Davy v. Paragon Coin, Inc. et al
Filing
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ORDER GRANTING 189 Renewed Motion for Default Judgment. Status Report due by 7/2/2021. Signed by Judge Jeffrey S. White on June 23, 2021. (jswlc3S, COURT STAFF) (Filed on 6/23/2021)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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ASTLEY DAVY, et al.,
Plaintiffs,
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United States District Court
Northern District of California
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Case No. 18-cv-00671-JSW
ORDER GRANTING PLAINTIFFS'
RENEWED MOTION FOR DEFAULT
JUDGMENT
v.
Re: Dkt. No. 189
PARAGON COIN, INC., et al.,
Defendants.
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This matter comes before the Court upon consideration of Plaintiffs’ renewed motion for
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default judgment against Defendant Jayceon Terrell Taylor AKA “The Game”. The deadline to
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submit an opposition has passed, and Taylor has not opposed the motion. The Court concludes a
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reply is not necessary. The Court has considered Plaintiffs’ motion, the lack of opposition,
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relevant legal authority, and the record in this case, and it finds the motion is suitable for
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disposition without oral argument. The Court VACATES the hearing scheduled for July 9, 2021,
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and it HEREBY GRANTS Plaintiffs’ motion.
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ANALYSIS
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On March 26, 2021, the Court issued an Order granting, in part, and denying, in part
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Plaintiffs’ motion for default judgment, and it denied their request for a default judgment against
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Taylor. (Dkt. No. 185 (“3/26/21 Order”).) The Court will not repeat the facts or procedural
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history set forth in that Order or the Court’s previous orders in this case and will address any
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additional facts below.
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Under Federal Rule of Civil Procedure 55(b)(2), once a defendant is in default, a court, in
its discretion may grant a motion for default judgment. See Aldabe v. Aldabe, 616 F.2d 1089,
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1092 (9th Cir. 1980). “The general rule of law is that upon default the factual allegations of the
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complaint, except those relating to the amount of damages, will be taken as true.” Geddes v.
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United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (citations omitted). “However, a defendant is
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not held to admit facts that are not well-pleaded or to admit conclusions of law.” DirecTV, Inc. v.
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Hyunh, 503 F.3d 847, 854 (9th Cir. 2007) (internal quotations and citations omitted).
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When it determines whether to grant default judgment, the Court considers:
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(1) the possibility of prejudice to the plaintiff, (2) the merits of
plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4)
the sum of money at stake in the action; [and] (5) the possibility of a
dispute concerning material facts[.]
Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). Eitel also requires the Court to consider
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United States District Court
Northern District of California
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“the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the
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merits.” Eitel, 782 F.2d at 1472.
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The Court previously found: it has subject matter jurisdiction; there is sufficient evidence
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to show Taylor was served; and the Court has personal jurisdiction over him. The Court also
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incorporates by reference its prior rulings on prejudice, excusable neglect, the sum of money at
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stake, and the preference for resolving caes on their merits. (3/26/21 Order at 7:24-8:18, 14:25-
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15:13.) The Court also incorporates by reference the ruling that PRG Tokens are a “security” and
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that the PRG Tokens were offered or sold “by means of a prospectus or oral communication,
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which includes an untrue statement of a material fact or omit[s] … a material fact necessary in
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order to make the statements, in the light of the circumstances under which they were made, not
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misleading.” (See id. at 9:9-15.)
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The Court denied the motion as to Taylor because it found the Plaintiffs had not met their
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burden to show he could be considered a statutory seller, for purposes of their claims for violations
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of Sections 12(a)(1) and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. sections 77l(a)(1)-(2)
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and 77o(a). An individual may be held liable under Sections 12(a)(1) and (a)(2) if they are an
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owner who passes title to an unregistered security. In Pinter v. Dahl, the Supreme Court
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determined that a “person who successfully solicits the purchase” of a security and who is
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“motivated at least in part by a desire to serve his own financial interests or those of the security
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owner,” i.e. a “statutory seller” can be held liable under Section 12(a)(1) while an individual who
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is merely a “collateral participant” cannot be held liable. 486 U.S. 622, 643-647, 650 n.26 (1988);
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see also In re Daou Systems, 411 F.3d 1006, 1029 (9th Cir. 2005). The Pinter court also
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determined that individuals who solicit securities transactions but who may not actually transfer
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title in the security can be held liable. Id. at 646-47; see also Lone Star Ladies Inv. Club v.
