Securities And Exchange Commission v. Wu et al

Filing 121

NOTICE OF QUESTIONS FOR HEARING ON MOTIONS FOR TERMINATING SANCTIONS. Signed by Judge Jeffrey S. White on 11/24/15. (jjoS, COURT STAFF) (Filed on 11/24/2015)

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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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NOTICE OF QUESTIONS FOR
HEARING ON MOTION FOR
TERMINATING SANCTIONS

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v.

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THOMAS S. WU,

United States District Court
Northern District of California

Re: Dkt. No. 113

Defendant.

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Case No. 11-cv-04988-JSW

TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD, PLEASE TAKE NOTICE

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OF THE FOLLOWING QUESTIONS FOR THE HEARING SCHEDULED ON DECEMBER

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11, 2015 AT 9:00 A.M.: The Court has reviewed the parties’ papers, and the parties shall not

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repeat the arguments set forth therein. If any party intends to rely on authorities not previously

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cited to this Court, that party is ORDERED to notify the Court and opposing counsel of the

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citations of these authorities reasonably in advance of the hearing and to make copies available at

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the hearing.

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The parties shall be prepared to address the following questions at the hearing:

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1.

Plaintiff Securities and Exchange Commission (“SEC”) may wish to file an

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administrative motion for leave to file its October 2, 2015 motion, which: (a) exceeds the page

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limits set forth in this Court’s standing orders and (b) does not include a one-page summary of

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argument. If Plaintiff is unable to obtain a stipulation, any such motion should be filed

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sufficiently in advance of the hearing for Defendant Thomas S. Wu (“Wu”) to file an opposition

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and for the Court to rule. See Civil L.R. 7-11. If the Court does not grant a motion for leave

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before the hearing, the parties shall be prepared to address whether the Court should strike the

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SEC’s motion, or deem waived all arguments raised after page 15 of the motion.

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2.

The fourth factor of the Ninth Circuit’s test for determining whether dismissal or

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default is appropriate under Rule 37 of the Federal Rules of Civil Procedure is the public policy

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favoring disposition of cases on their merits. If the Court does not order terminating sanctions at

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this time, will the Court be confronted with the same question at the time of trial? Is there any

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realistic possibility that the Court will be able to dispose of this case on the merits?

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3.

The fifth factor of the Ninth Circuit’s test is the availability of less drastic

sanctions. Although here, the motion is for entry of default rather than dismissal, the Court

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considers that the following factors are relevant: “(1) Did the court explicitly discuss the feasibility

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of less drastic sanctions and explain why alternative sanctions would be inadequate? (2) Did the

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court implement alternative methods of sanctioning or curing the malfeasance before ordering

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[terminating sanctions]? (3) Did the court warn the plaintiff of the possibility of [terminating

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United States District Court
Northern District of California

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sanctions] before actually ordering [such sanctions]?” Malone v. U.S. Postal Service, 833 F.2d

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128, 132 (9th Cir. 1987). Are less drastic sanctions than judgment against Wu feasible? Why is

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entry of default appropriate at this stage of the proceedings?

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a.

Under this factor, must the Court consider only less drastic sanctions that

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would induce Wu to appear for his deposition in the Northern District of California as ordered?

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Or must the Court also consider less drastic sanctions that would not induce Wu to appear, but

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would mitigate or cure the prejudice to the SEC (under the third factor of the Ninth Circuit’s test)

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of Wu’s failure to comply? What authority do the parties have for their position on this issue?

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b.

Will any less drastic sanction induce Wu to comply with the Court’s order

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for him to appear at his deposition? The Court now explicitly warns Wu of the possibility of

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terminating sanctions if he fails to comply with the order to appear for his deposition in the

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Northern District of California. If the Court were to provide Wu with one final opportunity to

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comply, does Wu contend that there is any possibility that he will take advantage of that

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opportunity, or would his refusal to return to the United States to be deposed remain unaltered?

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c.

