Cristo v. US Securities and Exchange Comission

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CONSTANTINE GUS CRISTO, Case No.: 19cv1910-GPC(MDD)

12 Plaintiff, ORDER DENYING DEFENDANTS 13 v. SEC, CLAYTON AND BARR’S MOTION TO DISMISS FOR 14 U.S. SECURITIES AND EXCHANGE INSUFFICIENT SERVICE OF COMMISSION; FINANCIAL 15 PROCESS AND DENYING INDUSTRY REGULATORY PLAINTIFF’S MOTION TO STRIKE 16 AUTHORITY; JAY CLAYTON, in his

official capacity as Chairman of the U.S. 17 [Dkt. Nos. 16, 24.] Securities and Exchange Commission; 18 WILLIAM BARR, in his official capacity as United States Attorney General; 19 ROBERT W. COOK, President and Chief 20 Executive Officer of FINRA; SEC employees DOE 1-20; and FINRA 21 employers DOE 1-20, 22 Defendants. 23

24 Before the Court is Defendant U.S. Securities and Exchange Commission (“SEC”), 25 Jay Clayton (“Mr. Clayton”), in his official capacity as Chairman of the SEC, and 26 William Barr’s (“Mr. Barr”), in his official capacity as the United States Attorney 27 General, (collectively “Defendants”) motion to dismiss for insufficient service of process 28 1 under Federal Rule of Civil Procedure 12(b)(5). (Dkt. No. 16.) Plaintiff filed an 2 opposition and also a motion to strike Defendants’ motion to dismiss.1 (Dkt. Nos. 22, 3 24.) Defendants filed a reply as well an opposition to Plaintiff’s motion to strike. (Dkt. 4 Nos. 27, 28.) Based on the reasoning below, the Court DENIES Defendants’ motion to 5 dismiss for insufficient service of process. 6 Procedural Background 7 On October 2, 2019, Plaintiff Constantine Gus Cristo (“Plaintiff’), proceeding pro 8 se, filed a Complaint against the U.S. Securities and Exchange Commission (“SEC”), 9 Financial Industry Regulatory Authority (“FINRA”), Jay Clayton (“Mr. Clayton”), in his 10 official capacity as Chairman of the SEC, William Barr (“Mr. Barr”), in his official 11 capacity as the United States Attorney General, and Robert W. Cook, in his official 12 capacity as President and Chief Executive Officer of FINRA. (Dkt. No. 1.) In this 13 complaint, Plaintiff alleges improper investigation of his Investor Complaint by FINRA, 14 improper SEC review of FINRA’s investigation as well as inconsistent 15 statements/advisements by FINRA and the SEC concerning his attempts to obtain a 16 ruling of ineligibility for arbitration and seeking to return the arbitrable issues back to this 17 Court even though the Court compelled Plaintiff’s claims to arbitration in his prior 18 related complaint with this Court in case no. 17cv1843-GPC(MDD). 19 Along with the Complaint, Plaintiff filed a motion to proceed in forma pauperis 20 (“IFP”). (Dkt. No. 1.) On December 27, 2019, the Court granted Plaintiff’s motion to 21 proceed in forma pauperis and directed the U.S. Marshal “to serve a copy of the 22 Complaint and summons upon Defendants as directed by Plaintiff on his completed U.S. 23 Marshal Form 285.” (Dkt. No. 6 at 3.) On February 13, 2020, the U.S. Marshall filed 24 “Process Receipt and Return” on Defendants. (Dkt. Nos. 9-13.) The Process Receipt and 25 Return show that SEC and Mr. Clayton were served on January 15, 2020 and Mr. Barr 26 27 28 1 was served on January 21, 2020. (Dkt. Nos. 11-13.) On April 7, 2020, Defendants SEC, 2 Mr. Barr, and Mr. Clayton filed a notice of defective service. (Dkt. No. 15.) On April 8, 3 2020, they filed the instant motion to dismiss for insufficient service of process which is 4 fully briefed. (Dkt. Nos. 16, 22, 27.) In conjunction with his opposition, Plaintiff also 5 filed a motion to strike the motion to dismiss with essentially the same arguments raised 6 in his opposition which is also fully briefed. (Dkt. Nos. 24, 28.) 7 Discussion 8 A Federal Rule of Civil Procedure 12(b)(5) 9 Federal Rule of Civil Procedure (“Rule”) 12(b)(5) allows a defendant to move to 10 dismiss due to insufficient service of process. Fed. R. Civ. P. 12(b)(5). “A federal court 11 is without personal jurisdiction over a defendant unless the defendant has been served in 12 accordance with Rule 4.” Benny v. Pipes, 799 F.2d 489, 492 (9th Cir. 1986) (citing 13 Jackson v. Hayakawa, 682 F.2d 1344, 1347 (9th Cir. 1982)). 14 Rule 4(i) governs service of process on the United States, its agencies, officers and 15 employees. It provides that a party must serve the agency or officer as well as the U.S. 16 attorney for the district where the action is brought and the Attorney General of the 17 United States at Washington, D.C.2 Fed. R. Civ. P. 4(i). “Rule 4 is a flexible rule that 18

