Loloee Motion To Stay Proceedings

Case 2:22-cv-00583-WBS-DB Document 96-1 Filed 11/22/23 Page 1 of 23
1 DOWNEY BRAND LLP

CASSANDRA M. FERRANNINI (Bar No. 204277)
2 cferrannini@downeybrand.com
SANDRA L. SAVA (Bar No. 117415)
3 ssava@downeybrand.com
FARAH AMJAD (Bar No. 346199)
4 famjad@downeybrand.com
621 Capitol Mall, 18th Floor
5 Sacramento, California 95814
Telephone: 916.444.1000
6 Facsimile: 916.444.2100
7 Attorneys for Defendants

SL ONE GLOBAL, INC.; SMF GLOBAL,
8 INC.; NARI TRADING, INC.; UNI
FOODS, INC.; SEAN LOLOEE; and
9 KARLA MONTOYA
10
UNITED STATES DISTRICT COURT
11
EASTERN DISTRICT OF CALIFORNIA, SACRAMENTO DIVISION
12
DOWNEY BRAND LLP
13
JULIE A. SU, Acting Secretary Case No. 2:22-cv-00583-WBS-DB
14 of Labor, United States
Department of Labor, Senior District Court Judge
15 William B. Shubb
Plaintiff,
16 DEFENDANTS’ MEMORANDUM OF
v. POINTS AND AUTHORITIES IN
17 SUPPORT OF MOTION TO STAY
SL ONE GLOBAL, INC., dba VIVA PROCEEDINGS
18 SUPERMARKET, a California
corporation; SMF GLOBAL, INC. Date: January 8, 2024
19 dba VIVA SUPERMARKET, a Time: 1:30 p.m.
California corporation, NARI Crtrm.: 5, 14th Floor
20 TRADING, INC., dba VIVA Judge: Hon. William B. Shubb
SUPERMARKET; UNI FOODS, INC.,
21 dba VIVA SUPERMARKET, a
California corporation; SEAN
22 LOLOEE, an individual, and as
owner and managing agent of the
23 Corporate Defendants; and KARLA
MONTOYA, an individual, and
24 managing agent of the Corporate
Defendants,
25
Defendants.
26
27
28
1894610
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STAY

1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION ...................................................................................................................1
4 II. FACTUAL BACKGROUND .....................................................................................................2
5 A. Sean Loloee’s Candidacy and Precursors to

Investigation .....................................................................................................2
6
B. Status of this Action..................................................................................4
7
C. The Pending Grand Jury Investigation..............................................6
8
III. LEGAL ANALYSIS ..............................................................................................................7
9
A. Fifth Amendment Concerns Dictate A Stay. ....................................8
10
1. Civil Suits May Be Stayed In the Interest of
11 Justice And To Protect The Fifth Amendment
Rights Of A Civil Litigant. .......................................................8
12
DOWNEY BRAND LLP
2. A Stay Is Required To Protect All Defendants. ..........10

13
B. Additional Relevant Factors Also Merit A Stay.....................12
14
1. A Stay Will Not Prejudice the Government.....................13
15
2. Defendants Will Suffer Prejudice Absent A
16 Stay. ..........................................................................................................14
17 3. A Stay Is the Most Efficient Use of Court

Resources. ..............................................................................................15
18
4. The Interests of Non-Parties and Public Favor
19 a Stay. .....................................................................................................15
20 C. Defendants’ Discovery Should Be Stayed, And In The

Alternative, the Court Should Stay This Suit
21 Entirely For At Least 90 Days. ..........................................................16
22 1. Defendants’ Discovery Obligations Should be

Stayed. .....................................................................................................16
23
2. Alternatively, This Suit Should Be Stayed for
24 90 Days. ...................................................................................................17
25 IV. CONCLUSION ......................................................................................................................18
26
27
28
1894610
i
1 TABLE OF AUTHORITIES
2 Page
Federal Cases
3
Campbell v. Gerrans,
4 592 F.2d 1054 (9th Cir. 1979) ................................8
5 Cf. Mattel, Inc. v. MGA Ent., Inc.,
No. CV 04-9049 DOC RNBX, 2010 WL 3705782, at *9 (C.D.
6
Cal. Aug. 3, 2010) ..........................................12
7
Commodity Futures Trading Comm’n v. Fin. Tree,
8 No. 2:20-CV-01184-TLN-AC, 2020 WL 6286329 (E.D. Cal.
Oct. 27, 2020) ..........................................17, 18
9
Consumer Fin. Prot. Bureau v. Global Fin. Support,
10 Inc.,
No. 15-CV-02440-GPC-WVG, 2016 WL 2868698 (S.D. Cal.
11
May 17, 2016)
12 .................................................9, 10, 11, 17
DOWNEY BRAND LLP
13 Continental Ins. Co. v. Cota,

No. No. 07-5800 SC, 2008 WL 4298372 (N.D. Cal. Sept.
14 19, 2008) ...................................................10
15 Fed. Sav. & Loan Ins. Corp. v. Molinaro,
889 F.2d 899 (9th Cir. 1989) ................................12
16
Four In One Co.,
17
No. CIV S-08-3017 MCE EFB, 2010 WL 4718751, at *5
18 (E.D. Cal. Nov. 12, 2010) ...................................14
19 General Elec. Co. v. Liang,

No. CV 13-08670 DDP, 2014 WL 1089264 (C.D. Cal. Mar.
20 19, 2014) ....................................................9
21 Hoffman v. U.S.,
341 U.S. 479 (1951) ..........................................8
22
23 Johnson v. Castillo,
No. 1:22-cv-00637-BAM (PC), 2023 WL 1785481 (E.D.
24 Cal. Jan. 18, 2023) .....................................11, 14
25 Keating v. Office of Thrift Supervision,

