1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Ignite International Limited, No. CV-21-02184-PHX-MTL
10 Plaintiff, ORDER
11 v.
12 Higher Connection LLC, et al.,
13 Defendants. 14 15 Once described as a “simple accounting dispute,” this action has been anything but 16 simple. With a winding procedural history, this case has been up to the Ninth Circuit Court 17 of Appeals and is now back before this Court on remand of the single remaining claim of 18 piercing the corporate veil brought by Plaintiff Ignite International Limited (“Ignite”) 19 against Defendants Zachariah Gleason and Mirza Baig (collectively, “Defendants”). 20 Ignite requested—and the Court granted—a limited reopening of discovery for 21 Ignite to take Defendants’ depositions based on the current record. (See Doc. 140 at 1.) 22 Because Defendants disclosed to the Court that these depositions could stray into topics at 23 issue in a criminal proceeding in the Central District of California, the Court ordered the 24 parties to meet and confer and submit a joint report “addressing the parameters for the 25 depositions . . . [and] whether and to what extent judicial supervision of Defendants’ 26 depositions [was] needed.” (Id.) The parties thereafter agreed that “[n]either party [would] 27 be permitted to question [Defendants] regarding any pending criminal matters involving 28 [Defendants], Ignite, and/or Ignite’s owners, representatives, or managers.” (Doc. 141 at 1 2.) 2 Then, one week before Defendants’ depositions were scheduled to take place, the 3 United States filed a motion to intervene in this action, requesting that the Court stay these 4 proceedings in light of the pending criminal proceedings. (Doc. 149.) At a status 5 conference concerning the government’s motion, the Court imposed a protective order 6 precluding Defendants’ depositions until further order of the Court and set a hearing on the 7 government’s motion. (See Doc. 154.) 8 The government’s motion is now fully briefed. Ignite opposes the government’s 9 motion, and Defendants have filed a notice of non-opposition. (See Docs. 151, 155.) For 10 the following reasons, the Court will grant the government’s motion to intervene and will 11 grant its request to stay proceedings. 12 I. 13 Although Ignite initially did not oppose the government’s intervention (Doc. 149 at 14 2), it has since challenged whether the government is entitled to or may intervene (see Doc. 15 155 at 5-7). The Court need not address whether the government is entitled to intervene as 16 a matter of right pursuant to Federal Rule of Civil Procedure 24(a), because the Court will 17 in its discretion permit the government to intervene pursuant to Rule 24(b). 18 Rule 24(b) provides courts with discretionary authority to permit intervention to 19 anyone who, in relevant part, “has a claim or defense that shares with the main action a 20 common question of law or fact.” Fed. R. Civ. P. 24(b)(1). “[A] district court has discretion 21 to permit intervention when the movant presents (1) an independent ground for jurisdiction; 22 (2) a timely motion; and (3) a common question of law and fact between the movant’s 23 claim or defense and the main action.” Callahan v. Brookdale Senior Living Cmtys., Inc., 24 42 F.4th 1013, 1022 (9th Cir. 2022) (quotation marks omitted). If these requirements are 25 met, courts may consider other factors including 26 the nature and extent of the intervenors’ interest, their standing to raise relevant legal issues, the legal position they seek to advance, . . . its probable 27 relation to the merits of the case[,] . . . whether the intervenors’ interests are 28 adequately represented by other parties, whether intervention will prolong or unduly delay the litigation, and whether parties seeking intervention will 1 significantly contribute to full development of the underlying factual issues in the suit and to the just and equitable adjudication of the legal questions 2 presented. 3 4 Id. (citation omitted). “The district court’s discretion under Rule 24(b), to grant or deny an 5 application for permissive intervention includes discretion to limit intervention to 6 particular issues.” Dep’t of Fair Emp. & Hous. v. Lucent Techs., Inc., 642 F.3d 728, 741 7 (9th Cir. 2011) (citation modified). 