19 2 (1) United States. To serve the United States, a party must: 20

21 (A)(i) deliver a copy of the summons and of the complaint to the United States attorney for the district where the action is brought--or to an assistant United States attorney or 22 clerical employee whom the United States attorney designates in a writing filed with the court clerk—or 23 (ii) send a copy of each by registered or certified mail to the civil-process clerk at the 24 United States attorney's office; 25 (B) send a copy of each by registered or certified mail to the Attorney General of the 26 United States at Washington, D.C.; . . .

27 (2) Agency; Corporation; Officer or Employee Sued in an Official Capacity. To serve a United States agency or corporation, or a United States officer or employee sued only in 28 1 should be liberally construed so long as a party receives sufficient notice of the 2 complaint.” Crowley v. Bannister, 734 F.3d 967, 975 (9th Cir. 2013) (quoting Benny, 3 799 F.2d at 492). However, “[n]either actual notice, nor simply naming the person in the 4 caption of the complaint, will subject defendants to personal jurisdiction if service was 5 not made in substantial compliance with Rule 4.” Jackson, 682 F.2d at 1347 (internal 6 citations omitted). 7 In Borzeka, the Ninth Circuit, addressing the predecessor to Rule 4(i), held that 8 Rule 4 requirements may be excused if “(a) the party that had to be served personally 9 received actual notice, (b) the defendant would suffer no prejudice from the defect in 10 service, (c) there is a justifiable excuse for the failure to serve properly, and (d) the 11 plaintiff would be severely prejudiced if his complaint were dismissed.” Borzeka v. 12 Heckler, 739 F.2d 444, 448 (9th Cir. 1984). 13 B. Analysis 14 Defendants argue that service was improper because a copy of the summons and 15 complaint was never served on the United States in compliance with Rule 4(i). Plaintiff 16 did not serve the Attorney General on behalf of the SEC or its Chairman and did not 17 serve the U.S. Attorney’s Office. 18 In response, Plaintiff does not dispute that he did not serve the Attorney General on 19 behalf of the SEC or its Chairman and did not serve the U.S. Attorney’s Office but argues 20 that his failure to timely serve is supported by good cause. (Dkt. No. 22 at 8.) He argues 21 that once he was granted IFP status, the responsibility of service fell onto the U.S. 22 Marshal. (Id. at 9 (“The U.S. Marshal is responsible for service when the Court grants a 23 plaintiff’s motion to proceed in forma pauperis.”). Plaintiff fulfilled his responsibility as 24 ordered by the Court by completing the IFP Package and returning it to the U.S. Marshal. 25

26 summons and of the complaint by registered or certified mail to the agency, corporation, 27 officer, or employee.

