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Takiguchi v. MRI International, Inc.

United States District Court, D. Nevada

February 27, 2017

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, Plaintiffs,
v.
MRI INTERNATIONAL, INC., EDWIN J FUJINAGA, JUNZO SUZUKI, PAUL MUSASHI SUZUKI, LVT, INC., dba STERLING ESCROW, and DOES 1-500, Defendants.

          ORDER

         Plaintiffs, on behalf of a class of about 8, 700 mostly Japanese investors, initiated this action against defendants MRI International (“MRI”), Edwin Fujinaga (“Fujinaga”), Junzo Suzuki, Paul Suzuki, and LVT, Inc. dba Sterling Escrow (“Sterling”) on July 5, 2013, asserting several claims in connection with the collapse of an alleged Ponzi scheme. Since that time, ten additional parties have been added to the case, including Keiko Suzuki.

         The operative complaint - the Fifth Amended Complaint (ECF No. 481) - asserts twelve causes of action: (1) violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j and Rule 10b-5, 17 C.F.R. § 240.10B-5, against Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (2) violation of § 20(a) of the Exchange Act of 1934, 15 U.S.C. § 77t against Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (3) violation of § 12(a)(1) of the Securities Act of 1933, 15 U.S.C. § 77l against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (4) violation of § 15 of the Securities Act of 1933, 15 U.S.C. § 77o against Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (5) intentional fraud against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, and Keiko Suzuki; (6) unjust enrichment against all defendants; (7) breach of fiduciary duty against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, Keiko Suzuki, and Sterling; (8) aiding and abetting fraud against Sterling; (9) breach of contract against MRI; (10) action for accounting against MRI, Fujinaga, Junzo Suzuki, Paul Suzuki, Keiko Suzuki, and Sterling; (11) constructive trust against all defendants; and (12) constructive fraudulent transfer against all defendants but MRI.

         On March 21, 2016, the court granted the plaintiffs' motion for class certification. Plaintiffs thereafter provided the required notice to the class members. Trial in this matter is currently scheduled to begin on August 1, 2017. The deadline for filing motions for summary judgment as to the original defendants expired on November 1, 2016.

         Currently before the court are the plaintiffs' motions for partial summary judgment against defendants (1) Paul Suzuki (ECF No. 520); (2) Junzo Suzuki (ECF No. 529); and (3) MRI and Fujinaga ECF No. 530) (hereinafter collectively “defendants”). Defendants have opposed (ECF Nos. 566, 563 & 559), and plaintiffs have replied (ECF Nos. 581, 577 & 580). In addition, the plaintiffs have filed separate statements of fact, to which the defendants have responded and plaintiffs have replied, and plaintiffs and defendants have noted various evidentiary objections.

         Summary judgment shall be granted “if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The burden of demonstrating the absence of a genuine issue of material fact lies with the moving party, and for this purpose, the material lodged by the moving party must be viewed in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Martinez v. City of Los Angeles, 141 F.3d 1373, 1378 (9th Cir. 1998). A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. Lynn v. Sheet Metal Workers Int'l Ass'n, 804 F.2d 1472, 1483 (9th Cir. 1986); S.E.C. v. Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982).

         Once the moving party presents evidence that would call for judgment as a matter of law at trial if left uncontroverted, the respondent must show by specific facts the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). “[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249-50 (citations omitted). “A mere scintilla of evidence will not do, for a jury is permitted to draw only those inferences of which the evidence is reasonably susceptible; it may not resort to speculation.” British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978).

         I. MRI and Edwin Fujinaga

         The plaintiffs seek summary judgment on all of the securities claims alleged against MRI and Fujinaga. MRI and Fujinaga argue that plaintiffs have not proven that the underlying transactions were domestic, a necessary condition for their federal securities claims. They further argue that plaintiffs have failed to prove that MRI was a Ponzi scheme and maintain that MRI was in fact a legitimate business.

         In opposition, plaintiffs principally argue that MRI and Fujinaga's arguments are precluded by the doctrine of collateral estoppel because those issues have already been decided in a case brought by the Securities and Exchange Commission against MRI and Fujinaga.

         A. Collateral Estoppel

         In September 2013, the Securities and Exchange Commission (“SEC”) filed a complaint against MRI and Fujinaga that included a securities fraud claim under § 10(b) and Rule 10b-5. See Securities & Exch. Comm'n v. Fujinaga, 2:13-cv-01658-JCM-CWH. On October 3, 2014, the court in that case in granted the SEC summary judgment on its claims against MRI and Fujinaga, including the securities fraud claim. That order has been appealed, and the appeal remains pending. Plaintiffs seek application of collateral estoppel against MRI and Fujinaga on the basis of the court's findings in that case.

         The court has broad discretion to determine when offensive collateral estoppel should apply, and may decline to apply it in cases where it would be unfair to the defendant and where it would not promote judicial economy. Collins v. D.R. Horton, 505 F.3d 874, 881-82 (9th Cir. 2007). Here, the court's judgment in the related SEC case is on appeal. Should this court rely on collateral estoppel to prevent MRI and Fujinaga from presenting a defense here, a reversal of any or all of the judgment in the SEC case could impact this case and could duplicate and further prolong these proceedings. Moreover, Fujinaga has elected to not invoke the Fifth Amendment in these proceedings and apparently intends to introduce evidence negating an inference of scienter. The court's findings as to scienter in the SEC case was based, in part, on Fujinaga's assertion of his Fifth Amendment rights in that case. (See 2:13-cv-01658-JCM-CWH, Doc. #156 at 14 (Ord. dated Oct. 3, 2016)). For these reasons, the plaintiffs' request for summary judgment on all the securities claims against MRI and Fujinaga based on the doctrine of collateral estoppel is DENIED.

         B. Domestic Transaction

         MRI and Fujinaga's principal argument in opposition to summary judgment is that plaintiffs have failed to prove a necessary element of their securities claims: that the transactions at issue qualified as “domestic transactions” as required by Morrison v. National Australia Bank Ltd., 561 U.S. 247, 267 (2010). Plaintiffs respond ...


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