Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_18-cv-01603/USCOURTS-cand-5_18-cv-01603-1/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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Case No.: 5:18-cv-01603-EJD

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO INTERVENE AND 

STAY ACTION 

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United States District Court 

Northern District of Californi

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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

SECURITIES AND EXCHANGE 

COMMISSION, 

Plaintiff, 

v. 

RAMESH “SUNNY” BALWANI, 

Defendant. 

Case No. 5:18-cv-01603-EJD 

ORDER GRANTING IN PART AND 

DENYING IN PART MOTION TO 

INTERVENE AND STAY ACTION 

Re: Dkt. No. 67 

The U.S. Department of Justice (“DOJ”) moves this Court to intervene into and to stay this 

civil enforcement action (“the Civil Action” or “this Action”) by the Securities and Exchange 

Commission (“SEC”) against Ramesh “Sunny” Balwani. DOJ says the Motion is necessary to 

prevent Balwani from impermissibly using civil discovery from this Action in DOJ’s parallel 

criminal case against him, USA v. Holmes et al., 5:18-cr-00258-EJD (“the Criminal Case”). The 

allegations underlying the Civil Action and the Criminal Case are well known to the Court, 

Balwani, SEC and DOJ, so the Court does not recount them here. SEC supports the motion. 

Balwani opposes it. The Court has considered the papers and oral arguments of SEC, DOJ, and 

Balwani. For the reasons discussed below, the Court will allow DOJ to intervene, but will deny 

the request to stay this Action. 

I. Intervention 

Federal Rule of Civil Procedure 24 provides two means of intervention: intervention of 

right and permissive intervention. Both require the applicant’s motion to be “timely.” Fed. R. 

Civ. P. 24. When an applicant to intervene of right also “claims an interest relating to . . . the 

subject of the action, and is so situated that disposing of the action may . . . impair or impede the 

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[applicant’s] ability to protect its interest,” then the court “must” allow the applicant to intervene. 

Fed. R. Civ. P. 24(a)(2). Alternatively, through permissive intervention, a court “may” allow an 

applicant with “a claim or defense that shares with the main action a common question of law or 

fact” to intervene. Fed. R. Civ. P. 24 (b)(2). The court also “must consider whether the 

[permissive] intervention will unduly delay or prejudice the adjudication of the original parties’ 

rights.” Fed. R. Civ. P. 24(b)(3). “Timeliness is a flexible concept; its determination is left to the 

district court’s discretion.” United States v. Alisal Water Corp., 370 F.3d 915, 921 (9th Cir. 

2004). Courts should consider three factors in deciding whether a motion to intervene is timely: 

“(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.” Id. (quotation omitted). Delay is 

measured from “when [the applicant] knows or has reason to know that [its] interests might be 

adversely affected by the outcome of litigation.” Id. at 923. The applicant bears the burden of 

showing intervention is justified. Id. at 919. In the Ninth Circuit, “courts are guided primarily by 

practical and equitable considerations, and the requirements for intervention are broadly 

interpreted in favor of intervention.” Id. 

Here, DOJ argues that it meets the requirements for both means of intervention. As to 

intervention of right, it argues that, through the Criminal Case, it has an interest in the events that 

are the subject of this Action, and that it is situated so that disposal of this Action would, as a 

practical matter, impair or impede its ability to prosecute Balwani. DOJ also urges the Court to 

grant permissive intervention because DOJ unquestionably has claims in the Criminal Case that 

share common questions of law or fact with this Action. Balwani opposes DOJ’s intervention on 

the grounds that (a) the Civil Action has progressed too far, (b) DOJ’s delay in bringing its motion 

prejudiced him, (c) DOJ cannot justify its delay, and (d) that intervention of right is inappropriate 

because DOJ does not have a protectable interest in the Civil Action. 

DOJ’s motion is timely. As an initial matter, the Court notes that DOJ moves to intervene 

solely to move for the stay; DOJ does not seek to become a full litigant to the final outcome. 

Considering the first timeliness factor, the Court finds that the present stage of the litigation does 

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ORDER GRANTING IN PART AND DENYING IN PART MOTION TO INTERVENE AND 

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not weigh against intervention. The trial schedule has not yet been set. Balwani recently 

requested a 12-month discovery extension, SEC agreed to a 90-day extension, and the Court 

ordered a 120-day extension. Intervention will not disrupt the case schedule at its current stage. 

 Second, intervention will not prejudice Balwani. He argues that he has already expended 

resources on this Action, which has depleted the resources he has to defend against the Criminal 

Case. Had DOJ moved to stay this Action at its outset, he argues, then he would not have spent 

those resources. However, this asserted prejudice “does not flow from the intervention, but 

instead from the proposed stay,” so it does not persuade the Court. S.E.C. v. Nicholas, 569 F. 