45 F.3d 322 (9th Cir. 1995) ..................................9
26
Marti v. Barnes,
27 2012 WL 2029720 (E.D. Cal. 2012) ............................13
28
1894610
ii
1 TABLE OF AUTHORITIES
(Continued)
2 Page
3 In re Master Key Litigation,

507 F.2d 292 .................................................8
4
Mediterranean Enterprises, Inc. v. Ssangyong Corp.,
5 708 F.2d 1458 (9th Cir. 1995) ................................9
6 S.E.C. v. Schroeder,
7 No. C0703798JWHRL, 2008 WL 152227 (N.D. Cal. Jan. 15,

2008) .......................................................17
8
Sanchez,
9 No. 1:19-cv-00354-ADA-HBK, 2023 WL 3310051, at *1
(E.D. Cal. April 12, 2023) ..................................15
10
Securities & Exchange Comm’n v. Power Securities Corp.,
11 142 F.R.D. 321 (D. Co. 1992) ................................17
12
Taylor, Bean & Whitaker Mortgage Corp. v. Triduanum
DOWNEY BRAND LLP
13 Fin., Inc.,
No. 2:09-cv-0954 FCD EFB, 2009 WL 2136986 (E.D. Cal.
14 July 15, 2009) ...........................................9, 10
15 In re Zinnel,
No. 2:12-cv-00249-MCE, 2013 WL 1284339 (E.D. Cal.
16 Mar. 28, 2013) ..............................................12
17 Rules
18
Federal Rule Criminal Procedure 16(b).......................9, 12
19
Federal Rule of Evidence 408...................................15
20
Constitutional Provisions
21
Fifth Amendment............................................passim
22
U.S. Const., Amendment V........................................8
23
Other Authorities
24
Stevenson & Fitzgerald, Federal Prac. Guide: Federal
25
Civil Procedure Before Trial, California & Ninth
26 Circuit Edition (The Rutter Group 2023), § 11:1105 ..........18
27
28
1894610 iii
1 I. INTRODUCTION
2 Defendants are in an untenable position in which they can no
3 longer properly defend this lawsuit absent a stay. On October
4 26, 2023, federal officers executed search and seizure warrants
5 at multiple locations associated with Councilman Sean Loloee,
6 store manager Karla Montoya, SL One Global Inc. (“SL One
7 Global”); SMF Global, Inc. (“SMF Global”); Nari Trading, Inc.
8 (“Nari Trading”), and Uni Foods, Inc. (“Uni Foods”)
9 (collectively, “Defendants”). On their face, the Warrants 1 show
10 that the subject matter of this lawsuit and the subject matter of
11 an ongoing Grand Jury investigation are largely co-extensive.
12 The pendency of these parallel proceedings implicates important

DOWNEY BRAND LLP
13 Fifth Amendment concerns that obstruct Defendants’ ability to
14 adequately defend themselves in this civil suit brought by the
15 Government.2
16 Defendants are cognizant of the secret nature of Grand Jury
17 proceedings, and thus will not divulge the subject matter of the
18 Warrants in this filing, but attach them under seal. As the
19 Court can see, the matters in this civil suit bear directly on,
20
1
The search warrants and their affidavits, bearing case numbers
21 U.S. Dist. Ct. E.D.C.A., Case Nos. 2:23-sw-1071, 2:23-sw-1072,
2:23-sw-1073, 2:23-sw-1074, 2:23-sw-1075 JDP, as well as one
22
bearing no case number (collectively, the “Warrants”) remain
23 under seal.
24 2 For simplicity, Defendants refer to the federal agencies as “the

Government,” whether they are the Department of Labor, Internal
25 Revenue Service, or Department of Homeland Security. While
Defendants recognize these are separate federal agencies,
26 Defendants also recognize they operate under the auspices of
federal authority and may share information. See e.g.
27
<https://www.dol.gov/sites/dolgov/files/WHD/MOU/MOU-WHD-IRS-22-
28 signed.pdf>.
1894610 1
1 and are significantly overlapping with, the subjects of
2 investigation divulged on the face of the Warrants, which pertain
3 to an ongoing Grand Jury investigation (the “Grand Jury
4 Investigation”).
5 This development makes moving forward with civil litigation
6 on substantially related issues problematic. Subjecting
7 Defendants to depositions and written discovery forces them to
8 show their hand, provide their defense, and testify early about
9 subject matters they may face in the Grand Jury Investigation and
10 any ensuing litigation. As this Court and others in the Ninth
11 Circuit have held, a stay is appropriate under these
12 circumstances to protect important Fifth Amendment concerns.

