Federal Solutions Group, Inc. a California corporation v. H2L1-CSC, JV

Filing 57

ORDER by Judge Kandis A. Westmore denying Plaintiff's 47 Motion to Stay. (kawlc1, COURT STAFF) (Filed on 6/19/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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FEDERAL SOLUTIONS GROUP,
Plaintiff,

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United States District Court
Northern District of California

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ORDER DENYING PLAINTIFF'S
MOTION TO STAY THE ENTIRE
ACTION OR, IN THE ALTERNATIVE,
TO CONTINUE TRIAL AND
DISCOVERY DEADLINES

Defendant.

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Case No. 4:17-cv-05433-KAW

Re: Dkt. No. 47

v.
H2L1-CSC,

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On March 28, 2019, Plaintiff Federal Solutions Group, Inc. filed a motion to stay the entire
action or, in the alternative, to continue trial and discovery deadlines.
Upon review of the moving papers, the Court finds this matter suitable for resolution

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without oral argument pursuant to Civil Local Rule 7-1(b), and, for the reasons set forth below,

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DENIES Plaintiff’s motion to stay.

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I.

BACKGROUND

On September 19, 2017, Plaintiff Federal Solutions Group, Inc. (“FSG”) filed a complaint

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against Defendant H2L1-CSC, JV (“H2L1”) for breach of contract and unjust enrichment and

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quantum meruit arising out of a construction project (“Project”) through the United States Army

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Corps of Engineers, located at Fort Hunter Liggett in Monterey County, California. Defendant was

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the Project’s prime contractor, and Plaintiff was a subcontractor. H2L1 terminated FSG from the

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Project, allegedly for cause, which FSG denies was proper. FSG instituted this action to recover

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damages it incurred due to H2L1’s conduct, including, but not limited to, H2L1’s allegedly

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wrongful termination of FSG from the Project.

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On January 18, 2018, the Court issued the case management scheduling order, which set a
trial date of April 1, 2019. (Dkt. No. 25.) On October 4, 2018, the Court adopted a joint stipulation

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to continue the trial date to December 16, 2019, which was sought, in part, because the parties

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were still meeting and conferring on discovery, including the production of documents. (Dkt. Nos.

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33 & 34.)
On November 7, 2018, a criminal complaint was filed against FSG’s sole shareholder,

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Selina Singh, and key personnel, Manjinder Paul Singh and Kabir Singh, pertaining to alleged

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workers compensation insurance fraud. (Pl.’s Mot., Dkt. No. 47 at 3, 7.) On March 18, 2019,

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Defendant H2L1 served a second set of document requests on Plaintiff, seeking copies of all

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criminal complaints filed against Selina Singh, Manjinder Paul Singh, and Kabir Singh from

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January 1, 2014 to present. (Req. for Produc. of Docs., Decl. of John A. Castro, “Castrol Decl.,”

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Dkt. No. 47-1 ¶ 5, Ex. A at 6.) Defendant also sought documents regarding Plaintiff’s workers’

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United States District Court
Northern District of California

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compensation policy that was in effect during the relevant time period. (Req. for Produc. of Docs.

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at 4.)

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On May 1, 2019, Plaintiff filed a motion to stay the case or, in the alternative, to continue

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trial and discovery deadlines in light of the parallel criminal proceeding. (Pl.’s Mot., Dkt. No. 47.)

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On May 15, 2019, Defendant filed an opposition. (Def.’s Opp’n, Dkt. No. 53.) On May 22, 2019,

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Plaintiff filed a reply. (Pl.’s Reply, Dkt. No. 54.)
II.

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LEGAL STANDARD

“[T]he power to stay proceedings is incidental to the power inherent in every court to

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control the disposition of the causes on its docket with economy of time and effort for itself, for

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counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). Whether to stay

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proceedings is entrusted to the discretion of the district court. See id. at 254-55. In deciding

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whether to stay proceedings pending resolution of another action, a district court must weigh

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various competing interests, including the possible damage which may result from granting a stay,

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the hardship a party may suffer if the case is allowed to go forward, and “the orderly course of

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justice measured in terms of the simplifying or complicating of issues, proof, and questions of law

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which could be expected to result from a stay.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th

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Cir. 2005).

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The United States Constitution does not require a stay of a civil proceeding pending the
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outcome of a criminal proceeding. Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th

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Cir. 1995). In the absence of substantial prejudice to the rights of the parties involved, parallel

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civil and criminal cases may proceed simultaneously. Id. at 324. Nevertheless, a court may

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exercise its discretion to stay the civil proceeding when the interest of justice so requires. Id. This

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decision should be made in consideration of the particular circumstances and competing interests

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involved, including the extent to which the criminal defendant’s Fifth Amendment rights are

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implicated. Id. (citing Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir.

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1989).) In addition, depending on the facts of the case, the court may also consider the following

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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.

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United States District Court
Northern District of California

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Keating, 45 F.3d at 325 (citing Molinaro, 889 F.2d at 903) (“Keating factors”).
The burden is on the movant to show that a stay is appropriate. See Clinton v. Jones, 520
U.S. 681, 708 (1997).
III.

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DISCUSSION

In making the motion, Plaintiff requests that the court stay the instant case pending the

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resolution of the parallel criminal proceeding. (Pl.’s Mot. at 2.) Plaintiff argues that the instant

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case and the parallel criminal proceeding overlap, and, because of that overlap, a stay is required

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due to the Fifth Amendment privileges of the individual defendants in the criminal proceeding. Id.