8 The Court begins with the understanding that “[i]t is well established that the United 9 States Attorney may intervene in a federal civil action to seek a stay of discovery when 10 there is a parallel criminal proceeding, which is anticipated or already underway that 11 involves common questions of law or fact.” Bureerong v. Uvawas, 167 F.R.D. 83, 86 (C.D. 12 Cal. 1996) (citation omitted); see also SEC v. FAT Brands Inc., No. 13 2:24-cv-03913-MCS-AGR, 2024 WL 5319127, at *3 (C.D. Cal. Dec. 13, 2024) (collecting 14 cases); S.E.C. v. Nicholas, 569 F. Supp. 2d 1065, 1068 (C.D. Cal. 2008) (“[N]umerous 15 courts have allowed the United States government to intervene in a civil case for the 16 purpose of moving to stay discovery and other proceedings until the resolution of a related 17 criminal case.”); Twenty First Century Corp. v. LaBianca, 801 F. Supp. 1007, 1009 18 (E.D.N.Y. 1992) (“As a rule, district courts in this Circuit have allowed the government to 19 intervene in civil actions—especially when the government wishes [to] do so for the limited 20 purpose of moving to stay discovery.”). This is because the government has “a discernible 21 interest in intervening in order to prevent discovery in the civil case from being used to 22 circumvent the more limited scope of discovery in the criminal matter.” S.E.C. v. 23 Chestman, 861 F.2d 49, 50 (2d Cir. 1988) (per curiam). The factors required for Rule 24(b) 24 have also been satisfied, so the Court will grant the government’s motion to intervene. 25 A. 26 The Ninth Circuit has held that “an independent jurisdictional basis is not required 27 [if] intervenors do not seek to litigate a claim on the merits” or “rule on additional claims 28 or seek to become parties to the action,” but instead to “ask the court only to exercise that 1 power which it already has.” Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 473 (9th 2 Cir. 1992). Here, the government does not seek to become a party to this action or to litigate 3 any claim on the merits, but instead to request the Court to exercise the power it already 4 maintains to stay proceedings. (See Doc. 149 at 9-15); O’Connell v. Smith, No. 5 CV-13-01905-MWF (PJWx), 2014 WL 12773900, at *2 (C.D. Cal. Aug. 18, 2014) (“[T]he 6 D.A.’s Office does not seek to become parties to or bring additional claims in this case, but 7 only asks this Court to stay discovery into the pending criminal investigation. The Court’s 8 power to stay discovery is power it inherently has. Therefore, no independent jurisdictional 9 basis is required for the D.A.’s Office to intervene.” (citation omitted)). 10 Courts in this Circuit have held that the requirement for an independent ground for 11 jurisdiction is either satisfied by the government’s presence as the movant or is not required 12 due to the limited nature of the government’s purpose for intervening to stay civil 13 proceedings pending resolution of criminal proceedings. Compare Bureerong, 167 F.R.D. 14 at 86 n.6 (“[T]he United States government obviously has an independent jurisdictional 15 ground for intervention.” (citing 28 U.S.C. § 1345)), with SEC v. Dickerson, No. 16 2:24-cv-02379-JAM-SCR, 2024 WL 4712358, at *2 (E.D. Cal. Nov. 7, 2024) (citing 17 § 1345 but also reasoning that “no independent jurisdictional grounds are required because 18 the United States does not seek to litigate any claim in the . . . Civil Case on the merits but 19 rather seeks intervention for a limited purpose of moving for a stay pending resolution in 20 the Criminal Case”). The government has therefore either satisfied this requirement or 21 satisfaction of this requirement is unnecessary. 22 B. 23 In the Ninth Circuit, “timeliness for an intervention motion is generally governed 24 by three factors: (1) the stage of the proceeding at which an applicant seeks to intervene; 25 (2) the prejudice to other parties; and (3) the reason for and length of the delay.” Brown v. 26 Google LLC, 172 F.4th 1128, 1133 (9th Cir. 2026) (quotation marks omitted). Each of 27 these factors is assessed “by reference to the crucial date when proposed intervenors should 28 have been aware that their interests would not be adequately protected by the existing 1 parties.” Id. (citation omitted). The requirement that a proposed intervenor’s motion be 2 timely “seeks to prevent a tardy intervenor from derailing a lawsuit within sight of the 3 terminal.” Id. (quotation marks omitted). Courts thus “do not require hasty intervention.” 4 Kalbers v. U.S. Dep’t of Just., 22 F.4th 816, 823 (9th Cir. 2021). The most important factor 5 is prejudice to the other parties. Brown, 172 F.4th at 1134. Ultimately, though, “timeliness 6 is to be determined from all the circumstances, and the point to which a suit has progressed 7 is not solely dispositive.” Cameron v. EMW Women’s Surgical Ctr., P.S.C., 595 U.S. 267, 8 279 (2022) (citation modified). 9 1. 