JOHN D. KIRBY CA Bar No. 149496 The Executive Complex 1010 ...

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SEC v. Cooper, et al..

Defendant’s Notice of Motion and Motion to Stay

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JOHN D. KIRBY

CA Bar No. 149496

The Executive Complex

1010 Second Avenue, Suite 2400

San Diego, CA 92101

Tel: (619) 557-0100

Fax: (619) 557-0123

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

(HONORABLE CYNTHIA A. BASHANT)

SECURITIES AND EXCHANGE

COMMISSION,

Plaintiff,

vs.

JACOB KEITH COOPER,

Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No.: 15-CV-00226-BAS-DHB DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY Date: TBD Time: TBD Judge: Hon. CYNTHIA A. BASHANT Courtroom: 4B HEARING/ORAL ARGUMENT REQUESTED

Case 3:15-cv-00226-BAS-DHB Document 173 Filed 08/28/17 PageID.4061 of 2

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SEC v. Cooper, et al..

Defendant’s Notice of Motion and Motion to Stay

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TO PLAINTIFF AND TO THEIR ATTORNEYS OF RECORD:

PLEASE TAKE NOTICE that Defendant Jacob Keith Cooper through his counsel

John D. Kirby does move the Court for an order to stay the above-entitled action due to the

state criminal case filed in the Superior Court of the County of San Diego against him. The

Motion is made on the grounds that a criminal complaint has been filed in the Superior

Court by the District Attorney’s Office of the County of San Diego, and is now pending

against him. This matter will require Mr. Cooper to assert their Fifth Amendment rights in

this case.

This Motion is based upon this Notice of Motion and Motion to Stay, the

accompanying Memorandum of Points and Authorities, all pleadings and papers on file in

this action, and upon such other matters as may be presented to the Court at the time of the

hearing.

Respectfully submitted,

Dated: August 28, 2017 BY: /s/ John D. Kirby

JOHN D. KIRBY

Case 3:15-cv-00226-BAS-DHB Document 173 Filed 08/28/17 PageID.4062 of 2

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SEC v Cooper

Defendants Memorandum of Points and Authorities in Support of Motion to Stay

15CV00226-BAS-DHB

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JOHN D. KIRBY CA Bar No. 149496 The Executive Complex 1010 Second Avenue, Suite 2400 San Diego, CA 92101 Tel (619)557-0100 Fax (619)557-0123

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF CALIFORNIA



COMMISSION,

Plaintiff,

vs. JACOB KEITH COOPER,

Defendant,

) ) ) ) ) ) ) ) ) )

Case No.: 15-CV-00226-BAS-DHB DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO STAY Date: TBD Time: TBD Judge: Hon. Cynthia A. Bashant Courtroom: 4B HEARING/ORAL ARGUMENT REQUESTED

Defendant Jacob Keith Cooper through his attorney John D. Kirby respectfully

submits this Memorandum of Points and Authorities in Support of his Motion to Stay the

above-entitled action.

Case 3:15-cv-00226-BAS-DHB Document 173-1 Filed 08/28/17 PageID.4063 Page 1 of 10

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SEC v Cooper


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STATEMENT OF FACTS

The Court should stay this case to protect Defendant’s Fifth Amendment rights

based upon the newly filed criminal state case closely related to this matter. In this case,

Plaintiff Securities and Exchange Commission (“SEC”) alleges that Mr. Cooper engaged in

fraudulent conduct by (1) Using investor funds, in the form of a loan, to fund an escrow

obligation in the context of an administrative proceeding also brought by the SEC, and (2)

misappropriated investor funds for what the SEC characterizes as inappropriate

administrative fees. These actions allegedly occurred between 2009 and 2014. (See

generally, Compl.) Thus, Plaintiff has brought suit alleging violations of Federal law. (See

generally, Compl.). This action was filed on February 3, 2015.

On March 15, 2017, almost two years after the complaint in this matter was filed, the

District Attorney’s Office for San Diego County filed a criminal complaint against Mr.

Cooper, as well as two individuals who also had roles at Defendant’s Total Wealth

Management (See generally Criminal Complaint CD 251154 (attached as Exhibit A)).

In this criminal complaint, the People allege that Mr. Cooper, along with his co-defendants,

made multiple misstatements in connection to the sales of securities to the investors in

Total Wealth Management and its investment vehicles. Based upon discovery, and


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repeated statements from the Deputy District Attorney handling the criminal case, both the

loan taken by Mr. Cooper and the administrative fees at issue here will be part of the

People’s alleged proof at trial. The Deputy District Attorney has even stated in court that

the $150,000 loan may form the basis of a separate state embezzlement charge that may be

added to the current complaint.

Because the gravamen of the civil complaint in this matter and the most recently

filed state complaint are so similar, this the Court should stay this civil case until the

criminal matter is resolved.

