UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLUMBIA 

SECURITIES AND EXCHANGE 

COMMISSION 

Petitioner, 

v. 

DELOITTE TOUCHE TOHMATSU 

CPA LTD. I 

Respondent. 

Civil Action No. 11-mc-512 

(GK/DAR) 

MEMORANDUM OPINION 

Petitioner Securities and Exchange Commission ("SEC11 ) filed 

an Application for Order to Show Cause and for Order Requiring 

Compliance with a Subpoena on September 8 1 2011 [Dkt. No. 1]. On 

August 7 1 2012 1 Magistrate Judge Deborah A. Robinson entered a 

minute order granting an Unopposed Motion for Stay of this 

Action. 

On December 3 1 2012 1 the SEC filed a Motion to Lift the 

Stay [Dkt. No. 36]. Respondent Deloitte Touche Tohmatsu CPA Ltd. 

("Deloitte 11 ) opposed that Motion on January 7 1 2013 [Dkt. No. 

42] 1 and filed a Motion to Extend the Stay [Dkt. No. 43]. The 

SEC opposed Deloitte 1 s Motion on January 24 1 2013 [Dkt. No. 45] 

and filed a Reply in Support of its Motion to Lift the Stay 

[Dkt. No. 44]. On March 4 1 2013 1 the Magistrate Judge issued a 
Memorandum Opinion and Order granting the· SEC's Motion to Lift 

the Stay and denying Deloitte's Motion to Extend the Stay 

( "Order" ) [Dkt . No. 4 9] . 

Deloitte objected to the Order within fourteen days as 

permitted by Federal Rule of Civil Procedure 72(a) [Dkt. No. 

53] . The SEC responded to Deloitte's Objections [Dkt. No. 55]. 

Upon consideration of the Order, the Objections, the Responses, 

the lengthy, and informative, oral argument held before this 

Court on April 11, 2013, and the entire record herein, the Court 

upholds the Magistrate Judge's decision to grant the SEC's 

Motion to Lift the Stay and to deny Deloitte's Motion to Extend 

the Stay. Deloitte 1 s Objections are overruled. 

Deloitte opposed a lifting of the stay and requested its 

extension "pending the expeditious resolution of a parallel, 

consolidated, and profession-wide administrative proceeding," 

pending . at the SEC. Opp 1 n of Deloitte to Motion to Life the 

Stay 1. 1 Deloitte 1 s central argument is that the Magistrate 

Judge applied the incorrect legal standard for determining 

whether or not to grant a stay. The Court concludes that she 

did apply the correct legal standard, relying upon Landis v. N. 

Am. Co., 299 U.S. 248 (1936), namely, that in order to prevail, 

1 Deloitte later substantially modified its position and 

requested a stay until the Administrative Law Judge issued his 

Initial Opinion. 

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the party requesting a stay must "make out a clear case of 

hardship or inequity in being required to go forward." Id. at 

255. 

Moreover, as she also pointed out, if the stay is of 

"indefinite duration," the party must establish a "pressing 

need" for it. Id.; Belize Soc. Dev. Ltd. v. Gov't of Belize, 668 

F. 3d 724, 731-32 (D.C. Cir. 2012) (quoting Dellinger v. 

Mitchell, 442 F.2d 782, 787 (D.C. Cir. 1971) (noting that 

indefinite stay order must be supported by a "balanced finding 

that such need overrides the injury to the party being stayed"), 

cert. denied, 133 S. Ct. 274 (2012). 

This Court will now analyze whether Deloitte is correct 

that the two proceedings overlap in such a way that Deloitte 

will suffer "hardship or inequity in being required to go 

forward in this case." Landis, 299 U.S. at 255. 2 

A. Overlapping Adjudications 

Deloitte insists there is significant overlap between this 

case and the Administrative Proceeding, In the Matter of BDO 

China Dahua CPA Co. Ltd., et al., A.P. No. 3-15116, Order 

Instituting Proceedings Pursuant to Rule 102 (e) (1) (iii) (Dec. 3, 

2 In discussing the correct legal standard, 

Judge may have, on occasion, used language more 

ruling on the underlying merits of the case. 

clear from her citations to Landis, Belize, 

Jones, 520 U.S. 681 (1997), that she understood 

for evaluating a request for a stay. 

