Takiguchi et al v. MRI International, Inc. et al

Filing 404

ORDER granting 255 Motion to Certify Class (see attached for details). Plaintiffs' proposed form of notice due 4/5/2016. Objections due 4/15/2016. Signed by Judge Howard D. McKibben on 3/21/16. (Copies have been distributed pursuant to the NEF - JC)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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SHIGE TAKIGUCHI, FUMI NONAKA,
MITSUAKI TAKITA, TATSURO SAKAI,
SHIZUKO ISHIMORI, YUKO NAKAMURA,
MASAAKI MORIYA, HATSUNE HATANO,
and HIDENAO TAKAMA, Individually
and on Behalf of All Others
Similarly Situated,

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Plaintiffs,
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vs.
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MRI INTERNATIONAL, INC., EDWIN J )
FUJINAGA, JUNZO SUZUKI, PAUL
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MUSASHI SUZUKI, LVT, INC., dba
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STERLING ESCROW, and DOES 1-500, )
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Defendants.
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_________________________________ )

2:13-cv-01183-HDM-VCF
ORDER GRANTING CLASS
CERTIFICATION

Before the court is the plaintiffs’ motion for class

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certification (#255).

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and plaintiffs have replied (#347).

Defendants have opposed (#336, #337 & #338),

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Plaintiffs are nine Japanese investors who bring this suit on

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behalf of a putative class of 8,700 individuals who invested with

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defendant MRI International, Inc. (“MRI”) between July 5, 2008, and

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May 1, 2013.

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Vegas with a branch in Tokyo, Japan.

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run a business that dealt in the purchase and collection of

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“Medical Accounts Receivable” (“MARS”).

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solicited investments – primarily from individuals in Japan – by

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promising a safe and secure return on investments.

MRI is a Nevada corporation headquartered in Las
Since 1998, MRI purported to

To obtain money, MRI

MRI’s U.S.

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operations were run by its president, CEO and sole shareholder,

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defendant Edwin Fujinaga (“Fujinaga”), and the Tokyo operations –

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from which marketing and solicitation of investments were

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controlled – were run by defendant Junzo Suzuki.

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Musashi Suzuki was also involved in the marketing and sales of MRI

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securities and responsible for many of the oral and written

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misrepresentations given to investors.

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(“Sterling Escrow”) received and distributed the investors’ funds

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and effectively operated as MRI’s bookkeeper.

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that MRI, Fujinaga, and the Suzukis specifically and repeatedly

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assured MRI’s prospective and existing investors that MRI’s

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business was legitimate and that investors’ monies would be secure.

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But instead, they allege, MRI operated as a massive Ponzi scheme,

Defendant Paul

Defendant LVT, Inc.

Plaintiffs assert

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and its collapse in 2013 has led to MRI’s now inability to repay

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its investors.

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MRI solicited investments by placing ads in Japanese

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newspapers and magazines and sending mass e-mails to Japanese

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citizens.

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contact the Tokyo office for more information, and MRI in return

It also hosted a web site.

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Interested individuals could

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would send a set of “welcome materials” that included its

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pamphlet/offering materials and an investment application.

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materials were, in all relevant years, substantially identical.

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addition to describing the various options investors had, the

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offering materials stated that:

These

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1.

Investors’ money would be invested only in MARS;

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2.

In

Investors’ money would be managed not by MRI but by an

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independent escrow company obligated by U.S. law to

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deposit a set percentage of funds with the state

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government each month, which would be used to indemnify

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the investors in the event of a default;

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3.

Investors’ money would be placed in a “lockbox” account,

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which only the largest and safest banks could establish,

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and which only the most trustworthy of customers could

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obtain;

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4.

Funds in the lockbox would be used solely to buy MARS

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that were of greater value than the amount MRI paid for

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them;

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5.

The lockbox would be independently managed and, if the

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bank were to fail, the state government would guarantee

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the funds in the account, with the investors having the

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first right of priority to recover the funds;

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6.

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Each U.S. state guaranteed MARS up to a legal limit, and
MRI purchased MARS only up to the guaranteed limit; and

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If MRI filed for bankruptcy, then the escrow company,

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with the assistance of the state government, would retain

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a new company to collect on the MARS.

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would then be responsible for distributing the funds to
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The escrow company

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the investors.

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Plaintiffs allege that every MRI investor received a packet

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containing the above information.

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MRI filled out the application and mailed it back to MRI’s Las

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Vegas headquarters.

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send the applicant a “Pre-Agreement Disclosure Document” (“PADD”)

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and a “Corporate Certificate of Investment Agreement.”

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represented that:

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1.

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Those who decided to invest with

Once MRI received an application, it would

The PADD

The purpose of the investment was solely to invest in the
collection of MARS; and

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MARS purchased in accordance with the contract would be

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separately maintained from MRI’s assets and would be

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managed by a third-party escrow company that had received

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authorization from the Nevada state government.

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To complete the investment, the investor signed and returned the

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agreement and transferred payment to a Las Vegas Wells Fargo bank

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account in the name of Sterling Escrow Trustee.

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were received, MRI would mail each investor a “Certificate of

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Investment” and a “Financial Products Trading Contract.”

Once the funds

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In addition to its advertisements and written offering

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materials, MRI frequently conducted seminars, informational

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meetings, and study sessions, as well as tours of the Las Vegas

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headquarters.

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both Junzo and Paul Musashi Suzuki.

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specific representations set forth in the written materials, all

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essentially touting the benefits and safety of investing in MRI.

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MRI also issued monthly newsletters and a magazine called VIMO.

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VIMO was published by Paul Musashi Suzuki, and in it he authored

Most of the presentations were given by either or

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The Suzukis reiterated the

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articles about MRI’s investment scheme and the safety of the

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investment.

