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

Filing 626

ORDER that Plaintiffs' Motions for Partial Summary Judgment ECF Nos. 520 , 529 and 530 are DENIED. The parties' evidentiary objections are DENIED WITHOUT PREJUDICE to renew at trial. Signed by Judge Howard D. McKibben on 02/27/2017. (Copies have been distributed pursuant to the NEF - KW)

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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

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Plaintiffs, on behalf of a class of about 8,700 mostly

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Japanese investors, initiated this action against defendants MRI

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International (“MRI”), Edwin Fujinaga (“Fujinaga”), Junzo Suzuki,

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Paul Suzuki, and LVT, Inc. dba Sterling Escrow (“Sterling”) on July

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5, 2013, asserting several claims in connection with the collapse
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of an alleged Ponzi scheme.

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parties have been added to the case, including Keiko Suzuki.

Since that time, ten additional

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The operative complaint – the Fifth Amended Complaint (ECF No.

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481) – asserts twelve causes of action: (1) violation of § 10(b) of

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the Securities Exchange Act of 1934, 15 U.S.C. § 78j and Rule

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10b-5, 17 C.F.R. § 240.10B-5, against Fujinaga, Junzo Suzuki, Paul

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Suzuki, and Keiko Suzuki; (2) violation of § 20(a) of the Exchange

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Act of 1934, 15 U.S.C. § 77t against Fujinaga, Junzo Suzuki, Paul

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Suzuki, and Keiko Suzuki; (3) violation of § 12(a)(1) of the

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Securities Act of 1933, 15 U.S.C. § 77l against MRI, Fujinaga,

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Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (4) violation of § 15

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of the Securities Act of 1933, 15 U.S.C. § 77o against Fujinaga,

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Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (5) intentional fraud

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against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki;

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(6) unjust enrichment against all defendants; (7) breach of

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fiduciary duty against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki,

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Keiko Suzuki, and Sterling; (8) aiding and abetting fraud against

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Sterling; (9) breach of contract against MRI; (10) action for

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accounting against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, Keiko

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Suzuki, and Sterling; (11) constructive trust against all

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defendants; and (12)

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defendants but MRI.

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constructive fraudulent transfer against all

On March 21, 2016, the court granted the plaintiffs’ motion

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for class certification. Plaintiffs thereafter provided the

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required notice to the class members.

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currently scheduled to begin on August 1, 2017.

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filing motions for summary judgment as to the original defendants

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expired on November 1, 2016.
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Trial in this matter is
The deadline for

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Currently before the court are the plaintiffs’ motions for

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partial summary judgment against defendants (1) Paul Suzuki (ECF

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No. 520); (2) Junzo Suzuki (ECF No. 529); and (3) MRI and Fujinaga

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ECF No. 530) (hereinafter collectively “defendants”).

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have opposed (ECF Nos. 566, 563 & 559), and plaintiffs have replied

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(ECF Nos. 581, 577 & 580).

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separate statements of fact, to which the defendants have responded

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and plaintiffs have replied, and plaintiffs and defendants have

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noted various evidentiary objections.

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Defendants

In addition, the plaintiffs have filed

Summary judgment shall be granted “if the movant shows that

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there is no genuine issue as to any material fact and the movant is

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entitled to judgment as a matter of law.”

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The burden of demonstrating the absence of a genuine issue of

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material fact lies with the moving party, and for this purpose, the

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material lodged by the moving party must be viewed in the light

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most favorable to the nonmoving party.

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Co., 398 U.S. 144, 157 (1970); Martinez v. City of Los Angeles, 141

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F.3d 1373, 1378 (9th Cir. 1998).

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that affects the outcome of the litigation and requires a trial to

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resolve the differing versions of the truth.

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Workers Int’l Ass’n, 804 F.2d 1472, 1483 (9th Cir. 1986); S.E.C. v.

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Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982).

Fed. R. Civ. P. 56(a).

Adickes v. S.H. Kress &

A material issue of fact is one

Lynn v. Sheet Metal

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Once the moving party presents evidence that would call for

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judgment as a matter of law at trial if left uncontroverted, the

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respondent must show by specific facts the existence of a genuine

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issue for trial.

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250 (1986).

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sufficient evidence favoring the nonmoving party for a jury to

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

“[T]here is no issue for trial unless there is

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return a verdict for that party.

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colorable, or is not significantly probative, summary judgment may

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be granted.”

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of evidence will not do, for a jury is permitted to draw only those

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inferences of which the evidence is reasonably susceptible; it may

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not resort to speculation.”

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F.2d 946, 952 (9th Cir. 1978).

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I. MRI and Edwin Fujinaga

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If the evidence is merely

Id. at 249-50 (citations omitted).

“A mere scintilla

British Airways Bd. v. Boeing Co., 585

The plaintiffs seek summary judgment on all of the securities

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claims alleged against MRI and Fujinaga.

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that plaintiffs have not proven that the underlying transactions

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were domestic, a necessary condition for their federal securities

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claims.

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that MRI was a Ponzi scheme and maintain that MRI was in fact a

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legitimate business.