28 1 Plaintiff’s argument is misplaced. While Rule 4(c) provides that a court may order 2 the United States Marshal to effect service under the IFP statute, Fed. R. Civ. P. 4(c)(3), 3 Rule 4(c) also provides that the “plaintiff is responsible for having the summons and 4 complaint served within the time allowed by Rule 4(m) and must furnish the necessary 5 copies to the person who makes service.” Fed. R. Civ. P. 4(c)(1). It is Plaintiff’s 6 responsibility to provide all the information necessary and the U.S. Marshal merely 7 serves according to the information provided by the plaintiff. See McIntyre v. NaphCare, 8 Inc., No. 16-CV-2107 JCM (BNW), 2016 WL 1243785, *1 (D. Nevada Mar. 16, 2020) 9 (“plaintiff's failure to complete service cannot be blamed on the USM. The record shows 10 that plaintiff failed to provide the USM with reliable information to serve. . .”). 11 Aguirre v. Monk, No. C 09-763 MHP, 2011 WL 2149087, *14 (N.D. Cal. June 1, 2011) 12 (“Although the Court can and does have the U.S. Marshal serve process on defendants 13 routinely in in forma pauperis cases, it is the plaintiff’s responsibility to provide a name 14 and address for each defendant to be served.”). Therefore, Plaintiff failed to strictly 15 comply with Rule 4(i) in serving Defendants. 16 However, under the Borzeka factors, the Court excuses Plaintiff from strict 17 compliance with Rule 4(i). It is not disputed that Defendants have received actual notice 18 of the complaint and there is no indication that they would suffer any prejudice from the 19 defect in service. The Court also concludes that there is a justifiable excuse for the 20 failure to serve properly. Although legally unsupported, Plaintiff’s strict construction of 21 the Court’s order granting the U.S. Marshal authority over service is not unreasonable 22 and could constitute justifiable good cause. Borzeka, 739 F.2d at 447 n.2 (“appellant was 23 proceeding pro se when the defective service was made. We are generally more solicitous 24 of the rights of pro se litigants, particularly when technical jurisdictional requirements are 25 involved.”); see also Draper v. Coombs, 792 F.2d 915, 924 (9th Cir. 1986) (“We 26 recognize that the plaintiff represented himself and therefore, in evaluating his 27 compliance with the technical rules of civil procedure, we treat him with great leniency” 28 as to service of discovery). Defendants’ citation to cases holding that ignorance of Rule 1 does not constitute good cause is not persuasive because in those cases the plaintiff 2 || was represented by counsel. See Townsel v. Cnty. of Contra Costa, 820 F.2d 319, 320 3 || (9th Cir. 1987); see also Hamilton v. Endell, 981 F.2d 1062, 1065 (9th Cir. 1992). 4 || Finally, the plaintiff would be severely prejudiced if his complaint were dismissed on a 5 || failure to comply with technical rule. See Kruska v. Perverted Justice Fdn. 6 || Incorporated.org, No. CV 08—0054—-PHX-SMM, 2010 WL 31560839, at *3 (D. Az. Aug. 7 ||9, 2010) (plaintiff “would be severely prejudiced if her complaint was dismissed for a 8 ||mere technical noncompliance”). 9 Accordingly, because the Borzeka factors have been met, the Court DENIES 10 || Defendants’ motion to dismiss. As such, the Court also DENIES Plaintiff’s motion to 11 ||strike Defendants’ motion to dismiss. 12 Conclusion 13 Accordingly, the Court DENIES Defendants’ motion to dismiss for failure to 14 effectuate service of process and DENIES Plaintiff's motion to strike Defendants’ motion 15 ||to dismiss. The hearing set on May 29, 2020 shall be vacated. 16 IT IS SO ORDERED. 17 || Dated: May 26, 2020 2 18 Hon. athe Cae 19 United States District Judge 20 21 22 23 24 25 26 27 28