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The gravamen of plaintiffs’ complaint is that none of the

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representations defendants made about the safety of investing in

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MRI were true, and that instead of using investors’ money to

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purchase MARS, defendants used the money to pay off earlier

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investors, fund their lavish lifestyles, and finance other

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undisclosed ventures.

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In 2013, the Financial Services Agency of Japan (Kanto Local

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Finance Bureau) (“FSA”) conducted an investigation of MRI.

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April 26, 2013, it issued findings that MRI had engaged in

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fraudulent marketing practices and improperly handled investors’

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funds.

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to investors about how their money would be handled, commingled

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company assets with investor funds, and used investor funds to pay

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dividends and redemptions to other investors rather than acquire

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equities.

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conduct business in Japan was revoked.

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On

It found that MRI had not followed the promises it had made

As a result of the investigation, MRI’s license to

The findings by the FSA precipitated the collapse of the MRI

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scheme.

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connection with MRI’s collapse.

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action, several individual lawsuits were filed in Japan, the U.S.

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Securities and Exchange Commission (“SEC”) filed suit against MRI

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and Fujinaga is this district, and a criminal indictment has been

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returned against Fujinaga, Junzo Suzuki and Paul Musashi Suzuki,

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also in this district.

Since that time, multiple lawsuits have been filed in
In addition to this putative class

Plaintiffs now seek class certification.

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Analysis

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A class action is “‘an exception to the usual rule that

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litigation is conducted by and on behalf of the individual named

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parties only.’”

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S. Ct. 2541,2550 (2011) (quoting Califano v. Yamasaki, 442 U.S.

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682, 700-01 (1979)).

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class representative must be part of the class and possess the same

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interest and suffer the same injury as the class members.”

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(internal quotation marks omitted).

Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 131

To “justify a departure from that rule, a

Id.

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To obtain certification, plaintiffs must first show that:

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(1)

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the class is so numerous that joinder of all members is
impracticable;

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(2)

there are questions of law or fact common to the class;

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(3)

the claims or defenses of the representative parties are

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typical of the claims or defenses of the class; and
(4)

the representative parties will fairly and adequately
protect the interests of the class.

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Fed. R. Civ. P. 23(a).

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subsections of Rule 23(b).

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which allows a class action to be maintained where “the court finds

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that the questions of law or fact common to class members

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predominate over any questions affecting only individual members,

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and that a class action is superior to other available methods for

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fairly and efficiently adjudicating the controversy.”

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Plaintiffs must also satisfy one of three
Here, plaintiffs rely on Rule 23(b)(3),

Plaintiffs, as the parties seeking class certification, bear

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the burden of affirmatively showing that they meet the requirements

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of Rule 23.

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certified only if the court is satisfied after a “rigorous

Wal-Mart, 131 S. Ct. at 2551.

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A class action may be

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analysis” that the requirements of Rule 23(a) have been met.

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Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982).

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sometimes require the court to “probe behind the pleadings” into

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the merits of the plaintiffs’ case.

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a general rule, the court may not “engage in free-ranging merits

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inquiries at the certification stage.”

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Plans & Trust Funds, – U.S. –, 133 S. Ct. 1184, 1194-95 (2013).

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“Merits questions may be considered to the extent – but only to the

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extent – that they are relevant to determining whether the Rule 23

Gen.

This may

Wal-Mart, at 2551-52.

But as

Amgen Inc. v. Conn. Ret.

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prerequisites for class certification are satisfied.”

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I. Rule 23(a)

Id. at 1195.

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A. Numerosity

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This element is satisfied if “the class is so numerous that

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joinder of all members is impracticable.”

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23(a)(1).

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could number between 4,000 and 8,000 members.

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contest that this number would make joinder impracticable.

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Plaintiffs have therefore satisfied the numerosity requirement.

Fed. R. Civ. P.

Plaintiffs have filed suit on behalf of a class that
Defendants do not

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B. Commonality

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Commonality requires there to be questions of law or fact

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common to the class.

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requirement, class members must have suffered the same injury;

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their claims must rely on a common contention, and that contention

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“must be of such a nature that it is capable of classwide

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resolution – which means that determination of its truth or falsity

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will resolve an issue that is central to the validity of each one

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of the claims in one stroke.”

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Ninth Circuit construes the commonality requirement permissively.

Fed. R. Civ. P. 23(a)(2).

To satisfy this

Wal-Mart, 131 S. Ct. at 2551.

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The

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“All questions of fact and law need not be common to satisfy the

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rule.

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predicates is sufficient, as is a common core of salient facts

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coupled with disparate legal remedies within the class.”

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Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998); see also

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Blackie v. Barrack, 524 F.2d 891, 904 n.19 (9th Cir. 1975) (“We

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think it is for the predominance and other requirements of Rule

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23(b)(3), rather than the common question requirement, to function

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to keep the balance between the economies attained and lost by

The existence of shared legal issues with divergent factual

Hanlon v.

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allowing a class action.

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not be restrictively interpreted to attain that objective,

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particularly as to do so would eliminate the class action deterrent

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for those who engage in complicated and imaginative rather than

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straightforward schemes to inflate stock prices.”).

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The common question requirement should

Here, each class member suffered the same injury – actual or

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expected loss of his or her investment – through the same conduct —

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MRI’s alleged Ponzi scheme.

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common to all class members, including but not limited to: (1)

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whether some or all of the representations made by the defendants

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about the safety of MRI’s

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defendants knew that those statements were false or recklessly

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disregarded their truth or falsity; (3) whether the representations

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caused plaintiffs to invest with MRI; (4) whether MRI operated as a

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Ponzi scheme; and (5) whether the individual defendants were

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control persons of MRI at the time of the misrepresentations and/or

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sales of MRI securities, or whether they aided and abetted MRI’s

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fraud.