DOWNEY BRAND LLP
13 The Government refuses to voluntarily extend Defendants’
14 time to respond to written discovery or stay the action.
15 Defendants therefore request a limited stay of the Government’s
16 discovery so that Defendants are not obligated to respond to
17 written discovery, be deposed, or produce documents for at least
18 90 days, pending the resolution of the Grand Jury Investigation
19 and any additional proceedings arising therefrom. Alternatively,
20 Defendants request this entire matter be stayed for at least 90
21 days. Defendants also ask the Court to schedule a status
22 conference 90 days from the date of any Order granting this
23 Motion to revisit the stay and assess the status of these
24 matters.
25 II. FACTUAL BACKGROUND
26 A. Sean Loloee’s Candidacy and Precursors to Investigation
27 Defendant Sean Loloee was born in Iran, immigrated to the
28 United States in 1984, and became a citizen the following year.
1894610 2
1 See Request for Judicial Notice (“RJN”), ¶ 1, Ex. A, at ¶ 2. As
2 a first-generation American, Mr. Loloee founded several
3 supermarkets serving underserved communities and “food deserts”
4 in Sacramento and Rancho Cordova. Id., at ¶ 3. The supermarkets
5 are separate legal entities. Id. Mr. Loloee is the sole
6 shareholder of each entity Defendant. Id. Defendant Karla
7 Montoya manages the supermarket on Norwood Avenue in Sacramento.
8 See Dkt. 47, Defendants’ Answer to Plaintiff’s Second Amended
9 Complaint, ¶ 16.
10 The Government began investigating Defendants in
11 approximately February 2020 after Mr. Loloee announced his
12 candidacy for the Sacramento City Council and after a local union
DOWNEY BRAND LLP
13 organizer affiliated with Loloee’s opponent accused him of
14 wrongdoing in the midst of that organizer’s failed effort to
15 unionize the markets. RJN, ¶ 1, Ex. A, at ¶ 4. The organizer
16 later telephoned Loloee and reported to him that “I’ve been
17 talking with Veronica at the Department of Labor; you’re getting
18 investigated; you’d better watch out.” Id.
19 A second investigation quickly followed. The investigator,
20 Michael Ontiveros, stated in deposition under oath that he could
21 not think of another time when a second investigation was
22 instigated within six months of the completion of a first
23 investigation. Declaration of Cassandra M. Ferrannini
24 (“Ferrannini Decl.”) ¶ 13, Ex. J (“Ontiveros Depo.”) at 93:21-
25 95:3. During these investigations, Defendants voluntarily and
26 promptly provided the Government with all of the information it
27 asked for, including employee contact lists and tens of thousands
28 of pages of documents. Mr. Loloee ultimately won the election.
1894610 3
1 RJN, ¶ 1, Ex. A, at ¶¶ 6-8.
2 B. Status of this Action
3 In April 2022, the Department of Labor filed this suit.
4 After the Court ruled in Defendants’ favor on two motions to
5 dismiss, the Government filed a Second Amended Complaint (the
6 operative pleading). Dkt. Nos. 17, 41, and 46. The operative
7 pleading purports to bring wage and hour claims under the Fair
8 Labor Standards Act (“FLSA”) and the Families First Corona Virus
9 Response Act (“FFCRA”). Dkt. 46, Second Amended Complaint
10 (“SAC”), at p. 2.
11 During discovery, Defendants (again) provided approximately
12 74,691 pages of documents to the Government. Ferrannini Decl., ¶

DOWNEY BRAND LLP
13 14. These productions included employee lists, payroll detail
14 reports (showing hours worked by employees), payroll registers
15 (showing wages earned by employees), payroll sign off sheets
16 (verifying employees’ receipt of their paychecks), employee
17 weekly schedules, employee requests for time off, general
18 ledgers, bank statements, and tax documents. Id. In addition to
19 the documents Defendants produced, the Government also received
20 records pursuant to subpoenas to Defendants’ banks, their payroll
21 company, their time clock company, and Western Union Financial
22 Services. Id., at ¶ 15.
23 During the pre-litigation investigations and throughout this
24 litigation, the Government freely contacted Defendants’
25 employees. In February 2023, the Government produced over fifty,
26 “Personal Interview Statements” and “Employee Interview Notes”
27 showing that it contacted many of Defendants’ employees during
28 this period. RJN, ¶ 2, Ex. B at ¶ 4, Ex. C. However, those
1894610 4
1 statements are so heavily redacted as to render them illegible
2 and useless in preparing any defense. Id. It appears that the
3 Government also spoke (freely) with managerial employees, such as
4 Defendant Karla Montoya, about matters far beyond their hours or
5 pay rate (i.e.: beyond their “personal capacity”), and sought
6 information (and possibly admissions) regarding Defendants’
7 operations.3 Id.
8 The Government continues using this information to contact
9 Defendants’ employees by letter and by phone. 4 The letter the
10 Government sent to the employees on December 20, 2022 is grossly
11 inaccurate. RJN ¶ 2, Ex. B at ¶ 11, Ex. J. Though Defendants
12 asked the Government to send the employees who received the

DOWNEY BRAND LLP
13 letter a corrective notice, DOL refuses to send one. Id.
14 In contrast to Defendants’ disclosures, the Government has
15 been less than forthcoming. It provided objections-only
16 responses to Defendants’ interrogatories. It produced documents
17 that are so heavily redacted as to be illegible or
18 incomprehensible. Those documents improperly assert various
19
20
3
Defendant Montoya was not represented by an attorney in 2020, nor
21 did anyone suggest she needed one. English is not her native
language and she communicated with the investigator in Spanish.
22 Despite this, the Government presented her with a statement to
sign that was written in English and which she did not fully
23
understand.
24
4
Dkt. No. 79-5(“Mosqueda Decl.”)¶¶ 2-3; Dkt. No. 79-13
25 (“Villarreal Dec.”)¶ 3; Dkt. No. 79-9 (“Shams Decl.”)¶ 2; Dkt.
No. 79-10 (“Barragan Decl.”)¶ 2; Dkt. No. 79-11 (“Torres Decl.”)¶
26 2; Dkt. No. 79-12 (“Hak Decl.”) ¶¶ 2-3; Dkt. No. 79-4 (“Flores
Decl.”)at Ex. A ¶ 2; Dkt. No. 79-6 (“Lucio Decl.”) at Ex. A ¶ 2;
27
Dkt. No. 79-7 (“Duran Decl.”) at Ex. A ¶¶ 2-3; and Dkt. No. 79-8
28 at Ex. A ¶ 2.
1894610 5
1 privileges to support the redaction. See, e.g., Ferrannini
2 Decl., ¶ 11, Ex. H. The Government also repeatedly refused to
3 answer many substantive questions in deposition. These questions
4 included, inter alia, which employees it claims were harmed, how
5 they were harmed, the evidence that they were harmed, and the
6 foundational facts on which its claim of privilege is based.
7 Ontiveros Depo. at 75:13-78:17; 136:4-25; 141:6-143:23; 145:23-
8 146:10. The Government even takes the untenable position that
9 people who dodged its phone calls and never talked to them are
10 Government “informants,” protected by a privilege. Id., at
11 209:3-210:25. The Government’s witness also admitted to
12 destroying his discoverable notes well after this litigation

