Ignite International Limited v. Higher Connection LLC et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Ignite International Limited,
Plaintiff,
v.
Higher Connection LLC, et al.,
Defendants.
No. CV-21-02184-PHX-MTL
ORDER
Once described as a “simple accounting dispute,” this action has been anything but
simple. With a winding procedural history, this case has been up to the Ninth Circuit Court
of Appeals and is now back before this Court on remand of the single remaining claim of
piercing the corporate veil brought by Plaintiff Ignite International Limited (“Ignite”)
against Defendants Zachariah Gleason and Mirza Baig (collectively, “Defendants”).
Ignite requested—and the Court granted—a limited reopening of discovery for
Ignite to take Defendants’ depositions based on the current record. (See Doc. 140 at 1.)
Because Defendants disclosed to the Court that these depositions could stray into topics at
issue in a criminal proceeding in the Central District of California, the Court ordered the
parties to meet and confer and submit a joint report “addressing the parameters for the
depositions . . . [and] whether and to what extent judicial supervision of Defendants’
depositions [was] needed.” (Id.) The parties thereafter agreed that “[n]either party [would]
be permitted to question [Defendants] regarding any pending criminal matters involving
[Defendants], Ignite, and/or Ignite’s owners, representatives, or managers.” (Doc. 141 at
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2.)
Then, one week before Defendants’ depositions were scheduled to take place, the
United States filed a motion to intervene in this action, requesting that the Court stay these
proceedings in light of the pending criminal proceedings. (Doc. 149.) At a status
conference concerning the government’s motion, the Court imposed a protective order
precluding Defendants’ depositions until further order of the Court and set a hearing on the
government’s motion. (See Doc. 154.)
The government’s motion is now fully briefed. Ignite opposes the government’s
motion, and Defendants have filed a notice of non-opposition. (See Docs. 151, 155.) For
the following reasons, the Court will grant the government’s motion to intervene and will
grant its request to stay proceedings.
I.
Although Ignite initially did not oppose the government’s intervention (Doc. 149 at
2), it has since challenged whether the government is entitled to or may intervene (see Doc.
155 at 5-7). The Court need not address whether the government is entitled to intervene as
a matter of right pursuant to Federal Rule of Civil Procedure 24(a), because the Court will
in its discretion permit the government to intervene pursuant to Rule 24(b).
Rule 24(b) provides courts with discretionary authority to permit intervention to
anyone who, in relevant part, “has a claim or defense that shares with the main action a
common question of law or fact.” Fed. R. Civ. P. 24(b)(1). “[A] district court has discretion
to permit intervention when the movant presents (1) an independent ground for jurisdiction;
(2) a timely motion; and (3) a common question of law and fact between the movant’s
claim or defense and the main action.” Callahan v. Brookdale Senior Living Cmtys., Inc.,
42 F.4th 1013, 1022 (9th Cir. 2022) (quotation marks omitted). If these requirements are
met, courts may consider other factors including
the nature and extent of the intervenors’ interest, their standing to raise
relevant legal issues, the legal position they seek to advance, . . . its probable
relation to the merits of the case[,] . . . whether the intervenors’ interests are
adequately represented by other parties, whether intervention will prolong or
unduly delay the litigation, and whether parties seeking intervention will
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significantly contribute to full development of the underlying factual issues
in the suit and to the just and equitable adjudication of the legal questions
presented.
Id. (citation omitted). “The district court’s discretion under Rule 24(b), to grant or deny an
application for permissive intervention includes discretion to limit intervention to
particular issues.” Dep’t of Fair Emp. & Hous. v. Lucent Techs., Inc., 642 F.3d 728, 741
(9th Cir. 2011) (citation modified).
The Court begins with the understanding that “[i]t is well established that the United
States Attorney may intervene in a federal civil action to seek a stay of discovery when
there is a parallel criminal proceeding, which is anticipated or already underway that
involves common questions of law or fact.” Bureerong v. Uvawas, 167 F.R.D. 83, 86 (C.D.
Cal. 1996) (citation omitted); see also SEC v. FAT Brands Inc., No.
