Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Grassmueck v. Yan

United States District Court, W.D. Washington

July 27, 2017

ZHOU YAN, et al., Defendants.


          JAMES L. ROBART United States District Judge


         Before the court are two motions: (1) Defendant Zhou Yan's motion for a six-month stay of this lawsuit (MFS (Dkt. # 17)), and (2) Ms. Zhou's motion to seal her counsel's supplemental declaration (Supp. Troberman Decl. (Dkt. # 23) (sealed)), which she filed in support of her reply memorandum related to the first motion (MTS (Dkt. # 24)). Plaintiff Michael A. Grassmueck, the court-appointed Receiver for Path America, LLC, and several other entities in Securities and Exchange Commission v. Path America, LLC, , No. C15-1350JLR (W.D. Wash.) (“the Receivership”), opposes Ms. Zhou's motion for a stay. (MFS Resp. (Dkt. # 19).) Mr. Grassmueck also opposes Ms. Zhou's motion to seal. (MTS Resp. (Dkt. ## 25-1 (redacted), 26 (sealed).) The court has reviewed the motions, the parties' submissions related to the motions, the relevant portions of the record, and the applicable law. Considering itself fully advised, [1] the court DENIES the motion to stay and GRANTS the motion to seal.


         Mr. Grassmueck's lawsuit arises from the allegedly fraudulent transfer of funds from Receivership entities to Ms. Zhou, which Ms. Zhou allegedly used to purchase a residence in Bellevue, Washington. (See generally Compl. (Dkt. # 1).) Mr. Grassmueck seeks to return those funds to the Receivership, or in the alternative, quiet title to Ms. Zhou's interest in the Bellevue residence. (See id.) Mr. Grassmueck has recorded a lis pendens against the Bellevue residence making any transfer or encumbrance of the property subject to any rights of Mr. Grassmueck in his role as Receiver following resolution of this lawsuit. (Mot. Ex. A.)

         Ms. Zhou is a party in a parallel civil action, in which she is represented by Richard J. Troberman. (Troberman Decl. (Dkt. # 18) ¶ 3; Supp. Troberman Decl. (Dkt. # 23) (sealed) ¶ 3.) During the course of Mr. Troberman's representation of Ms. Zhou, Assistant United States Attorneys informed Mr. Troberman that the related criminal proceeding involving Lobsang Dargey, [2] United States v. Lobsang Dargey, No. CR17-0001RSL (W.D. Wash.), remains an open investigation, and “Ms. Zhou remains a potential target of that investigation.”[3] (Troberman Decl. ¶ 4; see also Supp. Troberman Decl. ¶ 5.)

         III. ANALYSIS

         A. Ms. Zhou's Motion for a Stay

         In the absence of “substantial prejudice” to the parties' rights, simultaneous, parallel criminal and civil proceedings are unobjectionable. Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (internal quotations omitted). “Nevertheless, a court may decide in its discretion to stay civil proceedings when the interests of justice seem to require such action.” Id. The court “should consider ‘the extent to which the defendant's [F]ifth [A]mendment rights are implicated.'” Id. (quoting Fed. Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989)). However, “[n]ot only is it permissible to conduct a civil proceeding at the same time as a related criminal proceeding, even if that necessitates invocation of the Fifth Amendment privilege, but it is even permissible for the trier of fact to draw adverse inferences from the invocation of the Fifth Amendment in a civil proceeding.” Id. at 326 (citing Baxter v. Palmigiano, 425 U.S. 308, 318 (1976)).

         Although the extent to which a defendant's Fifth Amendment rights are implicated is a significant factor, it is only one consideration to be weighed against other considerations when evaluating a stay. Id. at 326. In addition to the defendant's Fifth Amendment rights, the court should consider: “(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. Ms. Zhou, as the moving party, bears the “heavy burden” of demonstrating that a stay is warranted. Slagowski v. Cent. Wash. Asphalt, 291 F.R.D. 563, 569 n.4 (D. Nev. 2013)

         1. Ms. Zhou's Fifth Amendment Privilege

         Although Assistant United States Attorneys have indicated to Ms. Zhou's counsel that she is possibly under criminal investigation (Troberman Decl. ¶ 4; see Supp. Troberman Decl. ¶ 5), the government has not responded to Ms. Zhou's counsel's recent requests for an update concerning the status of that possible criminal investigation (Supp. Troberman Decl. ¶ 5). Although a court will not categorically deny a stay solely because the defendant has not yet been indicted, “[w]hen ‘no indictment has been returned, ' and no criminal action is underway, the case for a stay is much weaker.” eBay, Inc. v. Digital Point Sols., Inc., No. C 08-4052 JF (PVT), 2010 WL 702463, at *3 (N.D. Cal. Feb. 25, 2010) (quoting Molinaro, 889 F.3d at 903). The case for a stay is weaker because the potential prejudice to a civil defendant facing a parallel criminal investigation is more remote than it is for an indicted defendant and the delay for the plaintiff is potentially indefinite. Id.

         Because the government has not issued an indictment against Ms. Zhou, the extent to which any criminal proceeding may overlap with this civil proceeding is unknown. Although Ms. Zhou argues that the criminal investigation “would likely stem from payments made to Mr. Dargey, ” she provides no supporting evidence for this assertion. (Mot. at 5.) As Mr. Grassmueck points out, the investigation might “be focused entirely on potential misrepresentations by [Ms. Zhou] while soliciting investors” for Mr. Dargey's various projects, or the investigation could “be focused on whether [Ms. Zhou] played a role in altering financial records provided to the government or [the] lender Voya Insurance and Annuity Company.” (MFS Resp. at 3.) Simply stated-there is scant information concerning any criminal investigation into Ms. Zhou's actions. (See generally Troberman Decl., Supp. Troberman Decl.) Indeed, the court cannot be certain that any criminal investigation of Ms. Zhou is ongoing. The mere fact that the government did not respond to Ms. Zhou's counsel's most recent inquiry concerning the possible investigation does not mean that an investigation is ongoing or that an indictment will issue. Rather, the government's failure to respond provides no information at all.

         As a result of the uncertainties surrounding any criminal investigation into Ms. Zhou, the court cannot evaluate the degree to which Ms. Zhou's Fifth Amendment rights would be implicated in this case, if at all. Although the fact that an indictment might issue at some point in the future may make it more difficult for Ms. Zhou to defend this suit, “[a] defendant has no absolute right not to be forced to choose between testifying in a civil matter and asserting h[er] Fifth Amendment privilege.” See Keating, 45 F.3d at 326; see also Molinaro, 889 F.2d at 903 (stating that the case for staying an action is “far weaker” when an indictment has not issued, even though the possibility of such an indictment makes responding to the civil action more ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.