whereas in the Rothstein Kass case, the court has not reached that procedural question. 24 Having reviewed all of Crombie’s pleadings, I conclude that if Crombie were 25 permitted more time for discovery, he would likely use it to pursue claims, defenses, and 26 interests in the Delaware action, the bankruptcy action, the Rothstein Kass action, and in 27 newly planned suits in this Court. Crombie has not plainly presented good cause to 28 extend the discovery period in this case. Therefore, his motion to extend the discovery period to December 31 is denied. Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 10 *** 1 2 In conclusion, the Court denies the motion for disqualification, grants in part and 3 denies in part the requests for judicial notice, denies the motion to compel, and denies 4 the motion to extend the discovery period. 5 Any party may object to this order within fourteen days. Fed. R. Civ. P. 72(a). 6 IT IS SO ORDERED. 7 DATED: November 5, 2012 ____________________________ NATHANAEL M. COUSINS United States Magistrate Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No. 11-cv-04577 CW (NC) ORDER DENYING MOT. TO DISQUALIFY 11

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