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UNITED STATES DISTRICT COURT


DISTRICT OF MASSACHUSETTS

___________________________________________
)
SECURITIES AND EXCHANGE COMMISSION, )
)
Plaintiff, )
)
v. ) Case No. 1:12-cv-12334-WGY
)
SPENCER PHARMACEUTICAL INC., et al., )
)
Defendants. )
___________________________________________ )

PLAINTIFF SECURITIES AND EXCHANGE COMMISSIONS
MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO
COMPEL THE PRODUCTION OF DOCUMENTS AND TO ISSUE SANCTIONS

Pursuant to Federal Rule of Civil Procedure 37 and Local Rule 37.1, the U.S. Securities
and Exchange Commission (the Commission) hereby respectfully moves the Court to (i)
compel the production of documents by defendants J ean-Franois Amyot, Hilbroy Advisory Inc.,
and IAB Media Inc. (collectively, the Amyot Defendants); and (ii) issue sanctions in the form
of an order prohibiting the Amyot Defendants from using to support any defenses, or introducing
as evidence, any documents sought in any of the Commissions document requests not produced
within 14 days. Over four weeks have passed since the response deadline for the Commissions
Second Requests for the Production of Documents to the Amyot Defendants, served on March 7,
2014. The only response the Commission has received is repeated verbal statements from the
Amyot Defendants counsel that he is still trying to work with his clients to determine whether
responsive documents exist. The Amyot Defendants have not provided a written response, nor
have they indicated when they expect their search for documents to be complete. Such continued
failure to respond is unreasonable, and an order compelling production and issuing discovery
sanctions should be issued.
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BACKGROUND
The SEC filed this action in December 2012 against (i) Spencer Pharmaceutical Inc.
(Spencer), a Delaware corporation; (ii) Canadian residents J ean-Franois Amyot, Maximilien
Arella, and Ian Morrice; and (iii) Canadian companies Hilbroy Advisory Inc. (Hilbroy) and
IAB Media Inc. (IAB). The SEC alleges that the defendants violated the federal securities
laws when they orchestrated a pump-and-dump involving the penny stock shares of Spencer.
The defendants scheme involved falsely promoting Spencers business activities and a
bogus all-cash buyout offer and then selling Spencers shares at inflated prices. Between March
and November 2010, the defendants misled investors about Spencers business through false and
misleading public statements and promotional materials. Then, beginning in early November
2010, the defendants announced, and thereafter relentlessly promoted, the news that Spencer had
received an unsolicited $245 million buyout offer from Al-Dora Holdings (Al-Dora), a
purported Kuwaiti company. Two days before the closing date, however, Spencer abruptly
announced a mutual extension agreement and, following months of subsequent silence,
announced in September 2011 that negotiations had ceased.
In truth, the SEC alleges, the transaction never took place because the offer was nothing
more than a fiction. Amyot orchestrated all aspects of the scheme and the offer, including the
steps taken by Al-Dora. Amyot also directed all aspects of the false and misleading promotional
efforts, including the activities of Hilbroy and IAB, which he controlled. As a result, Amyot
profited when he dumped approximately 36 million shares for gross proceeds in excess of $5.8
million. Amyot was able to secure this profit in large part because he also orchestrated, at the
outset, the issuance of millions of Spencer shares to entities and funds he controlled.
Discovery in this matter has been ongoing for many months, and depositions are
scheduled to begin on May 27
th
. Defendants Arella and Morrice have both produced documents
in response to the Commissions document requests, and third-party witnesses are beginning to
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as well. The Amyot Defendants, by contrast, have not produced a single document to the
Commission, despite two sets of document requests and multiple telephone conferences.
Instead, the only documents the Commission has received from the Amyot Defendants files
were received indirectly from the Quebec Autorit des Marchs Financiers (AMF), which
executed a search warrant on IAB in Quebec in J une 2011.
On March 7, 2014, the SEC issued its Second Requests for the Production of Documents
to the Amyot Defendants, which are the subject of the present motion (the Document
Requests, attached hereto as Exh. 1). The Document Requests seek two categories of
documents: (1) communications with certain individuals concerning Spencer, Al-Dora, and Al-
Doras subsidiary, which was the entity that would purportedly acquire Spencer; and (2)
documents and communications concerning certain aspects of the Amyot Defendants conduct
involving other companies, the stocks of which the Amyot Defendants may have manipulated
using similar plans and with similar intent. The Amyot Defendants have failed to respond to the
Document Requests in writing or through the production of documents. Rather, the Amyot
Defendants counsel has stated only that he is continuing to try to work with his clients to
determine whether responsive documents exist. No justifiable reasons have been given for why
the search has taken so long, nor has any indication been given when it will be complete.
The Amyot Defendants failure to timely respond is not without precedent. In response
to the Commissions First Set of Document Requests, served September 9, 2013 and attached
hereto as Exh. 2, the Amyot Defendants failed to respond within 30 days. When they ultimately
did respond in November 2013, after several letters inquiring about their delay, the Amyot
Defendants claimed that they had no responsive documents to produce. See Correspondence
between J . Drabick and J . Uretsky, attached hereto as Exh. 3; Amyot Defendants Responses and
Objections, attached hereto as Exh. 4. Incredibly, even though the requests sought documents
for the period J anuary 2009 to the present, the Amyot Defendants claimed that all of the
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responsive documents were either (i) seized by the AMF in J une 2011, and/or (ii) were gotten
rid of by the Amyot Defendants shortly after the seizure took place. See Exh. 3 at 9-10 (Nov.
5, 2013 Letter from J . Uretsky).
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On May 2, 2014, the undersigned, as counsel for the Commission, conferred in good faith
via telephone with counsel for the Amyot Defendants concerning their lack of response. The
undersigned had previously conferred with counsel for the Amyot Defendants on the same issue
shortly after the deadline passed on April 7, 2014. No resolution was reached during either
conference.
ARGUMENT
I. The Amyot Defendants Complete Failure to Respond Warrants Granting the
Commissions Motion to Compel