DOWNEY BRAND LLP
13 commenced. Id., at 27:4-30:13.
14 C. The Pending Grand Jury Investigation
15 The Warrants seek evidence that was already produced or that
16 is the subject of discovery in the instant case, including
17 employment documents related to scheduling, wages, payments,
18 financial documents, and video camera footage. Ferrannini Decl.,
19 ¶¶ 7 and 9, Exs. A and C-E.
20 During the execution of the Warrants, federal agents
21 questioned employees at the Defendant companies about matters
22 directly before the court in the instant case, including
23 employment issues such as hiring, payment, and scheduling.
24 Ferrannini Decl., ¶ 5. They did so outside the presence of
25 Defendants’ counsel. Id. Upon arrival at the corporate
26 locations of the search warrant executions, Defendants’ attorneys
27 identified themselves as corporate counsel, and in some
28 instances, provided their business cards. Ferrannini Decl., ¶ 4;
1894610 6
1 Declaration of Tyson E. Hubbard (“Hubbard Decl.”), ¶¶ 3-4. They
2 requested but were denied access to their client companies. Id.
3 They were not permitted to speak with employees inside. Id.
4 They asked to review the Warrants, but several were not permitted
5 to do so. Id.
6 Items and information seized included material relevant to
7 the defense of this lawsuit, including attorney-client privileged
8 communications and attorney work product pertaining to this suit,
9 employee files, calendars, time sheet reports, wage statements,
10 payroll documents, and employment applications. Ferrannini
11 Decl., ¶¶ 8 and 10, Exs. B and F-G. At some locations the point
12 of sale system was also taken. Hubbard Decl., ¶ 5.

DOWNEY BRAND LLP
13 Following the execution of the Warrants, the Government
14 twice indicated it would not stipulate to a stay in this matter.
15 Ferrannini Decl., ¶¶ 16-17, Exs. K-L. It also refused
16 Defendants’ request for an extension of time to respond to
17 written discovery. Id., at ¶ 18, Ex. M. The discovery cut-off
18 is April 26, 2024. Dkt. No. 73. The non-discovery motion
19 deadline is June 7, 2024. Id. Trial is set for November 13,
20 2024. Id.
21 III. LEGAL ANALYSIS
22 The Government seeks discovery in this case about the same
23 issues being addressed in the Grand Jury Investigation. In such
24 circumstances Defendants are entitled to a stay to avoid
25 responding to allegations they may face in the ongoing Grand Jury
26 Investigation, resulting litigation, or which may reveal
27 strategies, theories, or defenses. And, in cases like this one,
28 where the Government has undertaken years of pre-lawsuit
1894610 7
1 investigation and discovery, but refuses to comply with its own
2 discovery obligations, a more narrow stay pertaining only to
3 Defendants’ responses is appropriate.
4 A. Fifth Amendment Concerns Dictate A Stay.
5 Federal courts have the authority to stay civil matters in
6 the interest of justice where parallel grand jury investigations
7 or criminal proceedings are ongoing. The Court should issue such
8 a stay here.
9 1. Civil Suits May Be Stayed In the Interest of

Justice And To Protect The Fifth Amendment Rights
10 Of A Civil Litigant.
11 The Fifth Amendment guarantees a person a right to not
12 testify to any information that may incriminate him or her. U.S.

DOWNEY BRAND LLP
13 Const., Amendment V. In the civil context, the Fifth Amendment
14 protects parties from discovery that may require self-
15 incrimination. Campbell v. Gerrans, 592 F.2d 1054, 1057 (9th
16 Cir. 1979); Hoffman v. U.S., 341 U.S. 479, 488 (1951) (To find
17 that a Fifth Amendment issue does not exist, courts must
18 determine that it is “perfectly clear, from a careful
19 consideration of all the circumstances in the case . . . that the
20 answer(s) cannot possibly have such tendency to incriminate)”; In
21 re Master Key Litigation, 507 F.2d 292, 294 (Fifth Amendment
22 implicated even if testimony “could possibly” incriminate the
23 defendant); In re Master Key Litigation, supra, 507 F.2d at 293
24 (Fifth Amendment issue arises even where there is a mere
25 “possibility” and not “likelihood” of criminal prosecution). 5
26
It bears noting that, while business entities do not have Fifth
5
27
Amendment rights, courts recognize that Fifth Amendment rights of
28 directors, officers, and owners of an entity may still be
1894610 8
1 Trial courts may, for purposes of efficiency and fairness,
2 stay actions “pending resolution of independent proceedings which
3 bear upon the case.” Mediterranean Enterprises, Inc. v.
4 Ssangyong Corp., 708 F.2d 1458, 1465 (9th Cir. 1995). As the
5 Ninth Circuit has held, district courts have the discretion to
6 stay an action pending conclusion of any related criminal
7 proceedings to protect a civil litigant’s Fifth Amendment right
8 against self-incrimination, “when the interests of justice seem
9 to require such action.” Keating v. Office of Thrift
10 Supervision, 45 F.3d 322, 324 (9th Cir. 1995). And, as this
11 Court itself has observed, the need for such a stay during
12 ongoing parallel civil and grand jury investigations is