2:24-cv-03913-MCS-AGR, 2024 WL 5319127, at *3 (C.D. Cal. Dec. 13, 2024) (collecting
cases); S.E.C. v. Nicholas, 569 F. Supp. 2d 1065, 1068 (C.D. Cal. 2008) (“[N]umerous
courts have allowed the United States government to intervene in a civil case for the
purpose of moving to stay discovery and other proceedings until the resolution of a related
criminal case.”); Twenty First Century Corp. v. LaBianca, 801 F. Supp. 1007, 1009
(E.D.N.Y. 1992) (“As a rule, district courts in this Circuit have allowed the government to
intervene in civil actions—especially when the government wishes [to] do so for the limited
purpose of moving to stay discovery.”). This is because the government has “a discernible
interest in intervening in order to prevent discovery in the civil case from being used to
circumvent the more limited scope of discovery in the criminal matter.” S.E.C. v.
Chestman, 861 F.2d 49, 50 (2d Cir. 1988) (per curiam). The factors required for Rule 24(b)
have also been satisfied, so the Court will grant the government’s motion to intervene.
A.
The Ninth Circuit has held that “an independent jurisdictional basis is not required
[if] intervenors do not seek to litigate a claim on the merits” or “rule on additional claims
or seek to become parties to the action,” but instead to “ask the court only to exercise that
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power which it already has.” Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 473 (9th
Cir. 1992). Here, the government does not seek to become a party to this action or to litigate
any claim on the merits, but instead to request the Court to exercise the power it already
maintains to stay proceedings. (See Doc. 149 at 9-15); O’Connell v. Smith, No.
CV-13-01905-MWF (PJWx), 2014 WL 12773900, at *2 (C.D. Cal. Aug. 18, 2014) (“[T]he
D.A.’s Office does not seek to become parties to or bring additional claims in this case, but
only asks this Court to stay discovery into the pending criminal investigation. The Court’s
power to stay discovery is power it inherently has. Therefore, no independent jurisdictional
basis is required for the D.A.’s Office to intervene.” (citation omitted)).
Courts in this Circuit have held that the requirement for an independent ground for
jurisdiction is either satisfied by the government’s presence as the movant or is not required
due to the limited nature of the government’s purpose for intervening to stay civil
proceedings pending resolution of criminal proceedings. Compare Bureerong, 167 F.R.D.
at 86 n.6 (“[T]he United States government obviously has an independent jurisdictional
ground for intervention.” (citing 28 U.S.C. § 1345)), with SEC v. Dickerson, No.
2:24-cv-02379-JAM-SCR, 2024 WL 4712358, at *2 (E.D. Cal. Nov. 7, 2024) (citing
§ 1345 but also reasoning that “no independent jurisdictional grounds are required because
the United States does not seek to litigate any claim in the . . . Civil Case on the merits but
rather seeks intervention for a limited purpose of moving for a stay pending resolution in
the Criminal Case”). The government has therefore either satisfied this requirement or
satisfaction of this requirement is unnecessary.
B.
In the Ninth Circuit, “timeliness for an intervention motion is generally governed
by three factors: (1) the stage of the proceeding at which an applicant seeks to intervene;
(2) the prejudice to other parties; and (3) the reason for and length of the delay.” Brown v.
Google LLC, 172 F.4th 1128, 1133 (9th Cir. 2026) (quotation marks omitted). Each of
these factors is assessed “by reference to the crucial date when proposed intervenors should
have been aware that their interests would not be adequately protected by the existing
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parties.” Id. (citation omitted). The requirement that a proposed intervenor’s motion be
timely “seeks to prevent a tardy intervenor from derailing a lawsuit within sight of the
terminal.” Id. (quotation marks omitted). Courts thus “do not require hasty intervention.”
Kalbers v. U.S. Dep’t of Just., 22 F.4th 816, 823 (9th Cir. 2021). The most important factor
is prejudice to the other parties. Brown, 172 F.4th at 1134. Ultimately, though, “timeliness
is to be determined from all the circumstances, and the point to which a suit has progressed
is not solely dispositive.” Cameron v. EMW Women’s Surgical Ctr., P.S.C., 595 U.S. 267,
279 (2022) (citation modified).