Mr. Cooper would note that this motion is not intended to stay action on, and

specifically excludes the current “Joint Motion of Plaintiff, Securities and Exchange

Commission, Receiver, Thomas A. Seaman, and Defendant Jacob Cooper, for Order

Approving Settlement,” and the anticipated briefing regarding disposition of the Jacko

Settlement Funds. Mr. Cooper requests a stay of all other proceedings in this matter.

///

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ARGUMENT

The Court should grant this motion to protect Defendant’s Fifth Amendment rights

against self-incrimination in the newly filed state criminal matter. The government may

bring parallel civil and criminal proceedings against the same defendant either

"simultaneously or successively." Standard Sanitary Manufacturing Co. v. United States,

226 U.S. 20, 52 (1912). However, courts possess inherent authority to stay civil

proceedings, postpone civil discovery, or impose protective orders when justice requires.

United States v. Kordel, 397 U.S. 1, 12 n.27 (1970); SEC v. Dresser Indus. Inc., 628 F.2d

1368, 1375 (D.C. Cir. 1980).

Indeed, the regulation of a stay, unlike the question of dismissal, is one that falls

squarely within the discretion of the district court. See Landis v. North American Co., 299

U.S. 248, 254 (1936) (“the power to stay proceedings is incidental to the power inherent in

every court to control the disposition of causes on its docket with economy of time and

effort for itself, for counsel, and for litigants.”). Such discretion is appropriately used when

the resolution of another matter will have a direct impact on the issues before the court. See

Hoeun Yong v. INS, 208 F.3d 1116, 1119-20 (9th Cir. 2000) ("A trial court may, with

propriety, find it is efficient for its own docket and the fairest course of the parties to enter

a stay of an action before it, pending resolution of independent proceedings which bear

upon the case. This rule applies whether the separate proceedings are judicial,

administrative, or arbitral in character, and does not require that the issues in such


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proceeding are necessarily controlling of the action before the court.") (citing Leyya v.

Certified Grocers of California. Ltd., 593 F.2d 857, 863-64 (9th Cir. 1979)). Thus, a court

may decide to stay civil proceedings in the face of criminal proceedings even though "such

action is not required by the Constitution." Federal Savings and Loan Insurance Corp. v.

Molinaro, 889 F.2d 899, 902 (9th Cir. 1989); Dresser, 628 F.2d at 1375.

I. DEFENDANT IS ENTITLED TO EXERCISE HIS FIFTH AMENDMENT

RIGHTS TO PROTECT HIMSELF IN THE CRIMINAL CASE.

Defendant is entitled to exercise his Fifth Amendment privilege in conjunction with

the newly filed criminal proceeding. See, Mitchell v. United States, 526 U.S. 314, 327

(1999) (“To say that [a criminal defendant] had no right to remain silent but instead could

be compelled to cooperate in the deprivation of her liberty would ignore the Fifth

Amendment privilege at the precise stage where, from her point of view, it was most

important.”) In Mitchel, the Supreme Court was faced with a criminal defendant who had

pleaded guilty to a crime, but attempted to exercise her Fifth Amendment rights at the

sentencing hearing. Id. at 318-19. The district court determined that she was not entitled

to exercise her Fifth Amendment right and considered her refusal to testify at the hearing in

determining her sentence, and the court of appeals affirmed. Id. at 319

The Supreme Court, however, reversed the decision. Id. at 317. The Court based its

determination on two factors. First, it determined that the defendant did not waive her Fifth

Amendment rights by pleading guilty. Id. at 322 (“There is no convincing reason why the


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narrow inquiry at the plea colloquy should entail such an extensive waiver of the

privilege.”). Second, the Court held that the entry of the guilty plea did not terminate the

criminal proceeding. Id. at 326 (“To maintain that sentencing proceedings are not part of

‘any criminal case’ is contrary to the law and to common sense.”) Thus, the Court

reversed the trial court and held that a criminal defendant is entitled to exercise her Fifth

Amendment rights in a sentencing hearing. Id. at 330. Accordingly, Mr. Cooper is entitled

to exercise his Fifth Amendment rights in this case.

When a court is asked to stay civil proceedings during the pendency of a related

criminal action, the decision must be made in light of the particular circumstances and

competing interests involved in the case. Molinaro, 889 F.2d at 902; Keating v. Office of

Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1994). In making this determination, courts

in the Ninth Circuit generally consider the following factors:

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.


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Molinaro, 889 F.2d at 902-03; Keating, 45 F.3d at 325. Since it is the most important

factor in this case, the Court will address the burden on defendant before analyzing the

remaining factors. Here, as all of these factors weigh in favor of a stay, the Court should

grant this Motion.

A. The Burden on the Criminal Defendant Weighs Heavily in Favor of

Staying the Proceedings

The burden of prosecuting two matters concurrently is tremendous.1 When assessing

the burden on the defendant, courts generally have considered (1) whether an indictment

has been returned; (2) the degree the civil and criminal proceedings overlap; and (3) the

extent the defendant's Fifth Amendment rights are implicated. See Keating, 45 F.3d at 325-

26. There is also a very real concern that allowing the civil case to proceed could "expose

the basis of the defense to the prosecution in advance of criminal trial, or otherwise

prejudice the case." See Dresser, 628 F.2d at 1376.

