Cristo v. US Securities and Exchange Comission

Opinion

CONSTANTINE GUS CRISTO, Case No.: 19cv1910-GPC(MDD)

Plaintiff, ORDER DENYING DEFENDANTS v. SEC, CLAYTON AND BARR’S MOTION TO DISMISS FOR INSUFFICIENT SERVICE OF COMMISSION; FINANCIAL INDUSTRY REGULATORY PLAINTIFF’S MOTION TO STRIKE AUTHORITY; JAY CLAYTON, in his

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

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

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

(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 clerical employee whom the United States attorney designates in a writing filed with the court clerk—or (ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney's office; (B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; . . .

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

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

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