In April 2020, Apothio sued County Kern and the California Department of Fish and Wildlife. In October 2019, state and county law enforcement officers entered their agricultural fields and ordered the destruction of 500 acres of hemp crops worth approximately $ 1 billion. Apothio claims the agency’s search warrant was flawed because it contained an incorrect description of Apothio’s principal Trent Jones, the acreage, and because it ignored Apothio’s status as a research unit under California law. Most recently, the defendant authorities filed motions to dismiss the case of Apothio in full, as his harvests are contraband according to federal law and Apothio cannot have any ownership interest in such contraband.
At the start of the civil case, Mr. Jones was charged with criminal offense in October 2020 for the illegal cultivation and sale of marijuana (based on the facts of this case). As a result of this development, the defendant authorities filed a suspension motion (essentially suspend discovery) in the case until (1) completion of the criminal investigation against Mr. Jones or (2) at least a decision on the dismissal requests.
For the benefit of all, the Tribunal issued a lengthy opinion that struck down its decision. It began with the request of the defendant authorities to suspend the discovery until the criminal investigation was completed. It stated: “A party does not have a constitutional right to stay civil proceedings pending a criminal investigation or prosecution, nor does the Constitution protect a party from being compelled to choose the fifth between the consequences of asserting or waiving their rights Change to choose the civil procedure. “When considering whether to grant residence, the court should consider the extent to which the defendant’s rights to the Fifth Amendment are affected, as well as the following five Keating factors:
- Plaintiffs’ interest in dealing expeditiously with this dispute, or any aspect of it, and the potential prejudice of delay for plaintiffs;
- The burden that a particular aspect of the trial may place on the accused;
- The convenience of the court in managing its cases and the efficient use of legal remedies;
- The interests of people who are not involved in civil litigation; and
- The public interest in the pending civil and criminal proceedings.
Overall, the Court was not convinced that the privilege of Mr Jones’ fifth amendment would create major problems in civil proceedings:
Even if the criminal case causes Jones in his individual capacity to assert his fifth amendment privilege, since the investigation and civil trial here actually and legally overlap, corporate defendants are not entitled to such a privilege. The privilege also does not extend to company records. In addition, a corporate records administrator “has no privilege to refuse production [even if] their content tends to burden him. “… Defendants can still obtain valuable testimony from undisclosed company representatives and force relevant records to be submitted as the fifth amendment privilege does not apply to the business units. The extent to which Jones’ rights to the Fifth Amendment are affected does not warrant a suspension of this action. (Quotes omitted).
The Court then discussed each Keating factor and found that these factors, taken together, also favored Apothio’s position:
- “This factor weighs [Apothio’s] Favor ”- Apothio had expressed an interest in gathering evidence while it is fresh, before the witnesses’ memories fade and the evidence becomes out of date. Apothio had also claimed that his continued financial viability was in jeopardy while the litigation continued.
- “To the extent that the plaintiff attempts to abuse the civil discovery process and obtain material from an ongoing criminal investigation, the court finds that a stay would be warranted” – this was incredibly factual and largely a wash.
- “This factor speaks for the plaintiff” – Apothio had claimed that the efficient use of judicial resources would be to proceed with the discovery, as this could result in a faster resolution of the case and allow realistic settlement negotiations.
- With regard to the interests of parties and non-parties, the Court found that the general principle that “the public has an interest in a relatively rapid resolution of civil matters” was to outweigh all the arguments put forward by the defendants.
Ultimately, the court refused to suspend the discovery due to the ongoing criminal proceedings. Subsequently, however, the defendant authorities’ request to suspend the discovery pending a decision on their dismissal requests was examined. In deciding on this issue, it was suggested that the general consideration would be to “balance the harm caused by delaying the discovery against the possibility of the application being granted and to eliminate the need for such a discovery entirely”. Two requirements must be met in order for a residence permit to be issued:
- The pending application may need to be dispositive for the entire case, or at least for the topic the discovery is aimed at.
- The upcoming, possibly dispositive movement can be decided without additional discovery.
With regard to the first pen, the defendant authorities argued that their pending motions to dismiss the complaint would essentially reject the complaint because Apothio’s harvests are legally and factually contraband under federal law and Apothio cannot have any ownership interest in such contraband. The court agreed, writing that it had taken a “preliminary look” at Apothio’s opposition and found it unconvincing at first glance without further discovery being required. The Court therefore granted the defendant agencies’ applications for suspension pending a decision on their applications for dismissal. This was a pretty severe blow to Apothio – now the parties are essentially frozen in their efforts until the defendants’ motions are heard.
This case and mindset will definitely be watchable – not just because of the high stakes, but also because of the insight into how civil and criminal proceedings overlap, how federal courts view and treat hemp companies in general, and how much respect is shown Government agencies parties. We will get back to you when the motions are heard as this decision will certainly be meaningful.