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the Magistrate 

appropriate to 

However, it is 

and Clinton v. 

the proper test 
2012) ("Administrative Proceeding") [Dkt. No. 42-2]. In that 

Proceeding the SEC is seeking an Order, pursuant to 17 C.F.R. § 

201.102 (e) (1), to bar five China-based auditing companies, 

including Deloitte, from "the privilege of appearing or 

practicing" before the Commission. The SEC claims that those 

firms have willfully refused to produce documents requested by 

the Commission pursuant to Section 106 of the Sarbanes-Oxley Act 

of 2002, codified at 15 U.S.C. § 7126. The companies assert in 

that Proceeding, as Deloit te does in the present case, that 

under Chinese law, they will be committing a crime and could be 

subject to prosecution, possible conviction, and possible 

imprisonment if they produce the requested documents. None of 

the investigations included in the Administrative Proceeding 

involve Longtop Financial Technologies, Ltd. ("Longtop"), the 

company being investigated in this case. 

In the Order Instituting Proceedings ("OIP") I the 

Commission ordered the Administrative Law Judge ("ALJ") to issue 

an "Initial Decision" 3 no later than 300 days from the date of 

service, which would be in late September,2013. See 17 C.F.R. 

§ 201.360 (a) (2) (directing Commission to specify time period in 

which hearing officer's Initial Decision must be filed). 

Deloitte is challenging the legality of service, and, therefore, 

3 The Initial Decision is the final administrative opinion 

subject to appeal to the Commission. 17 C.F.R. § 201.410(a). 

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the 300-day deadline for issuance of the decision may not be met 

and may not even have begun to run during that time frame. 4 

Once an Initial Decision is filed, any party can then file 

a petition for review of the decision with the Commission. 17 

C.F.R. § 201.410 (a). That decision can then be appealed to our 

Court of Appeals. 15 U.S.C. § 78y(a) (1) ("A person aggrieved by 

a final order of the Commission entered pursuant to this chapter 

may obtain review of the order in . the District of Columbia 

Circuit • II ) • 

By contrast, this case revolves around the production of 

documents under the SEC's general subpoena powers, found in 

section 19(c) of the Securities Act of 1933, 15 U.S.C. § 77s(c), 

and section 21 (b) of the Securities Exchange Act of 1934, 15 

U.S.C. § 78u(b). The SEC served an administrative subpoena to 

Deloitte on May 27, 2011, almost twenty-three months ago, 

requesting documents related to an investigation into Deloitte's 

activities as an auditor for Longtop. Application for Order to 

Show Cause and For Order Requiring Compliance With a Subpoena 

[Dkt. No. 1] . Longtop is a foreign issuer whose securities were 

traded in United States markets. 

Unlike the Administrative Proceeding, the SEC is not 

seeking sanctions against Deloitte in this case. It simply 

4 The 300 days runs from the date of service. 

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seeks the production of relevant documents, although the SEC 

agrees that, if this Court grants its Order Requiring Compliance 

with Subpoena, and Deloitte continues to withhold the documents, 

it would "seek any avenue or means" available, including seeking 

a contempt order, "to be able to get the documents." Mot. Hr' g 

Tr. 44; see also 15 U.S.C. § 78u(c) (giving court power to issue 

an order requiring the production of records and noting that 

failure to obey such an order "may be punished by [the] court as 

a contempt thereof"). 

If this Court did cite Deloitte for contempt, its order 

would be appealable to our Court of Appeals. See In re Kessler, 

100 F.3d 1015, 1016 (D.C. Cir. 1996) (noting that a court of 

appeals has jurisdiction over final decisions of the district 

court under 28 U.S.C. § 1291, and that "[f]or purposes of 

appeal, an order holding a litigant in contempt for failure to 

obey a discovery order is considered final") . Thus, the final 

decisions emanating from both the SEC and this Court would both 

be resolved by the same decision-maker, our Court of Appeals. 

Given that fact, this Court sees little danger of inconsistent 

rulings on Deloitte' s underlying concern about application of 

Chinese law. 