1.
Courts “apply a nuanced, pragmatic approach to determine whether the intervention
occurred at an appropriate stage of the case.” Brown, 172 F.4th at 1138 (quotation marks
omitted). “In this inquiry, substance prevails over form: Neither the formal stage of the
litigation . . . nor the length of time that has passed since a suit was filed is dispositive.”
Kalbers, 22 F.4th at 826 (quotation marks omitted). “[T]he mere lapse of time, without
more, is not necessarily a bar to intervention.” W. Watersheds Project v. Haaland, 22 F.4th
828, 836 (9th Cir. 2022) (citation omitted). “This is especially true where . . . a change of
circumstances occurs, and that change is the major reason for the motion to intervene.”
Kalbers, 22 F.4th at 827 (quotation marks omitted). In such instances, “the stage of
proceedings factor should be analyzed by reference to the change in circumstances, and
not the commencement of the litigation.” Smith v. L.A. Unified Sch. Dist., 830 F.3d 843,
854 (9th Cir. 2016).
Ignite argues that the government’s motion is untimely because it “comes after
almost five (5) years of litigation, a stipulated judgment, a Ninth Circuit reversal and
remand, and a court-ordered reopening of discovery with agreed-upon deposition
parameters.” (Doc. 155 at 6-7.) Ignite correctly summarizes the procedural history, but that
alone is not dispositive as to whether the motion is timely. See W. Watersheds, 22 F.4th at
836; Kalbers, 22 F.4th at 826. Rather, it is the last listed development—the reopening of
discovery to take Defendants’ depositions—that constitutes the “change of circumstances”
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prompting the government’s request to intervene, so the Court assesses whether the
government timely moved from that point. Kalbers, 22 F.4th at 827. That the government
is not seeking to undo all the previous litigation, but instead to stay proceedings of what
remains, weighs in favor of finding the government’s motion timely. See Smith, 830 F.3d
at 856-57 (finding this factor weighed in favor of intervention where the movants were
“not seeking to reopen decades of litigation”).
2.
Prejudice “flows from a prospective intervenor’s failure to intervene after he knew,
or reasonably should have known, that his interests were not being adequately
represented—and not from the fact that including another party in the case might make
resolution more difficult.” Brown, 172 F.4th at 1134 (citation omitted). In other words, any
finding of prejudice must be tethered to the “prejudice which was caused by [the movant’s]
delay.” Smith, 830 F.3d at 857-58. “[A] party is put on notice when its interests might be
adversely affected by the outcome of the litigation.” Brown, 172 F.4th at 1135 (quotation
marks omitted). “[E]very motion to intervene will complicate or delay a case to some
degree” but this “is not a sufficient reason to deny intervention.” Kalbers, 22 F.4th at 825.
Ignite argues that it will be prejudiced because it has “waited years for resolution of
its veil-piercing claim, and the parties [had] agreed to a narrow discovery window that was
to close on April 21, 2026.” (Doc. 155 at 7.) So, “[i]ntervention and a stay would eliminate
that timeline and subject Ignite to indefinite delay pending a criminal case in another
jurisdiction.” (Id.) Ignite also argues that the “criminal matter has been pending since
2024,” yet the government waited “until mere days before the scheduled depositions” to
file its motion. (Id.)
The Court finds that Ignite would not be prejudiced by the government’s delay in
moving to intervene. First, that the criminal matter has been pending since 2024 is
irrelevant because the government would not have known that its interests were not being
adequately represented in 2024 with regard to sworn statements being taken of likely
government witnesses concerning matters overlapping with the criminal proceedings. Fact
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discovery closed in this action in November 2022, Defendants’ motion for summary
judgment was filed in May 2023, and the Court granted Defendants’ motion for summary
judgment in December 2023. (Docs. 31, 56, 67.) Later, in June 2024, the remaining parties
filed—and the Court granted—a stipulated judgment, in which the Court’s order granting
summary judgment to Defendants was deemed final. (Docs. 81, 82.) This action has been
on appeal and in post-judgment proceedings since then. (See, e.g., Docs. 83, 97, 109, 110,
113, 116.) A Grand Jury returned the indictment in the criminal case in September 2024
(Doc. 159-1 at 1), long after Defendants were dismissed from the action as individual
parties. As discussed above, the relevant time period from which the Court will assess
timeliness and prejudice is, at earliest, from when the Court reopened discovery on
February 18, 2026. (Doc. 140.)