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issue in this case.

Several questions of law and fact are

investments were false; (2) whether the

These are, in fact, the major questions of law and fact at

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The same evidence will be used to prove the existence of a

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Ponzi scheme, the falsity of the representations, each defendant’s

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role and knowledge in the scheme, and the failure of MRI to repay

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its investors.

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defendants – is whether the class members’ reliance on the

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representations, which is an element of the securities and state

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law fraud claims, can be proven on a classwide basis.

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A closer question – and that raised by the

In Blackie v. Barrack, the Ninth Circuit found the commonality
requirement met in a securities fraud case where the defendants,

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through a common course of conduct, defrauded a class of purchasers

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over a period of time with similar misrepresentations.

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Blackie, district courts in this circuit have found that individual

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questions of reliance do not preclude a finding of commonality

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where the plaintiffs allege a common course of conduct directed

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against all investors.

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Inc., 247 F.R.D. 598, 608 (S.D. Cal. 2007); In re Badger Mountain

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Irrigation Dist. Sec. Litig., 143 F.R.D. 693, 697 (W.D. Wash.

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1992).

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that had been marketed by some of the defendants as safe and

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secure.

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there were material variations in the representations given to

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potential class members, the court found that because plaintiffs

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were defrauded by the defendants’ common course of conduct, common

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questions predominated over individual issues.

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Mountain, 143 F.R.D. at 697.

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presentation that contained misleading statements and omissions.

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McPhail, 247 F.R.D. at 602.

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requirement was met, the McPhail court noted that “the Ninth

Applying

See McPhail v. First Command Fin. Planning,

In re Badger Mountain concerned litigation over investments

Noting that the defendants had failed to demonstrate that

In re Badger

McPhail involved a homogenized

In holding that the commonality

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Circuit’s case law does not require identical misrepresentations to

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satisfy the commonality requirement.”

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Id. at 609-10.

The Suzukis’ attempts to distinguish the cases relied on by

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plaintiffs is unavailing, as is their reliance on cases from

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outside this circuit.

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they are – to the extent they conflict with the cases cited above –

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not persuasive.

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individual issues of reliance are no bar to finding commonality

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where the plaintiffs have been deceived by the defendants’ common

Those cases are not only not controlling,

The Ninth Circuit has quite clearly held that

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course of conduct.

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safety of MRI’s business model and investor funds were made in

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written materials distributed to every investor – most notably the

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offering pamphlet and the PADD – before they invested.

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these documents defendants repeated some or all of the core

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representations: that investor money was used only to invest in

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MARS, that investor money was safeguarded by an independent escrow

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company and state law, and that MRI was a legitimate business.

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These alleged misrepresentations were reinforced orally and in

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writing through other means to new and existing investors.

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sales pitch was thus virtually identical from investor to investor.

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The Ninth Circuit liberally construes the commonality requirement

Here, the same core representations about the

In all of

The

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to enable class certification of fraud claims stemming from a

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common course of conduct.

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course of conduct that defrauded them and resulted in a loss and

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therefore the commonality requirement is met.

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Plaintiffs have amply alleged a common

The Suzukis, however, argue that they made oral

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representations to only some of the class members and that those

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representations differed.

Thus, they argue, the plaintiffs cannot
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prove their reliance on the Suzukis’ statements on a classwide

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basis.

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Suzukis’ oral representations; the Suzukis’ oral representations

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simply reinforced the misrepresentations made in the written

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materials, which were received by each and every investor.

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Further, plaintiffs allege that the Suzukis were personally

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involved in preparing the PADD.

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Plaintiffs respond that they are not relying solely on the

At a minimum, the Suzukis’ alleged role in drafting the PADD,
which was received by each investor before his or her investment,

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creates a common question of reliance as to the Suzukis.

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and more importantly, the Suzukis are allegedly two of only three

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to four people behind MRI’s alleged fraud.

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nature of the fraud, plaintiffs’ claim that the Suzukis are liable

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for a § 10(b) violation as control persons means MRI’s entire

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common course of conduct would be attributable to the Suzukis,

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whether they directly made the misrepresentations or not.

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court concludes that plaintiffs have alleged a common course of

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conduct perpetrated by MRI and its principals sufficient to satisfy

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the commonality requirement.

Moreover,

Given the close-knit

The

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C. Typicality

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Typicality requires that the claims or defenses of the

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representative parties are typical of the claims or defenses of the

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class.

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requirement is to assure that the interest of the named

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representative aligns with the interests of the class.”

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Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010)

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(quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir.

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1992)).

Fed. R. Civ. P. 23(a)(3).

“The purpose of the typicality

Wolin v.

Typicality is satisfied where the lead plaintiff has the
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same or similar injury as the class members; where the action is

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based on conduct which is not unique to the named plaintiff; and

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where other class members have been injured by the same course of

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conduct as the named plaintiff.

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Id.

Defendants do not contest that plaintiffs have met this

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requirement.

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the money they invested in MRI due to the defendants’ alleged

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operation of a Ponzi scheme and repeated misrepresentations.

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is the same injury based on the same conduct that all class members

The named plaintiffs in this case lost or will lose

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have suffered.

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This

requirement is met.

Accordingly, the court finds the typicality

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D. Adequacy

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To meet this requirement, the class representative must fairly

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and adequately protect the interests of the class.

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23(a)(4).

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of interest between named parties and the class they seek to

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represent.”

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(1997).

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conflicts of interest of class counsel, as well as whether the

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named plaintiffs and class counsel will vigorously prosecute the

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action on behalf of the class.

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Corp. Sec. Litig., 213 F.3d 454, 462 (9th Cir. 2000).

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Fed. R. Civ. P.

“The adequacy inquiry . . . serves to uncover conflicts

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625

Adequacy requires considering the competency and any

Id. at 626 n.20; In re Mego Fin.