10 Courts “apply a nuanced, pragmatic approach to determine whether the intervention 11 occurred at an appropriate stage of the case.” Brown, 172 F.4th at 1138 (quotation marks 12 omitted). “In this inquiry, substance prevails over form: Neither the formal stage of the 13 litigation . . . nor the length of time that has passed since a suit was filed is dispositive.” 14 Kalbers, 22 F.4th at 826 (quotation marks omitted). “[T]he mere lapse of time, without 15 more, is not necessarily a bar to intervention.” W. Watersheds Project v. Haaland, 22 F.4th 16 828, 836 (9th Cir. 2022) (citation omitted). “This is especially true where . . . a change of 17 circumstances occurs, and that change is the major reason for the motion to intervene.” 18 Kalbers, 22 F.4th at 827 (quotation marks omitted). In such instances, “the stage of 19 proceedings factor should be analyzed by reference to the change in circumstances, and 20 not the commencement of the litigation.” Smith v. L.A. Unified Sch. Dist., 830 F.3d 843, 21 854 (9th Cir. 2016). 22 Ignite argues that the government’s motion is untimely because it “comes after 23 almost five (5) years of litigation, a stipulated judgment, a Ninth Circuit reversal and 24 remand, and a court-ordered reopening of discovery with agreed-upon deposition 25 parameters.” (Doc. 155 at 6-7.) Ignite correctly summarizes the procedural history, but that 26 alone is not dispositive as to whether the motion is timely. See W. Watersheds, 22 F.4th at 27 836; Kalbers, 22 F.4th at 826. Rather, it is the last listed development—the reopening of 28 discovery to take Defendants’ depositions—that constitutes the “change of circumstances” 1 prompting the government’s request to intervene, so the Court assesses whether the 2 government timely moved from that point. Kalbers, 22 F.4th at 827. That the government 3 is not seeking to undo all the previous litigation, but instead to stay proceedings of what 4 remains, weighs in favor of finding the government’s motion timely. See Smith, 830 F.3d 5 at 856-57 (finding this factor weighed in favor of intervention where the movants were 6 “not seeking to reopen decades of litigation”). 7 2. 8 Prejudice “flows from a prospective intervenor’s failure to intervene after he knew, 9 or reasonably should have known, that his interests were not being adequately 10 represented—and not from the fact that including another party in the case might make 11 resolution more difficult.” Brown, 172 F.4th at 1134 (citation omitted). In other words, any 12 finding of prejudice must be tethered to the “prejudice which was caused by [the movant’s] 13 delay.” Smith, 830 F.3d at 857-58. “[A] party is put on notice when its interests might be 14 adversely affected by the outcome of the litigation.” Brown, 172 F.4th at 1135 (quotation 15 marks omitted). “[E]very motion to intervene will complicate or delay a case to some 16 degree” but this “is not a sufficient reason to deny intervention.” Kalbers, 22 F.4th at 825. 17 Ignite argues that it will be prejudiced because it has “waited years for resolution of 18 its veil-piercing claim, and the parties [had] agreed to a narrow discovery window that was 19 to close on April 21, 2026.” (Doc. 155 at 7.) So, “[i]ntervention and a stay would eliminate 20 that timeline and subject Ignite to indefinite delay pending a criminal case in another 21 jurisdiction.” (Id.) Ignite also argues that the “criminal matter has been pending since 22 2024,” yet the government waited “until mere days before the scheduled depositions” to 23 file its motion. (Id.) 24 The Court finds that Ignite would not be prejudiced by the government’s delay in 25 moving to intervene. First, that the criminal matter has been pending since 2024 is 26 irrelevant because the government would not have known that its interests were not being 27 adequately represented in 2024 with regard to sworn statements being taken of likely 28 government witnesses concerning matters overlapping with the criminal proceedings. Fact 1 discovery closed in this action in November 2022, Defendants’ motion for summary 2 judgment was filed in May 2023, and the Court granted Defendants’ motion for summary 3 judgment in December 2023. (Docs. 31, 56, 67.) Later, in June 2024, the remaining parties 4 filed—and the Court granted—a stipulated judgment, in which the Court’s order granting 5 summary judgment to Defendants was deemed final. (Docs. 81, 82.) This action has been 6 on appeal and in post-judgment proceedings since then. (See, e.g., Docs. 83, 97, 109, 110, 7 113, 116.) A Grand Jury returned the indictment in the criminal case in September 2024 8 (Doc. 159-1 at 1), long after Defendants were dismissed from the action as individual 9 parties. As discussed above, the relevant time period from which the Court will assess 10 timeliness and prejudice is, at earliest, from when the Court reopened discovery on 11 February 18, 2026. (Doc. 140.) 