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  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
  • Zhengjun Dong, Wen Lin, Kaixin Hong, Chenglong Wang, Fanhui Kong, Chu Lee, Chingwa Wong v. Gtv Media Group, Inc., Saraca Media Group, Inc.Commercial Division document preview
						
                                

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FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------------X ZHENGJUN DONG, WEN LIN, KAIXIN HONG and CHENGLONG WANG, individually, and on behalf of all others similarly situated, Plaintiffs, Hon. Andrew Borrok -against- Index No. 652190/2021 GTV MEDIA GROUP, INC., SARACA MEDIA GROUP INC., and WENGUI GUO, Defendants. ----------------------------------------------------------------------X MEMORANDUM OF LAW IN SUPPORT OF NONPARTY’S MOTION TO QUASH NONPARTY SUBPOENAS AND FOR PROTECTIVE ORDER AND SANCTIONS Brian Witthuhn Justin S. Weddle Weddle Law PLLC 250 West 55th Street 30th Floor New York, NY 10019 Attorneys for Nonparty G-Club Operations LLC 1 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 TABLE OF CONTENTS Introduction ................................................................................................ 1 Background ................................................................................................. 1 A. The Complaint................................................................................ 2 B. Plaintiffs’ Prior Attempts to Obtain Discovery about Nonparty G-Club ........................................................................................ 2 1. First Citibank Crane Subpoena ................................................ 3 2. Quashed Crane Subpoena ......................................................... 4 3. G-Club Subpoena and Pending Motion to Quash .................... 6 4. September 2022 Crane Citibank Subpoena ............................. 8 C. Current Signature and Morgan Stanley Subpoenas .................... 9 Argument .................................................................................................. 12 I. Plaintiffs Seek Utterly Irrelevant Information ................................. 12 A. No Plaintiff Has Standing with Respect to G-Club ................... 13 B. The Undisputed Facts Foreclose Any Purported Relevance to Discovery about Nonparty G-Club .......................................... 15 II. Plaintiffs Seek Improper Pre-Class Certification Discovery ............ 20 A. Applicable Law ............................................................................. 21 B. The Scope of the Nonparty Subpoena to G-Club Severely Violates the Limits of Pre-Class Certification Discovery ...... 24 III. The Court Should Issue a Protective Order and Sanction Plaintiffs25 A. Applicable Law ............................................................................. 26 B. Plaintiffs’ Repeated Misconduct .................................................. 28 1. Misuse of Subpoenas ............................................................... 28 2. Frivolous Legal and Factual Claims....................................... 32 C. Substantial Sanctions Are Warranted ........................................ 36 Conclusion................................................................................................. 37 i 2 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 TABLE OF AUTHORITIES Cases Arch Ins. Co. v. Delric Constr. Co., 174 A.D.3d 560 (2d Dept. 2019) ........................................................... 28 Barnes v. Osofsky, 373 F.2d 269 (2d Cir. 1967) .................................................................. 14 Burdick v. Tonoga, Inc., 60 Misc. 3d 1212(A), 2018 WL 3355239 (Sup. Ct., Rensselaer County, July 3, 2018) .......................................................................................... 24 Chang v. Westside 309 LLC, 206 A.D.3d 491 (1st Dept. 2022) .......................................................... 25 Chang v. Westside 309 LLC, Decision & Order on Motion, Ind. No. 153031/2018 (Sup. Ct., N.Y. County, March 2, 2022) ........................................................................ 24 Chimenti v. Am. Express Co., 97 A.D.2d 351 (1st Dept. 1983) ............................................................ 