Supp. 2d 1065, 1068 (C.D. Cal. 2008). 

As to the final factor, DOJ contends that it has not delayed in bringing this Motion. 

Rather, it argues, it brought this motion after Balwani issued subpoenas to nonparties that seek 

information that is not relevant to this Action but is directly relevant to the Criminal Case. 

Specifically, Balwani issued subpoenas to the following blood-testing centers and medical 

providers: LabCorp on October 19, 2018; Quest Diagnostics on November 7, 2018; Southwest 

Contemporary Women’s Care P.C. (“Southwest”) on March 26, 2019; Fountain Hills Women’s 

Health (“Fountain Hills”) on March 26, 2019; and the Arizona Department of Health Services on 

March 29, 2019. Balwani contends that these subpoenas are relevant to the Civil Action. DOJ 

filed its Motion on April 19, 2019, less than four weeks after the subpoenas to Southwest and 

Fountain Hills. Broadly interpreting the facts in favor of intervention—but without deciding the 

relevancy question—the Court finds that DOJ did not delay in bringing its motion to intervene. 

Having found that DOJ’s motion is timely, the Court further finds that this Action shares 

many common questions of fact and law with DOJ’s claims in the Criminal Case as their subject 

matters overlap. DOJ has satisfied the criteria for permissive intervention. The Court accordingly 

grants DOJ’s motion to intervene. The Court does not reach Balwani’s argument that DOJ has 

not adequately shown the protectable interest that is required to intervene of right. 

II. Stay 

Turning to whether to stay the Civil Action pending the outcome of the Criminal Case, the 

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Ninth Circuit has held that “[i]n the absence of substantial prejudice to the rights of the parties 

involved, simultaneous parallel civil and criminal proceedings are unobjectionable under our 

jurisprudence.” Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) 

(quotation and alteration omitted). Nonetheless, a district court may exercise “its discretion to stay 

civil proceedings when the interests of justice seem to require such action.” Id. (quotation and 

alteration omitted). “The decision whether to stay civil proceedings in the face of a parallel 

criminal proceeding should be made in light of the particular circumstances and competing 

interests involved in the case.” Id. (quotation omitted). The Ninth Circuit has laid out several 

factors for a district court to weigh when considering this question: “(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; . . . (5) the interest of the public in the pending civil and criminal litigation,” and (6) the 

extent to that the defendant’s Fifth Amendment rights are implicated. Id. at 325. “[O]ther courts 

have looked with disfavor to the Government’s request for a stay when a branch of the 

Government, and not private parties, has brought the civil lawsuit that a U.S. Attorney’s office is 

then seeking to stay.” S.E.C. v. Mazzo, 2013 WL 812503, at *2 n.3 (C.D. Cal. Feb. 25, 2013). 

While DOJ relies heavily upon the Nicholas, 569 F. Supp. 2d 1065, case, “the vast majority of 

cases hold that such a stay is improper absent a specific showing of prejudice that cannot be 

remedied by anything other than a complete stay of the civil proceeding.” S.E.C. v. Fraser, 2009 

WL 1531854, at *3 (D. Ariz. June 1, 2009); see also S.E.C. v. O’Neill, 98 F. Supp. 3d 219, 221 

(D. Mass. 2015); Mazzo, 2013 WL 812503, at *2; S.E.C. v. Sandifur, 2006 WL 3692611, at *3 

(W.D. Wash. Dec. 11, 2006). 

The first Keating factor looks to the interests of the civil plaintiff. Keating, 45 F.3d at 325. 

Here, SEC supports the proposed stay. SEC argues that Balwani has been attempting to push civil 

discovery beyond the scope of this Action, resulting in wasteful burdens on nonparties, and 

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increased time, effort, and costs for SEC. The Court finds that the first factor supports granting a 

stay. 

The second factor looks to the burden a stay would impose on the defendant. Keating, 45 

F.3d at 325. Staying this Action pending resolution of the Criminal Case, for which the Court has 

not yet set a trial schedule, would impose undue prejudice and a significant burden on Balwani. 

Balwani has begun to investigate SEC’s claims against him and forcing him to halt that 

investigation indefinitely would unfairly disadvantage him. It would increase the likelihood that 

witnesses will not be able to recall information, that they will become unavailable, or that 

documents may be lost. Moreover, the Civil Action, “like the [C]riminal [C]ase, asserts serious 

violations of the securities laws, and Defendant[] ha[s] a strong interest in being able to defend 

[himself] against the SEC’s allegations as quickly as possible.” Fraser, 2009 WL 1531854, at *3. 

An indefinite stay of the Civil Action would override that strong interest. This factor tilts sharply 

away from granting a stay. 

