Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-01596/USCOURTS-casd-3_12-cv-01596-1/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 12:3410 Right to Financial Privacy Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PAUL TABET and JENIFER TABET,

Movants,

CASE NO. 12-CV-1596-IEG (DHB)

ORDER REJECTING MOVANTS’

OBJECTIONS TO

MAGISTRATE’S ORDER

DENYING MOTION TO QUASH

[Doc. No. 7]

vs.

U.S. SECURITIES & EXCHANGE

COMMISSION,

Respondent.

Before the Court are Movants Paul and Jenifer Tabet’s objections to Magistrate Judge

David H. Bartick’s August 6, 2012 order denying their motion to quash administrative subpoenas

issued by the United States Securities and Exchange Commission’s (“SEC”). For the reasons

below, the Court rejects Movants’ objections and affirms Judge Bartick’s order. Movants’ motion

to quash is DENIED.

BACKGROUND

On February 7, 2012, the SEC issued a formal order of investigation into federal securities

law violations in connection with pre-initial public offering shares of Facebook, Inc., In the Matter

of Certain Trading of Facebook, Inc., NY-08741. [See Doc. No. 1.] As part of this investigation,

on June 14, 2012, the SEC issued two subpoenas to Bank of America, seeking Movants’ personal

bank records. [Id.] On June 28, 2012, Movants filed a motion to quash under the Right to

Financial Privacy Act of 1978 (“RFPA”). [Doc. No. 1.] The matter was referred to Magistrate

Judge David H. Bartick, who denied Movants’ motion on August 6, 2012. [See Doc. No. 4.] On

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August 28, 2012, Movant filed the present objections. [Doc. No. 7.] 

DISCUSSION

Upon timely objection, the district court reviews a magistrate’s non-dispositive rulings for

clear error and dispositive rulings de novo. Fed. R. Civ. P. 72(a), (b).1 Though “[a] motion to

quash is normally considered a non-dispositive matter,” Hard Drive Productions, Inc. v. Does 1-

188, 809 F.Supp.2d 1150, 1155 (N.D. Cal. 2011) (citing Arista Records LLC v. Doe 3, 604 F.3d

110, 116 (2d Cir. 2010)), where, as here, “the order denying the motion to quash dispose[s] of the

sole issue in the case,” it is considered dispositive. Doe v. U.S. S.E.C., 2011 WL 5600513, at *2

(N.D. Cal. Nov. 17, 2011); U.S. v. Bell, 57 F.Supp.2d 898, 905 (N.D. Cal. 1999) (“Once the court

grants or quashes the agency subpoena, it determines with finality the duties of the parties,” and is

thus dispositive.). Accordingly, the Court reviews Judge Bartick’s order de novo. Hunt v. Pliler,

384 F.3d 1118, 1123 (9th Cir. 2004) (“Where a party files written objections to the proposed

disposition, ‘[t]he district judge to whom the case is assigned shall make a de novo determination

upon the record.’”) (quoting Rule 72(b)).

Movants move to quash pursuant to the RFPA. [See Doc. No. 1.] “The RFPA ‘narrowly

constrains the range of decisions which the Court may make with regard to motions to quash.’”

Rosiere v. U.S. S.E.C., 2010 WL 489526, at *3 (D. Nev. Feb. 5, 2010) (quoting In re Blunden, 896

F.Supp. 996, 999 (C.D. Cal. 1995)). It “provides that the court must deny a customer challenge to

a subpoena if the government establishes the relevance of the subpoenaed documents to a

legitimate law enforcement inquiry.” Id. (emphasis in original); accord Phelps v. Soc. Sec.

Admin., Office of the Inspector General, 2009 WL 862167, at *1 (S.D. Cal. March 26, 2009).

Moreover, “[f]or the purposes of an administrative subpoena, the notion of relevancy is a broad

one. An agency can investigate merely on the suspicion that the law is being violated, or even just

because it wants assurance that it is not. So long as the material touches a matter under

investigation, an administrative subpoena will survive a challenge that the material is not

1 Movants’ reliance on Fed. R. Civ. P. 59 and 60 is misplaced, [Doc. No. 7 at 1], for,

inter alia, any such motion for reconsideration “must be presented to the rendering court.” Bd. of

Trustees, Sheet Metal Workers’ Nat. Pension Fund v. Elite Erectors, Inc., 212 F.3d 1031, 1034 (7th

Cir. 2000) (J. Easterbrook); accord First Beverages, Inc. v. Royal Crown Cola Co., 612 F.2d 1164,

1172 (9th Cir. 1980). This Court did not render Judge Bartick’s order.

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relevant.” S.E.C. v. Nicita, 2007 WL 1704585, at *3 n.4 (S.D. Cal. June 13, 2007) (internal

citation omitted). Under this standard, a “declaration of [a] government official attesting to [the]

commencement of investigation . . . [is] sufficient to establish [that the] law enforcement inquiry is

legitimate, and records are relevant.” Rosiere, 2010 WL 489526, at *3; In re Blunden, 896 F. Supp

at 999 (same). 

 Here, the SEC’s sworn, verified opposition sufficiently establishes both the legitimacy of

the SEC’s investigation and the relevance of the records sought in relation thereto. [See Doc. No.

3.] Under the RFPA, a legitimate law enforcement inquiry includes “a lawful investigation . . .

into a violation of . . . any criminal or civil statute.” 12 U.S.C. § 3401(8). The SEC attests that the

instant investigation relates to “possible violations of Section 17(a) of the Securities Act of 1933

and Section 10(b) of the Securities Exchange Act of 1934,” [see Doc. No. 3 at 6-7], thus falling

squarely within the SEC’s statutory authority to investigate possible violations of the federal

securities laws. See 15 U.S.C. §§ 77y(a), 78u(a); see also S.E.C. v. Arthur Young & Co., 584 F.2d

1018, 1023 (D.C. Cir. 1978) (Congress has endowed the Commission . . . with broad power to

conduct investigations . . . to ferret out violations of the securities laws . . . and in that connection

to call for production of relevant materials by those who seem to have them.”). As the SEC’s

investigation is a lawful investigation into violations of the federal securities laws, it constitutes a

legitimate law enforcement inquiry under the RFPA. See In re Blunden, 896 F.Supp. at 999.

The SEC’s verified opposition further attests that the records sought by its subpoenas will,

inter alia, help determine the extent of Movants’ involvement in the scheme being investigated,

show whether additional parties were involved, and help trace the proceeds of illegal transactions. 

[Doc. No. 3.] Such ends are directly probative of the matters under investigation, see In re John

Doe, 1990 WL 119321 (S.D.N.Y. Aug. 10, 1990) (“whether that person’s bank account contains

evidence of [illicit] conduct” is relevant to investigation of such illicit conduct), and thus more

than suffice under the broad relevance standard applicable to administrative subpoenas. See

Nicita, 2007 WL 1704585, at *3 n.4; Rosiere, 2010 WL 489526, at *3. Because the SEC’s

subpoenas are directly relevant to a legitimate law enforcement inquiry, Movants’ motion to quash

must be denied. See Casey v. FTC, 578 F.2d 793, 799 (9th Cir. 1978) (administrative

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“subpoena[s] must be enforced if the information sought is not plainly incompetent or irrelevant to

any lawful purpose.”).

CONCLUSION

For the foregoing reasons, as well as those articulated in Judge Bartick’s sound order,

Movants’ objections are REJECTED and motion to quash is DENIED.

IT IS SO ORDERED.

DATED: September 11, 2012 ______________________________

IRMA E. GONZALEZ

United States District Judge

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