21 Gewanter v. Quaker State Oil Refining Corp., 87 A.D.2d 970 (4th Dept. 1982) ............................................................ 23 In re Beiny, 129 A.D.2d 126 (1st Dept. 1987) .............................................. 29, 33, 35 In re Hoppenstein, 209 A.D.3d 492 (1st Dept. 2022) .......................................................... 32 Reiken v. Nationwide Leisure Corp., 75 A.D.2d 551 (1st Dept. 1980) ............................................................ 23 Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477 (1989) ............................................................................... 18 Rodriguez v. Metro. Cable Commc’ns, 79 A.D.3d 841 (2d Dept. 2010) ............................................................. 22 Smith v. Atlas Int’l Tours, 80 A.D.2d 762 (1st Dept. 1981) ............................................................ 22 Velez v. Hunts Point Multi-Service Center, 29 A.D.3d 104 (1st Dept. 2006) ............................................................ 31 ii 3 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 Statutes C.P.L.R. § 3103(a) ................................................................... 26, 29, 33, 36 C.P.L.R. § 3120(3) ............................................................................... 26, 32 Other Authorities Patrick M. Connors, Practice Commentaries, C.P.L.R. § 3120 (2018) ... 27 Rules 22 N.Y.C.R.R. § 130-1.1...................................................................... 28, 33 Treatises 7 Carmody-Wait 2d § 42:229 (Sept. 2022 Update) ................................. 21 iii 4 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 INTRODUCTION Almost one year ago, nonparty G-Club Operations LLC (“G-Club”) requested a protective order to avoid burdening G-Club with plaintiffs’ abusive discovery practices in this litigation, in which G-Club is not a party and has no involvement. Plaintiffs have since repeatedly taken G- Club’s prediction as an invitation to issue improper discover demands rather than as a warning. In their most recent round of demands, plaintiffs seek irrelevant financial information concerning G-Club and its members from nonparty banks, and plaintiffs have done so covertly in dereliction of their statutory obligations. The subpoenas should be quashed, and plaintiffs should be sanctioned. BACKGROUND Nonparty G-Club is a limited liability company organized under the laws of Puerto Rico. G-Club operates “G|CLUBS,” a luxury concierge service that is provided to customers on a paid membership basis. G|CLUBS members have access to, among additional services, a 24/7 concierge service center, an exclusive membership ID, discounted prices on fashion collections, music, and various events. 1 5 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 A. The Complaint Plaintiffs brought this action on April 1, 2021. They brought it against defendants GTV Media Group, Inc. (“GTV”), Saraca Media Group, Inc. (“Saraca”), and Wengui Guo, on April 1, 2021, “under Sections 5, 12 and 15 of the [Securities Act of 1933], 15 U.S.C. §§ 77e, 77l, and 77o . . . on behalf of all investors (‘Class’) who purchased or otherwise invested in securities of Defendant GTV in the offering (‘GTV Offering’) conducted by Defendants between approximately April 1, 2020 and the present.” NYSCEF 1 (Complaint) ¶ 1. G-Club is not a party. B. Plaintiffs’ Prior Attempts to Obtain Discovery about Nonparty G-Club Plaintiffs allege that defendant Guo, in a social media livestream in 2021, said that individuals who purchased G-Club memberships “would be entitled to receive” shares in GTV. NYSCEF 66 (Plaintiffs’ Motion) at 4. Plaintiffs, however, do not allege that G-Club sold GTV shares to anyone. Nor do plaintiffs dispute that every G-Club member agreed: that their membership was not an investment (in GTV or any entity); that any statements by defendant Guo about G-Club were void and not part of the terms of membership; and that G-Club members agreed to mandatory arbitration and to waive the right to participate in 2 6 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 a class action. NYSCEF 150 (Membership Agreement); NYSCEF 143 (Disclaimer); see NYSCEF 152-55 (Plaintiffs’ Opp.) (nowhere contesting those irrefutable facts). Nonetheless, plaintiffs have repeatedly used this litigation against defendants, over the course of more than one year, to attempt to obtain irrelevant, confidential, and extensive information about nonparty G- Club and its members through improper nonparty subpoenas. 