Plaintiffs argue that lead plaintiff Yuko Nakamura is adequate

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because her claim is typical of the class, she has no interests

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antagonistic to the class, and she has a substantial financial

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interest which will ensure her vigorous advocacy.

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understands the responsibilities of being lead plaintiff,

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understands the issues presented in this case, and is willing to
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Nakamura

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assist in the prosecution of this case through trial.

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further argue that counsel have no conflicts with the class, have

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thus far vigorously represented the class, and have extensive

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experience with class actions and complex commercial litigation.

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Plaintiffs

The Suzukis argue that the named plaintiffs and class counsel

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cannot adequately represent the class.

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plaintiffs lack an attorney-client relationship with class counsel

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and that this litigation is not actually being directed by class

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counsel but instead is being directed by a group of Japanese

First, they assert that

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attorneys who have joined together to represent victims of MRI’s

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fraud.

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signed up with the victim’s group created by the Japanese

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attorneys.

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in Japan against MRI and the Suzukis and, the Suzukis argue, the

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recovery in those actions will go to compensate all victims who

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have signed up with the group.

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attorneys behind this case – the Japanese attorneys – have a

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conflict of interest in representing this class because if they

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prevail in Japan they may be less motivated to devote resources to

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prosecuting this class action, which is being pursued on behalf of

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a substantial number of MRI victims who have not signed up with the

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Japanese victims’ group.

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About 4,000 out of MRI’s 8,700 potential victims have

The attorneys have already filed a handful of actions

The Suzukis argue that the real

The court is not persuaded that any conflict of interest

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exists.

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counsel are actually behind this litigation, or that plaintiffs

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lack a client relationship with class counsel.

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Japanese counsel are involved in this action, the argument that

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they would be unmotivated to pursue this action were they to

There is no evidence that Japanese, rather than class,

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However, even if

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prevail in Japan is, as plaintiffs argue, also unpersuasive.

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only do the defendants have substantial assets in the United

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States, which would be easier to collect with a U.S. judgment, but

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as the Suzukis’ argument implicitly concedes, the putative class

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for which this action is being pursued includes both members and

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non-members of the Japanese MRI Victim’s Group.

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to conclude that Japanese counsel would abandon a case that would

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benefit members of their group as well as non-members.

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cited by the Suzukis are distinguishable.

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Not

There is no reason

The cases

The Suzukis also argue that the named class representatives

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cannot adequately represent the class due to credibility issues.1

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The court is not persuaded that any omissions in the plaintiffs’

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declarations or any inconsistencies between the declarations and

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the depositions are evidence of a lack of credibility.

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the cases the Suzukis have cited in this regard are readily

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distinguishable.

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Further,

The named plaintiffs have suffered the same injury as the

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class members and no evident conflict exists between their

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interests and the interests of the class.

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class counsel have vigorously prosecuted this action since its

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inception, and class counsel are qualified and competent to do so.

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Accordingly, the court concludes the adequacy requirement is met.

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II. Rule 23(b)

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Named plaintiffs and

In addition to meeting the requirements of Rule 23(a),
plaintiffs must also satisfy one of the three subsections of Rule

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The Suzukis also focus on the failure of 16 of the 25 named
plaintiffs to attend or agree on dates to attend depositions in the United
States. This argument appears to be mooted by the recent reduction in the
number of named plaintiffs from 25 to 9. (See Doc. #351 at 2).

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23(b) before the court may certify this as a class action.

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Plaintiffs here rely on Rule 23(b)(3).

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A. Predominance

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The first requirement under Rule 23(b)(3) is that questions of

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law or fact common to the class members predominate over individual

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questions.

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the case that can be resolved for all members of the class in a

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single adjudication.”

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1061, 1068 (9th Cir. 2014) (internal punctuation omitted).

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“[T]he common questions must be a significant aspect of

Berger v. Home Depot USA, Inc., 741 F.3d

Determining whether common issues predominate begins with the

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elements of the underlying causes of action.

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Inc. v. Halliburton Co., 563 U.S. – , 131 S. Ct. 2179, 2184( 2011).

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Here, plaintiffs have asserted twelve causes of action: (1) Section

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10(b) of the Securities Exchange Act of 1934 and Rule 10b-5; (2)

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Section 12(a) of the Securities Act of 1933; (3) Section 20(a) of

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the Securities Exchange Act of 1934; (4) Section 15 of the

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Securities Act of 1933; (5) intentional fraud; (6) unjust

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enrichment; (7) breach of fiduciary duty; (8) aiding and abetting

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fraud; (9) breach of contract; (10) action for accounting; (11)

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constructive trust; and (12) fraudulent transfer.

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I.

Erica P. John Fund,

Section 10(b) and Rule 10B-5

Section 10(b) prohibits the use or employment “in connection

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with the purchase or sale of any security” of “any manipulative or

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deceptive device or contrivance in contravention of such rules and

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regulations as the Commission may prescribe as necessary or

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appropriate in the public interest or for the protection of

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investors.”

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15 U.S.C. § 78j.

Rule 10B-5 makes it

unlawful for any person, directly or indirectly, by the
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use of any means or instrumentality of interstate
commerce, or of the mails or of any facility of any
national securities exchange, (a) To employ any device,
scheme, or artifice to defraud, (b) To make any untrue
statement of a material fact or to omit to state a
material fact necessary in order to make the statements
made, in the light of the circumstances under which they
were made, not misleading, or (c) To engage in any act,
practice, or course of business which operates or would
operate as a fraud or deceit upon any person, in
connection with the purchase or sale of any security.

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17 C.F.R. § 240.10b-5.