Second, Ignite was not prejudiced by the delay from when the Court reopened
discovery on February 18, 2026 to when the government moved to intervene and stay
proceedings on April 10, 2026. (Compare Doc. 140, with Doc. 149.) This time period
amounted to 52 days, or approximately seven weeks. Although Ignite noticed the
depositions within that time frame, Ignite does not allege that it suffered “additional costs
or other prejudice” in that period alone. See Smith, 830 F.3d at 859, 862 (finding this factor
weighed in favor of intervention where there was no evidence of “additional costs or other
prejudice suffered between August 2013 and October 2013,” the length of delay in moving
to intervene). Moreover, the government states that it moved to intervene on April 10, 2026
after learning of the noticed depositions on April 8, 2026. (See Doc. 159-1 at 2.)
At bottom, Ignite’s asserted prejudice is simply that intervention would delay
resolving this action. Even setting aside that much of this claimed prejudice flows from the
government’s request for a stay, not from the motion to intervene, delay alone is not a
sufficient reason to deny intervention. Kalbers, 22 F.4th at 825. The Court therefore finds
that this factor weighs in favor of finding that the motion was timely.
3.
“Delay is measured from the date the proposed intervenor should have been aware
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that its interests would no longer be protected adequately by the parties, not the date it
learned of the litigation.” Brown, 172 F.4th at 1137 (citation omitted). “A party seeking to
intervene must act as soon as he knows or has reason to know that his interests might be
adversely affected by the outcome of the litigation.” Id. (citation omitted). “While the time
elapsed is not determinative, the court must weigh the related circumstances of the period
of delay.” Id. (quotation marks omitted).
As explained above, the earliest relevant date from which delay could be assessed
is the Court’s February 18, 2026 order reopening discovery. See id. The government filed
its motion to intervene 52 days later, and only two days after it learned of the noticed
depositions. Under these circumstances, the Court finds that the delay was not so
significant as to render its motion untimely. See W. Watersheds, 22 F.4th at 840 (reasoning
district court abused its discretion in finding motion to intervene untimely where the
“motion came just three months after [the movant] discovered that its leases were involved
in [the] litigation”); Smith, 830 F.3d at 861-62 (finding motion to intervene timely for
“delays of 71 and 79 days, respectively” in light of the circumstances).
On balance, the Court finds that the government’s motion was timely.
C.
“The existence of a ‘common question’ is liberally construed.” Bureerong, 167
F.R.D. at 85. Here, the government argues that the criminal case and this case “arise from
the same fulfillment agreement, the same warehouse, and the same inventory.” (Doc. 149
at 8.) The superseding indictment supports the existence of a common question when
liberally construed. Count Two alleges the defendants—one of which is Ignite’s corporate
parent—(1) contracted with a Phoenix-based company (which the government confirmed
is Defendant Higher Connection LLC) to store products in Higher Connection’s warehouse
and (2) either Higher Connection would package and ship products to a customer when
notified by Ignite’s parent or would submit a purchase order to Ignite’s parent in its role as
a distributor, resulting in inflated sales that were then included in a press release and caused
Ignite’s parent’s share price to increase. (Doc. 149-3 at 4, 11-12.) Then, when Higher
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Connection refused to certify to an auditor that it purchased unsold inventory that was
included in the press release, one of the criminal defendants sold the inventory to an
affiliated entity. (Id. at 13.)