DOWNEY BRAND LLP
13 compelling: A parallel civil proceeding “might undermine the
14 party’s Fifth Amendment privilege against self-incrimination,”
15 expand rights of discovery beyond the limits of Fed. R. Crim.
16 Proc. 16(b), “expose the basis of the defense to the prosecution
17 in advance of criminal trial, or otherwise prejudice the case.”
18 Taylor, Bean & Whitaker Mortgage Corp. v. Triduanum Fin., Inc.,
19 No. 2:09-cv-0954 FCD EFB, 2009 WL 2136986, at *2 (E.D. Cal. July
20 15, 2009)6. In addition to these important Fifth Amendment
21
implicated. Consumer Fin. Prot. Bureau, supra, 2016 WL 2868698,
22
at *3. Where a business entity’s key witnesses would not be able
23 to testify on behalf of that entity based on their own Fifth
Amendment rights, a stay may be granted to ensure a business
24 entity’s right to defend itself is not unfairly prejudiced. Id.
Here, Mr. Loloee’s Fifth Amendment rights are implicated as he
25 would be considered a key witness for each entity Defendant. Ms.
Montoya would be a key witness in any proceeding involving
26 Defendant SL One Global.
27
The existence of a grand jury investigation (absent an
6
28 indictment) is sufficient basis for a stay. General Elec. Co. v.
1894610 9
1 implications, this Court has also specifically cited other
2 concerns about parallel litigation, including the creation of
3 unnecessary complexities regarding discovery, exposure of
4 defendants’ strategy and theories with respect to a criminal
5 case, and prejudice toward any such proceedings. Id.
6 2. A Stay Is Required To Protect All Defendants.
7 The face of the Warrants shows that the Government’s civil
8 proceeding and Grand Jury Investigation appear largely co-
9 extensive or to spring from the same “nucleus of facts,” which
10 implicates Sean Loloee and Karla Montoya’s Fifth Amendment
11 rights. See, e.g., Continental Ins. Co. v. Cota, No. No. 07-5800
12 SC, 2008 WL 4298372, at * 2 (N.D. Cal. Sept. 19, 2008)

DOWNEY BRAND LLP
13 (considering whether criminal and civil actions “spring from the
14 same nucleus of facts” in granting a stay of proceedings). Both
15 proceedings encompass alleged labor violations and employment
16 issues. Ferrannini Decl., ¶¶ 7-10, Exs. A-G.
17 The Warrants expressly seek evidence pertaining to similar
18 alleged violations and were executed at all of Defendants’
19 locations, including the corporate headquarters. Id.
20 Accordingly, if discovery moves forward, Mr. Loloee and Ms.
21
Liang, No. CV 13-08670 DDP (VBKx), 2014 WL 1089264, at * 3 (C.D.
22 Cal. Mar. 19, 2014) (indictment not required for a stay); see
23 also Taylor, Bean & Whitaker Mortgage Corp., supra, 2009 WL

2136986, at *3 (staying civil lawsuit without indictment,
24 observing that “[t]he mere possibility of criminal prosecution is
all that is necessary for the Fifth Amendment privilege against
25 self-incrimination to be invoked”).) See also Consumer Fin.
Prot. Bureau v. Global Fin. Support, Inc., No. 15-CV-02440-GPC-
26 WVG, 2016 WL 2868698, at *3 (S.D. Cal. May 17, 2016) (granting
120-day stay in the absence of criminal charges, given evidence
27
of a current, ongoing law enforcement investigation by the IRS
28 and FBI”).
1894610 10
1 Montoya “will be faced with the difficult choice between
2 asserting [their] right against self-incrimination, thereby
3 inviting prejudice in the civil case, or waiving those rights,
4 thereby courting liability in the civil case.” Johnson v.
5 Castillo, No. 1:22-cv-00637-BAM (PC), 2023 WL 1785481, *2 (E.D.
6 Cal. Jan. 18, 2023) (quoting Jones v. Conte, No. C045312S1, 2005
7 WL 1287017, at *1 (N.D. Cal. April 19, 2005)).
8 While corporations do not enjoy Fifth Amendment rights per
9 se, any stay of Defendants’ discovery must also extend to the
10 corporate Defendants, because Mr. Loloee and Ms. Montoya’s Fifth
11 Amendment rights are implicated. See Consumer Fin. Prot. Bureau
12 v. Global Financial Support, Inc., No. 15-cv-02440-GPC-WVG, 2016

