Securities and Exchange Commission v. Chen

Background

The SEC alleges that the defendants violated federal securities laws in connection with investment offerings under the EB-5 Immigrant Investor Program. According to the opinion, Jean Danhong Chen filed EB-5 petitions for legal clients and, with Tony Ye, brokered transactions by introducing clients to regional centers for EB-5 projects. The SEC alleges that Chen and Ye received $12 million in undisclosed commissions and later attempted to conceal the scheme with help from Kuansheng Chen.

The discovery dispute concerned where the SEC could depose Jean Danhong Chen. The SEC sought an in-person deposition in San Francisco, where Chen previously lived and where the events occurred. Chen was living in China, had suffered a bone fracture that put her in a wheelchair, cared for her dependent mother, and asserted that she could not be deposed in China without Chinese government permission. She offered to testify in person or remotely in China, Japan, Hong Kong, Taiwan, Singapore, or Korea. She later added that flying could be medically dangerous because of potentially dangerous blood clots.

Legal Standard and Analysis

The court explained that a party’s deposition generally may be noticed wherever the deposing party designates, subject to a protective order. Under Federal Rule of Civil Procedure 26(c)(1), a court may issue a protective order for good cause to prevent annoyance, embarrassment, oppression, or undue burden or expense. The party seeking protection must show the harm or prejudice that discovery would cause.

The court had previously ordered Chen to appear for an in-person deposition in San Francisco. It followed the reasoning that Chen’s criminal difficulties should not be treated as either a reason to order her deposition in San Francisco to help apprehend her or a reason to give her an advantage in the civil litigation. The court again did not consider the criminal proceedings in deciding the deposition location.

The court rejected Chen’s argument that a foreign defendant should automatically be deposed at her residence. It also rejected her argument that remote videoconference depositions were necessarily favored. The court noted that videoconferencing can be an adequate substitute for an in-person deposition in some circumstances, including significant expense or limited topics, but it is not always adequate.

The court identified Chen’s health concerns as the main potentially persuasive issue. Counsel represented that flying could risk Chen’s life, and the court concluded that medical issues of the type counsel described can be medically dangerous. But the court found that the record needed updated information about Chen’s scheduled surgery, recovery, and ability to fly. It directed Chen to provide a supplemental declaration and said she should be able to provide a doctor’s note.

The court also required Chen to be more specific about where the deposition could occur. It stated that China was not a realistic solution on the current record and directed the parties to confer and submit concrete proposals.

Disposition

The court granted relief to the extent Chen needed permission to seek reconsideration of the earlier deposition-location ruling. It directed Chen to file a supplemental declaration about her health by February 26, 2024, and directed the parties to confer and file a joint statement with workable deposition-location proposals. The order disposed of ECF No. 194 but did not finally select an alternate deposition location.