12 Second, Ignite was not prejudiced by the delay from when the Court reopened 13 discovery on February 18, 2026 to when the government moved to intervene and stay 14 proceedings on April 10, 2026. (Compare Doc. 140, with Doc. 149.) This time period 15 amounted to 52 days, or approximately seven weeks. Although Ignite noticed the 16 depositions within that time frame, Ignite does not allege that it suffered “additional costs 17 or other prejudice” in that period alone. See Smith, 830 F.3d at 859, 862 (finding this factor 18 weighed in favor of intervention where there was no evidence of “additional costs or other 19 prejudice suffered between August 2013 and October 2013,” the length of delay in moving 20 to intervene). Moreover, the government states that it moved to intervene on April 10, 2026 21 after learning of the noticed depositions on April 8, 2026. (See Doc. 159-1 at 2.) 22 At bottom, Ignite’s asserted prejudice is simply that intervention would delay 23 resolving this action. Even setting aside that much of this claimed prejudice flows from the 24 government’s request for a stay, not from the motion to intervene, delay alone is not a 25 sufficient reason to deny intervention. Kalbers, 22 F.4th at 825. The Court therefore finds 26 that this factor weighs in favor of finding that the motion was timely. 27 3. 28 “Delay is measured from the date the proposed intervenor should have been aware 1 that its interests would no longer be protected adequately by the parties, not the date it 2 learned of the litigation.” Brown, 172 F.4th at 1137 (citation omitted). “A party seeking to 3 intervene must act as soon as he knows or has reason to know that his interests might be 4 adversely affected by the outcome of the litigation.” Id. (citation omitted). “While the time 5 elapsed is not determinative, the court must weigh the related circumstances of the period 6 of delay.” Id. (quotation marks omitted). 7 As explained above, the earliest relevant date from which delay could be assessed 8 is the Court’s February 18, 2026 order reopening discovery. See id. The government filed 9 its motion to intervene 52 days later, and only two days after it learned of the noticed 10 depositions. Under these circumstances, the Court finds that the delay was not so 11 significant as to render its motion untimely. See W. Watersheds, 22 F.4th at 840 (reasoning 12 district court abused its discretion in finding motion to intervene untimely where the 13 “motion came just three months after [the movant] discovered that its leases were involved 14 in [the] litigation”); Smith, 830 F.3d at 861-62 (finding motion to intervene timely for 15 “delays of 71 and 79 days, respectively” in light of the circumstances). 16 On balance, the Court finds that the government’s motion was timely. 17 C. 18 “The existence of a ‘common question’ is liberally construed.” Bureerong, 167 19 F.R.D. at 85. Here, the government argues that the criminal case and this case “arise from 20 the same fulfillment agreement, the same warehouse, and the same inventory.” (Doc. 149 21 at 8.) The superseding indictment supports the existence of a common question when 22 liberally construed. Count Two alleges the defendants—one of which is Ignite’s corporate 23 parent—(1) contracted with a Phoenix-based company (which the government confirmed 24 is Defendant Higher Connection LLC) to store products in Higher Connection’s warehouse 25 and (2) either Higher Connection would package and ship products to a customer when 26 notified by Ignite’s parent or would submit a purchase order to Ignite’s parent in its role as 27 a distributor, resulting in inflated sales that were then included in a press release and caused 28 Ignite’s parent’s share price to increase. (Doc. 149-3 at 4, 11-12.) Then, when Higher 1 Connection refused to certify to an auditor that it purchased unsold inventory that was 2 included in the press release, one of the criminal defendants sold the inventory to an 3 affiliated entity. (Id. at 13.) 