Mohebbi v. Khazen et al

Filing 91

ORDER DENYING 86 MOTION TO PARTIALLY LIFT THE STAY. Signed by Judge Beth Labson Freeman on 3/23/2017. (blflc4, COURT STAFF) (Filed on 3/23/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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SAEID MOHEBBI,
Plaintiff,

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MAHNAZ KHAZEN, et al.,

[Re: ECF 86]

Defendants.

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United States District Court
Northern District of California

ORDER DENYING MOTION TO
PARTIALLY LIFT THE STAY

v.

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Case No. 13-cv-03044-BLF

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Having allegedly been deceived into investing in a partnership in exchange for an

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immigrant visa, Plaintiff Saied Mohebbi brings suit against Defendants for fraud and other causes

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of action. Second Am. Compl. (“SAC”), ECF 66. The Court previously granted Defendants’

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motion to compel arbitration and stay remaining claims. Presently before the Court is Defendant

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Stacey Conti’s motion to lift the stay. Having reviewed the papers and oral argument of the

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parties, the Court DENIES Defendant Stacey Conti’s motion to partially lift the stay for the

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reasons set forth below.

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I.

BACKGROUND
According to the SAC, Plaintiff Saied Mohebbi (“Mohebbi”) is a Farsi-speaking Iranian

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citizen who, in 2012, was interested in obtaining permanent residency in the United States through

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the EB-5 Immigrant Investor Visa Program. SAC ¶ 26. This program allows foreign nationals to

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obtain a green card if they invest a certain amount of money (generally $500,000 or $1 million,

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depending on certain factors) in the United States. Id. While living in Iran, he learned about

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Defendant U.S. Immigration Investment Center LLC (“USIIC”) through an online Farsi-language

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video, and, in April 2012, met with its CEO, Ms. Khazen, in Los Angeles during a trip to the

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United States. Id. ¶ 30. In this meeting, Khazen and Mohebbi discussed ways in which Mohebbi

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could invest money with USIIC so as to qualify for an EB-5 visa. Id. ¶ 29-30. Plaintiff contends

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that at the time USIIC advertised itself on its website as the “only EB-5 Regional Center

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organization with its foundation in United States banking,” despite the fact that USIIC had not

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been approved by United States Citizenship and Immigration Services (“USCIS”) to serve as an

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EB-5 Regional Center. Id. ¶ 26.

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After returning to Iran, Mohebbi received correspondence from Khazen via email

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regarding the terms of an investment. Id. ¶ 31. After several exchanges between Mohebbi and

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certain Defendants, Mohebbi agreed to invest over $1 million into a partnership in exchange for

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Defendants’ assistance in helping him qualify for the federal EB-5 immigrant visa program. Id. ¶¶
32-36. Mohebbi now asserts twenty-two causes of action against Defendants in the SAC for

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United States District Court
Northern District of California

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fraudulently inducing his investment among other claims.

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As to Defendant Stacey Conti (“Conti”), Mohebbi alleges that Conti was the Chief

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Banking Officer of USIIC, and exercised control over USIIC, including the editing and

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publication of USIIC’s website and promotional materials. Id. ¶¶ 16, 20, 54, 65, 145, 163, 214,

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217. According to Mohebbi, Conti along with other Defendants, also prepared and supervised the

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preparation of the agreement signed by Mohebbi. Id. ¶ 85.

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Previously, the Court granted in part Defendants’ motions to compel arbitration certain

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causes of action and denied in part as to false and misleading advertising in count 13 and violation

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of § 17500 of the California Business and Professions Code as part of count 14 of the SAC. ECF

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81. For claims that were not ordered to be arbitrated, this Court also granted Defendants’ motion

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to stay litigation of those claims. Id.

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In initiating arbitration, Mohebbi elected not to name Conti as a respondent. Mot. 1, ECF

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86-1. However, Conti remains a defendant in the claims of false and misleading advertising and

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violation of California Business and Professions Code § 17500 in this case. The arbitration was

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originally scheduled to start on March 20, 2017 but the parties represented at the hearing that it

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was postponed to June 2017. Heller Decl. ¶ 2; Opp’n 2, ECF 88. Conti now moves to lift the stay

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of litigation so she can conduct discovery and bring a dispositive motion. Mot. 1.

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II.