The allegations still at issue in this case, meanwhile, concern whether the corporate
form should be disregarded so Defendants’ personal assets can be used to satisfy judgments
obtained by Ignite. (See Doc. 1 at 12.) Although at surface level these allegations might
seem separate and distinct, the Court cannot conclude that there will be absolutely no
overlap in any deposition or trial testimony on this remaining claim, particularly
concerning (1) background testimony, (2) other testimony that establishes foundation for
evidence concerning observance of the corporate form, (3) the source of funds received by
Defendants that Ignite argues are sufficient to pierce the corporate veil, (4) Defendants’
role in the alleged scheme to steal Ignite’s products, (5) whether the corporate form was
used for non-legitimate corporate purposes, (6) whether observance of the corporate form
would sanction the fraud of theft of Ignite’s products, and (7) whether Defendants can be
held liable for their role in an alleged agreement to distribute Ignite products. (See Doc. 57
at 2 (arguing in response to Defendants’ motion for summary judgment that Higher
Connection “entered into a Fulfillment Agreement with Ignite to be a warehouse and
shipping provider” and a “customer and distributor for Ignite,” after which the defendants
“stole Ignite property” and “distributed some of the illicit funds to Gleason and Baig under
W-2s and 1099s” through transfers to Defendants’ “personal online crypto currency
accounts during the time period [defendants] were stealing Ignite’s products”); id. at 2-3
(arguing that Gleason was Vice President of Distribution for Ignite “during the time he was
stealing Ignite’s products,” so his “participation (along with his partner Baig) in the theft
of Ignite’s products cannot be shielded because [they] were also members of [Higher
Connection]”); id. at 8 (“It is clear, or at least a disputed fact, that [Higher Connection] was
in reality an alter ego of Baig and Gleason, who used the stolen funds from Ignite to finance
speculative investing in crypto currency and/or to pay their personal expenses,” which had
“absolutely no relation to [Higher Connection’s] business purpose of providing
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warehousing services in Arizona.”); id. at 9 (“[Higher Connection] (through Baig and
Gleason) callously used its relationship as a warehouse and shipping provider, as well as a
distributor, of Ignite products to steal from and disrupt Ignite’s business.”); id. at 9-10
(arguing that Defendants could be personally liable even as non-parties to the Fulfillment
Agreement because “[Higher Connection] (through Baig and Gleason) also had a side
business wherein it acted as a distributor of Ignite products”); see also Doc. 156 at 6-7.)
The Court therefore finds that there exists a common question of fact between the
sole remaining claim in this action and charges in the criminal case.
D.
Having determined that the requirements of Rule 24(b) have been met, the Court
analyzes additional factors, including
the nature and extent of the intervenors’ interest, their standing to raise
relevant legal issues, the legal position they seek to advance, . . . its probable
relation to the merits of the case[,] . . . whether the intervenors’ interests are
adequately represented by other parties, whether intervention will prolong or
unduly delay the litigation, and whether parties seeking intervention will
significantly contribute to full development of the underlying factual issues
in the suit and to the just and equitable adjudication of the legal questions
presented.
Callahan, 42 F.4th at 1022 (citation omitted).
The Court finds that the government’s interest in seeking to intervene is significant
and that its interest is not adequately represented by other parties. See Chestman, 861 F.2d
at 50; Bureerong, 167 F.R.D. at 86 (“In this case, the Government’s prosecutorial and
investigative interest is not adequately protected by any of the civil parties. . . . Clearly,
neither the Plaintiffs nor the Defendants have this identical interest.”). Courts have found
that permitting the government to intervene to seek a stay of discovery pending resolution
of criminal proceedings will not unduly prejudice the parties to the action or delay the
action. See Dickerson, 2024 WL 4712358, at *2; SEC v. Christian Stanley, Inc., No. CV
11-7147 GHK (MANx), 2012 WL 13009158, at *4 (C.D. Cal. Sep. 6, 2012) (“Where a
party seeks to intervene solely for the purpose of requesting a stay in the proceedings, the
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prejudice of intervention on the original parties is minimal. The only consequence of such
intervention is that it allows [the court] to entertain the motion to stay, which neither unduly
delays the proceeding nor imposes unfair prejudice on the parties.” (citation omitted)). As
another court found, “any undue delay or perceived prejudice does not flow from the
intervention, but from the proposed stay.” O’Connell, 2014 WL 12773900, at *2; see also
Nicholas, 569 F. Supp. 2d at 1068 (same). And although the arguments the government
intends to offer in intervention may not “significantly contribute to full development of the
underlying factual issues in the suit [or] to the just and equitable adjudication of the legal
questions presented,” Callahan, 42 F.4th at 1022 (citation omitted), this does not persuade
the Court to deny intervention in light of the government’s significant interest in preventing
interference with criminal proceedings and in light of the lack of prejudice to the parties.