4 The allegations still at issue in this case, meanwhile, concern whether the corporate 5 form should be disregarded so Defendants’ personal assets can be used to satisfy judgments 6 obtained by Ignite. (See Doc. 1 at 12.) Although at surface level these allegations might 7 seem separate and distinct, the Court cannot conclude that there will be absolutely no 8 overlap in any deposition or trial testimony on this remaining claim, particularly 9 concerning (1) background testimony, (2) other testimony that establishes foundation for 10 evidence concerning observance of the corporate form, (3) the source of funds received by 11 Defendants that Ignite argues are sufficient to pierce the corporate veil, (4) Defendants’ 12 role in the alleged scheme to steal Ignite’s products, (5) whether the corporate form was 13 used for non-legitimate corporate purposes, (6) whether observance of the corporate form 14 would sanction the fraud of theft of Ignite’s products, and (7) whether Defendants can be 15 held liable for their role in an alleged agreement to distribute Ignite products. (See Doc. 57 16 at 2 (arguing in response to Defendants’ motion for summary judgment that Higher 17 Connection “entered into a Fulfillment Agreement with Ignite to be a warehouse and 18 shipping provider” and a “customer and distributor for Ignite,” after which the defendants 19 “stole Ignite property” and “distributed some of the illicit funds to Gleason and Baig under 20 W-2s and 1099s” through transfers to Defendants’ “personal online crypto currency 21 accounts during the time period [defendants] were stealing Ignite’s products”); id. at 2-3 22 (arguing that Gleason was Vice President of Distribution for Ignite “during the time he was 23 stealing Ignite’s products,” so his “participation (along with his partner Baig) in the theft 24 of Ignite’s products cannot be shielded because [they] were also members of [Higher 25 Connection]”); id. at 8 (“It is clear, or at least a disputed fact, that [Higher Connection] was 26 in reality an alter ego of Baig and Gleason, who used the stolen funds from Ignite to finance 27 speculative investing in crypto currency and/or to pay their personal expenses,” which had 28 “absolutely no relation to [Higher Connection’s] business purpose of providing 1 warehousing services in Arizona.”); id. at 9 (“[Higher Connection] (through Baig and 2 Gleason) callously used its relationship as a warehouse and shipping provider, as well as a 3 distributor, of Ignite products to steal from and disrupt Ignite’s business.”); id. at 9-10 4 (arguing that Defendants could be personally liable even as non-parties to the Fulfillment 5 Agreement because “[Higher Connection] (through Baig and Gleason) also had a side 6 business wherein it acted as a distributor of Ignite products”); see also Doc. 156 at 6-7.) 7 The Court therefore finds that there exists a common question of fact between the 8 sole remaining claim in this action and charges in the criminal case. 9 D. 10 Having determined that the requirements of Rule 24(b) have been met, the Court 11 analyzes additional factors, including 12 the nature and extent of the intervenors’ interest, their standing to raise relevant legal issues, the legal position they seek to advance, . . . its probable 13 relation to the merits of the case[,] . . . whether the intervenors’ interests are 14 adequately represented by other parties, whether intervention will prolong or unduly delay the litigation, and whether parties seeking intervention will 15 significantly contribute to full development of the underlying factual issues 16 in the suit and to the just and equitable adjudication of the legal questions presented. 17 18 Callahan, 42 F.4th at 1022 (citation omitted). 19 The Court finds that the government’s interest in seeking to intervene is significant 20 and that its interest is not adequately represented by other parties. See Chestman, 861 F.2d 21 at 50; Bureerong, 167 F.R.D. at 86 (“In this case, the Government’s prosecutorial and 22 investigative interest is not adequately protected by any of the civil parties. . . . Clearly, 23 neither the Plaintiffs nor the Defendants have this identical interest.”). Courts have found 24 that permitting the government to intervene to seek a stay of discovery pending resolution 25 of criminal proceedings will not unduly prejudice the parties to the action or delay the 26 action. See Dickerson, 2024 WL 4712358, at *2; SEC v. Christian Stanley, Inc., No. CV 27 11-7147 GHK (MANx), 2012 WL 13009158, at *4 (C.D. Cal. Sep. 6, 2012) (“Where a 28 party seeks to intervene solely for the purpose of requesting a stay in the proceedings, the 1 prejudice of intervention on the original parties is minimal. The only consequence of such 2 intervention is that it allows [the court] to entertain the motion to stay, which neither unduly 3 delays the proceeding nor imposes unfair prejudice on the parties.” (citation omitted)). As 4 another court found, “any undue delay or perceived prejudice does not flow from the 5 intervention, but from the proposed stay.” O’Connell, 2014 WL 12773900, at *2; see also 6 Nicholas, 569 F. Supp. 2d at 1068 (same). And although the arguments the government 7 intends to offer in intervention may not “significantly contribute to full development of the 8 underlying factual issues in the suit [or] to the just and equitable adjudication of the legal 9 questions presented,” Callahan, 42 F.4th at 1022 (citation omitted), this does not persuade 10 the Court to deny intervention in light of the government’s significant interest in preventing 11 interference with criminal proceedings and in light of the lack of prejudice to the parties. 