eBay Inc. v. Digital Point Solutions, Inc. et al

Filing 162

RESPONSE in Support re 125 MOTION to Strike 119 Answer to Amended Complaint ; Memorandum of Points and Authorities in support thereof MOTION to Strike 119 Answer to Amended Complaint ; Memorandum of Points and Authorities in support thereof PLAINTIFF EBAY INC.S REPLY IN SUPPORT OF MOTION TO STRIKE THE ANSWER OF DEFENDANTS THUNDERWOOD HOLDINGS, INC., BRIANDUNNING.COM AND KESSLERS FLYING CIRCUS filed byeBay Inc.. (Kennedy, Colleen) (Filed on 11/6/2009)

eBay Inc. v. Digital Point Solutions, Inc. et al

Doc. 162

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DAVID R. EBERHART (S.B. #195474) [e-mail] SHARON M. BUNZEL (S.B. #181609) [e-mail] COLLEEN M. KENNEDY (S.B. #227107) [e-mail] O'MELVENY & MYERS LLP Two Embarcadero Center, 28th Floor San Francisco, CA 94111 Telephone: [phone] Facsimile: [phone] Attorneys for Plaintiff eBay Inc.

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION EBAY INC., Plaintiff, v. DIGITAL POINT SOLUTIONS, INC., SHAWN HOGAN, KESSLER'S FLYING CIRCUS, THUNDERWOOD HOLDINGS, INC., TODD DUNNING, DUNNING ENTERPRISE, INC., BRIAN DUNNING, BRIANDUNNING.COM, and DOES 1-20, Defendants. Case No. C 08-04052 JF PVT PLAINTIFF EBAY INC.'S REPLY IN SUPPORT OF MOTION TO STRIKE THE ANSWER OF DEFENDANTS THUNDERWOOD HOLDINGS, INC., BRIANDUNNING.COM AND KESSLER'S FLYING CIRCUS Hearing Date: November 20, 2009 Time: 9:00 a.m. Judge: Hon. Jeremy Fogel

EBAY'S REPLY ISO MOT. TO STRIKE CASE NO. C 08-04052 JF PVT
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I.

INTRODUCTION The opposition filed by Defendants Thunderwood Holdings, Inc. ("THI"),

Kessler's Flying Circus ("KFC") and BrianDunning.com (herein, the "BD Entities") to eBay's motion to strike provides no justification for the BD Entities' improper assertion of the Fifth Amendment privilege in their answer to eBay's Second Amended Complaint ("SAC"). The BD Entities fail to cite even a single case that permits a collective entity to assert the Fifth Amendment in an answer to a complaint, nor do they address much of the controlling authority cited by eBay in its motion. The BD Entities instead 1) reargue their motion to stay and 2) ask the Court to rely on cases that are inapplicable to the issues raised by eBay's motion. Because the BD Entities cannot take advantage of the individual defendants' Fifth Amendment privilege to refuse to provide responses to eBay's SAC, the BD Entities' answer should be stricken. II. ARGUMENT A. The BD Entities Fail To Justify Their Improper Assertion Of The Fifth Amendment

