Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-02461/USCOURTS-casd-3_12-cv-02461-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:0078m(a) Securities Exchange Act

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

IAN MAUSNER, an individual, on behalf 

of himself and as trustee for the Borg 

Trust, 

Plaintiff,

v. 

MARKETBYTE LLC, a California 

limited liability company; LAWRENCE 

D. ISEN, an individual; DAVID 

FREDERICK BAHR, an individual; and 

DOES 1 through 100, inclusive, 

Defendant.

 Case No.: 12cv2461 NLS (MDD) 

ORDER GRANTING DEFENDANTS’ 

MOTION TO REMAND [Dkt. No. 90] 

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Relevant Facts. 

Plaintiff Ian Mausner alleged defendants Lawrence Isen, David Bahr and 

Marketbyte, LLC (collectively, Marketbyte) engaged in a “pump and dump” scheme, 

where they falsely promoted over-the-counter (“OTC”) stocks in order to sell their own 

shares of the stock at a higher price. See, e.g., First Amended Complaint (FAC), Dkt. No. 

15 ¶¶ 2, 36-38. Four claims were at issue in the case: (1) Violation of Securities 

Exchange Act of 1934 Section 10(b) and Rule 10b-5; (2) Violation of California 

Corporations Code § 25400; (3) common law fraud; and (4) negligent misrepresentation. 

Marketbyte moved for summary judgment on all four claims. This court granted 

summary judgment and ordered judgment entered in favor of all Defendants. [Dkt. Nos. 

68, 69.] Mausner then filed a motion to amend the judgment, seeking relief on the 

common law fraud and negligent misrepresentation claims only, and alternatively, asking 

for leave to file an amended complaint. [Dkt. No. 72.] The court denied the motion. 

[Dkt. No. 78.] 

Mausner appealed the order on the motion to amend, leaving the court’s rulings on 

the Rule 10(b)(5) claim and the California Corporations Code intact. Thus, the only 

claims considered on appeal were the state law claims for common law fraud and 

negligent misrepresentation. The Ninth Circuit reversed this court regarding those two 

claims, finding that this court erred in holding that the FAC did not include causes of 

action for common law fraud and negligent misrepresentation based on direct fraudulent 

inducement. It specifically reversed this court’s finding that because Mausner failed to 

provide an expert to testify regarding the damages caused by Marketbyte’s alleged 

fraudulent and negligent conduct, it could not succeed on those claims: 

However, neither the district court nor the Defendants point to 

any California law requiring an expert for these torts, and we 

find none. To the contrary, California law permits damages for 

fraud and negligent misrepresentation to be proved in a variety 

of ways, including by out-of-pocket losses. See Strebel v. 

Brenlar Invs., Inc., 135 Cal. App. 4th 740, 749–750 (2006). 

Without clear law from California courts, it was 

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inappropriate for the district court to require Mausner to either 

provide a damages expert or suffer summary judgment. Our 

decision does not foreclose the parties from renewing the 

argument, which may benefit from further factual development. 

Ninth Cir. Order, p.3 (emphasis added). 

At the Appeal Mandate hearing, and following the hearing, counsel agreed to file a 

joint motion to remand this action because only state law claims remain in the case. But 

a few days after the hearing Mausner changed his mind. Then, Marketbyte filed this 

contested motion to remand. 

Discussion and Order. 

Marketbyte asks to remand the case because only state law claims remain and a 

California state court should decide the “open question” of whether expert testimony is 

required to establish common law fraud or negligent misrepresentation based on fraud in 

the inducement. Mausner asks the court to exercise its discretion and retain jurisdiction 

over the pendent state law claims and see this case through trial. Mausner argues this 

would serve the interests of judicial economy as the court is “deeply familiar with the 

facts and issues forming the basis of Mr. Mausner’s claims, especially given the attention 

this lawsuit received at the summary judgment stage, and is prepared to try this case 

within the next several months.” Opp’n, p.4. 

“If at any time before final judgment it appears that the district court lacks subject 

matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Further, a district 

court “may decline to exercise supplemental jurisdiction over a claim...if...the district 

court has dismissed all claims over which it has original jurisdiction.” Further, the 

doctrine of 

pendent jurisdiction is a doctrine of discretion, not of plaintiff's 

right. Its justification lies in considerations of judicial 

economy, convenience and fairness to litigants; if these are not 

present a federal court should hesitate to exercise jurisdiction 

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over state claims, even though bound to apply state law to 

them[.] 

United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966). 

This case has been absent from this court for well over two years. While at one 

time the court was familiar with the facts, given the passage of time, this court would 

have to conduct an in-depth review all the facts and issues forming the basis of Mr. 

Mausner’s claims. Further, the Ninth Circuit noted there is an open question under state 

law as to whether expert testimony is needed to prove the elements of Mausner’s 

remaining claims. Given these circumstances, neither judicial economy nor fairness to 

litigants is served by this court retaining jurisdiction. Given the lack of federal claims, 

the need for this court to re-learn the facts and issues of this case, and the open question 

under California law, the court finds good cause to remand the case to state court. 

 The court, therefore, ORDERS that the case of Mausner v. Marketbye, LLC, et. al, 

Case No. 12cv2461 NLS (MDD) be remanded to the Superior Court of the State of 

California for the County of San Diego. 

IT IS SO ORDERED. 

Dated: January 3, 2017 

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