DISCUSSION
Conti claims that the stay should be lifted for claims asserted against her because being a

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defendant in this case jeopardizes her career in the banking and finance industry and other
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professional or personal pursuits. Mot. 2. Conti avers that while she was a non-signatory to the
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agreement containing the arbitration clause, she joined other Defendants in moving to compel
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arbitration. Id. at 3. Nonetheless, she was not named as a respondent in the arbitration and thus
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“remains in limbo” without a means to defend herself. Id.; Reply 1, ECR 89. Conti also asserts
that the claims against her – Lanham Act and California Business and Professions Code § 17500 –

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are meritless. Mot. 4. Conti then urges this Court to lift the stay so that she could conduct limited
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written discovery and bring a dispositive motion to establish her lack of liability. Id. at 3, 5 (citing
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GEA Group AG v. Flex-N-Gate Corp., 740 F. 3d 411 (7th Cir. 2014)). Furthermore, given that
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United States District Court
Northern District of California

she is not a respondent in the arbitration proceeding, Conti contends that the outcome of the
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arbitration would not govern the pending claims against her in this case. Reply 1.
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Mohebbi opposes this motion, arguing first that Conti provides no reasonable basis to lift
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the stay given that Conti requested the stay in the first place and the arbitration will soon be
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completed. Opp’n 2-3. Mohebbi also underscores that Conti was in charge of advertising and

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promotion of USIIC, which contained false statements, so the stayed claims against her are not
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meritless. Id. at 3-5.
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Pursuant to the Federal Arbitration Act, when a court determines that some claims are
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arbitrable while some are not, the claims that are not arbitrable must be stayed pending the
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completion of arbitration. 9 U.S.C. § 3 (“[The Court,] on application of one of the parties [must]

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stay the trial of the action until such arbitration has been held in accordance with the terms of the
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agreement.”).
Separately from the requirement to stay non-arbitrable claims, “the power to grant a stay in

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pending litigation is incidental to the power inherent in every court to control the disposition of the
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cases on its docket.” Landis v. North Am. Co., 299 U.S. 248, 254–55 (1936). Accordingly, federal

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district courts have broad discretion to stay discovery in the interests of justice. Little v. City of
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Seattle, 863 F.2d 681, 685 (9th Cir. 1988).
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While recognizing that being a defendant in this action may hinder certain activities Conti

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wants to pursue, the Court finds that lifting the stay against her at this stage is not in the interests

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of justice. First, Conti, together with other Defendants, requested the stay in the first place, which

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the Court granted. Only afterwards, more than two years later, does Conti realize the

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disadvantages to staying the litigation despite the fact that the current stay is of Conti’s own

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choosing. Lifting the stay as to Conti would also put different Defendants on different schedules,

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with the risk of creating potential estoppel and prejudice to other Defendants. Lifting the stay thus

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would not only be contrary to the mandate of the Federal Arbitration Act but would also prejudice

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other Defendants. Second, the parties did not dispute at the hearing that the arbitration will
proceed in June 2017 and thus draw to a close shortly thereafter. Given that the stay was instituted

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United States District Court
Northern District of California

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more than two years ago, whatever additional hardship or prejudice to Conti stemming from a

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length of stay between now and until arbitration is completed should be relatively small in

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comparison to any pre-existing inconvenience Conti has already experienced.

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The sole authority relied upon by Conti, GEA Group AG v. Flex-N-Gate Corp., fails to

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persuade the Court otherwise. 740 F. 3d 411 (7th Cir. 2014). First, the Seventh Circuit in GEA

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merely affirms the decision of the lower court to allow a partial lift of the stay to permit a

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defendant to conduct discovery but does not make mandatory such partial lift. Id. at 413, 416

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(framing the question as “whether the district court had authority to allow any discovery to

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proceed”). Second, the circumstances justifying the partial lift in GEA are not analogous to the

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present case. The plaintiff in GEA, not content with having initiated an arbitration proceeding in

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Germany, filed a suit in a federal district court in Illinois, only to immediately move to stay the

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Illinois suit pending resolution of the arbitration proceeding. Id. at 413-14. The Seventh Circuit

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found that the plaintiff should not have brought the suit in Illinois anyway, as the suit not only

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offered the plaintiff “a second bite at the same apple” but was also brought in violation of the

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arbitration clause. Id. at 416. The court then concluded that it was sensible for the lower court to

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allow a defendant to conduct discovery for claims now nine years old. Id. at 414, 416. In contrast

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to GEA, Mohebbi here did not file this suit while arbitration is pending, only to stay this case so to

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obtain a “second bite at the same apple.” Instead, it was Defendant Conti, together with other
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Defendants, who moved to stay pending arbitration and who also now is moving to lift the stay.
At this junction, when the completion of arbitration is imminent, this Court finds that

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maintaining the stay is in the interests of justice and would not introduce substantial prejudice or

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hardship to any party. Awaiting the result of the arbitration furthers the goal of efficiency for both

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the judiciary and litigants. Conversely, granting the motion to lift the stay would undermine the

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purpose for which it was originally granted, to permit the arbitration to resolve issues relevant to

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the claims in this case and prevent prejudice to other parties in this case, as intended by the

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Federal Arbitration Act. Therefore, the Court finds reasons proffered by Conti insufficient to lift

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the stay at this juncture and DENIES her motion for an order partially lifting the stay.

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United States District Court
Northern District of California

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IT IS SO ORDERED.

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Dated: March 23, 2017
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BETH LABSON FREEMAN
United States District Judge

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