The BD Entities do not contest that the improper invocation of the Fifth Amendment is a basis for striking an answer. Rather, they claim that their invocation of the Fifth Amendment in their answer to eBay's SAC was justified because they cannot admit or deny the allegations of the SAC without implicating the Fifth Amendment privilege against self-incrimination held by Brian and Todd Dunning. The BD Entities' argument ignores the controlling authority set forth in eBay's motion. The law is clear that the Fifth Amendment privilege against self-incrimination does not extend to collective entities, even where the collective entity is a purported "oneperson" entity. See eBay's Motion to Strike ("eBay Strike Mot.") at 3; Bellis v. United States, 417 U.S. 85, 100 (1974) (holding that regardless of size, the Fifth Amendment privilege against self-incrimination does not extend to collective entities). Indeed, THI and BrianDunning.com have acknowledged in their motion to stay that "a business entity has no Fifth Amendment privilege against self-incrimination." Motion to Stay of
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Defendants Brian Dunning, THI and BrianDunning.com (Docket No. 133) at 14. Having no Fifth Amendment privilege of their own, the BD Entities argue that Brian Dunning's invocation of his Fifth Amendment privilege "extends to" the BD Entities because Brian Dunning (along with his brother Todd Dunning, who, through Dunning Enterprise, Inc. ("DEI"), is also a representative of KFC) "is the only person who can respond on their behalf." Opposition of Defendants THI, KFC and BrianDunning.com to eBay's Motion to Strike ("BD Strike Opp.") at 3. Yet the BD Entities do not (and cannot) cite a single case that permits a collective entity to rely on an individual's Fifth Amendment privilege in a responsive pleading--even where that individual is the entity's sole representative. The BD Entities' argument instead rests entirely on generic Fifth Amendment cases discussing the circumstances under which an individual may assert the Fifth Amendment, see BD Strike Opp. at 3, 11 (citing cases that contain no discussion of whether collective entities may properly invoke an individual's Fifth Amendment privilege in an answer), and on their misplaced effort to distinguish cases regarding discovery issues not relevant to this motion. See id. at 12-13.1 As a result, the BD Entities largely ignore the authority cited in eBay's motion to strike, which clearly establishes that a collective entity--regardless of its size and regardless of whether the only knowledgeable individual has invoked the Fifth Amendment privilege--must answer a complaint and, if necessary, appoint an agent to do so. See eBay Strike Mot. at 3-4. The only case cited in support of eBay's motion to strike that the BD Entities
The following cases that the BD Entities attempt to "distinguish" in their opposition to eBay's motion to strike were not cited by eBay in its motion to strike at all: Navel Orange Admin. Comm. v. Exeter Orange Co., 722 F.2d 449 (9th Cir. 1983); United States v. 3963 Bottles, More or Less, 265 F.2d 332 (7th Cir. 1959); Priebe v. World Ventures, Inc., 407 F. Supp. 1244 (C.D. Cal. 1976); and Central States v. Carstensen Freight Lines, Inc., No. 96 C 6252, 1998 WL 413490 (N.D. Ill. July 17, 1998). These cases were cited by eBay only in its motion to compel (pending before Magistrate Judge Trumbull and set to be heard on November 13, 2009) in support of the argument that the BD Entities improperly refused to respond to discovery based on Brian and Todd Dunning's Fifth Amendment privileges. eBay's discovery motion raises legal issues distinct from those raised by this motion to strike, and the BD Entities' focus on these cases is somewhat inexplicable. In the interest of conserving judicial resources eBay will not address the BD Entities' wrongheaded discussion of case law relevant only to issues before a different court. -2EBAY'S REPLY ISO MOT. TO STRIKE CASE NO. C 08-04052 JF PVT
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actually address is SEC v. Leach, 156 F. Supp. 2d 491 (E.D. Pa. 2001), the holding of which the BD Entities mischaracterize as being made "in passing" and as constituting "unpersuasive dicta." See BD Strike Opp. at 14. In reality, the court in Leach directly confronted the issue of "whether it should excuse [the collective entity] from answering the Complaint on the ground that the only individual with the knowledge required to answer the Complaint . . . has invoked his Fifth Amendment privilege." 156 F. Supp. 2d at 494. The Leach court unequivocally rejected this position, stating that the entity was required to appoint an agent to answer the complaint who could do so without fear of selfincrimination--which could include "the corporation's attorney." Id. at 498. Moreover, the BD Entities entirely fail to address City of Chicago v. Reliable Truck Parts Co., No. 88 C 1458, 1989 WL 32923 (N.D. Ill. Mar. 31, 1989), which also held that, if necessary, a collective entity must appoint an agent--who "need not have `first-hand personal knowledge' of the facts reflected in the answers"--to satisfy its pleading obligations. Id. at *3. Because appointed agents can be educated in order to answer a complaint, it is irrelevant that the BD Entities "had no attorney representation prior to . . . June 2007" and that their current attorneys have "no knowledge of the information sought by eBay other than what has been told to them by Mr. Dunning." See BD Strike Opp. at 13; Reliable Truck Parts Co., 1989 WL 32923, at *3 (an appointed agent can be educated by gathering information from books, records, other officers or employees, or other sources). For this reason, it is simply not true that any responses to the SAC on behalf of the BD Entities "would necessarily implicate Mr. Dunning since he is the sole owner and representative of those entities." See BD Strike Opp. at 3. The act of appointing an agent is not incriminating to Brian Dunning for Fifth Amendment purposes: "In fifth amendment terms, the act of having to appoint an agent, while compelled, is not testimonial and therefore does not implicate the fifth amendment." See In re Grand Jury No. 86-3 (Will Roberts Corporation), 816 F.2d 569, 574 (11th Cir. 1987), abrogated on other grounds by Braswell v. United States, 487 U.S. 99, 102 (1988).
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The BD Entities' argument that they could not possibly appoint an agent to respond to eBay's SAC without compromising Brian and Todd Dunning's Fifth Amendment rights is also fatally undermined by two significant facts. First, DEI--the other of the two general partners of KFC, whose purported "sole representative" is Todd Dunning--has provided an answer to the SAC that does not assert any Fifth Amendment privilege. See Declaration of Colleen M. Kennedy in Support of eBay's Motion to Strike, previously filed on September 25, 2009, Ex. 4. Like Brian Dunning, Todd Dunning has asserted the Fifth Amendment in his answer to the SAC. That DEI can answer the SAC without abrogating Todd Dunning's Fifth Amendment rights shows that the BD Entities can do the same without abrogating the same rights of either Todd or Brian Dunning. Second, KFC-- of which the purported "sole representatives" are Brian and Todd Dunning--has provided substantive responses to eBay's Requests for Admissions, denying some 25 requests. See Declaration of Jean B. Niehaus in Support of eBay's Reply in Support of Motion to Strike, Ex. 1. These responses--which addressed matters occurring as early as 2003, see id., Ex. 1 at 5--were signed by KFC's counsel, belying the BD Entities' claim that their current attorneys cannot be educated on pre-June 2007 events. See BD Strike Opp. at 13-14. KFC's counsel is surely equally capable of signing an answer on KFC's behalf, as is any other person who may be educated on the matters necessary to respond to the SAC. Given these facts, the BD Entities cannot maintain that they are unable to appoint one or more agents to answer eBay's SAC; in fact, they are required to do so. B. This Motion Should Not Be Deferred Pending Resolution Of Defendants' Motion To Stay

