Consumer Financial Protection Bureau v. Global Financial Support, Inc. et al
Filing
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ORDER Extending Stay for 30 Days and Lifting Stay on May 27, 2019 (re ECF No. 72 ). Signed by Judge Gonzalo P. Curiel on 5/1/19.(dlg)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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CONSUMER FINANCIAL
PROTECTION BUREAU,
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ORDER EXTENDING STAY FOR 30
DAYS AND LIFTING STAY ON
MAY 27, 2019
Plaintiff,
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Case No.: 3:15-cv-02440-GPC-WVG
v.
GLOBAL FINANCIAL SUPPORT, INC.,
d/b/a Student Financial Resource Center,
d/b/a College Financial Advisory; and
ARMOND ARIA a/k/a ARMOND AMIR
ARIA, individually and as owner and
CEO of GLOBAL FINANCIAL
SUPPORT, INC.,
[ECF No. 72.]
Defendants.
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This matter has been stayed since May 17, 2016 based upon an ongoing criminal
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investigation of Defendant Armond Aria. (ECF Nos. 34, 38, 40, 42, 46, 48, 51, 55, 57,
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59, 61, 63, 65, 67, 69, 71.) The most recent stay was set to expire on April 27, 2019. On
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April 22, 2019, the parties submitted a joint status report to the Court, in which
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Defendants requested an extension of the stay for another 60 days, and Plaintiff stated it
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was amenable to no more than a 30-day extension with an order for the stay to be lifted
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thereafter. (ECF No. 72.)
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For the reasons articulated below, the Court will grant a final 30-day extension and
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order the stay to be lifted at its conclusion.
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I.
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Background
On April 7, 2016, Defendants Desmond Aria and his company, Global Financial
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Support, Inc., petitioned the Court for a stay of the civil proceedings instituted by the
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Consumer Financial Protection Bureau (“CFPB”) which alleged that Defendants violated
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the Consumer Financial Protection Act in connection with their offering, marketing, sale
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and provision of student financial aid advisory services. Defendants argued that a stay
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was necessary in light of a parallel and ongoing criminal investigation against Mr. Aria
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by the IRS and the FBI premised on the same nucleus of facts. To refuse a stay, they
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argued, would be to undermine their Fifth Amendment privilege and ability to mount a
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defense.
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On May 17, 2016, the Court applied the multi-factor Keating analysis to
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Defendants’ request and ordered a stay. (ECF No. 34.) Keating held that “[a] defendant
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has no absolute right not to be forced to choose between testifying in a civil matter and
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asserting his Fifth Amendment privilege;” on the contrary, “[i]n the absence of
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substantial prejudice to the rights of the parties involved, simultaneous parallel civil and
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criminal proceedings are unobjectionable under our jurisprudence.” Keating v. Office of
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Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (alterations omitted). At the same
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time, Keating recognized that a stay may be ordered at the court’s discretion when the
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interest of justice so required. The Court determined that a temporary stay should be
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issued because Defendant Aria’s interest in preserving his Fifth Amendment privilege
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and the burden on Defendants, outweighed the prejudice to the CFPB, the Court’s
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convenience in the management of its cases, and the interests of the public and third
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parties.
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Since the initial stay was instituted in 2016, the Court has extended the stay fifteen
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times. Several developments occurred in the interim. In May of 2017, Mr. Aria
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informed the Court that he had signed a plea agreement with the Assistant United States
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Attorney for the Southern District of California (“AUSA”), but that the Department of
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Justice, Tax Division (“DOJ Tax”), and the IRS had not yet approved the agreement.
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(ECF No. 72, at 3.) Thereafter, in December of 2017, Defendants were informed that the
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plea agreement was not approved by DOJ Tax. (Id.) Defendants state that they are still
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in the process of negotiating a plea agreement. (Id.) To date, no criminal indictment has
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yet been filed against Mr. Aria. (Id.)
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II.