The Court therefore finds that the parties would not be unduly prejudiced and this action
would not be unduly delayed by permitting the government to intervene to seek a stay.
Under the circumstances, the Court will in its discretion permit the government to
intervene for the limited purpose of seeking to stay proceedings pending resolution of the
criminal proceedings.
E.
Rule 24(c) also requires that any motion to intervene “be accompanied by a pleading
that sets out the claim or defense for which intervention is sought.” Fed. R. Civ. P. 24(c).
The Ninth Circuit has held that intervention motions not accompanied by a pleading are
proper “where the court was otherwise apprised of the grounds for the motion.” Beckman
Indus., 966 F.2d at 474. “Thus, where . . . the movant describes the basis for intervention
with sufficient specificity to allow the district court to rule, its failure to submit a pleading
is not grounds for reversal.” Id. at 475. Here, the government has sufficiently described the
grounds for its motion and the basis for its intervention, so the Court finds that a pleading
under Rule 24(c) is not required.
II.
Having decided that the government’s motion to intervene should be granted, the
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Court must now address whether to grant its motion to stay proceedings in this case,
including Defendants’ depositions and the trial, pending resolution of the criminal
proceedings. “The Constitution does not ordinarily require a stay of civil proceedings
pending the outcome of criminal proceedings.” Keating v. Off. of Thrift Supervision, 45
F.3d 322, 324 (9th Cir. 1995). “In the absence of substantial prejudice to the rights of the
parties involved, simultaneous parallel civil and criminal proceedings are unobjectionable
under [the court’s] jurisprudence.” Id. (citation modified). But the Court may nevertheless
“decide in its discretion to stay civil proceedings when the interests of justice seem to
require such action.” Id. (citation modified). This decision “should be made in light of the
particular circumstances and competing interests involved in the case.” Id. (quotation
marks omitted). Courts should consider whether any rights would be implicated under the
Fifth Amendment, along with the following factors:
(1) the interest of the plaintiffs in proceeding expeditiously with this
litigation or any particular aspect of it, and the potential prejudice to plaintiffs
of a delay; (2) the burden which any particular aspect of the proceedings may
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
persons not parties to the civil litigation; and (5) the interest of the public in
the pending civil and criminal litigation.
Id. at 324-25. The government does not contend that any Fifth Amendment rights are
implicated (see Doc. 149 at 9 n.5), so the Court analyzes Keating’s remaining five factors.
On balance, the Court finds that a stay is warranted and will grant the government’s motion.
A.
The government does not argue that Ignite lacks an interest in proceeding
expeditiously in resolving its remaining claim, but instead argues that Ignite will not be
unduly prejudiced because the “requested stay is for a limited duration—until the
conclusion of the Criminal Case, which is set for trial in October 2026.” (See Doc. 149 at
9-10.) Ignite argues that because this case has been pending for five years, a “stay of
indefinite duration would cause concrete prejudice” and that, “[w]ithout piercing the
corporate veil, Ignite cannot reach the personal assets of Gleason and Baig to satisfy the
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$900,000 judgment against the Higher Connection entities.” (Doc. 155 at 8.) Ignite also
argues that “[d]elay increases the difficulty of obtaining accurate testimony about 2021
transactions” and “creates additional time during which assets that are the subject of the
veil-piercing claim could be transferred or dissipated.” (Id.)