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10B-5 claim are: (1) defendants’ material misrepresentations or

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omissions; (2) scienter; (3) connection between the

Thus, the elements of a § 10(b) and Rule

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misrepresentation or omission and the purchase or sale of a

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security; (4) reliance upon the misrepresentation or omission; (5)

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economic loss; and (6) loss causation.

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Ct. at 2184.

14

Erica P. John Fund, 131 S.

As discussed above in connection with commonality, most of

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these elements are clearly susceptible to classwide proof,

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particularly the alleged misrepresentations made by the defendants,

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scienter, and loss.

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are not susceptible to classwide proof: plaintiffs’ reliance and

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the materiality of the representations.

20
21

The Suzukis argue, however, that two elements

a. Reliance
Predominance involves many of the same considerations as

22

commonality, but it is a more stringent requirement.

23

World Travel, Inc. v. AMR Corp., 218 F.R.D. 223, 236 (C.D. Cal.

24

2003).

25

court concludes that individual issues of reliance do not compel a

26

finding that individual questions predominate over common

27

questions.

28

Westways

Even under the higher predominance standard, however, the

The “Ninth Circuit decisions favor a liberal use of class
16

1

actions to enforce federal securities laws.”

2

Command Fin. Planning, Inc., 247 F.R.D. 598 (S.D. Cal. 2007)

3

(internal quotation marks omitted).

4

has found class certification to be appropriate where the defendant

5

used a “standardized sales pitch.”

6

Co., 471 F.3d 977, 990 (9th Cir. 2006).

7

defendant “trained its loan officers to follow a manual and script

8

known as the ‘Track,’ which was to be memorized verbatim by sales

9

personnel and executed as taught.”

McPhail v. First

In addition, the Ninth Circuit

In re First Alliance Mortg.
In First Alliance, the

Id. at 985.

Importantly, the

10

court noted that while other courts have adopted somewhat differing

11

standards as to “the degree of factual commonality required in the

12

misrepresentations to class members in order to hold a defendant

13

liable for classwide fraud,” the Ninth Circuit “has followed an

14

approach that favors class treatment of fraud claims stemming from

15

a ‘common course of conduct.’”

16

990.

17

In re First Alliance, 471 F.3d at

The First Alliance court cited and discussed with approval a

18

district court case, In re American Continental Corp./Lincoln

19

Savings & Loan Securities Litigation, 140 F.R.D. 425 (D. Ariz.

20

1992).

21

that included sales presentations to the plaintiffs.

22

28, 430-31.

23

were not uniform, and thus individual issues of reliance precluded

24

class certification.

25

actions are appropriate where a “standardized sales pitch” is

26

employed, because sales presentations “uniformly patterned on a

27

known model provides certitude that material misrepresentations

28

were a causative factor in each plaintiffs’ decision and “[t]hus, a

Lincoln Savings involved a “multifarious scheme to defraud”
Id. at 427-

The defendants argued that the sales presentations

Id. at 430.

17

The court noted that class

1

class action may be maintained where plaintiffs can establish that

2

the sales agents’ representations did not vary in material

3

respects.”

4

not identical, they were “sufficiently uniform to warrant class

5

treatment.”

Id.

The court held that while the representations were

Id.

6

As discussed above, McPhail v. First Command Fin. Planning

7

involved a homogenized presentation given by sales agents which

8

contained misleading statements and omissions.

9

McPhail objected to class certification primarily on the grounds

The defendants in

10

that individual issues of reliance predominated over common

11

questions.

12

discussed the holdings of First Alliance and Lincoln Savings and

13

noted that, “[i]n effect, the Lincoln Savings court used the

14

uniformity of the misrepresentations to presume the plaintiffs

15

relied on those misrepresentations in their investment decisions.”

16

Id.

17

Savings, “within the Ninth Circuit, plaintiffs can establish a

18

presumption of reliance by means of sufficiently uniform oral

19

misrepresentations in a marketing script.”

20

614.

21

must encompass the rise of sophisticated marketing strategies which

22

rely on communicating similar misrepresentations to a large class

23

of investors.”

24

In considering the predominance question, the court

It concluded that, on the basis of First Alliance and Lincoln

McPhail, 247 F.R.D. at

The court noted, importantly, that “the reliance requirement

Id. at 614-15.

Here, plaintiffs allege that defendants made to all investors

25

substantially similar, if not identical, misrepresentations as to

26

the safety of investing with MRI.

27

misrepresentations sufficiently uniform to raise a presumption of

28
18

The court finds the alleged

1

reliance under McPhail, First Alliance, and Lincoln Savings.2

2
3

b. Materiality
The Suzukis argue that materiality is not susceptible to

4

classwide proof.

5

to plaintiffs investing at the same time.

6

argument on two cases that held that whether a misrepresentation is

7

material depends on the “total mix” of information available to an

8

investor.3

9

994 (7th Cir. 1980); Gelman v. Westinghouse Elec., 73 F.R.D. 60

10
11

They assert that materiality will exist only as
The Suzukis base their

J.H. Cohn Co. v. Am. Appraisal Assocs., Inc., 628 F.2d

(W.D. Penn. 1976).
Both J.H. Cohn and Gelman, however, involved evolving

12

situations where the information known to the investing class was

13

constantly changing.

