Hsu v. UBS Financial Services, Inc.

Background

Darru K. Hsu entered into a wrap agreement with UBS Financial Services, Inc. for investment and advisory services. He sued under the Investment Advisers Act, alleging that UBS acted as an investment adviser but that a hedge clause in the agreement improperly required him to waive certain rights under that Act.

In August 2011, the court dismissed Hsu’s first amended complaint for failure to state a claim. The court allowed him to propose a second amended complaint, but he did not do so, and judgment was entered for UBS. Hsu appealed. In February 2013, the court of appeals affirmed the dismissal, and the Supreme Court later denied his petition for review.

Hsu subsequently filed several motions seeking to set aside or reconsider the judgment, to transfer jurisdiction, to disqualify the judge, and to certify a class and appoint class counsel. The court denied those motions. The court had previously warned Hsu that continuing to file unmeritorious or duplicative motions could lead to his being declared a vexatious litigant.

Rule 54(b) Motion

Hsu filed a motion under Federal Rule of Civil Procedure 54(b), which can allow a court to enter a final judgment on some claims in a case involving multiple claims when there is no just reason to delay. The court found that Hsu’s motion asked it to revise earlier rulings and certify a class, rather than seeking relief available under Rule 54(b). The court described the motion as incomprehensible and not a proper Rule 54(b) motion.

The court further held that the motion would fail even if it had been brought properly because final judgment had already been entered. The motion repeated arguments that the court had previously rejected, including arguments that UBS had falsified documents and that the court improperly failed to convert an earlier motion to dismiss into a motion for summary judgment.

The court DENIED Hsu’s Rule 54(b) motion.

Order to Show Cause

The court explained that federal courts have authority to declare a litigant vexatious and impose a pre-filing order when the litigant’s filings are numerous and frivolous. A pre-filing order can require future papers to undergo an initial review before filing. The court also noted that this is an extreme remedy that should rarely be used because of the right of access to the courts.

The court found that Hsu had continued filing repetitive and duplicative motions containing arguments previously rejected. It described the filings as frivolous, indecipherable, and incomprehensible, and found that they had unnecessarily consumed judicial time and resources. The court ORDERED Hsu TO SHOW CAUSE why he should not be declared a vexatious litigant subject to a pre-filing order. The court set a deadline of November 24, 2021, at 5:00 p.m. for any response and scheduled a hearing for November 29, 2021, at 1:30 p.m.

Disposition

Judge William Alsup denied the Rule 54(b) motion and issued an order requiring Hsu to explain why he should not be declared a vexatious litigant. The opinion did not itself declare Hsu a vexatious litigant or impose a pre-filing order.