The Court agrees with Ignite that its interest in proceeding expeditiously and the
potential prejudice resulting from delay weighs against a stay. Ignite’s interest only weighs
slightly against a stay, however, because as the government notes, a stay would not be
indefinite. The criminal trial is set for October 2026, which is less than six months from
now. A trial has not yet been scheduled in the action before this Court, and in light of the
Court’s calendar at this time, it is unlikely a trial could commence until months after
October 2026, which would presumably carry the same risks of which Ignite complains.
The Court also notes that Ignite could seek relief if it learns of attempted asset transfers to
avoid a potential judgment, as Ignite indicated to the Court it had considered. See Ariz.
Rev. Stat. § 44-1004.
Thus, although a stay of proceedings for approximately six months would delay
resolution of Ignite’s remaining claim, the Court finds that the delay is not so significant
that it strongly militates against a stay. See SEC v. Left, No. 2:24-cv-06311-SPG-JC, 2025
WL 2684195, at *4 (C.D. Cal. Aug. 19, 2025) (agreeing that the defendants “face[d] some
amount of prejudice from a stay” but it would “not [be] inordinate” because the “criminal
trial [was] set for . . . approximately seven months from the time of [the] order” and “fading
memories are an issue in any stay”); Dickerson, 2024 WL 4712358, at *2 (finding that a
stay would not “unduly delay the expeditious resolution of the . . . Civil Case” because the
“requested stay [was] for a limited duration—until the conclusion of the Criminal Case”);
O’Connell, 2014 WL 12773900, at *4 (finding that a stay of only 120 days “mitigate[d]
the potential prejudice of the delay to Plaintiffs” and noting that “[o]ther courts [had]
granted stays of similar durations”).
B.
Defendants do not oppose a stay of proceedings. (Doc. 151.) To the extent the factor
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considering the burden on defendants applies here, see Christian Stanley, 2012 WL
13009158, at *4, the factor weighs in favor of a stay.
C.
“In general, considerations of judicial economy weigh most strongly in favor of
staying a civil proceeding or aspects of the civil proceeding when a parallel criminal
proceeding is pending at the same time and involves overlapping issues.” Christian
Stanley, 2012 WL 13009158, at *5. Although this factor “normally does not favor granting
a stay because the court has an interest in clearing its docket,” Sanrio, Inc. v. Ronnie Home
Textile Inc., No. 2:14-cv-06369-RSWL (JEMx), 2015 WL 1062035, at *4 (C.D. Cal. Mar.
10, 2015) (quotation marks omitted), the Court finds that the interest in clearing the docket
does not override the judicial economy considerations of an ongoing parallel criminal
proceeding, particularly where the criminal proceeding is set for trial in a few months. The
Court therefore finds that this factor weighs in favor of a stay of proceedings or is neutral.
D.
The Court analyzes the government’s interest and the public’s interest together
because these interests “overlap[] substantially.” Dickerson, 2024 WL 4712358, at *4
(citation omitted); see also Christian Stanley, 2012 WL 13009158, at *6 (finding the
“public interest in the criminal investigation favor[ed] a stay of civil discovery to the same
extent that the Government’s interest favor[ed] a stay”). As another court has stated, “the
interests of the Government in protecting its criminal investigation are clearly the
paramount concern here.” Bureerong, 167 F.R.D. at 87; see also Christian Stanley, 2012
WL 13009158, at *6 (“[C]ourts have generally recognized the government’s strong interest
in preserving the integrity of the criminal proceeding.”). “There is a clearcut distinction
between private interests in civil litigation and the public interest in a criminal prosecution
. . . . [which] requires a government policy determination of priority: which case should be
tried first.” Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962). “Administrative
policy gives priority to the public interest in law enforcement,” which “seems so necessary
and wise that a trial judge should give substantial weight to it in balancing the policy against
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the right of a civil litigant to a reasonably prompt determination of his civil claims or
liabilities.” Id. The Court should therefore “be sensitive to the difference in the rules of
discovery in civil and criminal cases,” and notably that the “rules governing criminal
discovery are far more restrictive.” Id. Relevant here, criminal proceedings have done
“away with any pre-trial discovery of statements of a government witness,” and a “litigant
should not be allowed to make use of the liberal discovery procedures applicable to a civil
suit as a dodge to avoid the restrictions on criminal discovery and thereby obtain
[discovery] he would not otherwise be entitled to for use in his criminal suit.” Id.; see also
Nicholas, 569 F. Supp. 2d at 1071-72 (citing similar concerns about the difference between
civil and criminal discovery rules). The government’s interest and the public’s interest
therefore weigh heavily in favor of a stay. See In re Packaged Seafood Prods. Antitrust
Litig., No. 15-MD-2670 JLS (MDD), 2018 WL 5785284, at *7 (S.D. Cal. Nov. 5, 2018)
(“Because of the liberal discovery rights in civil cases, the government argues that a stay
is the only way to protect the criminal proceedings. The Court agrees, and finds this factor
weighs in favor of granting a stay.” (citation omitted)).