The BD Entities devote seven of the thirteen pages of their opposition to facts and argument relevant not to this motion to strike, but to their motion to stay currently pending before this Court. The BD Entities ask this Court to defer hearing eBay's motion to strike until after it rules on the motion to stay, suggesting that a stay would moot or otherwise decide the issues raised by this motion to strike. BD Strike Opp. at 7-10. But the BD
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Entities fail to provide any basis to conclude that eBay's motion to strike is in any way dependent on the outcome of their motion to stay, much less that eBay's motion to strike would be mooted by the pending stay motion. As an initial matter, eBay has demonstrated that a stay is not warranted in this action: because no indictments have issued and the timing of any potential future indictments cannot be predicted, all of the relevant factors weigh against the issuance of a stay. See generally eBay's Opposition to Defendants' Motions to Stay, filed October 30, 2009 (Docket No. 151). Regardless of the outcome of the motion to stay, however, the Court's ruling should have no bearing on eBay's motion to strike, for several reasons. First, the Court's inquiry on a motion to stay is fundamentally different from that posed by the present motion: a stay motion asks the Court to evaluate a number of factors, including the prejudice to the parties, whether the discovery process will be abused and the efficient use of judicial resources, while this motion simply asks whether the BD Entities improperly invoked the Fifth Amendment to avoid answering the SAC. Second, at least one court has held that the lack of an answer on file hinders the court's ability to decide a motion to stay. See State Farm Mut. Auto. Ins. Co. v. Beckham-Easley, No. Civ. A. 01-5530, 2002 WL 31111766, at *2 (E.D. Pa. Sept. 18, 2002) ("The absence of an indictment coupled with the fact that this Court does not have an answer before it, impedes the Court's ability to discern the extent to which the legal and factual issues in the instant case are related to those under investigation."). Finally, even if this action were ultimately to be stayed in some form after an indictment issues and if the relevant factors then weigh in favor of a stay, the BD Entities should be required to file a proper answer now. This case will ultimately proceed against the BD Entities, and an answer must be in place in any event. There is no justification for suspending eBay's right to obtain the BD Entities' response to the allegations of the SAC. eBay's motion to strike was filed several weeks before the BD Entities' motion to stay, and should be resolved independently of that motion.
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III.

CONCLUSION The BD Entities have failed to justify their improper assertions of the Fifth

Amendment in their answer to eBay's SAC, and eBay's motion to strike should therefore be granted. DATED: November 6, 2009 DAVID R. EBERHART SHARON M. BUNZEL COLLEEN M. KENNEDY O'MELVENY & MYERS LLP By: /s/ David R. Eberhart DAVID R. EBERHART Attorneys for Plaintiff eBAY INC.

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