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A.

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The first step is to consider the extent to which the defendant’s Fifth Amendment rights are

FSG does not enjoy Fifth Amendment protections, but the individuals do.

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implicated. Keating, 45 F.3d at 324. Generally, artificial entities, such as corporations, do not

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enjoy Fifth Amendment protections. Braswell v. United States, 487 U.S. 99, 102 (1988). For that

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reason, no privilege can be asserted by the custodian of corporate records, regardless of the

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corporation’s size, because any claim by the agent is tantamount to a claim of privilege by the

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corporation, which possesses no such privilege. Id. at 108, 110. There are no circumstances under
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which a records custodian may resist a subpoena for an entity's records on Fifth Amendment

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grounds. In re Twelve Grand Jury Subpoenas, 908 F.3d 525, 531 (9th Cir. 2018).

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Here, Plaintiff claims that the Fifth Amendment warrants a stay, because Defendant has

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requested to take the depositions of three of Plaintiff’s employees, all of whom are named

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defendants in the parallel criminal proceeding. (Pl.’s Mot. at 6.) Thus, while Plaintiff as a

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corporation may not have Fifth Amendment protections, the individual defendants do. Id. As a

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result, if discovery moves forward, Plaintiff contends that its employees will have to choose

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between invoking their individual rights against self-incrimination or waiving those rights, which

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could adversely affect the civil case. Id. at 7.

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In support of this argument, Plaintiff relies on Clifford v. Trump, 2018 U.S. Dist. LEXIS

United States District Court
Northern District of California

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122521, at *10 (C.D. Cal. Apr. 27, 2018), where the court held that, so long as the evidence is

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testimonial in nature and is potentially incriminating toward the speaker, not the corporation, the

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Fifth Amendment privilege applies. (Pl.’s Mot. at 6.) While true, the case also explicitly states that

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“‘[a] stay of an action is not necessary where a defendant's fifth amendment rights can be

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protected through less drastic means, such as asserting the privilege on a question-by-question

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basis and implementing protective orders.’” Id. at *7 (quoting Doe v. City of San Diego, 2012 U.S.

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Dist. LEXIS 174773, at *2 (S.D. Cal. Dec. 10, 2012)).

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Similarly, in opposition, Defendant argues that there are safeguards in place for Plaintiff’s

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employees and shareholder, such as asserting their Fifth Amendment privilege at deposition.

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(Def.’s Opp’n at 5.) The Court agrees. Indeed, a deponent is not permitted to invoke their right

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against self-incrimination prophylactically. Privileges, like objections, may only be asserted in

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response to a question. Therefore, the possibility of questions seeking to elicit incriminating

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testimony at a deposition does not necessitate a stay when there is minimal factual overlap. See

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discussion, infra, Part III.B.

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B.

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Fifth Amendment concerns may be sufficient to warrant a stay when simultaneous civil

Minimal factual overlap

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and criminal proceedings involve “the same or closely related facts.” Ebay, Inc. v. Dig. Point

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Sols., Inc., 2010 U.S. Dist. LEXIS 23253, at *8 (N.D. Cal. Feb. 25, 2010). This is not the situation
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here. The instant case involves breach of contract, while the pending criminal proceeding relates

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to alleged workers’ compensation fraud. (Pl.’s Mot. at 7.) Plaintiff argues that they do overlap

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because the time frame of the matters being investigated include the contract between Plaintiff and

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Defendant. (Pl.’s Mot. at 7). In support of its contention, Plaintiff points to Defendant’s request

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for the criminal complaints filed against Selina Singh, Manjinder Paul Singh, and Kabir Singh. Id.

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Defendant also requested a copy of Defendant’s worker’s compensation policy for the project,

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which Plaintiff argues clearly illustrates that the pending criminal proceeding heavily overlaps

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with relevant facts and issues in the case at bar, and that Defendant intends to investigate factual

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issues that are central to the criminal proceeding. Id. at 7-8.
In opposition, Defendant argues that Plaintiff’s position has been that the criminal

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United States District Court
Northern District of California

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complaints are irrelevant, and that it has refused to produce them in response to the document

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requests. (Def.’s Opp’n at 5.) Defendant also points out that FSG has not produced any admissible

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evidence to show that the facts overlap. Id. at 6.
The Court agrees on both counts. The instant case does not turn on whether Plaintiff

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committed workers’ compensation fraud. Rather, it will depend on whether there was a breach of

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contract. Indeed, any potential overlap is due to Defendant’s document requests, to which Plaintiff

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appears to have correctly objected. Moreover, as discussed above, the individual, criminal

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defendants may invoke their right against self-incrimination in response to specific deposition

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questions, which is far less drastic than an indefinite stay in the litigation. See discussion, supra,

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Part III.A.

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Accordingly, the minimal overlap regarding the time frame does not weigh in favor of a

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stay, and, even if it did, Plaintiff has failed to carry its burden to show that a stay is appropriate.

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As a result, the Court need not address the remaining Keating factors.

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IV.

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CONCLUSION

In light of the foregoing, Plaintiff’s motion for stay is DENIED. As previously conveyed,

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the Court will address the potential continuance of case deadlines at the next case management

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conference.

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IT IS SO ORDERED.
Dated: June 19, 2019
__________________________________
KANDIS A. WESTMORE
United States Magistrate Judge

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United States District Court
Northern District of California

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