FILED
NOT FOR PUBLICATION
JUN 07 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
U.S. SECURITIES & EXCHANGE No. 15-16026
COMMISSION,
D.C. No.
Plaintiff-Appellee, 2:13-cv-01658-JCM-CWH
v.
MEMORANDUM*
EDWIN YOSHIHIRO FUJINAGA; et al.,
Defendants-Appellants,
and
THE YUNJU TRUST, Relief Defendant
and JUNE FUJINAGA, Relief Defendant,
Defendants,
______________________________
ROBB EVANS & ASSOCIATES LLC,
Receiver-Appellee.
Appeal from the United States District Court
for the District of Nevada
James C. Mahan, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Argued and Submitted April 21, 2017
San Francisco, California
Before: TASHIMA and PAEZ, Circuit Judges, and AMON,** District Judge.
In a civil enforcement action brought by the Securities and Exchange
Commission (the “SEC”), Edwin Fujinaga (“Fujinaga”) and his company MRI
International, Inc. (“MRI”) (collectively, “Defendants”) were found liable for
securities violations under Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934, and Section 17(a) of the Securities Act of 1933.1 The
district court ordered Defendants to disgorge $442.2 million, and to pay $102.1
million in prejudgment interest and $40 million in civil monetary penalties.
Defendants appeal the district court’s order granting summary judgment to
the SEC on the issue of Defendants’ liability and denying Defendants’ motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6). Defendants also appeal
the district court’s order granting the SEC’s motion for judgment and
disgorgement.
We review de novo a “denial of a Federal Rule of Civil Procedure 12(b)(6)
motion to dismiss,” Pakootas v. Teck Cominco Metals, LTD., 830 F.3d 975, 980
**
The Honorable Carol Bagley Amon, United States District Judge for
the Eastern District of New York, sitting by designation.
1
Defendants-Appellants CSA Service Center (“CSA”) and The Factoring
Company were named as Relief Defendants in this action.
2
(9th Cir. 2016), and an award of summary judgment, McCormack v. Herzog, 788
F.3d 1017, 1029 (9th Cir. 2015). We review for abuse of discretion an order of
disgorgement, SEC v. Platforms Wireless Int’l Corp., 617 F.3d 1072, 1096 (9th
Cir. 2010), and “a district court’s decision to draw an adverse inference from a
party’s invocation in a civil case of the Fifth Amendment privilege against self-
incrimination,” Nationwide Life Ins. Co. v. Richards, 541 F.3d 903, 909 (9th Cir.
2008). We affirm.
1. “We apply a general rule against entertaining arguments on appeal
that were not presented or developed before the district court.” Conservation Nw.
v. Sherman, 715 F.3d 1181, 1188 (9th Cir. 2013) (quoting In re Mercury
Interactive Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010)). Defendants failed
to “properly” raise their argument regarding the SEC’s authentication of
documents, their challenge to Colin J. Rand’s declaration under Federal Rule of
Evidence 701, and their argument regarding the nature of and performance under
the investment contracts. See O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert,
Inc.), 887 F.2d 955, 957 (9th Cir. 1989). We therefore will not consider those
arguments. See id.
2. Defendants’ primary argument on appeal is that, in granting summary
judgment to the SEC, the district court abused its discretion by drawing an adverse
3
inference from Fujinaga’s assertion of his Fifth Amendment privilege against self-
incrimination. “When a party asserts the privilege against self-incrimination in a
civil case, the district court has discretion to draw an adverse inference from such
assertion.” Nationwide Life Ins. Co., 541 F.3d at 911. “The inference may not be
drawn ‘unless there is a substantial need for the information and there is not
another less burdensome way of obtaining that information.’” Id. at 912 (quoting
Doe ex rel. Rudy-Glanzer v. Glanzer, 232 F.3d 1258, 1265 (9th Cir. 2000)).
“Moreover, the inference may be drawn only when there is independent evidence
of the fact about which the party refuses to testify.” Id.
3. Here, because Fujinaga was MRI’s sole corporate officer and owner,
Fujinaga exclusively possessed information that was material to this case, and he
refused to testify as to those matters. The district court nonetheless relied not only
on the adverse inference it drew from Fujinaga’s assertion of his privilege, but also
on other substantial evidence. Under these circumstances, it was not an abuse of
discretion for the district court to draw an adverse inference from Fujinaga’s
assertion of his privilege. See id. at 914.
4. Defendants argue that the district court erred in denying their motion
to dismiss because the transactions occurred extra-territorially, and the United
States securities laws therefore do not apply. Their argument fails, however,
4
because Defendants’ sales of securities were “made” in the United States. See
Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 269–70 (2010). Indeed, to
complete an investment, investors’ funds were wired to MRI’s United States bank
account, their paperwork was forwarded to MRI’s office in Nevada, and the MRI
office issued the Certificate of Investment. The Certificates of Investment further
indicate that they are “Corporate Certificate[s] of Investment” issued in “The
United States of America,” and they contain a Nevada corporation seal.
5. Defendants’ argument that the district court abused its discretion in
ordering disgorgement likewise fails. “The SEC bears the ultimate burden of
persuasion that its disgorgement figure reasonably approximates the amount of
unjust enrichment.” Platforms Wireless, 617 F.3d at 1096 (internal quotation
marks omitted). “Once the SEC establishes a reasonable approximation of
defendants’ actual profits, however, . . . the burden shifts to the defendants to
demonstrate that the disgorgement figure was not a reasonable approximation.” Id.
(internal quotation marks omitted). The SEC approximated Defendants’ profits by
relying on a thorough analysis conducted by a Certified Public Accountant for the
SEC, which accounted for both the amount of investments received by Defendants
and the amount Defendants paid out to investors. It was not an abuse of discretion
for the district court to deem this calculation reasonable. See SEC v. JT
5
Wallenbrock & Assocs., 440 F.3d 1109, 1114 (9th Cir. 2006). Defendants failed to
rebut the SEC’s calculation with reliable substantive evidence, and therefore failed
to carry their burden of overcoming the SEC’s reasonable approximation. See
Platforms Wireless, 617 F.3d at 1096.
6. The district court did not abuse its discretion in imposing civil
monetary penalties on Defendants in an amount that, in sum, represented only ten
percent of the total disgorgement figure. See 15 U.S.C. § 77T(d)(2)(C) (permitting
imposition of civil penalty up to “the gross amount of pecuniary gain” where the
violation “involved fraud, deceit, manipulation, or deliberate or reckless disregard
of a regulatory requirement” and “directly or indirectly resulted in substantial
losses . . . to other persons”).
7. Defendants’ motion to supplement the record and for judicial notice
(Dkt. No. 18) is DENIED. “Only the record that was before the district court is
normally considered, and the summary judgment record cannot be supplemented
on appeal.” USA Petroleum Co. v. Atl. Richfield Co., 13 F.3d 1276, 1279 (9th Cir.
1994) (citations omitted).
AFFIRMED.
6