1. First Citibank Crane Subpoena Another nonparty, Crane Advisory Group LLC (“Crane”), used a bank account at Citibank (“Crane Citibank Account”) to perform escrow agent services on behalf of G-Club. That is, Crane received membership payments from G-Club customers into the Crane Citibank Account pursuant to a written Payment Facilitation Agreement. G-Club and Crane had a comprehensive Non-Disclosure Non-Circumvention Agreement (NYSCEF 74) in place to protect the confidentiality of G- Club’s financial information, and of the personal identity and financial information of G-Club members. On September 27, 2021, plaintiffs subpoenaed Citibank to obtain information about G-Club members and the Crane Citibank Account. 3 7 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 NYSCEF 42 (“September 2021 Citi Crane Subpoena”). Plaintiffs defined the “Relevant Period” for the subpoena as “January 1, 2019 to the present,” i.e., as starting more than one year before the “GTV Offering” allegedly began. Id. at 5. Plaintiffs demanded, among multiple other blanket requests, “[a]ll documents sufficient to identify all wire transfers received into [the Crane Citibank Account] during the Relevant Period, including but not limited to the identity of the sender of the wire, the sending bank, sending account number, and the amount of the wire.” Id. at Doc. Request No. 3. On October 29, 2021, Crane moved to quash plaintiffs’ September 2021 Citi Crane Subpoena because it demanded irrelevant and confidential information. NYSCEF 41. Plaintiffs thereafter withdrew their subpoena, and Crane therefore withdrew its motion on November 23, 2021. NYSCEF 47. 2. Quashed Crane Subpoena On or about January 5, 2022, plaintiffs issued another subpoena demanding blanket access to irrelevant, confidential personal identity and financial information of G-Club and its members. NYSCEF 75 (“January 2022 Crane Subpoena”). This time, plaintiffs subpoenaed 4 8 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 Crane, demanding financial records regarding the Crane Citibank Account, as well as communications involving Crane. Id. G-Club learned of the subpoena only indirectly; plaintiffs did not provide it to G-Club. On February 2, 2022, G-Club, as a nonparty, moved to quash the subpoena and for a protective order to block plaintiffs from further improper subpoenas seeking to obtain information about G-Club and its members. Motion Seq. 005.1 G-Club demonstrated that the subpoena failed to provide notice why the material sought was relevant, and sought improper pre-class certification discovery; and that plaintiffs improperly sought confidential financial and personal identity information of G-Club and its members. NYSCEF 76. Plaintiffs opposed, arguing that the subpoena was not defective, that a discovery stipulation into which the parties entered (not nonparties, such as G-Club) alleviated confidentiality concerns, and that because the subpoena demanded information purportedly relevant to merits and damages issues, it was properly issued prior to class certification. NYSCEF 89. Plaintiffs also argued that G-Club had no 1 Crane separately moved to quash. Motion Seq. 007. 5 9 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 standing to move to quash the subpoena or for a protective order because plaintiffs issued it to Crane, not to G-Club. Id. at 8, 14 n.6. On September 16, 2022, the Court granted G-Club’s motion and quashed the January 2022 Crane Subpoena. The Court agreed that the subpoena was defective on its face, and that G-Club had standing to object to the subpoena. NYSCEF 123 at 3. The Court quashed the subpoena because plaintiffs failed to comply with a basic requirement of nonparty subpoenas—a statement providing notice of why the material was purportedly relevant. Even though the plaintiffs provided no such articulation—which would provide the starting point for litigating the propriety