The Federal Rules of Civil Procedure plainly require a response to the Commissions
Document Requests and the Amyot Defendants failure to respond warrants issuance of an
order compelling production. Rule 34(b)(2)(A) provides that a party upon whom a document
request is served must respond in writing within 30 days after being served. Rule 34 goes
on to provide that such response must include a response as to each item in the document
request stat[ing] that inspection and related activities will be permitted or stat[ing] an
objection to the request, including the reasons. Fed. R. Civ. P 34(b)(2)(B). The Amyot
Defendants have not responded in writing at all, much less on an item-by-item basis. Under
Rule 37, this failure warrants granting the Commissions motion to compel. Fed. R. Civ. P.
37(a)(3)(B) (A party seeking discovery may move for an order compelling production.
This motion may be made if (iv) a party fails to respond that inspection will be permitted
as requested under Rule 34.).

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The Amyot Defendants likewise failed to timely file their Answer, which they filed on
September 6, 2013, over five weeks after it was due.
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Moreover, any objections the Amyot Defendants may have had to the Document
Requests have been waived by their failure to timely respond. To be sure, the Commission
believes that the Document Requests are not objectionable and fall squarely within Rule 26s
broad standard for discoverable information. Fed. R. Civ. P. 26(b)(1) (Parties may obtain
discovery regarding any nonprivileged matter that is relevant to any partys claim or defense
.); see also, e.g., Whittingham v. Amherst College, 164 F.R.D. 124, 126 (D. Mass. 1995)
([I]nformation is discoverable if there is any possibility it might be relevant to the subject
matter of the action.). But even if the Amyot Defendants disagree and believe that one or
more requests are objectionable, any such objections should be deemed waived. Failure to
file a timely objection to a request for production of documents constitutes a waiver of any
objections which a party might have to the requests. Willard v. Constellation Fishing Corp.,
136 F.R.D. 28, 31 (D. Mass. 1991); see also Krewson v. City of Quincy, 120 F.R.D. 6, 7 (D.
Mass. 1988) ([A] failure [to file timely objections] constitutes a waiver of any objections
which a party might have to the requests. Any other result would . . . give a license to litigants
to ignore the time limits for discovery without any adverse consequences. (internal citations
omitted)); Kooker v. Susan Marie II, Inc., 1998 WL 34061513, *1 (D. Mass. Nov 10, 1998).
Here, the lack of response four weeks after the response deadline, coupled with the
Commissions multiple inquiries and the Amyot Defendants history of late responses,
warrants holding that the Amyot Defendants objections, if any, have been waived. Cf.
Brenford Envtl. Sys. v. Pipeliners of Puerto Rico, Inc., 269 F.R.D. 143 (D.P.R. 2010) (holding
all objections waived when party provided response to document requests 61 days late);
Krewson, 120 F.R.D. at 7 (holding all objections waived when defendant failed to file
objections until after deadline had passed and a motion to compel was filed).
For the reasons stated above, the SEC respectfully requests that this Court issue an order
compelling the Amyot Defendants to produce all responsive documents to the Document
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Requests within 14 days. Given the Amyot Defendants prolonged delay and the upcoming
depositions in this matter, the Commission suggests that a 14-day deadline is both reasonable
and warranted.
II. The Court Should Issue Sanctions in the Form of an Order Prohibiting Use of
Later-Produced Documents by the Amyot Defendants