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Schlotzky’s, Inc., 238 F.3d 363, 369-371 (5th Cir. 2001) (holding defendants not liable as statutory
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sellers in “firm commitment underwriting,” i.e. where “stocks are sold to underwriters under a
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firm commitment and the underwriters sell to the public” based on findings that plaintiffs had not
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alleged defendants’ role “was not the usual one” in firm underwriting and “went farther and
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United States District Court
Northern District of California
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became a vendor’s agent”).
Plaintiffs maintain that Taylor can be considered a “statutory seller” for purposes of their
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Section 12 claims. To satisfy the remaining Eitel factors they must show that Taylor “did more
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than simply urge another to purchase a security; rather, [they] must show that [Taylor] solicited
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purchase of the securities for [his] own financial gain.” In re Daou, 411 F.3d at 1029. As the
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Court previously discussed, soliciting requires more than giving gratuitous advice, and the Ninth
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Circuit has not issued definitive guidance on the type of facts that would show more than mere
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participation. (3/26/21 Order at 10:1-12:12.)
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Plaintiffs allege that Paragon “employed” Taylor as a celebrity endorser to solicit
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investments. (Second Amended Complaint (“SAC”) ¶¶ 45, 82, 233-234, 253, 265-267).)
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Plaintiffs have consistently referred to Taylor as a member of Paragon’s “advisory board,” which
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suggests that he was affiliated in some way with Paragon. Plaintiffs do not allege that clearly
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allege Taylor was a Paragon employee, rather than an outside consultant, but the Court does not
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find that fact dispositive. See, e.g., Moore v. Kayport Package Express, Inc., 885 F.2d 531, 535-
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36 (9th Cir. 1989). Plaintiffs also do not clearly allege in the SAC that Paragon paid Taylor; nor
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do they support their argument with evidence of that fact. However, Plaintiffs highlight that the
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Paragon White Paper stated that “‘[f]ounders and team members’ would be prohibited from
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‘liquidating’ more than 20% of their PRG Tokens in the first calendar year, as this would ‘keep a
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stable token price’ and ‘keep[] their interests aligned with the Paragon community’” and allege
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Taylor would be considered a team member. (SAC ¶ 202.) Upon consideration of Plaintiffs’
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renewed motion, the Court is persuaded the allegations are sufficient to show that Taylor acted for
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his own gain or for Paragon’s gain and, thus, could be considered a statutory seller. Therefore, the
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Court concludes that each of the Eitel factors weighs in favor of granting Plaintiffs’ renewed
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motion for default judgment.
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CONCLUSION
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For the foregoing reasons, the Court GRANTS Plaintiffs’ renewed motion for default
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judgment relating to the alleged violations of Sections 12(a)(1-2) of the Securities Act of 1933.
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Pursuant to Federal Rule of Civil Procedure 55(b)(2), Jayceon Terrell Taylor a/k/a “The Game” is
found jointly and severally liable with Paragon, Inc., Jessica VerSteeg, Egor Lavrov, Eugene
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United States District Court
Northern District of California
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“Chuck” Bogorad, Alex Emelichev, and Gareth Rhodes in the amount of $12,066,000, plus pre-
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judgment and post-judgment interest.
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The Court ORDERS Plaintiffs to file a further status report regarding how they intend to
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proceed with respect to Black Rabbit Holdings by July 2, 2021 and their proposed timing for filing
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a motion for attorneys’ fees and costs and the submission of a final judgment.
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IT IS SO ORDERED.
Dated: June 23, 2021
______________________________________
JEFFREY S. WHITE
United States District Judge
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