Would any lesser sanction serve adequately to mitigate or cure the prejudice

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to the SEC? For instance, is there any issue upon which the Court may properly hold that it will

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draw an adverse inference at the summary judgment stage, or issue adverse inference jury

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instructions, as a sanction for Wu’s failure to appear for deposition? See Fed. R. Civ. P.
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37(b)(2)(A)(i)-(ii). Under the specific circumstances of this case, would there be any substantive

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difference between such an adverse inference sanction and an order for terminating sanctions

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under Rule 37(b)(2)(A)(vi), other than to cause delay? Alternatively, would it be feasible to

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preclude Wu from testifying at trial, if he refuses to appear for deposition, or would this prejudice

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the SEC more than it would prejudice Wu? What about any other less drastic sanction? In posing

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this question, the Court does not wish any party to repeat arguments set forth in the briefs

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regarding alternatives to the Court’s order for Wu’s deposition in the Northern District of

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California. Rather, the parties should focus on sanctions and remedies for Wu’s admitted refusal

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to comply with that order.

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4.

Why should the Court not be persuaded by the reasoning of SEC v. Razmilovic,

United States District Court
Northern District of California

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738 F.3d 14, 25-27 (2d Cir. 2013), in which the Second Circuit concluded that the entry of

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terminating sanctions against the defendant was not an abuse of discretion where the defendant

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failed to comply with an order to appear for deposition in New York? Wu contends that his fear

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of indictment and arrest justifies his refusal to return to the United States. In what way is his

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defiance of the order for his deposition less willful than the conduct of defendant Razmilovic, who

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refused to return to the United States for deposition following his indictment? The Razmilovic

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court expressly held the defendant was not sanctioned for being a fugitive, but rather, for failing to

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appear for his deposition.

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5.

Should this Court reconsider the Magistrate Judge’s order for Wu to appear for

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deposition in the United States despite Wu’s failure to file a motion for relief from that order

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pursuant to Civil Local Rule 72-2? If so:

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a.

The Court notes that the Magistrate Judge held that “a voluntary deposition

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is not an acceptable substitute for Mr. Wu’s compelled testimony in this case,” relying on SEC v.

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Sabhlok, No. C 08-4238 CRB (JL), 2009 WL 3561523 at *7 (N.D. Cal. Oct. 30, 2009). (July 7,

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2015 Order at 6.) Is this case distinguishable from Sabhlok because the SEC has not sought

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issuance of a Walsh Act subpoena for the compelled deposition of a witness, see 28 U.S.C.

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§ 1783, but has noticed the deposition of the Defendant in this action pursuant to Federal Rule of

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Civil Procedure 30?
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b.

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Ther would be an obvious l
re
logistical dif
fficulty asso
ociated with seeking this

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Court’s interve
ention during a depositio in Hong K
g
on
Kong. Is the any other reason that conducting
ere
r

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the deposition at the U.S. Consulate Ge
e
C
eneral in Ho Kong, su
ong
ubject to stip
pulated jurisd
diction, is

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not feasible? Would it be feasible for the Court to order: (i) th Wu pay, i advance, a of the
t
W
f
t
hat
in
all

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SE
EC’s costs of taking and reporting the deposition at the U.S. c
f
r
e
consulate in Hong Kong including
g,

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but not limited to fees for travel time and all associ
t
t
iated expens and (ii) t the depo
ses,
that
osition in

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Ho Kong tak place with
ong
ke
hout prejudic to the SEC seeking a further depo
ce
C
osition in the Northern
e

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Dis
strict of Cali
ifornia, and/o terminatin sanctions if the Cour found that despite the SEC’s good
or
ng
s,
rt
t
d

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fait efforts, th deposition at the U.S. Consulate h proved in
th
he
n
had
nfeasible in p
practice?
c.

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United States District Court
Northern District of California

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Are the parties aware of any case in whi a court h held that fear of
a
y
ich
has

ind
dictment and arrest const
d
titutes good cause for fai
ilure to appe at a depo
ear
osition?
6.

If the Court were to gran the SEC’s motion, wh is the nex step? Sho
nt
s
hat
xt
ould the

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Court then sche
edule an evidentiary hea
aring on the i
issue of dam
mages, or wo
ould a differe course be
ent
e

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app
propriate?

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IT IS SO ORDER
S
RED.
Da
ated: Novemb 24, 2015
ber
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__
___________
__________
____
JE
EFFREY S. W
WHITE
Un
nited States D
District Judg
ge

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