The Court finds that the factors ultimately weigh in favor of granting a stay of
proceedings pending resolution of the criminal proceedings, especially considering the
substantial weight owed to the interest in maintaining the integrity of parallel criminal
proceedings and in not permitting criminal discovery limitations to be circumvented
through civil discovery. See Dickerson, 2024 WL 4712358, at *3 (finding the “United
States’ interest [was] compelling and weigh[ed] strongly in favor of a stay” and therefore
finding a “stay of discovery until the resolution of the Criminal Case . . . [was] consistent
with the relief often granted by courts in similar cases”); O’Connell, 2014 WL 12773900,
at *4 (concluding that “the public’s interest should be given priority over Plaintiffs’ interest
in [the] case”). The Court notes that the Southern District of New York came to the same
conclusion in another parallel civil proceeding. See SEC v. Ignite Int’l Brands, Ltd., No.
24-CV-7331 (VM) (OTW), 2026 WL 1028100, at *2-5 (S.D.N.Y. Apr. 16, 2026). The
court reasoned in part that the public’s interest “strongly favor[ed] a stay” because of the
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“overriding interest in the integrity of criminal proceedings” and to “prevent circumvention
of the limitations on discovery in criminal proceedings.” Id. at *5 (citation modified). The
“public’s interest in the integrity of the criminal case” was therefore “more important” than
the public’s interest in “expeditiously resolving” the SEC’s action to “protect investors
from fraud.” Id. The public’s interest in protecting the integrity of criminal proceedings
therefore weighs even more strongly against a private litigant’s expeditious resolution of
its civil claim. See Dickerson, 2024 WL 4712358, at *4 (“[T]he Ninth Circuit gives
‘substantial weight’ to the ‘public interest in law enforcement’ when balancing against the
public interest in prompt resolution of civil claims.” (quoting Bureerong, 167 F.R.D. at
87)).
For these reasons, the Court will grant the government’s motion to stay proceedings
pending resolution of the criminal proceedings. That said, the Court will permit Ignite to
file a motion to lift the stay if the criminal trial is continued beyond October 2026. The
Court will also permit Ignite to continue its efforts to collect on its judgment and its award
of attorneys’ fees and costs arising out of its motion for sanctions. (See Docs. 131, 133.)
III.
Accordingly,
IT IS ORDERED that the Motion (Doc. 149) is granted.
IT IS FURTHER ORDERED that the United States is permitted to intervene in
this action for the limited purpose of seeking a stay of these proceedings pending resolution
of the criminal proceedings.
IT IS FURTHER ORDERED that this action is stayed pending resolution of the
criminal proceedings set for trial in October 2026.
IT IS FURTHER ORDERED that, notwithstanding this stay of proceedings,
Ignite may continue its efforts to collect on its judgment and its award of attorneys’ fees
and costs arising out of its motion for sanctions.
. . . .
. . . .
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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
October 2026.
IT IS FINALLY ORDERED that Ignite may file a motion to lift the stay if the
criminal trial is continued beyond October 2026.
Dated this 14th day of May, 2026.
Case 2:21-cv-02184-MTL Document 160 Filed 05/15/26 Page 17 of 17