For the third factor, the Court considers “the convenience of the court in the management 

of its cases, and the efficient use of judicial resources.” Keating, 45 F.3d at 325. “[T]he Court 

ha[s] an interest in clearing its docket” through the just and efficient resolution of the pending 

matters. Sanrio, Inc. v. Ronnie Home Textile Inc., 2015 WL 1062035, at *4 (C.D. Cal. Mar. 10, 

2015); see also ESG Capital Partners LP v. Stratos, 22 F. Supp. 3d 1042, 1047 (C.D. Cal. 2014). 

This Action involves complicated factual questions, so that the Court (and the parties) will be best 

served by gathering evidence and establishing a record so that the two trials may proceed as 

closely together as practicable. 

DOJ argues that first resolving the Criminal Case would streamline discovery and decide a 

number of issues in this Action. Assuming that is correct, the Court would still be wary of 

abridging Balwani’s procedural and discovery rights in an effort to save resources and time. See

S.E.C. v. Kanodia, 153 F. Supp. 3d 478, 483 (D. Mass. 2015). In any event, DOJ’s argument is a 

gamble. It is possible that the Criminal Case could result in a mistrial leaving the Criminal Case 

unresolved and this case stayed with discovery open. This factor also weighs against a stay. 

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Fourth, the Court considers the interests of nonparties to the civil litigation. Keating, 45 

F.3d at 325. To support its position, DOJ points to Fountain Hills’s recent letter to the Court 

complaining of Balwani’s subpoena. The Court takes seriously the burdens that litigation can 

force upon nonparties, but the Court must balance those burdens against Balwani’s right to build 

his defense through civil discovery. After Fountain Hills complained, the assigned Magistrate 

Judge considered whether to quash the subpoena. He read the parties’ briefing, heard oral 

arguments on the question, and ultimately quashed the subpoena for being “overly broad, not 

proportional to the needs of the case,” and for “impos[ing] undue burden and expense on [a] nonparty.” Dkt. No. 73. In other words, the system worked. Nonparty witnesses, DOJ, and SEC may 

object to Balwani’s discovery requests in the future, and the Court will then decide those 

objections on an case-by-case basis. The Court’s decision to quash one subpoena does not support 

halting all of Balwani’s civil discovery for some indeterminate amount of time. 

The fifth factor looks at the interests of the public. Keating, 45 F.3d at 325. DOJ argues 

that the public interest favors staying discovery to prevent Balwani from impermissibly using civil 

discovery to his benefit in the Criminal Case. But to the extent that this is a problem, it is of 

DOJ’s own making. See e.g., Kanodia, 153 F. Supp. 3d at 482; S.E.C. v. Saad, 229 F.R.D. 90, 91 

(S.D.N.Y. 2005). These case’s overlapping subject matter did not come as a surprise to DOJ. It 

could have moved to stay the Civil Action immediately after Balwani’s indictment, but instead it 

chose to let this Action proceed far enough that a stay would significantly prejudice Balwani. The 

Court does not presently decide whether Balwani’s third-party subpoenas go beyond the scope of 

this Action, but the Court does find that the question of their relevancy in this Action is not so 

obvious as to cut off all of Balwani’s civil discovery. Even though SEC argued that the Fountain 

Hills subpoena sought information not relevant to this Action, Magistrate Judge Cousins quashed 

the subpoena for other reasons. The Court is not unsympathetic to DOJ’s concerns that Balwani 

may attempt to overreach in civil discovery, but the Court is capable of addressing such concerns 

with a scalpel instead of a saw. As with potential concerns over the discovery burdens to 

nonparties, SEC or DOJ may object to any discovery requests that it believes improperly go 

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beyond the scope of this Action. The Court will hear those objections and, if appropriate, sustain 

them. The fifth Keating factor does not support a stay. 

Finally, the Court considers how a stay would implicate Balwani’s Fifth Amendment 

rights. See Keating, 45 F.3d at 325-26. Balwani opposes the proposed stay, so he has “[himself] 

elected to be put in the position of having to decide whether to assert their Fifth Amendment 

rights.” Fraser, 2009 WL 1531854, at *2 n.3. And as Balwani points out, he was already put in 

that position in the Colman litigation after DOJ indicted him. This factor does not support a stay. 

The Court finds that, in sum, the Keating factors do not support staying the Civil Action, 

so the Court denies the motion to stay. 

III. Conclusion 

For the reasons discussed above, the Court grants DOJ’s motion to intervene, but denies 

the motion to stay. Having allowed DOJ to intervene, it may remain in the case to object to any of 

Balwani’s discovery requests that it contends are only relevant to the Criminal Action. 

IT IS SO ORDERED. 

Dated: June 14, 2019 

______________________________________ 

EDWARD J. DAVILA 

United States District Judge 

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