of the subpoena or the relevance of the material sought—the Court sua sponte posited that the documents were necessary for class certification and on the merits. Id. 3. G-Club Subpoena and Pending Motion to Quash On September 16, 2022, the same day the Court’s decision quashing the January 2022 Crane Subpoena was entered, plaintiffs issued a subpoena directly to nonparty G-Club. Plaintiffs demanded near total access to G-Club’s records and to the personal and financial information 6 10 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 of G-Club members, as well as for a G-Club representative to testify at a deposition (“September 2022 G-Club Subpoena”). NYSCEF 142. G-Club moved to quash and for a protective order, explaining that: the subpoenaed information was irrelevant because no plaintiff or prospective plaintiff had standing based on any actual or purported purchase of a G-Club membership; plaintiffs are seeking improper pre- class certification discovery; and the subpoena, in any event, is overbroad. NYSCEF 141. Plaintiffs opposed, claiming that the information was relevant because on March 11, 2021, defendant Guo said in a social media livestream that individuals “who ‘purchased’ G-Club memberships would be entitled to receive 10 GTV shares per dollar spent ‘purchasing’ G-Club memberships.” NYSCEF 155 at 4. Plaintiffs also claimed that they are “entitled to seek both merits and class certification discovery,” and that the subpoena is not overbroad. Id. at 10-13. The motion to quash the September 2022 G-Club Subpoena and for a protective order is pending. Motion Seq. 010. 7 11 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 4. September 2022 Crane Citibank Subpoena Unbeknownst to G-Club, on or about September 19, 2022, plaintiffs once again subpoenaed Citibank to obtain blanket access to the confidential financial and personal identity information of G-Club and its members through the Crane Citibank Account (“September 2022 Citibank Subpoena”). Plaintiffs provided no notice to G-Club of the subpoena seeking information about G-Club and its members. It also does not appear that plaintiffs provided any notice to Crane—plaintiffs failed to include G- Club or Crane on an email to defendants linking the subpoena, and unlike prior subpoenas, Crane has filed no motion to quash. Exhibit 1 (Sept. 19 email from plaintiffs’ counsel to defendants’ counsel attaching September 2022 Citibank Subpoena; not sent to G-Club or Crane). G- Club first learned of the September 2022 Citibank Subpoena more than three months later, on December 21, 2022, when counsel for defendant Guo forwarded an email (Exhibit 1) with an expired link to the subpoena to counsel for G-Club. Witthuhn Aff. ¶ 4a. Neither counsel for defendants GTV and Saraca nor counsel for defendant Guo was able to provide G- Club with a copy of the actual September 2022 Citibank Subpoena. Id. 8 12 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 In addition, it appears that plaintiffs did not provide defendants with the subpoena return from Citibank until November 29 and December 21, 2022, at least forty-one days or more than two months after plaintiffs received the documents from Citibank. Exhibits 2 & 3 (Nov. 29 and Dec. 21 emails from plaintiffs to defendants purporting to attach documents produced by Citibank).2 Plaintiffs also did not notify G-Club (nor, apparently, Crane) of the documents produced by Citibank. C. Current Signature and Morgan Stanley Subpoenas Now with blanket information in hand from Citibank regarding the Crane Citibank Account, as a result of their surreptitious September 2022 Citibank Subpoena, plaintiffs issued yet two more nonparty subpoenas to Signature Bank and Morgan Stanley Smith Barney LLC (“Morgan Stanley”) seeking to trace funds from the Crane Citibank Account to accounts at those banks (“Signature Subpoena” and “Morgan 2 In their emails to defendants, plaintiffs’ counsel stated merely that they had “recently received” the documents from Citibank, without specifying the date when Citibank produced them. Exhibits 2 & 3. G-Club, of course, has been kept in the dark about the September 2022 Citibank Subpoena, but if we assume plaintiffs issued it on September 19, the same day plaintiffs provided it to defendants rather than earlier (which is not a safe assumption, given plaintiffs’ repeated failures to comply with C.P.L.R. § 3120(3)), then the return date for the subpoena would have been October 19. 