Case Number: BC488472 Hearing Date: June 18, 2018 Dept: 94

Plaintiff Neman Real Estate Investment, LLC’s Motion for Order (1) to Continue the Debtor’s Examination Pending the Close of Criminal Proceedings or, in the alternative, (2) to Stay the Request for Production of Documents and Debtor’s Examination Pending the Close of Criminal Proceedings is DENIED.

Background

On July 17, 2012, Plaintiff Neman Real Estate Investment, LLC (“Plaintiff”) filed this action against Defendants Frederic Oken; Stanford Oken and Ruth Dawson as Successor Co-Trustees of the Survivor’s Trust Created Under the Will of Harry Oken; Frederic Oken, Stanford Oken, and Ruth Dawson as Successor Co-Trustees of Marital Deduction Trust Created Under the Will of Harry Oken; and Frederic Oken, Stanford Oken, and Ruth Dawson as Successor Co-Trustees of the Residuary Trust Created Under the Will of Harry Oken (collectively, “Defendant”) for breach of oral and implied agreement and fraud. On January 22, 2015, the Court granted Defendants’ motion for summary judgment and entered judgment in Defendants’ favor and against Plaintiff. In the Amended Further Judgment, entered on June 9, 2015, Defendants were awarded $17,387 in costs and $619.566.75 in attorney’s fees against Plaintiff. (6/9/15 Amended Further Judgment.) The judgment was appealed, and on July 11, 2017, the Court of Appeal affirmed the judgment.

On October 26, 2017, this Court, per Defendants’ application, issued an Order to Appear for Examination (“ORAP”) to Ben Neman (“Neman”), the Managing Partner of Plaintiff. On October 23, 2017, Defendants also served Neman a Civil Subpoena for Personal Appearance and Production of Documents, Electronically Stored Information, and Things at Hearing (the “Subpoena”). (Motion, Exh. B.)

On April 2, 2018, Plaintiff filed a Motion for Order (1) to Continue the Debtor’s Examination Pending the Close of Criminal Proceedings or, in the alternative, (2) to Stay the Request for Production of Documents and Debtor’s Examination Pending the Close of Criminal Proceedings (the “Motion”). On May 10, 2018, Defendants filed an opposition. On May 16, 2018, Plaintiff filed a reply.

The Debtor’s Examination is set for hearing on July 11, 2018.

Legal Standard

“Whatever their response to requests for accommodation of the conflicting constitutional rights of a defendant in concurrent civil and criminal proceedings, courts have consistently refrained from recognizing any constitutional need for such accommodation. Rather, the alleviation of tension between constitutional rights has been treated as within the province of a court’s discretion in seeking to assure the sound administration of justice. ‘There may be cases where the requirement that a criminal defendant participates in a civil action, at peril of being denied some portion of his worldly goods, violates concepts of elementary fairness in view of the defendant’s position in an inter-related criminal prosecution. On the other hand, the fact that a man is indicted cannot give him a blank check to block all civil litigation on the same or related underlying subject matter. Justice is meted out in both civil and criminal litigation. The overall interest of the courts that justice be done may very well require that the compensation and remedy due to a civil plaintiff should not be delayed (and possibly denied). The court, in its sound discretion, must assess and balance the nature and substantiality of the injustices claimed on either side.’ [Citation.]” (People v. Coleman (1975) 13 Cal.3d 867, 885, emphasis added.)

“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.’” (Avant! Corp. v. Superior Court (2000) 79 Cal.App.4th 876, 885.) Courts should consider: (1) “the extent to which the defendant’s fifth amendment rights are implicated;” (2) “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;” (3) “the burden which any particular aspect of the proceedings may impose on defendants;” (4) “the convenience of the court in the management of its cases, and the efficient use of judicial resources;” (5) “the interests of persons not parties to the civil litigation;” and (6) “the interest of the public in the pending civil and criminal litigation.” (Id.) Where a party’s silence is constitutionally guaranteed, the court should weigh the parties’ competing interests with a view toward accommodating the interests of both parties, if possible. (Id. at 882.)

Discussion

Neman has been named as a defendant in the following two criminal cases.

Plaintiff submits a declaration from Neman’s attorney, Ariel A. Neuman (“Neuman”), in United States of America v. Pacific Eurotex Corp., et al. (Case No. 2:14-cr-00521-JAK), in the United States District Court, Central District of California (the Eurotex Case). (Motion, Neuman Decl. ¶ 2.) In the Eurotex Case, Neman was indicted with various financial crimes, including money laundering, conspiracy, structuring financial transactions to evade reporting requirements. (Id. ¶ 3, Exh. A.) Neuman declares that Neman has entered into a plea agreement with the United States government, but the Eurotex Case is still pending until the United States determines that Neman has fully complied with the terms of the plea agreement. (Id. ¶ 3, Exh. C.)

