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Jackson v. Fischer

United States District Court, N.D. California

March 16, 2017

WILLIAM FISCHER, et al., Defendants.


          PHYLLIS J. HAMILTON, United States District Judge

         The motions of plaintiff Suzanne D. Jackson (“Jackson”) and defendant Joshua Rosen (“Rosen”) for summary judgment came on for hearing before this court on January 11, 2017. Jackson appeared by her counsel Alan Kaufman and Robert Stumpf, and defendant Rosen appeared by his counsel Mark Peterson and Matthew Cate. Also appearing was Kyle Withers, counsel for defendants Jon Sabes, Steven Sabes, Marvin Siegel, and Brian Campion (“SpeciGen defendants”). Having read the parties' papers and carefully considered their arguments and the relevant legal authority, the court hereby DENIES the motions.


         The procedural and factual background of this case is as set forth in the September 21, 2015, order re defendants' motions to dismiss and motions to strike certain claims asserted against them in the fourth amended complaint (“4thAC”). Briefly, Jackson alleges that she and Fischer met in October 2006, and that he falsely represented himself as having extensive investment and management experience; that he fraudulently induced her to place her money in various risky investments that he claimed were sound investments; and that she lost $8.25 million in those investments.

         In June 2011, Jackson filed the present action against numerous individual and corporate defendants, including Fischer and the companies in which she invested and the officers and directors of those companies. She asserted claims of primary liability for securities fraud under § 10(b) of the 1934 Securities Exchange Act, and Rule 10b-5 promulgated thereunder, and claims of “control-person liability” under § 20(a) of the Exchange Act, along with claims under the California Corporations Code and the federal Investment Advisers Act. She also alleged common law claims including fraud, negligent misrepresentation, and breach of fiduciary duty.

         In April 2012, Fischer filed for Chapter 7 bankruptcy protection in the Bankruptcy Court for the District of Minnesota. See In re William Richard Fischer, 12-bk-42128 (Bankr. D. Minn.). He indicated that his sole creditor was Jackson, based on the claims asserted in the present action. The Bankruptcy Court discharged the debt. On July 17, 2012, Jackson filed a complaint in the Bankruptcy Court in Adversary No. 12-ap-4183 (“the adversary proceeding”) to determine the dischargeability of Fischer's debt under 11 U.S.C. § 523(a)(2) and (a)(4).

         Jackson and Fischer litigated the adversary proceeding, and engaged in extensive discovery. None of the other defendants in the present action were involved, although two of the SpeciGen defendants (Jon Sabes and Steven Sabes) unsuccessfully attempted to intervene after Jackson moved for an order compelling them to respond to discovery subpoenas.

         On December 15, 2013, Jackson and Fischer entered into a confidential Settlement Agreement, pursuant to which Fischer agreed to pay Jackson a total of $500, 000, with scheduled payments spread out over nine or ten years. Fischer also agreed to stipulate to entry of judgment for the non-dischargeability of Jackson's $8.25 million claim against Fischer, based on the applicability of 11 U.S.C. § 523(a)(2)(A) (money obtained through false pretenses, false representations, and actual fraud), though not on the applicability of 11 U.S.C. § 523(a)(4) (money obtained through embezzlement and larceny).

         On December 17, 2013, Jackson and Fischer filed a stipulation for judgment, in which Fischer admitted - notwithstanding the above-described agreement to pay Jackson $500, 000 - that "he is indebted to plaintiff Suzanne D. Jackson in the amount of $8, 250, 000.00 as [p]laintiff alleged in her complaint filed in the above-captioned adversary proceeding[;] and that "his debt to plaintiff Suzanne D. Jackson in the amount of $8, 250, 000.00 is non-dischargeable under 11 U.S.C. § 523(a)(2)(A) because such debts were obtained by means of false pretenses, false representations, and actual frauds committed against [p]laintiff as she alleged in her adversary complaint." On December 18, 2013, the Bankruptcy Court entered a judgment of non-dischargeability, ordering that Jackson was entitled to recover from Fischer the sum of $8.25 million, and that the debt represented by this judgment "is excepted from the defendant's discharge pursuant to 11 U.S.C. § 523(a)(2)(A)."


         A. Legal Standard

         A party may move for summary judgment on a “claim or defense” or “part of . . . a claim or defense.” Fed.R.Civ.P. 56(a). Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Id.

         A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion, and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Material facts are those that might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.

         Where the moving party will have the burden of proof at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun v.Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 324-25. If the moving party meets its initial burden, the opposing party must then set out specific facts showing a genuine issue for trial in order to defeat the motion. Anderson, 477 U.S. at 250; see also Fed.R.Civ.P. 56(c), (e). When deciding a summary judgment motion, a court must view the evidence in the light most favorable to the nonmoving party and draw all justifiable inferences in its favor. Anderson, 477 U.S. at 255; Hunt v. City of Los Angeles, 638 F.3d 703, 709 (9th Cir. 2011).

         B. Plaintiff's Motion

         In a renewed attempt to establish Fischer's “primary liability” under § 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, Jackson asserts that the judgment of non-dischargeability in the adversary proceeding in the Minnesota bankruptcy case is res judicata as to the Exchange Act claims against Fischer, and that the judgment also creates collateral estoppel as to "facts and issues" underlying the primary claims asserted against Fischer.

         Previously, the defendants moving to dismiss the 4thAC argued that Jackson had failed to state a claim against them for “control-person liability” under § 20(a) of the Exchange Act because she had failed to allege facts sufficient to state a claim for primary liability against Fischer under § 10(b) and Rule 10b-5. In opposing the motions, Jackson asserted that based on the stipulated judgment in the Minnesota adversary proceeding, defendants were barred ...

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