12 The Court therefore finds that the parties would not be unduly prejudiced and this action 13 would not be unduly delayed by permitting the government to intervene to seek a stay. 14 Under the circumstances, the Court will in its discretion permit the government to 15 intervene for the limited purpose of seeking to stay proceedings pending resolution of the 16 criminal proceedings. 17 E. 18 Rule 24(c) also requires that any motion to intervene “be accompanied by a pleading 19 that sets out the claim or defense for which intervention is sought.” Fed. R. Civ. P. 24(c). 20 The Ninth Circuit has held that intervention motions not accompanied by a pleading are 21 proper “where the court was otherwise apprised of the grounds for the motion.” Beckman 22 Indus., 966 F.2d at 474. “Thus, where . . . the movant describes the basis for intervention 23 with sufficient specificity to allow the district court to rule, its failure to submit a pleading 24 is not grounds for reversal.” Id. at 475. Here, the government has sufficiently described the 25 grounds for its motion and the basis for its intervention, so the Court finds that a pleading 26 under Rule 24(c) is not required. 27 II. 28 Having decided that the government’s motion to intervene should be granted, the 1 Court must now address whether to grant its motion to stay proceedings in this case, 2 including Defendants’ depositions and the trial, pending resolution of the criminal 3 proceedings. “The Constitution does not ordinarily require a stay of civil proceedings 4 pending the outcome of criminal proceedings.” Keating v. Off. of Thrift Supervision, 45 5 F.3d 322, 324 (9th Cir. 1995). “In the absence of substantial prejudice to the rights of the 6 parties involved, simultaneous parallel civil and criminal proceedings are unobjectionable 7 under [the court’s] jurisprudence.” Id. (citation modified). But the Court may nevertheless 8 “decide in its discretion to stay civil proceedings when the interests of justice seem to 9 require such action.” Id. (citation modified). This decision “should be made in light of the 10 particular circumstances and competing interests involved in the case.” Id. (quotation 11 marks omitted). Courts should consider whether any rights would be implicated under the 12 Fifth Amendment, along with the following factors: 13 (1) the interest of the plaintiffs in proceeding expeditiously with this litigation or any particular aspect of it, and the potential prejudice to plaintiffs 14 of a delay; (2) the burden which any particular aspect of the proceedings may 15 impose on defendants; (3) the convenience of the court in the management of its cases, and the efficient use of judicial resources; (4) the interests of 16 persons not parties to the civil litigation; and (5) the interest of the public in 17 the pending civil and criminal litigation. 18 Id. at 324-25. The government does not contend that any Fifth Amendment rights are 19 implicated (see Doc. 149 at 9 n.5), so the Court analyzes Keating’s remaining five factors. 20 On balance, the Court finds that a stay is warranted and will grant the government’s motion. 21 A. 22 The government does not argue that Ignite lacks an interest in proceeding 23 expeditiously in resolving its remaining claim, but instead argues that Ignite will not be 24 unduly prejudiced because the “requested stay is for a limited duration—until the 25 conclusion of the Criminal Case, which is set for trial in October 2026.” (See Doc. 149 at 26 9-10.) Ignite argues that because this case has been pending for five years, a “stay of 27 indefinite duration would cause concrete prejudice” and that, “[w]ithout piercing the 28 corporate veil, Ignite cannot reach the personal assets of Gleason and Baig to satisfy the 1 $900,000 judgment against the Higher Connection entities.” (Doc. 155 at 8.) Ignite also 2 argues that “[d]elay increases the difficulty of obtaining accurate testimony about 2021 3 transactions” and “creates additional time during which assets that are the subject of the 4 veil-piercing claim could be transferred or dissipated.” (Id.) 5 The Court agrees with Ignite that its interest in proceeding expeditiously and the 6 potential prejudice resulting from delay weighs against a stay. Ignite’s interest only weighs 7 slightly against a stay, however, because as the government notes, a stay would not be 8 indefinite. The criminal trial is set for October 2026, which is less than six months from 9 now. A trial has not yet been scheduled in the action before this Court, and in light of the 10 Court’s calendar at this time, it is unlikely a trial could commence until months after 11 October 2026, which would presumably carry the same risks of which Ignite complains. 