Plaintiff also presents evidence that Neman has been charged with crimes relating to building construction and maintenance in Case No. 6CJ01914 by the Los Angeles City Attorney’s Office. (Motion, Fisher Decl. 5, Exh. C.)

The Court notes that the ORAP requests Neman to “furnish information to aid in enforcement of a money judgment against [Plaintiff].” (Motion, Exh. A, Item No. 2a.) The Subpoena, on the other hand, requests documents that “will assist Defendants in locating the nature and extent of [Plaintiff’s] assets in order to assist in the enforcement of judgment.” (Id., Exh. B, Item No. 3.) Significantly, the ORAP and Subpoena seek information and documents concerning Plaintiff’s assets—not Neman.

A. Precedent Case

Plaintiff argues that Siry Investment, L.P. v. Saeed Farkhondehpour, et at., Los Angeles Superior Court Case No. BC372362, is analogous to the instant circumstances, where

trial court, and subsequently the Court of Appeal, sustained Mr. Neman’s objections to the requests for production of documents based upon his Fifth Amendment privilege; Plaintiff urges this Court to follow suit. (Motion p. 1.)

The Court notes that Plaintiff’s description of the trial court and Court of Appeal’s orders are inaccurate. In its March 21, 2017 order, trial court only sustained some of Neman’s objections, and, even then, only to the extent the requested documents involved certain parties; many other objections were not sustained. (See Motion, Exh. E p. 2.) The trial court also ordered Neman to appear for a judgment debtor examination. (See id.)

On appeal, the Court of Appeal sustained some of Neman’s objections and suggested that an in camera review of documents withheld by Neman would be appropriate to determine if Neman had properly asserted his Fifth Amendment privilege was properly asserted. (See id., Exh. F pp. 1-2) The Court of Appeal did not unconditionally sustain Neman’s objections.

The Court notes, however, that the before the trial court and the Court of Appeal in Case No. BC372362 was Neman’s motion to quash subpoena and for protective order, where Neman submitted a separate statement objecting to each of the requested documents. Here, Plaintiff is moving to stay the ORAP and the Subpoena. Plaintiff has not submitted any proper objections to the requested documents in the Subpoena on which the Court may rule.

Significantly, the requested documents in Case No. BC372362 are distinct from the requested documents in the present Subpoena. The Court cannot assume that the requested documents in the instant Subpoena necessarily implicate Neman’s Fifth Amendment privilege because of how Neman’s objections sustained in a different case based on different reasons and facts. The Court must look to the requested documents in the Subpoena and determine independently whether the Subpoena implicates Neman’s Fifth Amendment privilege as it relates to the Eurotex Case and Case No. 6CJ01914.

B. Neman’s Fifth Amendment Privilege

Plaintiff argues: “Where civil defendant faces criminal prosecution which involves the same or similar facts as those in a pending civil action, Courts have not required the defendant to participate in discovery, whether it be written or oral testimony, where the defendant will be required to choose between asserting his Fifth Amendment privilege against self-incrimination or defending himself in a civil litigation,” citing to Pacers, Incorporated v. Superior Court (1984) 162 Cal.App.3d 686. (Motion p. 2.) Pacers, however, stands for no such proposition. (See, e.g., Bains v. Moores (2009) 172 Cal.App.4th 445, 484 [affirming the trial court’s denial of a stay pending a criminal case.])

In Pacers, supra, 162 Cal.App.3d at 690, the Court of Appeal held:

“Where, as here, a defendant’s silence is constitutionally guaranteed, the court should weigh the parties’ competing interests with a view toward accommodating the interests of both parties, if possible. An order staying discovery until expiration of the criminal statute of limitations would allow real parties to prepare their lawsuit while alleviating petitioners’ difficult choice between defending either the civil or criminal case.’ Thus, whether a civil action should be stayed pending a criminal proceeding is not mandatory, but rather depends on the ‘weigh the parties’ competing interests with a view toward accommodating the interests of both parties, if possible.’”

(Emphasis added.)

As the California Supreme Court in People v. Coleman (1975) 13 Cal.3d 867, 885 affirmed:

“‘There may be cases where the requirement that a criminal defendant participates in a civil action, at peril of being denied some portion of his worldly goods, violates concepts of elementary fairness in view of the defendant’s position in an inter-related criminal prosecution. On the other hand, the fact that a man is indicted cannot give him a blank check to block all civil litigation on the same or related underlying subject matter. Justice is meted out in both civil and criminal litigation. The overall interest of the courts that justice be done may very well require that the compensation and remedy due to a civil plaintiff should not be delayed (and possibly denied). The court, in its sound discretion, must assess and balance the nature and substantiality of the injustices claimed on either side.’ [Citation.]”

(Emphasis added.)

