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U.S. Commodity Futures Trading Commission v. Banc de Binary, Ltd.

United States District Court, District of Nevada

April 22, 2015

BANC DE BINARY LTD., et al. Defendants.

Defs.’ Objections to Magistrate Judge’s Jan. 15, 2015 Discovery Order – dkt. no. 102

Defs.’ Objections to Magistrate Judge’s Feb. 11, 2015 Discovery Order – dkt. no. 108

Defs.’ Emergency Motion for a Hearing and Expedited Ruling – dkt. no. 115




Defendants Banc de Binary Ltd., et al., object to, and seek reconsideration of, two discovery orders (dkt. nos. 101, 103) issued by Magistrate Judge Cam Ferenbach. (Dkt. nos. 102, 108.) The Court has reviewed Plaintiff’s opposition briefs (dkt. nos. 104, 109). Because the Court finds that the Magistrate Judge’s decisions are not clearly erroneous or contrary to law, Defendants’ objections are overruled, and their requests for reconsideration are denied. Furthermore, Defendants’ Emergency Motion for a Hearing and Expedited Ruling (dkt. no. 115) is denied as moot.


The discovery disputes at issue arise from Plaintiff’s civil enforcement action, which alleges that Defendants violated various provisions of the Commodity Exchange Act and its applicable regulations by trading certain financial instruments. (See dkt. no. 52 ¶¶ 1-10.) On January 15, 2015, the Magistrate Judge issued a discovery order (“January Order”) denying Defendants’ Motion for Partial Stay of Discovery pending the resolution of a dispositive motion. (Dkt. no. 101.) Defendants objected on February 2, 2015. (Dkt. no. 102.) Shortly thereafter, on February 11, 2015, the Magistrate Judge entered a second discovery order (“February Order”) that denied Defendants’ Motion for Protective Order and granted Plaintiff’s Motion to Compel. (Dkt. no. 103.) Defendants filed their objections on March 2, 2015. (Dkt. no. 108.)


Magistrate judges are authorized to resolve pretrial matters subject to district court review under a “clearly erroneous or contrary to law” standard. 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72(a); LR IB 3-1(a) (“A district judge may reconsider any pretrial matter referred to a magistrate judge in a civil or criminal case pursuant to LR IB 1-3, where it has been shown that the magistrate judge’s ruling is clearly erroneous or contrary to law.”). A magistrate judge’s “finding is clearly erroneous when although there is evidence to support it, the reviewing body on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Concrete Pipe & Prods., Inc. v. Constr. Laborers Pension Trust, 508 U.S. 602, 622 (1993) (alteration, citation, and internal quotation marks omitted). Because a magistrate judge’s pretrial order issued under 28 U.S.C. § 636(b)(1)(A) is not subject to de novo review, “[t]he reviewing court may not simply substitute its judgment for that of the deciding court.” Grimes v. City & Cnty. of San Francisco, 951 F.2d 236, 241 (9th Cir. 1991).


The January Order denied Defendants’ Motion for Partial Stay of Discovery relating to Defendants’ alleged contacts with United States-based customers before October 2012. (Dkt. no. 101 at 1-4; see dkt. no. 76.) Defendants sought the partial stay in light of their pending Motion for Partial Summary Judgment (“MPSJ”), which argues that Plaintiff lacked jurisdiction to regulate the financial instruments at issue in Plaintiff’s civil enforcement action before a change in the relevant law became effective in October 2012. (Dkt. no. 74 at 4.)

“Under the liberal discovery principles of the Federal Rules, ” a party seeking to limit discovery “carr[ies] a heavy burden of showing why discovery [should be] denied.” Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975); see also Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597, 601 (D. Nev. 2011). To determine whether Defendants met this burden, the Magistrate Judge applied the following two-part test, which several courts in this District have adopted: (1) “the pending motion must be potentially dispositive of the entire case or at least dispositive of the issue on which discovery is sought, ” and (2) “the court must determine whether the pending potentially dispositive motion can be decided without additional discovery.” (Dkt. no. 101 at 2 (quoting Tradebay, 278 F.R.D. at 602) (internal quotation marks omitted).) The Magistrate Judge concluded that Defendants could not satisfy the second prong of this two-part test because the issue underlying the MPSJ - the scope of Plaintiff’s jurisdiction - turns on open questions of fact, not law, and because Defendants failed to show that those questions of fact could be decided without further discovery. (Dkt. no. 101 at 2-4.)

Defendants assert that the Magistrate Judge’s analysis was clearly erroneous and contrary to law because it relies on the Magistrate Judge’s misreading of an earlier order that denied Defendants’ Motion to Dismiss (“MTD Order”). (Dkt. no. 102 at 3-5.) Like the MPSJ, the Motion to Dismiss had raised arguments regarding the scope of Plaintiff’s jurisdiction. (See dkt. no. 44.) As the Magistrate Judge noted, the MTD Order denied dismissal because of a factual dispute over whether Defendants’ financial instruments could be classified as “options” as defined in the Commodity Exchange Act. (Dkt. no. 101 at 2-3.) The Court could not resolve such a factual dispute at the pleading stage without reaching beyond the Complaint. (See dkt. no. 44 at 6.) The Magistrate Judge reasoned that the same questions of fact that foreclosed dismissal would affect Defendants’ MPSJ. (Dkt. no. 101 at 2-4.) In light of this open ...

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