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MRI and Fujinaga argue

They further argue that plaintiffs have failed to prove

In opposition, plaintiffs principally argue that MRI and

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Fujinaga’s arguments are precluded by the doctrine of collateral

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estoppel because those issues have already been decided in a case

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brought by the Securities and Exchange Commission against MRI and

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Fujinaga.

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A. Collateral Estoppel

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In September 2013, the Securities and Exchange Commission

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(“SEC”) filed a complaint against MRI and Fujinaga that included a

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securities fraud claim under § 10(b) and Rule 10b-5.

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Securities & Exch. Comm’n v. Fujinaga, 2:13-cv-01658-JCM-CWH.

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October 3, 2014, the court in that case in granted the SEC summary

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judgment on its claims against MRI and Fujinaga, including the

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securities fraud claim.

See

That order has been appealed, and the
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On

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appeal remains pending.

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estoppel against MRI and Fujinaga on the basis of the court’s

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findings in that case.

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Plaintiffs seek application of collateral

The court has broad discretion to determine when offensive

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collateral estoppel should apply, and may decline to apply it in

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cases where it would be unfair to the defendant and where it would

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not promote judicial economy.

Collins v. D.R. Horton, 505 F.3d

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874, 881-82 (9th Cir. 2007).

Here, the court’s judgment in the

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related SEC case is on appeal.

Should this court rely on

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collateral estoppel to prevent MRI and Fujinaga from presenting a

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defense here, a reversal of any or all of the judgment in the SEC

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case could impact this case and could duplicate and further prolong

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these proceedings.

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the Fifth Amendment in these proceedings and apparently intends to

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introduce evidence negating an inference of scienter.

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findings as to scienter in the SEC case was based, in part, on

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Fujinaga’s assertion of his Fifth Amendment rights in that case.

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(See 2:13-cv-01658-JCM-CWH, Doc. #156 at 14 (Ord. dated Oct. 3,

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2016)).

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judgment on all the securities claims against MRI and Fujinaga

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based on the doctrine of collateral estoppel is DENIED.

Moreover, Fujinaga has elected to not invoke

The court’s

For these reasons, the plaintiffs’ request for summary

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B. Domestic Transaction

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MRI and Fujinaga’s principal argument in opposition to summary

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judgment is that plaintiffs have failed to prove a necessary

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element of their securities claims: that the transactions at issue

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qualified as “domestic transactions” as required by Morrison v.

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National Australia Bank Ltd., 561 U.S. 247, 267 (2010). Plaintiffs

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respond that the court has already decided this issue in connection
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with the Suzukis’ motion to dismiss.
In Morrison, the Supreme Court held that § 10(b) and Rule 10b-

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“domestic transactions in other securities.”

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Australia Bank Ltd., 561 U.S. 247, 267 (2010).

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extended Morrison to § 12 claims.

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S’holder Litig., 295 F.R.D. 50, 56 (S.D.N.Y. 2013).

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have not disputed Morrison’s application to their § 12(a)(1) claim.

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Morrison v. National
Some courts have

See In re Smart Techs., Inc.
Plaintiffs

The Morrison court did not discuss what “domestic purchases

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and sales” meant.

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transaction is domestic “if irrevocable liability is incurred or

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title passes within the United States.”

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Master Fund Ltd. v. Ficeto, 677 F.3d 60, 67 (2d Cir. 2012).

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another way, these definitions suggest that the ‘purchase’ and

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‘sale’ take place when the parties become bound to effectuate the

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transaction.”

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parties committed to one another, which is where “there was a

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meeting of the minds.”

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[also] be understood to take place at the location in which title

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is transferred.”

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transfer of property or title for a price.”

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punctuation omitted).

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which focuses not upon the place where deception originated, but

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upon purchases and sales of securities in the United States.”

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& Exch. Comm’n v. Ficeto, 2013 WL 1196356, at *2 (C.D. Cal. 2013)

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(internal punctuation omitted).

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Id.

The Second Circuit, however, has held that a

Absolute Activist Value
“Put

Irrevocable liability attaches at the time the

Id.

Id. at 68.

A “sale of securities can

A “sale is ordinarily defined as the
Id. (internal

“Morrison adopted a transactional test,

Sec.

It is undisputed that MRI did not register its securities in
the United States; thus the question is whether irrevocable
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liability was incurred or title was passed in the United States.

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While the court has concluded that plaintiffs’ complaint

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sufficiently alleges a domestic transaction, that is not the same

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as holding that plaintiffs have established a domestic transaction

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with admissible evidence.

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brief or introduce evidence on this issue precludes summary

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judgment on any of their securities law claims.1

The fact that plaintiffs have failed to

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C. Other Issues of Fact

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In addition to the domestic transaction issue, genuine issues

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of material fact exist as to the plaintiffs’ securities claims

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against Fujinaga and MRI.

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In order to prove securities fraud in violation of § 10(b) and

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Rule 10b-5, the plaintiffs must show: “(1) a material

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misrepresentation or omission; (2) scienter (i.e., a wrongful state

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of mind); (3) a connection between the misrepresentation and the

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purchase or sale of a security; (4) reliance upon the

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misrepresentation . . . ; (5) economic loss; and (6) loss

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causation.”