Here, Plaintiff is essentially using Neman’s criminal proceedings as a basis for stay the enforcement of the judgment brought by Defendants by ways of the ORAP and Subpoena. Plaintiff is not entitled to “a blank check to block all civil litigation” against it through nonparty Neman. (People, supra, 13 Cal.3d at 885.)

C. Plaintiff’s Fifth Amendment Privilege

Plaintiff also argues: “Mr. Neman is the Managing Member of Neman Real Estate Investments, LLC [(Plaintiff)]. To the extent that an employee’s assertion of a Fifth Amendment privilege against self-incrimination (such as Mr. Neman here) might affect the ability of the corporate defendant to respond truthfully to discovery requests, a stay is appropriate,” citing to Avant! Corporation v. Superior Court (2000) 79 Cal.App.4th 876. (Motion p. 3.)

Avant stands for no such proposition. In fact, the Avant Court reached the opposite conclusion:

“The rule that corporations have no privilege against self-incrimination was reaffirmed in United States v. Kordel, supra, 397 U.S. 1. Kordel added that ‘service of the interrogatories obliged the corporation to ‘appoint an agent who could, without fear of self-incrimination, furnish such requested information as was available to the corporation.’ [Fn. omitted.] The corporation could not satisfy its obligation … simply by pointing to an agent about to invoke his constitutional privilege. ‘It would indeed be incongruous to permit a corporation to select an individual to verify the corporation’s answers, who because he fears self-incrimination may thus secure for the corporation the benefits of a privilege it does not have.’ [Fn. omitted.] Such a result would effectively permit the corporation to assert on its own behalf the personal privilege of its individual agents.’ [Citation.]”

(Avant!, supra, 79 Cal.App.4th at 884–885, emphasis added.)

Thus, Plaintiff cannot impute Neman’s privilege against self-incrimination onto itself as it would be “incongruous” to what the Supreme Court held in Kordel, supra—which was that corporations have no such Fifth Amendment privilege.

D. Plaintiff’s Waiving of Neman’s Fifth Amendment Privilege

In opposition, Defendants argue that because Plaintiff initiated this civil action it, Plaintiff and Neman, therefore, waived any right to Fifth Amendment privilege, citing to Alvarez v. Sanchez (1984) 158 Cal.A3d 709, 712 and Fremont Indem. Co. v. Sup.Ct. (Sharf) (1982) 137 Cal.App.3d 554, 560. (Oppo. p. 5.) The Court disagrees with Defendants’ reading of Alvarez and Fremont. Even if Defendants’ reading of Alvarez and Fremont is correct, it was Plaintiff that initiated this action against Defendants—not Neman. Plaintiff cannot waive Neman’s Fifth Amendment privilege on his behalf.

E. The Avant! Factors

In deciding the instant Motion, Avant, supra, is instructive:

“Even where the civil discovery process is directed against an individual defendant who is also a defendant in a related criminal case, the Ninth Circuit has held that ‘[t]he Constitution does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings. [Citations.]’ (Keating v. Office of Thrift Supervision (9th Cir. 1995) 45 F.3d 322, 324.) Keating observed that the question of whether a civil proceeding should be stayed pending the outcome of a parallel criminal proceeding often rests not on the constitutional issue of self-incrimination, but on the issue of abuse of discretion. ‘‘In the absence of substantial prejudice to the rights of the parties involved, [simultaneous] parallel [civil and criminal] proceedings are unobjectionable under our jurisprudence.’ [Citation.] ‘Nevertheless, a court may decide in its discretion to stay civil proceedings . . .’ when the interests of justice seem[ ] to require such action.’’ [Citations.]’ [Citation.]”

(Avant!, supra, 79 Cal.App.4th at 885.)

As the Avant Court provides, the issue before the Court is not whether the Court is required to stay the ORAP and Subpoena, but how the Court should exercise its discretion in the interest of justice. “[A] party is not entitled to decide for himself or herself whether the privilege against self-incrimination may be invoked. ‘Rather, this question is for the court to decide after conducting ‘a particularized inquiry, deciding, in connection with each specific area that the questioning party seeks to explore, whether or not the privilege is well founded.’” (Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1053, original emphasis.) Accordingly, the Court turns to the six factors set out in Avant to balance the interests of Neman and Defendants and to determine what justice so required.

A. The Extent to Which the Neman’s Fifth Amendment Rights are Implicated

The first factor is the extent to which the Neman’s fifth amendment rights are implicated by proceeding with the ORAP and Subpoena.

In the Eurotex Case, Neman has entered a plea agreement that would shield him from the indictment that was brought against him by the United States. Thus, there is no risk of Neman’s self-incriminating himself with respect to the Eurotex Case—unless Neman breaches the terms of the plea agreement.

