## Facts

- The Securities and Exchange Commission (SEC) brought a civil enforcement action alleging securities-law violations arising from an alleged Broadcom stock-option backdating scheme.
- Henry T. Nicholas III (former CEO) and William J. Ruehle (former CFO) were defendants in the SEC action.
- The United States Attorney’s Office (USAO) pursued a parallel criminal prosecution against Nicholas and Ruehle based on substantially the same alleged conduct.
- The USAO moved to intervene in the SEC civil action and sought a stay of discovery and other proceedings to prevent civil discovery from being used to obtain information unavailable under criminal discovery rules.
- The SEC did not oppose a stay; Nicholas and Ruehle objected to the breadth and duration of the requested relief.

## Issues

1. Whether the USAO could intervene in the SEC’s civil enforcement action to protect its interests in a parallel criminal prosecution.
2. Whether, and to what extent, the court should stay civil discovery and proceedings to prevent circumvention of criminal discovery limits and interference with the criminal case.

## Decision

- The court granted the USAO’s motion to intervene under Federal Rule of Civil Procedure 24, at least for purposes related to protecting the criminal prosecution.
- The court granted a broad stay of discovery and substantive proceedings in the SEC action while the related criminal case progressed.
- The stay was not treated as indefinite or absolute; the court allowed for later modification based on changed circumstances in the criminal matter.

## Legal Principles

- A federal court has broad discretion, as part of its inherent docket-management authority, to stay civil proceedings when justice and efficient case management so require.
- In deciding whether to stay a civil case due to parallel criminal proceedings, courts commonly balance factors including:
  - the degree of factual and legal overlap between the civil and criminal matters;
  - the posture and progress of the criminal case;
  - the civil plaintiff’s interests;
  - the burden and potential prejudice to civil defendants from delay;
  - judicial economy and risk of inconsistent rulings; and
  - the public interest, including effective criminal law enforcement.
- A stay is particularly justified where substantial overlap creates a risk that civil discovery will function as an end run around the narrower discovery available in criminal cases and may expose witnesses or prosecutorial strategy.
- Intervention may be warranted when the intervenor has a direct, substantial interest that may be impaired absent participation and that is not adequately protected by existing parties with different litigation objectives.

## Conclusion

The court allowed the USAO to intervene in the SEC enforcement action and imposed a broadly tailored stay, prioritizing protection of the parallel criminal prosecution by preventing defendants from using civil discovery to circumvent criminal discovery limits, while leaving room to adjust the stay as the criminal case developed.


Sec. & Exch. Comm'n v. Nicholas, 569 F. Supp. 2d 1065 (C.D. Cal. 2008)