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World Group Securities, Inc v. William S. Sugg

February 1, 2013


The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge


Currently pending before the Court is Plaintiff World Group Securities, Inc.'s ("WGS"),*fn1 motion for summary judgment. To date, Defendant William Sugg has not filed an opposition to WGS's motion. For the reasons set forth below, the Court GRANTS WGS's motion and ORDERS that the arbitration filed with FINRA Dispute Resolution, entitled William S. Sugg v. World Group Securities, Inc. and World Financial Group, Inc., Case No. 10-04389, be permanently ENJOINED as to World Group Securities, Inc. and Transamerica Financial Advisors, Inc.


On August 23, 2010, a third party named Christopher Campbell contacted Defendant, Mr. Sugg, offering to help Mr. Sugg with a loan modification. [Doc. No. 54-3, p.25 (FINRA statement of claim).] Mr. Sugg subsequently met with Mr. Campbell at an office in Brea, California where Mr. Campbell allegedly represented that he was an employee of WGS/WFG,*fn2 and showed Mr. Sugg some of WGS/WFG's sales videos. [Id. pp.25-26; Doc. No. 8, p.2 (Plaintiff's Opposition to Motion for Preliminary Injunction).] Mr. Sugg then filled out a loan modification application and provided Mr. Campbell with tax returns, banking information, and pay stubs. [Doc. No. 54-3, p.25.] Mr. Campbell informed Mr. Sugg a few weeks later that the application was approved. [Id.; Doc. No. 8, p.3.] Mr. Sugg gave Mr. Campbell a cashier's check for $3,500, made out to the Feldman Law Center, which Mr. Sugg believed was WGS/WFG's legal team. [Id. pp.12-13 (Sugg Depo).] Several months later, Mr. Sugg discovered the loan modification was not completed as promised. [Id. p.25 (FINRA statement of claim).] After Mr. Campbell stopped returning Mr. Sugg's calls, Mr. Sugg contacted WGS/WFG.*fn3 [Id. pp.25-26.] Ultimately, Mr. Sugg was unable to obtain a loan modification and his property was sold in a short sale. [Id. p.27.]

In September 2010, Mr. Sugg filed a Statement of Claim with the Financial Industry Regulatory Authority ("FINRA")*fn4 seeking $101,000 in compensation and additional punitive damages. [Id.] Mr. Sugg later initiated arbitration proceedings with FINRA against WGS/WFG, entitled William S. Sugg v. World Group Securities, Inc. and World Financial Group, Case No. 10-04389, asserting that WGS/WFG is responsible for the actions of its alleged associate, Campbell, and that WGS/WFG sold services it was not licensed to sell (i.e., loan modifications). [Doc. No. 30, p.2 (Order Denying Defendant's Motion to Dismiss).]

On November 4, 2010, WGS filed the current action seeking declaratory and permanent injunctive relief against Mr. Sugg to terminate the FINRA arbitration, as WGS maintains it has no obligation to arbitrate Mr. Sugg's grievances. [Doc. No. 1.] The Court previously granted WGS's motion for a preliminary injunction on January 24, 2011, and ordered the arbitration proceedings "to be stayed and otherwise enjoined as to World Group Securities, Inc., pending further order of the Court." [Doc. No. 12.]

Several months later, WGS moved the Court to convene a Rule 26(f) conference, which the Court denied because Mr. Sugg still had not answered WGS's Complaint. [Doc. No. 13.] Soon thereafter, WGS requested that Clerk of Court enter default against Mr. Sugg, which the Clerk entered the next day. [Doc. No. 16.] Mr. Sugg promptly moved the Court to set aside the default. [Doc. No. 19.] The Court granted Mr. Sugg's motion, and ordered Mr. Sugg to respond to the Complaint. [Doc. No. 24.] Instead of filing an answer, Mr. Sugg submitted a response "requesting that the Courts [sic] dismiss this complaint and remove the Preliminary Injunction, thus allowing my FINRA Arbitration Case #10-04389 to move forward." [Doc. No. 26, p.6.] The Court construed Mr. Sugg's filing as a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) and denied the motion, again ordering Mr. Sugg to answer WGS's Complaint. [Doc. No. 30.] Mr. Sugg answered on March 28, 2012, and a discovery plan was set out during a Rule 26(f) planning conference. [Doc. Nos. 36, 45.]