Here, due to the extensive overlap between the two cases, a stay is in order.

Defendant’s pleadings and discovery will be available for use in the criminal matter, in

violation of their Fifth Amendment rights. Thus, it would place an unfair burden on

Defendant if he is required to respond to any further pleadings while this newly filed

Criminal Matter is pending. Furthermore, given the contentious nature of this case, it can

be expected that Plaintiff have or will contact the prosecuting agency in an effort to apply

1 As referenced in a prior pleading, Defendant is also currently appeal the administrative law judge’s finding to the Ninth

Circuit.


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extra pressure against Defendant to resolve the instant case.2 Accordingly, Defendants face

a tremendous burden in prosecuting the instant case while the Criminal Matter is pending.

B. A Stay Will Not Prejudice Plaintiff SEC

There is no prejudice to the Plaintiff SEC arising from the potential delay. If the

criminal proceedings terminate in results favorable to Plaintiff, they will undoubtedly

attempt to utilize those proceedings to bolster their case here. Moreover, by setting

periodic status conferences, the Court will be able to keep control over the proceedings by

permitting the Court to recalendar all pending matters quickly, and thus protect the

Plaintiff’s interest in this litigation. In this way, a stay would prevent this case from

languishing on the calendar, so that the Plaintiff would be entitled to receive its day in

court once the criminal matter is resolved. Accordingly, there will be no prejudice to the

Plaintiff from a stay.

C. The Convenience of the Court Weighs in Favor of Granting Defendant’s

Stay Request

Granting the stay will conserve judicial resources. Plaintiff SEC has filed a motion

for summary judgment in this matter. By granting this stay, the Court will be able to defer

ruling on that motion until after the criminal matters have resolved. Thus, granting the stay

will conserve judicial resources.

//

2 With reference to the posited cooperation between the civil and criminal authorities, the SEC deposed Defendant for a second

time less than two weeks before the criminal case was files.


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D. The Interests of Persons Not Parties to this Litigation and the

Public are in Favor of a Stay

Granting the stay will not harm third parties. There will be no trial or other

evidentiary hearings that will adversely impact the rights and availability of potential

witnesses. Additionally, with this action stayed, the Criminal Matter can receive priority

from all potential witnesses, without fear of intervention of this action. Thus, granting the

stay will not adversely impact persons not parties to this action.

Moreover, granting the stay will not harm the public’s interest in the litigation.

There has not yet been any indication that the public has taken any interest in this case, and

given the garden-variety sort of allegations in the Complaint, it is not likely that such an

interest will manifest. Further, the public’s general interest in the prompt resolution of

judicial proceedings will be vindicated in the parallel Criminal Matters, because those

claims are brought on the public’s behalf.

In sum, the Court should grant this Motion and continue the case to allow for the

resolution of the Criminal Matter. On the one hand, Mr. Cooper’s own interests do not

parallel any public interest in this matter. On the other hand, Mr. Cooper is in the situation

of defending against two matters, with the possibility that the prosecution in the Criminal

Matter would gain an unfair advantage from the civil proceedings. Further, the Court will

benefit from the stay by reducing the number of potential issues for dispute. Finally, third


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parties—including the public at large—will not be harmed by the stay. Accordingly, the

Court should grant the requested stay.

CONCLUSION

For the reasons set forth herein, Defendant respectfully requests this Court to order

the above-entitled action to be stayed until the Criminal Matter is resolved.

Respectfully submitted,

Dated: August 28, 2017 BY: /s/ John D. Kirby

JOHN D. KIRBY


SEC v Cooper

15-CV-00226-BAS-DHB

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JOHN D. KIRBY CA Bar No. 149496 The Executive Complex 1010 Second Avenue, Suite 2400 San Diego, CA 92101 Tel (619)557-0100 Fax (619)557-0123

THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF CALIFORNIA



COMMISSION,

Plaintiff,

vs.

JACOB KEITH COOPER,

Defendant,

) ) ) ) ) ) ) ) ) )

Case No. 15-CV-00226-BAS-DHB PROOF OF SERVICE

I, the undersigned, hereby declare as follows:

1. I am over 18 years of age, a resident of the County of San Diego, State of

California, counsel for the Defendant and that my address is 1010 Second

Avenue, Suite 2400, San Diego, CA 92101;

2. That today I served Defendants’ Memorandum of Points and Authorities in Support of Motion to Stay Notice of Motion to stay and Exhibit A, on opposing counsel by causing to be delivered by efile to office of the clerk to the; and that I emailed a copy to defendant.

I declare under penalty of perjury that the foregoing is true and correct.

Dated: August 28, 2017 /s/John D. Kirby

JOHN D. KIRBY


JOHN D. KIRBY CA Bar No. 149496 The Executive Complex 1010 ...

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