DOWNEY BRAND LLP
13 WL 2868698, at *3 (granting a stay where the Fifth Amendment
14 rights of key corporate witnesses were implicated, thus
15 prejudicing the corporation in defending itself in the civil
16 matter); citing Cadence Design Sys. v. Avant!, Inc., No. C 95–
17 20828, 1997 U.S. Dist. LEXIS 24147 (N.D. Cal. July 22, 1997)
18 (holding that a partial stay was appropriate in a civil
19 proceeding against a corporate defendant where certain key
20 witnesses would be able to testify on behalf of the corporation
21 until the conclusion of criminal proceedings).
22 As the sole and managing shareholder for each Defendant, Mr.
23 Loloee is the key witness for them. RJN, ¶ 1, Ex. A at ¶ 1.
24 Because the corporate entities cannot testify unless Mr. Loloee
25 testifies on their behalf, the ongoing Grand Jury Investigation
26 implicates their Fifth Amendment rights. Thus, the stay should
27 extend to each of the Defendant entities.
28 This Court has previously observed that dual-tracked civil
1894610 11
1 and criminal proceedings involving the same defendants threaten
2 to “unfairly expand the scope of criminal discovery beyond the
3 limits of Federal Rule of Criminal Procedure 16(b).” In re
4 Zinnel, No. 2:12-cv-00249-MCE, 2013 WL 1284339, at *5 (E.D. Cal.
5 Mar. 28, 2013). This civil suit would afford the Government the
6 unfair advantage of forcing Defendants to disclose their
7 strategy, put their own Fifth Amendment rights on hold, and
8 provide discovery the Government would never be permitted to
9 obtain if a grand jury investigation existed alone. Cf. Mattel,
10 Inc. v. MGA Ent., Inc., No. CV 04-9049 DOC RNBX, 2010 WL 3705782,
11 at *9 (C.D. Cal. Aug. 3, 2010) (“It is undoubtedly true that a
12 court may issue a protective order against civil discovery sought

DOWNEY BRAND LLP
13 for the purpose of circumventing restrictions on discovery in
14 criminal cases.”).
15 B. Additional Relevant Factors Also Merit A Stay.
16 The Ninth Circuit counsels that, in addition to considering
17 the extent to which a defendant’s Fifth Amendment right is
18 implicated, district courts considering a stay also should also
19 weigh other factors, including: “(1) the interest of the
20 plaintiffs in proceeding expeditiously with th[e] litigation or
21 any particular aspect of it, and the potential prejudice to
22 plaintiffs of a delay; (2) the burden which any particular aspect
23 of the proceedings may impose on defendants; (3) the convenience
24 of the court in the management of its cases, and the efficient
25 use of judicial resources; (4) the interests of persons not
26 parties to the civil litigation; and (5) the interest of the
27 public in the pending civil and criminal litigation.” Fed. Sav.
28 & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902-903 (9th Cir.
1894610 12
1 1989). These considerations also support a limited stay of the
2 civil proceedings amidst the Government’s ongoing Grand Jury
3 investigation.
4 1. A Stay Will Not Prejudice the Government.
5 A stay of Defendant’s discovery obligations would not
6 prejudice the Government in the least. The Government began
7 gathering information during pre-litigation investigations as
8 early as February 2020. RJN, ¶ 1, Ex. A at ¶ 6. Defendants
9 provided further significant discovery in the litigation.
10 Ferrannini Decl., ¶ 14. And, the Government has helped itself to
11 information far beyond its normal discovery rights through the
12 execution of the Warrants. Id., at ¶¶ 7-10 at Exs. A-G.

DOWNEY BRAND LLP
13 At the same time, the Government produced little to no
14 useable discovery in this matter and remains deficient in its
15 discovery obligations. It engaged in inappropriate legal tactics
16 serving objection-only responses to interrogatories. See Marti
17 v. Barnes, 2012 WL 2029720 (E.D. Cal. 2012) (providing objection-
18 only responses is a “litigation tactic [that] is not tolerable”
19 and threatening sanctions), quoting Mitchell v. Felker, 2010 WL
20 3835765 (granting motion to compel where, among other things,
21 “responses consisted entirely of objections.”) It produced
22 heavily redacted documents, without anything more than a five-
23 page privilege log. Those redactions were so extensive as to
24 render the discovery essentially illegible. See, e.g.,
25 Ferrannini Decl., ¶ 11, Ex. H. The Government’s witnesses have
26 refused to answer basic, relevant questions in deposition and
27 admitted to destroying discoverable notes. See, e.g., Ontiveros
28 Depo. at 28:6-30:9 and 239:7-24. Staying the Government’s
1894610 13
1 discovery while allowing Defendants to obtain the discovery to
2 which they have long been entitled, allows Defendants to protect
3 their rights in this action, while enabling this matter to move
4 efficiently toward trial.
5 Nor would staying the Government’s discovery risk loss of
6 any evidence, especially since the Government has already
7 collected the evidence it would otherwise use in this suit. See
8 Johnson, supra, 2023 WL 1785481, at *2 (granting stay, finding
9 “[a]ny prejudice to Plaintiff is minimal given that both
10 proceedings involve the similar facts and witnesses, and it is
11 unlikely that evidence will be lost or memories will fade with
12 passage of time”). The Government — which by now must possess

DOWNEY BRAND LLP
13 any discovery it could ever desire — would not be prejudiced in
14 any way by the requested stay of Defendants’ discovery
15 obligations.
16 2. Defendants Will Suffer Prejudice Absent A Stay.
17 This Court has recognized that Defendants in this situation
18 are placed in an untenable position. See Four In One Co., No.
19 CIV S-08-3017 MCE EFB, 2010 WL 4718751, at *5 (E.D. Cal. Nov. 12,
20 2010) (continuing discovery causes defendant to “be faced with
21 the difficult choice between asserting his right against self-
22 incrimination, thereby inviting prejudice in the civil case, or
23 waiving those rights, thereby courting liability in the civil
24 case”) (internal citation and quotations omitted). Continuing
25 this civil litigation, which appears to be substantially related
26 to an ongoing Grand Jury investigation, raises substantial Fifth
27 Amendment concerns and deeply prejudices Defendants in both
28 matters. Defendants would be subjected to depositions and
1894610 14
1 written discovery in this lawsuit that would effectively force
2 Defendants to show their hand, provide their defense, and testify
3 early to the same or similar allegations that may be the subject
4 of the Grand Jury Investigation. 7
5 3. A Stay Is the Most Efficient Use of Court