During discovery, on July 5, 2012 WGS propounded on Mr. Sugg a set of nine requests for admissions. [Doc. No. 54-3, p.31 (Plaintiff's Requests for Admission).] Plaintiff's attorney emailed Mr. Sugg on August 21, 2012, warning him that his failure to respond to these requests within the thirty days allowed by Federal Rule of Civil Procedure would mean he would be deemed to have admitted to the requests, and offered Mr. Sugg an extension to August 27, 2012. [Id. p.37.] On August 27, 2012, Mr. Sugg emailed Plaintiff's attorney informing her of a recent medical emergency, and Plaintiff's attorney extended the deadline for Mr. Sugg to respond to the requests for admissions to September 6, 2012, warning Mr. Sugg again of the adverse impact of failing to respond to the requests. [Id. pp.38, 40.] In Mr. Sugg's deposition taken September 25, 2012, Plaintiff's attorney asked Mr. Sugg if he understood from counsel's emails that his failure to respond to the requests for admissions meant that they were deemed admitted, and Mr. Sugg responded: "[t]hat's what it says." [Id. p.19 (Sugg Depo).]

Further, during Mr. Sugg's deposition, he admitted the following: (1) Mr. Sugg agrees that Mr. Campbell is not and has never been an employee or registered representative of WGS; (2) no one from WGS represented to Mr. Sugg that Mr. Campbell was an employee or registered representative of WGS; (3) Mr. Campbell is the only person that gave Mr. Sugg the impression that WGS/WFG was involved in his loan modification; (4) Mr. Campbell never represented that he was a registered representative of WGS, only WFG; (5) Mr. Sugg agrees that WGS has no affiliation with the Feldman Law Center or Lionstar Financial; (6) Mr. Campbell is the only person Mr. Sugg ever talked to about the Feldman Law Group; (7) Mr. Sugg never signed a contract with WGS; (8) Mr. Sugg never signed a document that contained an arbitration provision; (9) Mr. Sugg never purchased securities through WGS; (10) Mr. Sugg never exercised stock options at or through WGS; (11) Mr. Sugg never rolled over his 401(k) to WGS. [Id. pp.7-9, 11, 14-17.]


A motion for summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-24 (1986). The moving party bears the initial burden of informing the Court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits which demonstrate the absence of a triable issue of material fact. Id. at 323. The evidence and all reasonable inferences therefrom must be viewed in the light most favorable to the non-moving party. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987).

If the moving party meets its initial burden, the burden then shifts to the non-moving party to present specific facts showing that there is a genuine issue of material fact for trial. Celotex, 477 U.S. at 324. The opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588 (1986). When a party fails to properly address another party's assertions of fact, a court may consider these facts as undisputed. Fed. R. Civ. P. 56(e)(2). If the motion and supporting materials, including facts considered undisputed, show the movant is entitled to summary judgment, the Court may grant the motion. Fed. R. Civ. P. 56(e)(3). Summary judgment is not appropriate if the non-moving party presents evidence from which a reasonable jury could resolve the disputed issue of material fact in his or her favor. Anderson, 477 U.S. at 248; Barlow v. Ground, 943 F.2d 1132, 1136 (9th Cir.1991). However, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co., 475 U.S. at 587.

Here, WGS seeks declaratory relief and a permanent injunction. According to well-established principles of equity, a plaintiff must demonstrate:

(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). Having to arbitrate claims in the absence of a clear agreement to do so is contrary to arbitration jurisprudence and constitutes irreparable injury. See World Grp. Sec. v. Ko, 2004 U.S. Dist. LEXIS 15726, at *23 (N.D. Cal. Feb. 11, 2004). "To the extent that ...

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