The Amyot Defendants failure to respond the Document Requests, when considered in
context of the Amyot Defendants failure to produce any documents to date, also warrants the
issuance of discovery sanctions.
The Court has broad discretion and authority to issue discovery sanctions when the facts
and circumstances so warrant. See Martinez-Serrano v. Quality Health Servs. of Puerto Rico,
Inc., 568 F.3d 278, 283 (1st Cir. 2009) (It is a bedrock principle that federal trial courts possess
wide-ranging authority to manage the conduct of litigation and, as a necessary corollary of that
authority, to sanction litigants who fail to comply with court-imposed deadlines.); Faigin v.
Kelly, 184 F.3d 67, 84 (1st Cir. 1999) (A district courts case-management powers apply with
particular force to the regulation of discovery and the reconciliation of discovery disputes.).
Pursuant to Rule 37(d)(1)(A)(ii), the Court may order sanctions if a party, after being properly
served with a request for inspection under Rule 34, fails to serve its written response.
Rule 37 further provides that the sanctions available include prohibiting the disobedient party
from supporting or opposing designated claims or defenses, or from introducing designated
matters into evidence. Fed. R. Civ. P. 37(d)(3), (b)(2)A)(ii)).
In this matter, there is no dispute that Amyot Defendants were properly served with the
Document Requests and that the Amyot Defendants have failed to timely respond. Counsel for
the Amyot Defendants has not provided any justifiable reason for the delay, and instead claims
only that he is continuing to try to work with his clients to determine whether responsive
documents exist. This delay has occurred against the backdrop of the Amyot Defendants failure
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to produce a single document thus far in this litigation, despite multiple conferences and despite
Commission correspondence explaining why such failure is incredible given the scope and
timeframe of the requests. See, e.g., Exh. 3 at 12-13 (Nov. 7, 2013 Letter from J. Drabick). In
these circumstances, it would be unjust for the Amyot Defendants to be permitted to later
produce documents in support of their defenses when they have failed to timely produce any
documents to date. With the bulk of the depositions in this matter nearly all of which will take
place in Canada pursuant to letters rogatory set to take place in late May and June 2014, the
Commission would be unfairly prejudiced if the Amyot Defendants were to produce documents
thereafter in support of their defenses. See Update Art, Inc. v. Modiin Pub., Ltd., 843 F.2d 67,
71 (2d Cir. 1988) (noting that a purpose of sanctions is to ensure that a party will not benefit
from its own failure to comply). Accordingly, the Commission respectfully requests that the
Court issue sanctions pursuant to Rule 37(d)(3) and (b)(2)A)(ii) in the form of an order
prohibiting the Amyot Defendants from using to support any defenses, or introducing as
evidence, any documents sought in any of the Commissions document requests not produced
within 14 days of the date of the Courts order. Cf. Applewood Landscape & Nursery Co.,
Inc. v. Hollingsworth, 884 F.2d 1502, 1507 (1st Cir. 1989) (upholding district court sanction
under Rule 37 prohibiting a party from offering testimony of surprise expert witness who was
not designated or placed on witness list in timely manner); Petroleum Ins. Agency, Inc. v.
Hartford Accident and Indem. Co., 106 F.R.D. 59, 64 (D. Mass. 1985) (noting that a partys
negligent failure to timely produce documents in response to document requests would fully
support a sanction in the form of an order precluding use of the later-produced documents at
trial).
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The Commission notes that Rule 37(d)(3) also provides that [i]nstead of or in addition to
these sanctions, the court must require the party failing to act, the attorney advising that party, or both
to pay the reasonable expenses, including attorneys fees, caused by the failure, unless the failure was
substantially justified or other circumstances make an award of expenses unjust. The Commission
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CONCLUSION
For the reasons stated above, the SEC respectfully requests that this Court grant the
Commissions motion to compel and issue sanctions in the Commissions favor.

Dated: May 7, 2014 Respectfully submitted,

/s/ J ames R. Drabick
Frank C. Huntington (Mass. Bar No. 544045)
Amy Gwiazda (Mass. Bar No. 663494)
J ames R. Drabick (Mass. Bar No. 667460)

Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
33 Arch Street, 23
rd
Floor, Boston, MA 02110
(617) 573-4535 (Drabick direct)
(617) 573-4590 (fax)
drabickj@sec.gov (Drabick email)



does not believe that the Amyot Defendants failure to timely respond to the Document Requests is
substantially justified. The Commission, however, is not affirmatively seeking the imposition of a
monetary sanction, given the practical difficulties associated with calculating such an award for the
Commission.
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CERTIFICATE OF SERVICE
I, J ames R. Drabick, certify that on May 7, 2014, the foregoing Motion was filed
electronically with the Court and was served upon each party appearing pro se and the
attorney of record for each other party by electronic means on May 7, 2014.

/s/ J ames R. Drabick
J ames R. Drabick
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