14

feel the district court did not abuse its discretion in concluding

15

that the changing factual situation over a thirty-three month

16

period undercuts the predominance of any common course of

17

conduct.”); Gelman, 73 F.R.D. at 67 (“In this case, however,

18

plaintiffs’ claims are based not on a single or substantially

See J.H. Cohn, 628 F.2d at 998 & n.3 (“We

19
20
21
22
23
24
25
26
27
28

2

The Suzukis’ attempts to distinguish the relevant case law is
unavailing as are their other arguments. The Suzukis argue that many of the
plaintiffs made their initial investments outside of the class period, so
it is impossible for them to have relied on any misrepresentation during the
class period. This argument is without merit. Clearly, any decisions to
reinvest
in
MRI
would
have
been
influenced
by
the
continuing
misrepresentations about the safety of investing in MRI, which were made
repeatedly to all investors.
The Suzukis also argue that different
subgroups of investors received differing oral disclosures over the class
period and that some of the class members never met the Suzukis and never
received any representations from them directly. As discussed above, this
argument is irrelevant in this case, where the Suzukis at a minimum were
involved in written materials distributed to all investors before they
invested and where the Suzukis have been sued as control persons.
3

The Suzukis also cite and rely on TSC Industries, Inc. v. Northway,
Inc., 426 U.S. 438 (1976), but that case merely provides the definition of
materiality. TSC Indus., 426 U.S. 444.

19

1

constant misdeed, but rather on a changing, fluctuating series of

2

alleged events . . . .”).

3

throughout the entire class period, the defendants repeatedly made

4

the same core misrepresentations.

Nothing is alleged to have

5

changed through the class period.

In fact, the Suzukis’ argument

6

that as to some of the investors, the Suzukis’ oral representations

7

did not alter the “total mix” of what they already knew (see Opp’n

8

14) actually supports plaintiffs’ position – that the total mix of

9

information more or less remained consistent throughout the class

10

Here, the plaintiffs have alleged that

period.

11

The Suzukis argue that statements they made to individuals who

12

had already invested are less material than statements they made to

13

individuals who were considering investing, and thus materiality

14

will differ from one class member to another.

15

participated in a common course of conduct in which the same core

16

misrepresentations were constantly repeated.

17

decisions to reinvest in MRI would have been influenced by the

18

continuing misrepresentations about the safety of investing in MRI

19

which reinforced what the existing investor already believed about

20

MRI.

21

statements made to individuals who had not yet invested and the

22

statements made to existing investors.

23
24

The Suzukis

As noted above, any

The court does not see any meaningful difference between the

ii.

Section 12(a)

Section 12(a)(1) imposes liability for the offer or sale of an

25

unregistered security.

26

imposes liability for the offer or sale of securities by means of a

27

prospectus or oral communication that “includes an untrue statement

28

of material fact or omits to state a material fact necessary in

15 U.S.C. § 77l(a)(1).

20

Section 12(a)(2)

1

order to make the statements, in the light of the circumstances

2

under which they were made, not misleading.”

3

77l(a)(2).

15 U.S.C. §

4

Defendants do not argue that individual issues predominate as

5

to this claim, nor does the court believe any element would entail

6

an analysis of individual issues.

7

or sold unregistered MRI securities and whether the defendants made

8

misleading or false statements in connection with the sale or offer

9

to sell MRI securities can be proven on a classwide basis.

Whether the defendants offered

10

Accordingly, the predominance requirement is met with respect to

11

this claim.

12
13

iii. Sections 15 and 20(a)
Sections 15 and 20(a) impose liability on control persons for

14

a primary violation of the securities laws – in this case, §§ 12(a)

15

and 10(b).

16

indirect, of the power to direct or cause the direction of the

17

management and policies of a person, whether through the ownership

18

of voting securities, by contract, or otherwise.”

19

230.405.

20

plaintiff must show that a primary violation was committed and that

21

the defendant ‘directly or indirectly’ controlled the violator.”

22

Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1161

23

(9th Cir. 1996).

24

an intensely factual question, involving scrutiny of the

25

defendant’s participation in the day-to-day affairs of the

26

corporation and the defendant’s power to control corporate

27

actions.”

28

Control is defined as “the possession, direct or

17 C.F.R. §

“To establish ‘controlling person’ liability, the

“[W]hether a person is a ‘controlling person is

Id. at 1162.

Defendants do not argue that individual issues predominate as
21

1

to this claim, nor does the court believe any element would entail

2

an analysis of individual issues.

3

were controlling persons will depend on proof that is specific to

4

Fujinaga and the Suzukis, which is proof common to the entire

5

class.

6

respect to this claim.

Whether Fujinaga or the Suzukis

Accordingly, the predominance requirement is met with

7

iv. Fraud

8

The elements of a fraud claim under Nevada law are: (1) a

9

false representation made by the defendant; (2) the defendant’s

10

knowledge or belief that the representation was false (or an

11

insufficient basis for making the representation); (3) the

12

defendant’s intention to induce the plaintiff to act or to refrain

13

from acting in reliance upon the misrepresentation; (4) the

14

plaintiff’s justifiable reliance upon the misrepresentation; and

15

(5) damage to the plaintiff resulting from such reliance.

16

Inc. v. Nev. Bell, 825 P.2d 588, 592 (Nev. 1992).

Bulbman,

17

For purposes of certification, the relevant elements of the

18

state law fraud claim are substantially the same as those of the

19

securities fraud claim.

20

predominance is satisfied with respect to the securities fraud

21

claim, it is also satisfied with respect to the state law fraud

22

claim.

23
24

Therefore, for the same reasons that

v. Unjust Enrichment
Unjust enrichment is “the result or effect of a failure to

25

make restitution of, or for, property or benefits received under

26

such circumstances as to give rise to a legal or equitable

27

obligation to account therefor.”

28

Brooks Trust Dated Nov. 12, 1975, 942 P.2d 182, 187 (Nev. 1997).

Leasepartners Corp. v. Robert L.

22

1
2

The elements are:
(1)

a benefit conferred on the defendant by the

3

plaintiff;

4

(2)

appreciation by the defendant of such benefit; and

5

(3)

an acceptance and retention by the defendant of such

6

benefit under circumstances such that it would be

7

inequitable for him to retain the benefit without

8

payment of the value thereof.