Discussion of the Keating factors
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The Court finds it proper to revisit the necessity of the stay given its lengthy
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pendency. Upon consideration of the Keating factors, and in recognition of the fact that
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a stay is an “extraordinary remedy” to be rarely prescribed, Trade Comm’n v. Adept
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Mgmt., Inc., No. 1:16-CV-00720-CL, 2017 WL 722586, at *3 (D. Or. Feb. 23, 2017), the
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Court finds that the circumstances no longer weigh in favor of maintaining a stay in the
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civil action.
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A. Defendants’ Fifth Amendment Rights
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Originally, the Court found that this factor weighed in favor of a stay. Although no
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criminal indictment had been filed at the time, the Court held that Defendants could
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potentially face a significant challenge to the preservation of their Fifth Amendment
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rights. Given the apparent coordination between the CFPB, IRS, and FBI, proceeding in
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the civil case might “expand the rights of criminal discovery beyond the limits of Federal
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Rule of Criminal Procedure 16(b), expose the basis of the defense to the protection in
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advance of criminal trial, or otherwise prejudice the case.” SEC v. Dresser Indus., Inc.,
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628 F.2d 1368, 1376 (D.C. 1980).
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Now, almost three years later, the risk of such an outcome has considerably
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lessened. No indictment has been issued, making the possibility that the civil
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proceedings will hamper the Defendants’ ability to defend in an inchoate criminal
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proceeding speculative and unripe. As the Ninth Circuit observed, the case for staying
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civil proceedings is “a far weaker one” when “[n]o indictment has been returned[, and]
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no Fifth Amendment privilege is threatened.” Fed. Sav. And Loan Ins. Corp. v.
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Molinaro, 889 F.2d 899, 902 (9th Cir. 1989) (citing Dresser, 628 F.2d at 1376)). The
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fact that no indictment has issued after three years of ongoing investigations and
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negotiations between Mr. Aria and CFPB undercuts the potential that a parallel criminal
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proceeding will ever commence. The necessity of a stay of the civil case necessarily
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diminishes as well.
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Although Defendants object that the AUSA reserves the right to indict Defendants
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if a plea agreement is not approved (ECF No. 72, at 5), that claim is on the one hand
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rebutted by CFPB’s doubt that “the Assistant United States Attorney and Defendant will
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ever resolve the criminal case,” (id. at 4), and on the other, rendered almost irrelevant by
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the well-established notion that the Constitution “does not require a civil action to be
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stayed until criminal proceedings are no longer possible.” Favaloro v. S/S Golden Gate,
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687 F. Supp. 475, 481 (N.D. Cal. 1987) (citing Arthurs v. Stern, 560 F.2d 477, 479–80
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(1st Cir. 1977)); see also Gordon v. Fed. Deposit. Ins. Corp., 427 F.2d 578, 580 (D.C.
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1970) (holding that justice does not mandate halting all civil litigation pending the
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outcome of a related criminal prosecution). Stays of parallel proceedings are an
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exception, not the rule, and the Court sees little reason to continue such an extraordinary
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remedy in this case.
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Thus, this factor no longer favors the Defendants. Although there is still a remote
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risk that Defendants’ Fifth Amendment rights and ability to prepare a defense will be
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hampered by the lifting of the stay, the Court finds that on the whole, the risk are
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minimized given the lack of an indictment issued. The Court’s determination is further
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supported by the existence of less drastic means by which the Defendants may protect
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their fifth amendment rights. For example, protective orders can be made as necessary to
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control discovery. See Wehling v. Columbia Broadcasting Sys., 608 F.2d 1084, 1086 (5th
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Cir. 1979); see also Gen. Elec. Co. v. Liang, No. CV 13-08670 DDP VBKX, 2014 WL
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1089264, at *6 (C.D. Cal. Mar. 19, 2014).
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B. Prejudice to Defendants
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The Court’s original order also found in favor of Defendants on this factor.