Although both proceedings obviously concern document 

requests to foreign-based auditing firms and the scope of the 

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SEC's authority to order such requests, it is significant that 

they involve different statutes, with different legal standards, 

and seek entirely different results. The remedy sought in the 

Administrative Proceeding differs greatly from what is sought in 

this case. In the former, the SEC seeks to bar the five firms 

from "appearing or practicing" before the Commission; in this 

case, the SEC merely seeks production of documents. 

In sum, Deloitte has failed to show any "hardship or 

inequity," Landis, 299 U.S. at 255, it will suffer from 

simultaneous litigation of the Administrative Proceeding with 

this case. 

B. Balance of Interests 

Not only has Deloitte failed to establish that requiring it 

to litigate this case while the Administrative Proceeding is 

pending will subject it to ~hardship or inequity," the balance 

of the interests as a whole do not support extending the stay. 

The SEC made clear at oral argument that the Administrative 

Proceeding did not concern and could not result in production of 

those documents it deems necessary to conduct the Longtop 

investigation in this case. Mot. Hr'g Tr. 25-26. The SEC insists 

that those documents and this investigation are important to its 

~central mission," which involves investigating potential 

violations of the securities laws and protection of the public. 

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Id. 23-25; see also Gabelli v. S.E.C., 133 S. Ct. 1216, 1222 

(2013) (noting that "a central mission of the Commission is to 

investigate potential violations of the federal securities 

laws") (citations and internal quotations omitted). 

The SEC is attempting to investigate whether Longtop or any 

other entity associated with it committed fraud on the American 

investing public. Mot. Hr'g Tr. 24-25. Moreover, if fraud was 

committed, the SEC argues that it will also attempt to ascertain 

the scope of that fraud, how it was committed, who was involved, 

and how it went undetected for so long. Id. These are 

undoubtedly important questions to the SEC and to the American 

investors who may have been defrauded. 

It has been more than twenty-two months since the SEC first 

sought these documents from Deloitte. Obviously, a thorough, 

comprehensive investigation only gets more difficult with the 

passage of time. "If the SEC suspects that a company has 

violated the securities laws, it must be able to respond 

quickly; it must be able to obtain relevant information 

concerning the alleged violation and to seek prompt judicial 

redress if necessary." SEC v. Dresser Indus., Inc., 628 F.2d 

1368, 1377 (D.C. Cir. 1980) (en bane). In short, the SEC has a 

responsibility to complete this investigation and pursue these 

documents in a timely fashion in the venue available to it. 

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The SEC's interest in obtaining these documents in a timely 

fashion would be hindered if the stay was granted, particularly 

because even the modified stay requested by Deloitte would, as a 

practical matter, be indefinite and could easily extend for a 

significant period of time. See Belize Soc., 668 F.2d at 731-32. 

Although the Commission ordered the ALJ to produce an Initial 

Decision in approximately late September, litigation of 

Deloitte's challenge to the method of service will likely delay 

that decision. If Deloitte prevailed, the SEC would then be 

required to proceed under the Hague Convention, which would add 

at least another six months to the 300 days already allotted the 

ALJ to issue his Initial Decision. Thus, for all intents and 

purposes, Deloitte' s request is for an indefinite stay- -which 

must not "override[] the injury to the party being stayed." Id. 

Such a request for an indefinite stay must not only 

demonstrate "hardship or inequity," Landis, 299 U.S. at 255, but 

also be justified by a "pressing need." Id.; Belize Soc., 668 

F.3d at 731-32. Deloitte has not met that standard. There is no 

significant burden placed on Deloitte by requiring it to 

litigate these two very different proceedings simultaneously. 

There is no overlap of issues that would justify staying this 

case for "judicial efficiency." And the SEC has effectively 

demonstrated that this case is the only way it can obtain the 

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documents it needs to conduct the Longtop investigation. Thus, 

after "weigh[ing] competing interests," Landis, 299 U.S. at 254-

55, the Court concludes that Deloitte has not established that 

it is entitled to a further stay of proceedings in this action. 

C. Conclusion 

For the foregoing reasons, the Court adopts the Magistrate 

Judge's conclusion to grant the SEC's Motion to Lift the Stay 

and deny Deloitte's Motion to Extend the Stay. An Order shall 

accompany this Memorandum Opinion. 

/s/ 

April 22, 2013 Gladys Kessl 1 

United States District Judge 

Copies to: attorneys on record via ECF 

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