9

Unionamerica Mortg. & Equity Trust v. McDonald, 626 P.2d 1272, 1273

10

(Nev. 1981).

11

retains a benefit which in equity and good conscience belongs to

12

another.”

13

“Unjust enrichment occurs whenever a person has and

Id.

The Suzukis argue that choice-of-law issues prevent

14

certification of this claim.

15

finding that because the law of unjust enrichment varies from state

16

to state, certification of a nationwide class on unjust enrichment

17

poses insurmountable choice of law problems.

18

case, where nearly all the plaintiffs are Japanese citizens and all

19

alleged misrepresentations occurred in either Japan or Nevada,

20

either Nevada or Japanese law will govern.

21

argued that several types of unjust enrichment standards exist

22

throughout Japan, nor even that Japanese law recognizes such a

23

claim.

24

and Japanese law, which may or may not, does not defeat class

25

certification of this claim.

The Suzukis cite district court cases

However, in this

The Suzukis have not

The choice between Nevada law, which recognizes this claim,

26

Whether the defendants received and retained money from

27

plaintiffs that they have no just right to retain by operating a

28

Ponzi scheme is a question that can be answered classwide; no
23

1

individual issues preclude certification of this claim.

2

vi. Breach of Fiduciary Duty

3

“A breach of fiduciary duty claim seeks damages for injuries

4

that result from the tortious conduct of one who owes a duty to

5

another by virtue of the fiduciary relationship.”

6

Mushkin, 199 P.3d 838, 843 (Nev. 2009).

7

exists between two persons when one of them is under a duty to act

8

for or to give advice for the benefit of another upon matters

9

within the scope of the relation.”

Id.

Stalk v.

A “fiduciary relation

To prevail on a breach of

10

fiduciary duty claim, the plaintiff must establish: “(1) the

11

existence of a fiduciary duty; (2) breach of that duty; and (3) the

12

breach proximately caused the damages.”

13

Partners, LLC, 595 F. Supp. 2d 1152, 1162 (D. Nev. 2009).

14

Klein v. Freedom Strategic

Defendants do not argue that this claim is improper for class

15

certification, nor does the court believe any individual issues

16

would make certification inappropriate.

17
18

vii. Aiding and Abetting
“[L]iability attaches for civil aiding and abetting if the

19

defendant substantially assists or encourages another’s conduct in

20

breaching a duty to a third person.”

21

P.2d 98, 112 (Nev. 1998), overruled on other grounds by GES, Inc.

22

v. Corbitt, 21 P.3d 11, 15 (Nev. 2001).

23

is asserted only against Sterling Escrow, plaintiffs must show: (1)

24

that one or more of the defendants made a fraudulent

25

misrepresentation that injured plaintiffs; (2) that Sterling Escrow

26

was aware of its role in promoting the fraudulent misrepresentation

27

at the time it provided assistance; and (3) that Sterling Escrow

28

knowingly and substantially assisted the defendants in committing
24

Dow Chem. Co. v. Mahlum, 970

To prove this claim, which

1

fraudulent misrepresentation.

Id.

2

Sterling Escrow argues that reliance as to the fraud claim

3

cannot be proven on a classwide basis, and thus certification as to

4

the aiding and abetting fraud claim would be improper.

5

reasons discussed above, common questions predominate over

6

individual questions as to the fraud claim, and therefore Sterling

7

Escrow’s argument is without merit.

8

aware of its role in promoting a fraud and knowingly assisted the

9

other defendants in committing the fraud are clearly common

10
11
12

For the

Whether Sterling Escrow was

questions subject to class certification.
viii. Breach of Contract
Defendants do not argue that this claim is inappropriate for

13

class certification. Plaintiffs allege that all investors signed

14

the same form contract and MRI either breached or did not breach

15

the contract with respect to all investors.

16

questions appear to exist with respect to this claim, and therefore

17

class certification is appropriate.

18

ix. Accounting

19

No individual

“An action for accounting . . . is a proceeding in equity for

20

the purpose of obtaining a judicial settlement of the accounts of

21

the parties in which proceeding the court will adjudicate the

22

amount due, administer full relief and render complete justice.”

23

Oracle USA, Inc. v. Rimini St., Inc., 2010 WL 3257933, at *6 (D.

24

Nev. 2010) (internal citations and quotation marks omitted).

25

District of Nevada “has held that ‘[a]n action for inspection and

26

accounting will prevail only where the plaintiff can establish that

27

there exists a relationship of special trust between the plaintiff

28

and defendant.’”• Thomas v. Wachovia Mortgage, FSB, 2011 WL
25

The

1

3159169, at *6 (D. Nev. 2011) (internal citations omitted).

2

Whether defendants, by their common course of conduct and

3

alleged repeated misrepresentations, created a relationship of

4

special trust with the plaintiffs is subject to classwide proof.

5

No individual issues exist that would impede certification of this

6

claim.

7

x. Constructive Trust

8

“A constructive trust has been defined as a remedial device by

9

which the holder of legal title to property is held to be a trustee

10

for the benefit of another who in good conscience is entitled to

11

it.

12

mere possession) to the property involved is critical to the

13

imposition of a constructive trust.”

14

P.2d 166, 167 (Nev. 1970).

15

requires: ‘(1) [that] a confidential relationship exists between

16

the parties; (2) retention of legal title by the holder thereof

17

against another would be inequitable; and (3) the existence of such

18

a trust is essential to the effectuation of justice.’”

19

Maini, 195 P.3d 850, 857 (Nev. 2008). Constructive trust “is not

20

‘limited to [fraud and] misconduct cases; it redresses unjust

21

enrichment, not wrongdoing.’”

22

The requirement that a constructive trustee have title (not

Danning v. Lum's, Inc., 478

“[I]mposition of a constructive trust

Waldman v.

Id.