12 The Court also notes that Ignite could seek relief if it learns of attempted asset transfers to 13 avoid a potential judgment, as Ignite indicated to the Court it had considered. See Ariz. 14 Rev. Stat. § 44-1004. 15 Thus, although a stay of proceedings for approximately six months would delay 16 resolution of Ignite’s remaining claim, the Court finds that the delay is not so significant 17 that it strongly militates against a stay. See SEC v. Left, No. 2:24-cv-06311-SPG-JC, 2025 18 WL 2684195, at *4 (C.D. Cal. Aug. 19, 2025) (agreeing that the defendants “face[d] some 19 amount of prejudice from a stay” but it would “not [be] inordinate” because the “criminal 20 trial [was] set for . . . approximately seven months from the time of [the] order” and “fading 21 memories are an issue in any stay”); Dickerson, 2024 WL 4712358, at *2 (finding that a 22 stay would not “unduly delay the expeditious resolution of the . . . Civil Case” because the 23 “requested stay [was] for a limited duration—until the conclusion of the Criminal Case”); 24 O’Connell, 2014 WL 12773900, at *4 (finding that a stay of only 120 days “mitigate[d] 25 the potential prejudice of the delay to Plaintiffs” and noting that “[o]ther courts [had] 26 granted stays of similar durations”). 27 B. 28 Defendants do not oppose a stay of proceedings. (Doc. 151.) To the extent the factor 1 considering the burden on defendants applies here, see Christian Stanley, 2012 WL 2 13009158, at *4, the factor weighs in favor of a stay. 3 C. 4 “In general, considerations of judicial economy weigh most strongly in favor of 5 staying a civil proceeding or aspects of the civil proceeding when a parallel criminal 6 proceeding is pending at the same time and involves overlapping issues.” Christian 7 Stanley, 2012 WL 13009158, at *5. Although this factor “normally does not favor granting 8 a stay because the court has an interest in clearing its docket,” Sanrio, Inc. v. Ronnie Home 9 Textile Inc., No. 2:14-cv-06369-RSWL (JEMx), 2015 WL 1062035, at *4 (C.D. Cal. Mar. 10 10, 2015) (quotation marks omitted), the Court finds that the interest in clearing the docket 11 does not override the judicial economy considerations of an ongoing parallel criminal 12 proceeding, particularly where the criminal proceeding is set for trial in a few months. The 13 Court therefore finds that this factor weighs in favor of a stay of proceedings or is neutral. 14 D. 15 The Court analyzes the government’s interest and the public’s interest together 16 because these interests “overlap[] substantially.” Dickerson, 2024 WL 4712358, at *4 17 (citation omitted); see also Christian Stanley, 2012 WL 13009158, at *6 (finding the 18 “public interest in the criminal investigation favor[ed] a stay of civil discovery to the same 19 extent that the Government’s interest favor[ed] a stay”). As another court has stated, “the 20 interests of the Government in protecting its criminal investigation are clearly the 21 paramount concern here.” Bureerong, 167 F.R.D. at 87; see also Christian Stanley, 2012 22 WL 13009158, at *6 (“[C]ourts have generally recognized the government’s strong interest 23 in preserving the integrity of the criminal proceeding.”). “There is a clearcut distinction 24 between private interests in civil litigation and the public interest in a criminal prosecution 25 . . . . [which] requires a government policy determination of priority: which case should be 26 tried first.” Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962). “Administrative 27 policy gives priority to the public interest in law enforcement,” which “seems so necessary 28 and wise that a trial judge should give substantial weight to it in balancing the policy against 1 the right of a civil litigant to a reasonably prompt determination of his civil claims or 2 liabilities.” Id. The Court should therefore “be sensitive to the difference in the rules of 3 discovery in civil and criminal cases,” and notably that the “rules governing criminal 4 discovery are far more restrictive.” Id. Relevant here, criminal proceedings have done 5 “away with any pre-trial discovery of statements of a government