9 13 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 Stanley Subpoena”). Plaintiffs aver that these are G-Club funds. See, e.g., Exhibit 5 (Signature and Morgan Stanley Subpoenas) at pdf 4, 62. Plaintiffs served Signature and Morgan Stanley with the respective subpoenas on December 1, 2022. Exhibit 5 at pdf 60, 118. Nonetheless, plaintiffs did not provide notice of the subpoenas to defendants until eleven days later, on December 12, 2022. Exhibit 4 (Dec. 12 email from plaintiffs to defendants linking Signature and Morgan Stanley Subpoenas). Plaintiffs never provided notice of the subpoenas to G-Club, about whom they are seeking information.3 G-Club learned of the subpoenas only because counsel for defendants Saraca and GTV forwarded them to G-Club on December 12. Witthuhn Aff. ¶ 4d. In the Morgan Stanley Subpoena, plaintiffs demand comprehensive information about a purported $60 million transfer of funds Crane received on behalf of G-Club from the Crane Citibank Account to an account at Morgan Stanley, information about that account, and information about any other Morgan Stanley accounts of Crane. Exhibit 5 at pdf 4. Plaintiffs also claim, “[b]ased on Citibank’s records for the 3 It also appears that plaintiffs never served Crane with the Signature and Morgan Stanley Subpoenas, as Crane, like G-Club, was not copied on plaintiffs’ belated email to defendants. Exhibit 4. 10 14 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 Citibank Crane Account,” that “over $9 million was transferred to an account . . . held at Signature Bank by [Crane],” Exhibit 5 at pdf 62, and demand similar information from Signature. Plaintiffs defined the “Relevant Period” for both subpoenas as beginning January 1, 2019, i.e., more than one year before the alleged “GTV Offering” took place. 11 15 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 ARGUMENT I. PLAINTIFFS SEEK UTTERLY IRRELEVANT INFORMATION Plaintiffs’ latest subpoenas fail on every level to seek relevant information. Plaintiffs are pursuing an action based on the alleged improper sale of unregistered securities (shares in defendant GTV), but no one purchased securities from nonparty G-Club. Plaintiffs do not even allege otherwise. The most plaintiffs claim regarding G-Club is that defendant Guo mentioned G-Club in a social media post, but the express terms of G-Club’s membership agreement provide that a G-Club membership is just that: a membership, not an investment of any sort, let alone in shares of GTV. Furthermore, individuals purchasing G-Club memberships also expressly acknowledged and agreed to a disclaimer stating that no one could rely on statements of defendant Guo referencing G-Club. And, even if a dispute arises between a G-Club member and G- Club, whether related to purported securities-related conduct or otherwise, each G-Club member specifically agreed to arbitrate any claims, and not to participate in a class action. Plaintiffs’ counsel, on some level, seems to understand all that. After all, they did not name G-Club as a defendant in their lawsuit. (Nor 12 16 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 was G-Club subject to, nor even mentioned in, the SEC enforcement action against defendants GTV and Saraca from which plaintiffs’ counsel cribbed their lawsuit). Nonetheless, plaintiffs’ counsel has treated G-Club like a defendant, issuing subpoenas, one after another, seeking extensive, confidential, and burdensome discovery about G-Club and its members. Plaintiffs’ counsel’s repeated, backdoor attempts to use their lawsuit against defendants GTV, Saraca, and Guo, to obtain information about nonparty G-Club and its members are a paradigmatic abuse of the discovery process. The most recent subpoenas, to Morgan Stanley and Signature Bank, should be quashed, and an order protecting G-Club from all such future attempts should enter. A. No Plaintiff Has Standing with Respect to G-Club The first insurmountable hurdle facing plaintiffs is standing. A person may not offer or sell