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Cir. 2014), as amended (Sept. 11, 2014).

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material fact exist as to this claim, including but not limited to

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the defendants’ state of mind.

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Loos v. Immersion Corp., 762 F.3d 880, 886-87 (9th
Genuine issues of

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

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The court notes that plaintiffs’ motion cites the undisputed fact
that investors wired their money to an escrow account in the United States
and that in return investors were sent a “Certificate of Investment.” (ECF
No. 530 at 9 (Pl. Mot. Summ. J. MRI & Fujinaga at 8)). These two facts
alone, however, are not sufficient to conclude that the transactions at
issue were domestic.
The plaintiffs’ complaint contained far more
allegations supporting the court’s conclusion, at the dismissal stage, that
a domestic transaction had been sufficiently alleged.
These additional
allegations have not been supported by the plaintiffs with admissible
evidence in connection with their motion for summary judgment.

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unregistered security in violation of 15 U.S.C. § 77(e).

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§ 77l(a)(1).

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issue were exempt from § 77(e), 15 U.S.C. § 77d, such that the

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court can conclude, as a matter of law, that MRI and/or Fujinaga

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violated § 12(a)(1).

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15 U.S.C.

No party has briefed whether the transactions at

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

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

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12(a)(1) and § 10(b).

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primary violations, summary judgment cannot be granted on the

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control person claims.

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Because questions of fact remain as to the

II. Paul Suzuki

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Plaintiffs seek summary judgment on their first cause of

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action against Paul Suzuki, securities fraud in violation of §

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10(b) and Rule 10b-5.

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material fact exist as to several of the elements of this claim,

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including but not limited to the connection between statements

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attributable to Paul Suzuki and the plaintiffs’ purchase of MRI

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securities, and Paul Suzuki’s state of mind.

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plaintiffs’ motion for partial summary judgment against Paul Suzuki

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is denied.

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III. Junzo Suzuki

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The court concludes that genuine issues of

Accordingly, the

Plaintiffs seek summary judgment on their claims of

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constructive fraudulent transfer and unjust enrichment against

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Junzo Suzuki.

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A. Constructive Fraudulent Transfer

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Under Nevada Revised Statutes § 112.180, constructive

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fraudulent transfer as to a creditor occurs when a debtor makes a

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transfer or incurs an obligation
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[w]ithout receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
(1) [w]as engaged or was about to engage in a business or
a transaction for which the remaining assets of the
debtor were unreasonably small in relation to the
business or transaction; or (2) [i]ntended to incur, or
believed or reasonably should have believed that the
debtor would incur, debts beyond his or her ability to
pay as they became due.

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Nev. Rev. Stat. § 112.180(1)(b).

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alleged fact that MRI operated as a Ponzi scheme, and thus when

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Junzo Suzuki received commissions over the class period, MRI was

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transferring him money without having sufficient assets to pay back

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Plaintiffs’ claim is based on the

its creditors, the plaintiffs.
Junzo Suzuki argues that plaintiffs have not established that

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MRI was a Ponzi scheme and for that reason alone summary judgment

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must be denied.

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to whether he gave reasonably equivalent value in exchange for the

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commissions he received from MRI.

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Further, he asserts, a question of fact exists as

At a minimum, there are questions of fact as to the extent and

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timing of the alleged Ponzi scheme in this case, which pertains to

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whether and when MRI was unable to repay its debts to plaintiffs at

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the time of each transfer to Junzo Suzuki.

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denied as to the constructive fraudulent transfer claim against

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Junzo Suzuki.

Summary judgment is

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B. Unjust Enrichment

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

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

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such circumstances as to give rise to a legal or equitable

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obligation to account therefor.”

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

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The elements are:

Leasepartners Corp. v. Robert L.

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(1)

a benefit conferred on the defendant by the
plaintiff;

(2)

appreciation by the defendant of such benefit; and

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an acceptance and retention by the defendant of such
benefit under circumstances such that it would be
inequitable for him to retain the benefit without
payment of the value thereof.

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

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(Nev. 1981).

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Junzo Suzuki argues that plaintiffs can prevail on this claim
only if they show the existence of a Ponzi scheme; plaintiffs

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disagree that this is a necessary condition to prevail. Whether and

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to what extent Junzo Suzuki is liable for unjust enrichment should

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be decided after all the facts are disclosed at trial.

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Accordingly, the plaintiffs’ motion for summary judgment on their

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claim of unjust enrichment against Junzo Suzuki is denied.

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IV. Conclusion

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In accordance with the foregoing, the plaintiffs’ motions for

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summary judgment (ECF Nos. 520, 529 & 530) are hereby DENIED.

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parties’ evidentiary objections are DENIED WITHOUT PREJUDICE to

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renew at trial.

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IT IS SO ORDERED.

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DATED: This 27th day of February, 2017.

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____________________________
UNITED STATES DISTRICT JUDGE

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The