Resources.
6
7 Because the civil suit and grand jury investigation appear
8 co-extensive, a stay “could prevent the unnecessary expenditure
9 of resources.” Sanchez, No. 1:19-cv-00354-ADA-HBK, 2023 WL
10 3310051, at * 1 (E.D. Cal. April 12, 2023.) Absent a stay,
11 discovery and motion practice in this matter will likely increase
12 due to Fifth Amendment concerns. For example, the Government is

DOWNEY BRAND LLP
13 already demanding discovery that Defendants are not able to
14 provide while the Grand Jury Investigation is pending. And, the
15 Government refuses to provide extensions of time to respond to
16 that discovery. Ferrannini Decl., ¶ 18. This circumstance is
17 likely to lead to law and motion practice that would otherwise
18 not be necessary.
19 4. The Interests of Non-Parties and Public Favor a

Stay.
20
21 The public has an interest in receiving accurate information
22 regarding ongoing federal litigation and in preserving an
23 unbiased jury pool. As this civil matter proceeds concurrently
24 with a Grand Jury Investigation, media outlets already have begun
25
7 The existence of a grand jury investigation may also chill
26 settlement negotiations in this civil case under Federal Rule of
Evidence 408. A stay in this lawsuit is therefore warranted to
27
allow the investigation to further develop and not prejudice any
28 possible settlement negotiations between the parties.
1894610 15
1 reporting on the two matters together, in some instances
2 confusing and conflating them.
3 This confusion of the two in the press threatens the
4 veracity of information available to the public, and has a real
5 potential to prejudice Defendants in any future litigation or
6 trial, civil or otherwise. For example, in an October 31, 2023
7 article in the Sacramento Bee, that news outlet cited a court
8 filing regarding a discovery dispute by the Department of Labor
9 suggesting that Mr. Loloee “missed” a deadline to provide
10 “additional documents.” Ferrannini Decl., ¶ 12, Ex. I. The
11 paper further reported that a “raid occurred about five days
12 after that missed deadline.” Id. No such discovery deadline

DOWNEY BRAND LLP
13 existed in this litigation, and even if it had, discovery
14 disputes are not solved by a search warrant.
15 Conflating ordinary discovery disputes in civil litigation
16 with the subject matter of a grand jury investigation, serve to
17 confuse, rather than inform, the public. Such misinformation
18 also threatens to prejudice any future jury pool against
19 Defendants. Staying Defendants’ discovery obligations so that
20 they no longer provide fodder for mischaracterization and
21 speculation serves these interest of the public and weighs in
22 favor of staying the litigation.
23 C. Defendants’ Discovery Should Be Stayed, And In The

Alternative, the Court Should Stay This Suit Entirely For At
24 Least 90 Days.
25 1. Defendants’ Discovery Obligations Should be

Stayed.
26
27 Defendants ask that any obligation to respond to discovery
28 be stayed for 90 days, a request that is limited, specific and
1894610 16
1 wholly reasonable.
2 There is precedent for staying a defendant’s discovery
3 obligations without staying the entire civil suit. For example,
4 in S.E.C. v. Schroeder, during an ongoing grand jury
5 investigation, but absent any indictment, the court granted a
6 motion (styled as a protective order) to postpone the defendant’s
7 deposition by four months. S.E.C. v. Schroeder, No.
8 C0703798JWHRL, 2008 WL 152227, at *1 (N.D. Cal. Jan. 15, 2008).
9 There, the U.S. Attorney’s office had merely advised that the
10 Defendant was a “possible target of the investigation.” Id.; see
11 also Securities & Exchange Comm’n v. Power Securities Corp., 142
12 F.R.D. 321, 323 (D. Co. 1992) (granting defendant’s request to

DOWNEY BRAND LLP
13 postpone deposition until after time when grand jury reached a
14 decision on indictments). Here, however, Defendants have already
15 been subjected to Search and Seizure Warrants targeted at the
16 same evidence the Government asked for in discovery. Defendants’
17 request is therefore particularly reasonable in this instance.
18 2. Alternatively, This Suit Should Be Stayed for 90 Days.
19 In the alternative, if the court is not inclined to stay
20 discovery of Defendants alone, it should stay this entire action
21 for at least 90 days.
22 Such limited stays are regularly granted when no indictment
23 exists, including here in the Eastern District of California. As
24 mentioned above, in Consumer Fin. Prot. Bureau, the Court stayed
25 a civil lawsuit for 120 days in the absence of any indictment,
26 with an ongoing grand jury investigation, in which search
27 warrants had been executed. Consumer Fin. Prot. Bureau, 2016 WL
28 2868698, at *3. Likewise, in Commodity Futures Trading Comm’n v.
1894610 17
1 Fin. Tree, this Court imposed a stay of the deadline to file a
2 responsive pleading and all discovery for 90 days, even though no
3 indictment had issued and defendants were merely “targets of an
4 ongoing criminal investigation.” Commodity Futures Trading
5 Comm’n v. Fin. Tree, No. 2:20-CV-01184-TLN-AC, 2020 WL 6286329,
6 at *4 (E.D. Cal. Oct. 27, 2020).
7 Defendants’ limited request for relief pending the Grand
8 Jury Investigation is therefore especially warranted. See also
9 Stevenson & Fitzgerald, Federal Prac. Guide: Federal Civil
10 Procedure Before Trial, California & Ninth Circuit Edition (The
11 Rutter Group 2023), § 11:1105 (“Where a party asserts the Fifth
12 Amendment privilege in response to discovery requests and