For the same reasons that support class certification of the

23

breach of fiduciary and accounting claims, no individual questions

24

exist to preclude class certification as to the constructive trust

25

claim.

26
27
28

xi. Fraudulent Transfer
Plaintiffs allege a claim of constructive fraudulent transfer
under Nevada Revised Statutes § 112.180(1)(b) against the Suzukis
26

1

and Sterling Escrow.

2

transfers to the Suzukis and Sterling Escrow without “receiving a

3

reasonably equivalent value in exchange for the transfer or

4

obligation” at a time that MRI believed or reasonably should have

5

believed that it would not be able to repay its investors.

6

Such a claim requires showing that MRI made

The defendants do not claim that individual issues predominate

7

as to this claim.

8

action.

9
10

Accordingly, this claim is proper for class

B. Superiority
The class action must be superior to other available methods

11

for fairly and efficiently adjudicating the controversy.

12

Civ. P. 23(b)(3). Factors to consider in this respect include:

13

(A)

the class members’ interests in individually controlling

14
15

the prosecution or defense of separate actions;
(B)

the extent and nature of any litigation concerning the

16
17

Fed. R.

controversy already begun by or against class members;
(C)

18

the desirability or undesirability of concentrating the
litigation of the claims in the particular forum; and

19

(D)

20

Plaintiffs argue that a class action is superior because the

the likely difficulties in managing a class action.

21

costs of individual litigation would be prohibitively high compared

22

to each individual plaintiff’s measure of damages.

23

damages run from tens of thousands to hundreds of thousands of

24

dollars, travel to the United States for each plaintiff would be a

25

hardship to their finances and their health.

26

litigation of these cases would be a substantial burden on this

27

court.

28

Fujinaga and Sterling Escrow, along with their assets, are here, as

While the

Further, individual

Finally, litigation in this district is desirable because

27

1
2

are some of the Suzukis’ assets.
The Suzukis argue that the class action here in the United

3

States is not superior to individual litigation in Japan,

4

especially since – as Japan may not recognize class actions – any

5

judgment in this case may not be entitled to preclusive effect and

6

the Suzukis would therefore face continued exposure in Japan even

7

after expending significant resources to defend this action.

8

argue that where foreign plaintiffs are involved, the fact that a

9

foreign court may not recognize the judgment will count against a

They

10

finding of superiority and may, in consideration of other facts,

11

lead to the exclusion of foreign claimants from the class.

12

The enforceability of the class action in Japan is of less

13

significance given that substantial assets of the defendants are

14

located in this district and country.

15

identified any other method that would be better suited to resolve

16

this controversy.

17

the filing of individual claims, which would “burden the judiciary

18

[and] prove uneconomic for potential plaintiffs.”

19

at 1023.

20

even thousands of individual actions in either Japan or the United

21

States, which would occur if class certification is denied, would

22

be a fairer or more efficient method of resolving this controversy

23

– to the plaintiffs, to the court, or to the Suzukis.

24

it would place on plaintiffs to individually litigate their claims

25

outweigh any interest in individually controlling the litigation.

26

Further, it is desirable to concentrate litigation in the District

27

of Nevada, where much of the relevant assets of the defendants are

28

located.

The Suzukis have not

The only alternative suggested to the court is

Hanlon, 150 F.3d

The court is not persuaded that dozens or hundreds or

The burdens

Although some individual cases are pending against some
28

1

of the defendants in Japan, Japan does not have a class action

2

mechanism.

3

jurisdiction, and that jurisdiction also contains assets of the

4

defendants apart from the assets located in this district,

5

persuades the court that the existing actions will have little

6

impact on this case.

7

to manage, that factor alone does not outweigh the benefits of

8

consolidating the claims of thousands of investors into one action

9

that will reduce the caseload on both this court and the courts in

The fact that other cases are pending in another

Finally, while class actions can be difficult

10

Japan.

11

superior method for handling this dispute.

12

Conclusion

13

Accordingly, the court concludes that a class action is the

In accordance with the foregoing, the plaintiffs’ motion for

14

class certification (#255) is hereby GRANTED.

15

the following class is certified.

16

IT IS ORDERED that

The MRI Investor Class consisting of: all persons who
purchased MRI securities during the period July 5, 2008,
through May 1, 2013, and were injured as a result of the
defendants’ conduct. Excluded from the class are the
defendants, their employees, their family members and
their affiliates, and the following 26 individuals who
are plaintiffs in the pending litigation against the
defendants in Japan: (1) Tomoyasu Kojima; (2) Keiko
Amaya; (3) Masakazu Sekihara; (4) Chiri Satou; (5) Meiko
Murakami; (6) Masayoshi Tsutsumi; (7) Yumiko Ishiguro;
(8) Reiko Suzuki; (9) Hiroji Sumita; (10) Eiko Uchiyama;
(11) Hideyo Uchiyama; (12) Youzou Shiki; (13) Naoki
Nagasawa; (14) Noboru Yokoyama; (15) Masami Segawa; (16)
Fumiko Takagi; (17) Kumiko Kaita; (18) Fumi Kobayashi;
(19) Ikuko Miyazaki; (20) Hina Nagase; (21) Akio Iwama;
(22) Kouji Kishida; (23) Eri Kishida; (24) Nomai Nii;
(25) Youko Miyahara; and (26) Tsukiko Kurano.

17
18
19
20
21
22
23
24
25

/

26

/

27

/

28

/
29

1

Plaintiffs shall file with the court a proposed form of notice

2

in accordance with Rule 23(c)(2)(B) on or before April 5, 2016.

3

Any objection to the proposed notice should be filed on or before

4

April 15, 2016.

5

IT IS SO ORDERED.

6

DATED: This 21st day of March, 2016.

7
8

____________________________
UNITED STATES DISTRICT JUDGE

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