nonexempt, unregistered securities, 15 U.S.C. § 77e, and anyone who does is liable “to the person purchasing such security from him” in the amount of “the consideration paid for such security . . . or for damages if he no longer owns the security,” id. § 77l (emphasis added); see also id. § 77o (holding a person who “controls any 13 17 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 person liable under” Section 77l jointly-and-severally liable). Thus, it is axiomatic—and clear from the plain statutory language—that only those individuals who purchased a security offered in violation of Section 77e have standing to obtain damages under Sections 77l and 77o, as plaintiffs seek here. Accord Barnes v. Osofsky, 373 F.2d 269, 271-72 (2d Cir. 1967) (holding that only plaintiffs who could prove they purchased shares issued under defective registration statement had standing under Section 77k, not individuals who purchased in secondary offering). It is undisputed that no one purchased unregistered GTV shares from G-Club. Neither plaintiffs nor the proposed plaintiffs allege that they did so. At most, they claim that they purchased G-Club memberships, and that (according to a Guo social media post) G-Club members “would be entitled to receive 10 GTV shares per dollar spent purchasing G-Club memberships.” See Exhibit 5 (Signature and Morgan Stanley Subpoenas) at pdf 4, 62. But plaintiffs do not claim that they actually purchased GTV shares from G-Club, as required for standing under Section 77l. Therefore, plaintiffs’ vague claim—that “the documents sought . . . are material and necessary to establish Plaintiffs’ 14 18 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 allegations that Defendants violated Sections 5 and 12(a)(1) of the Securities Act,” Exhibit 4 at pdf 4, 62—is not and cannot be true. Plaintiffs’ counsel’s repeated efforts to pry into G-Club’s finances and confidential membership information can therefore have no relevance to this action for damages, under the federal securities laws, on behalf of individuals who allegedly bought unregistered GTV shares (not G-Club memberships) from defendants GTV, Saraca, and Guo (not from nonparty G-Club). See 15 U.S.C. § 77l. B. The Undisputed Facts Foreclose Any Purported Relevance to Discovery about Nonparty G-Club In their fishing expedition, the only line plaintiffs’ counsel has cast toward G-Club is the allegation that in 2021, defendant Guo said in a social media livestream that G-Club members “would be entitled to receive 10 GTV shares per dollar spent ‘purchasing’ G-Club memberships.” See NYSCEF 66 (Plaintiffs’ Memo of Law in Support of Motion for Class Certification) at 4. Even accepting that allegation, the uncontested facts regarding G-Club memberships also foreclose any relevance to demanding nonparty discovery from or about G-Club. Each individual who purchased a G-Club membership agreed to a Membership Agreement, and to having “reviewed, underst[ood], and 15 19 of 42 FILED: NEW YORK COUNTY CLERK 12/30/2022 10:12 AM INDEX NO. 652190/2021 NYSCEF DOC. NO. 175 RECEIVED NYSCEF: 12/30/2022 agree[d] to” a disclaimer. See NYSCEF 140 (Witthuhn Aff.) ¶¶ 5-6. Plaintiffs do not dispute that. See NYSCEF 152-55 (Plaintiffs’ Opposition to Motion to Quash). The Membership Agreement specifically states that the agreement provides just that (membership in G-Club), and that “the membership is not an investment” in any entity. NYSCEF 150 (Membership Agreement) ¶ 12(e) (emphasis added). Plaintiffs do not contest that either. Plaintiffs’ counsel also do not dispute that any proposed named plaintiffs who purchased G-Club memberships necessarily signed a disclaimer stating that they understood and agreed that they could not rely on any statement by defendant Guo (or anyone else) about G-Club: NO ONE CAN RELY ON ANY EARLIER DESCRIPTION BY MR. GUO OR ANY OTHER PERSON OF (I) THE BENEFITS THAT COULD OR WOULD BE AVAILABLE TO [G-CLUB] MEMBERS OR (II) ANY OTHER ASPECT OF THE STRUCTURE OR TERMS OF [G-CLUB]. NYSCEF 143 (Disclaimer). Thus, nonparty discovery about G-Club and its customers is irrelevant because it is uncontested that G-Club members (including the proposed plaintiffs who joined G-Club)4 agreed 4 See NYSCEF 141 (Memo of Law in Support