witness,” and a “litigant 6 should not be allowed to make use of the liberal discovery procedures applicable to a civil 7 suit as a dodge to avoid the restrictions on criminal discovery and thereby obtain 8 [discovery] he would not otherwise be entitled to for use in his criminal suit.” Id.; see also 9 Nicholas, 569 F. Supp. 2d at 1071-72 (citing similar concerns about the difference between 10 civil and criminal discovery rules). The government’s interest and the public’s interest 11 therefore weigh heavily in favor of a stay. See In re Packaged Seafood Prods. Antitrust 12 Litig., No. 15-MD-2670 JLS (MDD), 2018 WL 5785284, at *7 (S.D. Cal. Nov. 5, 2018) 13 (“Because of the liberal discovery rights in civil cases, the government argues that a stay 14 is the only way to protect the criminal proceedings. The Court agrees, and finds this factor 15 weighs in favor of granting a stay.” (citation omitted)). 16 The Court finds that the factors ultimately weigh in favor of granting a stay of 17 proceedings pending resolution of the criminal proceedings, especially considering the 18 substantial weight owed to the interest in maintaining the integrity of parallel criminal 19 proceedings and in not permitting criminal discovery limitations to be circumvented 20 through civil discovery. See Dickerson, 2024 WL 4712358, at *3 (finding the “United 21 States’ interest [was] compelling and weigh[ed] strongly in favor of a stay” and therefore 22 finding a “stay of discovery until the resolution of the Criminal Case . . . [was] consistent 23 with the relief often granted by courts in similar cases”); O’Connell, 2014 WL 12773900, 24 at *4 (concluding that “the public’s interest should be given priority over Plaintiffs’ interest 25 in [the] case”). The Court notes that the Southern District of New York came to the same 26 conclusion in another parallel civil proceeding. See SEC v. Ignite Int’l Brands, Ltd., No. 27 24-CV-7331 (VM) (OTW), 2026 WL 1028100, at *2-5 (S.D.N.Y. Apr. 16, 2026). The 28 court reasoned in part that the public’s interest “strongly favor[ed] a stay” because of the 1 “overriding interest in the integrity of criminal proceedings” and to “prevent circumvention 2 of the limitations on discovery in criminal proceedings.” Id. at *5 (citation modified). The 3 “public’s interest in the integrity of the criminal case” was therefore “more important” than 4 the public’s interest in “expeditiously resolving” the SEC’s action to “protect investors 5 from fraud.” Id. The public’s interest in protecting the integrity of criminal proceedings 6 therefore weighs even more strongly against a private litigant’s expeditious resolution of 7 its civil claim. See Dickerson, 2024 WL 4712358, at *4 (“[T]he Ninth Circuit gives 8 ‘substantial weight’ to the ‘public interest in law enforcement’ when balancing against the 9 public interest in prompt resolution of civil claims.” (quoting Bureerong, 167 F.R.D. at 10 87)). 11 For these reasons, the Court will grant the government’s motion to stay proceedings 12 pending resolution of the criminal proceedings. That said, the Court will permit Ignite to 13 file a motion to lift the stay if the criminal trial is continued beyond October 2026. The 14 Court will also permit Ignite to continue its efforts to collect on its judgment and its award 15 of attorneys’ fees and costs arising out of its motion for sanctions. (See Docs. 131, 133.) 16 III. 17 Accordingly, 18 IT IS ORDERED that the Motion (Doc. 149) is granted. 19 IT IS FURTHER ORDERED that the United States is permitted to intervene in 20 this action for the limited purpose of seeking a stay of these proceedings pending resolution 21 of the criminal proceedings. 22 IT IS FURTHER ORDERED that this action is stayed pending resolution of the 23 criminal proceedings set for trial in October 2026. 24 IT IS FURTHER ORDERED that, notwithstanding this stay of proceedings, 25 Ignite may continue its efforts to collect on its judgment and its award of attorneys’ fees 26 and costs arising out of its motion for sanctions. 27 . . . . 28 . . . . 1 IT IS FURTHER ORDERED that the United States must file a status report || starting on June 1, 2026, and on the first business day of every month thereafter, indicating || the status of proceedings and whether the criminal trial is set to proceed as scheduled in 4|| October 2026. 5 IT IS FINALLY ORDERED that Ignite may file a motion to lift the stay if the 6 || criminal trial is continued beyond October 2026. 7 Dated this 14th day of May, 2026. 8 Micha T. Sihurde Michael T, Liburdi ll United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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