DOWNEY BRAND LLP
13 criminal prosecution is pending or possible, courts may grant a
14 total or partial stay of discovery in order to allow the criminal
15 prosecution to be resolved”).
16 IV. CONCLUSION
17 A stay is appropriate to ensure that Defendants are not
18 prejudiced in this lawsuit, the ongoing Grand Jury Investigation,
19 or any resulting proceeding. Balancing the relevant factors, a
20 limited stay of Defendants’ need to respond to written discovery,
21 be deposed, or to produce documents for 90 days is appropriate.
22 In the alternative, this matter should be stayed in its entirety
23 for 90 days. Defendants further request that the Court schedule
24 a Status Conference 90 days from now to revisit the stay and
25 assess the status of the Grand Jury proceedings.
26 / / /
27 / / /
28 / / /
1894610 18
1 DATED: November 22, 2023 DOWNEY BRAND LLP
3 By: /s/ Cassandra M. Ferrannini

4 CASSANDRA M. FERRANNINI
Attorneys for Defendants
5 SL ONE GLOBAL, INC.; SMF GLOBAL,
INC.; NARI TRADING, INC.; UNI
6 FOODS, INC.; SEAN LOLOEE; and
KARLA MONTOYA
7
10
11
12
DOWNEY BRAND LLP
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1894610 19

Loloee Motion To Stay Proceedings

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Loloee Motion To Stay Proceedings

Uploaded by

Copyright:

Available Formats

Case 2:22-cv-00583-WBS-DB Document 96-1 Filed 11/22/23 Page 1 of 23

1 DOWNEY BRAND LLP

7 Attorneys for Defendants

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STAY

4 II. FACTUAL BACKGROUND .....................................................................................................2

5 A. Sean Loloee’s Candidacy and Precursors to

2. A Stay Is Required To Protect All Defendants. ..........10

17 3. A Stay Is the Most Efficient Use of Court

20 C. Defendants’ Discovery Should Be Stayed, And In The

22 1. Defendants’ Discovery Obligations Should be

25 IV. CONCLUSION ......................................................................................................................18

13 Continental Ins. Co. v. Cota,

19 General Elec. Co. v. Liang,

25 Keating v. Office of Thrift Supervision,

3 In re Master Key Litigation,

7 No. C0703798JWHRL, 2008 WL 152227 (N.D. Cal. Jan. 15,

2 Defendants are in an untenable position in which they can no

3 longer properly defend this lawsuit absent a stay. On October

4 26, 2023, federal officers executed search and seizure warrants

5 at multiple locations associated with Councilman Sean Loloee,

6 store manager Karla Montoya, SL One Global Inc. (“SL One

7 Global”); SMF Global, Inc. (“SMF Global”); Nari Trading, Inc.

8 (“Nari Trading”), and Uni Foods, Inc. (“Uni Foods”)

9 (collectively, “Defendants”). On their face, the Warrants 1 show

11 an ongoing Grand Jury investigation are largely co-extensive.

12 The pendency of these parallel proceedings implicates important

13 Fifth Amendment concerns that obstruct Defendants’ ability to

14 adequately defend themselves in this civil suit brought by the

16 Defendants are cognizant of the secret nature of Grand Jury

18 Warrants in this filing, but attach them under seal. As the

24 2 For simplicity, Defendants refer to the federal agencies as “the

1 and are significantly overlapping with, the subjects of

2 investigation divulged on the face of the Warrants, which pertain

3 to an ongoing Grand Jury investigation (the “Grand Jury

5 This development makes moving forward with civil litigation

6 on substantially related issues problematic. Subjecting

7 Defendants to depositions and written discovery forces them to

10 any ensuing litigation. As this Court and others in the Ninth

11 Circuit have held, a stay is appropriate under these

12 circumstances to protect important Fifth Amendment concerns.

13 The Government refuses to voluntarily extend Defendants’

14 time to respond to written discovery or stay the action.

15 Defendants therefore request a limited stay of the Government’s

16 discovery so that Defendants are not obligated to respond to

17 written discovery, be deposed, or produce documents for at least

18 90 days, pending the resolution of the Grand Jury Investigation

19 and any additional proceedings arising therefrom. Alternatively,

20 Defendants request this entire matter be stayed for at least 90

21 days. Defendants also ask the Court to schedule a status

22 conference 90 days from the date of any Order granting this

23 Motion to revisit the stay and assess the status of these

25 II. FACTUAL BACKGROUND

26 A. Sean Loloee’s Candidacy and Precursors to Investigation

27 Defendant Sean Loloee was born in Iran, immigrated to the

28 United States in 1984, and became a citizen the following year.

1 See Request for Judicial Notice (“RJN”), ¶ 1, Ex. A, at ¶ 2. As

2 a first-generation American, Mr. Loloee founded several

3 supermarkets serving underserved communities and “food deserts”

4 in Sacramento and Rancho Cordova. Id., at ¶ 3. The supermarkets

5 are separate legal entities. Id. Mr. Loloee is the sole

6 shareholder of each entity Defendant. Id. Defendant Karla

7 Montoya manages the supermarket on Norwood Avenue in Sacramento.

8 See Dkt. 47, Defendants’ Answer to Plaintiff’s Second Amended