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As explained in that earlier order, Courts have found that even when a defendant’s
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Fifth Amendment rights are implicated, this factor does not support granting a stay unless
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the defendant can show other “compelling favors as described in Keating.” Gen. Elec.
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Co. v. Liang, 2014 WL 1089264, at *5. The Ninth Circuit has found that where a
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defendant has had adequate time to prepare for a related civil trial, the burden on the
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defendant is substantially diminished. See Keating, 45 F.3d at 325. There is no
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indication that Defendants have been deprived of adequate time to prepare for this civil
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trial. What negotiations Defendants have reported between themselves and the AUSA
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have been intermittent and would not have precluded them from preparing a meaningful
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civil defense in the four years since CFPB’s original complaint.
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This factor no longer favors Defendants.
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C. Interest of Plaintiff in Proceeding Expeditiously with this Litigation and
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the Potential Prejudice to Plaintiff of a Delay
The Court previously found that this factor favored CFPB. That finding has only
been magnified with time.
Courts have recognized that a civil plaintiff has an interest in having his or her case
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resolved quickly. See S.E.C. v. Loomis, No. 2:10-cv-00458-KJM-KJN, 2013 WL
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4543939, at *2 (E.D. Cal. Aug. 27, 2013). Courts have also recognized that there may be
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prejudice to a plaintiff where a stay of discovery might result in his or her inability to
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locate other potential defendants. See Liang, 2014 WL 1089264, at *4. Here, CFPB’s
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enforcement action has been in a holding position since 2016 and deserves to proceed
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forward. In fact, it has been more than four years since CFPB lodged its complaint
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against Defendants. At this juncture, “it would be prejudicial to [CFPB] to force it to
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wait until the unknowing culmination of a criminal case, for which no indictment has
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even been issued.” Adept Mgmt. Inc., 2017 WL 722586, at *4.
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D. Convenience of the Court and Judicial Efficiency
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As a general matter, “the court [has] an interest in clearing its docket.” Molinaro,
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889 F.2d at 903; eBay, Inc. v. Digital Point Sols., Inc., No. C 08-4052 JF (PVT), 2010
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WL 702463, at *6 (N.D. Cal. Feb. 25, 2010). This is particularly so where—as here—no
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indictment has been returned and “there is no way to predict when the criminal
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investigation [will] end.” Walsh Sec., Inc. v. Cristo Prop. Mgmt., Ltd., 7 F.Supp.2d 523,
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528 (D.N.J. 1998); ESG Capital Partners LP v. Stratos, 22 F. Supp. 3d 1042, 1047 (C.D.
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Cal. 2014) (“Staying a civil case until the resolution of a criminal case is inconvenient for
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the court, especially where . . . there is no date set for the criminal trial.”).
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The Court originally found that this factor, on balance, favored CFPB. After
almost three years of stays, this factor has swung entirely in CFPB’s direction.
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E. Interests of Third-Parties and the Public
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The Court originally held that the interests of third-parties and the public in
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seeking expeditious relief and speedy resolution of the civil enforcement action were
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substantial, but not likely to be significantly impaired by a “temporary stay.” (ECF No.
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34, at 10.) However, the almost three-year long stay can no longer be rightly
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characterized as “temporary.” The Court agrees with CFPB that at this late hour, the
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76,000 plus consumers allegedly impacted by Defendants’ scheme, and the general
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public at large, have an outsize interest in progressing the civil case. Delays of
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proceedings may be detrimental to public confidence, and the public has an interest that
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an agency charged with enforcing federal consumer protection laws is able to perform its
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statutory duties. These two factors weigh in favor of lifting the stay.
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III.
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Conclusion
For the reasons articulated above, the Court grants CFPB’s request for a 30-day
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extension until Mary 27, 2019. The stay will be lifted after the expiration of that
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extension.
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IT IS SO ORDERED.
Dated: May 1, 2019
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