Further, the ORAP and the Subpoena seeks information concerning Plaintiff’s assets—not Neman. Plaintiff argues that the requests for documents concerning its bank account, schedule of employees and independent contractors, schedule showing all family relationships among officers, directors, and managers, financing agreements, tax returns, profit and loss statements, income and expense statements—among others—necessarily require Neman to invoke his Fifth Amendment privilege. (Motion pp. 3-4, 11-13.) The Court is not persuaded. On their face, the requested documents are related to Plaintiff’s finance and not Neman; thus, Neman’s Fifth Amendment privilege is not implicated. Plaintiff appears to conflate its financial assets with Neman’s financial assets. This blanket conflation of Plaintiff’s and Neman’s finance is problematic, particularly in light of the fact that the Court has not reviewed the contents of the requested documents. Plaintiff has provided no evidence to show how producing Plaintiff’s financial records would implicate Neman’s Fifth Amendment privilege other than making this unfounded assertion.

As for Case No. 6CJ01914, the charges brought against Neman involve alleged crimes relating to building construction and maintenance, which are wholly unrelated to Plaintiff’s finance. The Court is unclear how the ORAP and the Subpoena would implicate Neman’s Fifth Amendment privilege in Case No. 6CJ01914, and Plaintiff has not shown such implication. Plaintiff appears to argue that because Neman is involved in its business, any documents relating to Neman would implicate his Fifth Amendment privilege. (Motion pp. 11-13.) The Court finds this premise that all of Plaintiff’s finance is one and the same as Neman’s finance to be overbroad and unfounded—at least not without first reviewing documents of Plaintiff’s and Neman’s finance. The issue, again, turns to the contents of the requested documents, which have not been produced. This issue can also easily be resolved if Plaintiff would designate another person (other than Neman) in its corporate office to produce the requested documents—after all, Neman is entitled to his Fifth Amendment privilege, not Plaintiff.

The risk of Neman’s Fifth Amendment privilege being implicated, here, only exists in the Eurotex Case—even then, only if Neman breaches the terms of his plea bargain. Thus, at most, this factor in unclear as to which party it favors without the Court reviewing each of the requested documents, and, at least, very slightly favors Plaintiff.

B. The Interest of the Defendants in Proceeding Expeditiously with this Litigation or any Particular Aspect of It, and the Potential Prejudice to Defendants of a Delay

The second factor is the interest of Defendants in proceeding expeditiously with this litigation or any particular aspect of it, and the potential prejudice to Defendants of a delay.

Defendants have clearly asserted their interest in expeditiously enforcing their judgment against Plaintiff in their opposition. Plaintiff has not argued otherwise. Therefore, this factor favors Defendants.

C. The Burden Which any Particular Aspect of the Proceedings May Impose on Neman

The third factor is the burden which any particular aspect of the proceedings may impose on Neman. Neman does not argue how the ORAP and the Subpoena would impose any particular burden on him—other than implicating his Fifth Amendment privilege, which has been analyzed above. Accordingly, this factor is neutral.

D. The Convenience of the Court in the Management of Its Cases, and the Efficient Use of Judicial Resources

The fourth factor is the convenience of the court in the management of its cases, and the efficient use of judicial resources. “‘Clearly, denial of the stay motion promotes the convenience of the court in the management of its cases.’” (Bains v. Moores (2009) 172 Cal.App.4th 445, 484.) Therefore, this factor favors Defendants.

E. The Interests of Persons not Parties to the Civil Litigation

The fifth factor is the interests of persons not parties to the civil litigation. Neither party argues this issue. For this reason, this factor is neutral.

F. The Interest of the Public in the Pending Civil and Criminal Litigation

The sixth factor is the interest of the public in the pending civil and criminal litigation. The “denial of the request for a stay promoted the public’s interest’s in maintaining ‘a system that encourages individuals to come to court for the settlement of their disputes.’” (Bains, supra, 172 Cal.App.4th at 484.) Accordingly, this factor favors Defendants.

Conclusion

Weighing of all the factors together favors Defendants. Accordingly, the Motion is DENIED.

Neman is to appear at the Debtor’s Examination Hearing scheduled for July 11, 2018, at 1:30 p.m. in Department 94 and is free to assert his Fifth Amendment privilege at the hearing.

Neman is also to comply with the Subpoena and produce the requested documents. Neman is free to object to the production of the requested documents based on his Fifth Amendment privilege, but if Neman were to make such assertion, he is to produce a privilege log. If necessary, Neman should be ready to produce the requested documents for the Court to hold an in camera review of the documents to determine if Neman’s assertion of his Fifth Amendment privilege is appropriate.

Alternatively, Defendants may subpoena another employee of Plaintiff to produce the requested documents or file another application to have another employee of Plaintiff to appear at the debtor’s examination hearing.

Moving party to give notice.