Securities And Exchange Commission v. Richman

• Court: District Court, N.D. California
• Decided: October 25, 2021
• Docket: 3:21-cv-01911
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division 11 SECURITIES AND EXCHANGE Case No. 21-cv-01911-CRB(LB) COMMISSION, 12 Plaintiff, DISCOVERY ORDER 13 v. Re: ECF No. 51 14 JESSICA RICHMAN, et al., 15 Defendants. 16 17 INTRODUCTION 18 The parties dispute three subpoenas served by the SEC on Bank of America, J.P. Morgan 19 Chase Bank, and Fidelity Brokerage Services. The subpoenas seek the defendants’ bank and 20 investment information, which the SEC asserts is related to the defendants’ alleged securities 21 fraud. The defendant moved to quash the subpoenas generally contending that they are irrelevant 22 and duplicative.1 The court can decide the issues without oral argument. Civ. L. R. 7-1(b). The 23 court finds that the subpoenas are relevant, denies the motion to quash, and orders the production 24 of the records. 25 26 27 1 Joint Letter Br. – ECF No. 51. Citations refer to material in the Electronic Case File (ECF); pinpoint 1 ANALYSIS 2 On September 2, 2021, the SEC served three Rule 45 subpoenas on Bank of America, J.P. 3 Morgan Chase Bank, and Fidelity Brokerage Services, seeking financial records for the 4 defendants’ accounts from July 1, 2018 to the present.2 On September 13, 2021, the defendants 5 filed a motion to quash the subpoenas.3 The court dismissed the motion to quash without prejudice 6 and directed the parties the comply with the court’s joint discovery letter briefing process outlined 7 in the court’s standing order.4 The parties submitted their joint discovery letter brief on October 8 13, 2021. The defendants object to the subpoenas and ask the court to quash them, asserting 9 generally that they are irrelevant and duplicative.5 10 The court denies the motion to quash. 11 First, the subpoenas seek relevant information. In the underlying case, the SEC is seeking 12 permanent injunctions, disgorgement, and civil penalties for alleged securities fraud.6 The 13 information sought — records of the defendants’ transfer of assets overseas — is directly relevant 14 to the SEC’s claims. See SEC v. Newpoint Fin. Servs., Inc., No. 10 Civ. 124, 2010 WL 11484382, 15 at *3 (C.D. Cal. Nov. 5, 2010) (ruling that subpoenas seeking financial records were relevant 16 because “[a] claim for relief consists of both the claim, and a demand for relief,” which includes 17 disgorgement and civil penalties (cleaned up)); In re Suzuki, No. 14 Civ. 516, 2014 WL 6908384, 18 at *4 (D. Haw. Dec. 5, 2014) (refusing to quash a subpoena seeking bank records of person who 19 allegedly received fraud proceeds because that information “is relevant to the claims, remedies, 20 and resolution of the underlying action”). Moreover, the information is relevant to the SEC’s 21 determination of whether additional relief may be appropriate, including a potential pre-judgment 22 asset freeze. See SEC v. Liu, 851 Fed. App’x 665, 668 (9th Cir. 2021) (affirming a pre-judgment 23 asset freeze, which prevents “a defendant from dissipating assets in order to preserve the 24

25 2 Subpoenas, Exs. A–C to Mot. – ECF No. 42-1, 42-2 & 42-3. 26 3 Mot. – ECF No. 42. 4 Order – ECF No. 44. 27 5 Joint Letter Br. – ECF No. 51 at 1–3. 1 possibility of equitable remedies.”’) (citation omitted); SEC v. PlexCorps, No. 17 Civ. 7007, 2018 2 || WL 3038500, at *3 (E.D.N.Y. June 19, 2018) (ordering additional asset freeze post-filing in light 3 of continued dissipation). The cases cited by the defendants do not persuade the court otherwise. 4 Second, the subpoenas are not duplicative. The SEC did not previously request the defendants’ 5 account information from Bank of America or J.P. Morgan Chase Bank. Moreover, a protective 6 || order is not warranted here. A party seeking a protective order must show “good cause” by stating 7 || with specificity that “the information sought will cause harm or prejudice if the protective order is 8 || not granted.” Fed. R. Civ. P. 26(c)(1); Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 9 F.3d 1206, 1210-11 (9th Cir. 2002). The defendants’ account records will not cause harm or 10 || prejudice: the SEC already has the information, and it seeks it directly from the banks now in 11 order to establish the authenticity of the records.

13 CONCLUSION S 14 The court denies the defendants’ motion to quash the subpoenas and orders the production of 3 15 the financial records. A 16

17 IT IS SO ORDERED. 18 Dated: October 25, 2021 LAE 19 LAUREL BEELER 20 United States Magistrate Judge 21 22 23 24 25 26 27 28