You're viewing Docket Item 98 from the case Securities and Exchange Commission v. Jenkins. View the full docket and case details.

Download this document:




Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 1 of 16

GIBSON, DUNN & CRUTCHER LLP
Douglas M. Fuchs (CA Bar # 196371) (Pro Hac Vice Pending)
[email protected]
David S. Han (CA Bar # 247789) (Pro Hac Vice Pending)
[email protected]
333 S. Grand Ave.
Los Angeles, CA 90071
Telephone: (213) 229-7000
Attorneys for CSK Auto Corporation

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

DON W. WATSON, et al.,

Defendants.

SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

MAYNARD L. JENKINS,

Defendant.

Case No. CV-09-0443-GMS
THIRD-PARTY CSK AUTO
CORPORATION’S NOTICE OF
MOTION AND MOTION TO
INTERVENE AND STAY
PROCEEDINGS OR LIMIT
DISCOVERY
(Oral Argument Requested)

Case No. CV-09-01510-PHX-GMS
THIRD-PARTY CSK AUTO
CORPORATION’S NOTICE OF
MOTION AND MOTION TO
INTERVENE AND STAY
PROCEEDINGS OR LIMIT
DISCOVERY
(Oral Argument Requested)

NOTICE OF MOTION AND MOTION TO INTERVENE AND STAY

PROCEEDINGS OR LIMIT DISCOVERY
TO ALL PARTIES AND TO THEIR COUNSEL OF RECORD:

PLEASE TAKE NOTICE that CSK Auto Corporation (“CSK”), by and

through the undersigned counsel, and pursuant to Fed. R. Civ. P. 24, respectfully
files this motion for orders (1) allowing CSK to intervene in these actions and (2)

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 2 of 16

staying proceedings or limiting discovery in the matters pending resolution of
United States vs. Fraser, et al., 09-00372-SRB.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

2

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 3 of 16

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

I.

INTRODUCTION

Three distinct but inextricably-linked cases have arisen from accounting

misconduct that allegedly occurred at CSK Auto Corporation (“CSK”): (1) SEC v.
Watson (“Watson-SEC” matter), (2) SEC v. Jenkins (“Jenkins” matter), and (3)
U.S. v. Watson (“Watson-Criminal” matter). In denying a prior motion to stay
filed by the United States, the Watson-SEC Court stressed that defendant Don
Watson and then-defendant Martin Fraser “have a strong interest in being able to
defend themselves against the SEC’s allegations as quickly as possible.” SEC v.
Fraser, 2009 U.S. Dist. LEXIS 50379, at *7-8 n.3 (D. Ariz. June 1, 2009).
Circumstances have changed considerably in the intervening nineteen months,
however, and a stay is now fully warranted and proper in not only Watson-SEC,
but also Jenkins.

First, since the time the Court denied the government’s prior stay request,
an impending trial date of June 7, 2011 has been set in the Watson-Criminal case,
whereas no trial date has been set in the Watson-SEC matter and discovery does
not cutoff until March 2012. No scheduling order is in place in Jenkins.
Second, the outcome of the Watson-Criminal trial will sharpen and

streamline and perhaps even go a long way to eliminate the need for discovery in
the civil cases, save perhaps discovery on specific compensation points in Jenkins.

Third, the prejudice to CSK, which is responsible for advancing legal fees

and other defense costs for Watson and Jenkins and covering related costs
stemming from actions of their counsel, is severe and outweighs any prejudice to
Watson and Jenkins, who will have ample opportunity to complete civil discovery
following the forthcoming Watson-Criminal trial. The financial hardship to CSK
tips the balance strongly in favor of a temporary stay and at the very least an order
permitting only very narrow and limited document discovery.

In these circumstances, the Court should permit intervention by CSK and

grant its requested stay.

Gibson, Dunn &
Crutcher LLP

1

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 4 of 16

II.

BACKGROUND

A.

The Watson-SECMatter (SEC v. Watson, 09-CV-00443)
The alleged accounting improprieties at CSK form the basis of the Watson-

SEC matter and the Watson-Criminal matter. And it is these same two matters
that have brought with them onerous and continuing costs for CSK in the form of
attorney’s fees and other defense costs—all incurred as part of obligations
imposed by CSK’s bylaws, undertakings, and applicable corporate law. The
itemization confirms the financial burden:

• CSK paid over $24 million to conduct the internal investigation
underlying the same accounting issues spawning the costly civil litigation
before the Court.
• Through December 2010, CSK has incurred more than $5.9 million in
costs for the Watson-SEC and Watson-Criminal matters. At least $2.2
million relates to the Watson-SEC case alone, and Watson’s counsel project
2011 costs at $500,000 per month for legal fees and $150,000 per month
for forensic accounting assistance. (See, e.g., Declaration of Jeffrey L.
Groves (“Groves Decl.”) ¶ 2, 4.)
• CSK also continues to advance defense costs to Opper and O’Brien, as
well as expenses associated with subpoenas and requests to waive the
attorney-client privilege made upon CSK, its counsel, and the law firm that
assisted CSK’s Audit Committee with the internal investigation. (Groves
Decl. ¶ 4.)

The cost burden will not lessen moving forward. To the contrary, Watson

has indicated that he plans to take at least thirty-five depositions and possibly sixty
to seventy if allowed. Each deposition entails significant costs—from preparing
and appearing, which sometimes involves travel, to after-the-fact reviewing the
printed transcript.
B.

The JenkinsMatter (SEC v. Jenkins, 09-CV-01510)
While Jenkins has not been pending for nearly as long as the Watson-
Criminal matter, it shares two important attributes: first, Jenkins has come to
focus on whether wrongdoing occurred at CSK, and, second, exploring that
question has proven very expensive for CSK—with the company having incurred

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

2

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 5 of 16

over $1.9 million in fees and costs to date. (Groves Decl. ¶ 3.) Furthermore,
counsel for Jenkins has already recently noticed or cross-noticed eight depositions
(Ex. 11 at 2:11-13) and have indicated their intention for more, while also
continuing with document discovery.

II.

ARGUMENT

A.

The Proceedings In The Watson-SEC And Jenkins Matters
Should Be Stayed, Or Discovery Should Be Limited, Pending
Resolution Of The Parallel Watson-Criminal Matter.

Legal Standards.

1.
In determining whether a stay of civil litigation is in the interests of justice,

the Court considers multiple factors:

(1) the extent to which Fifth Amendment rights are implicated; (2) the
interest of the plaintiff in proceeding expeditiously with the litigation or
any particular aspect thereof, and the potential prejudice delay would cause
to the plaintiff; (3) the burden that any particular aspect of the proceedings
may impose on the defendant; (4) the convenience of the court in the
management of its cases, including the efficient use of judicial resources;
(5) the interests of non-parties; and (6) the interest of the public in the
pending civil and criminal cases.

Fraser, 2009 U.S. Dist. LEXIS 50379, at *5-6 (citing Keating v. Office of Thrift
Supervision, 45 F.3d 322, 324-25 (9th Cir. 1995)).

CSK has moved to intervene—the propriety of which is set out below—and

requests a stay (or, at the very least, a limitation on discovery) on the basis of the
unique burdens parallel proceedings impose on non-parties, namely CSK and the
witnesses to be deposed (factor #5), the burden on Watson or Jenkins (factor #3),
and the convenience of the court and judicial efficiency (factor #4). As the Court
previously recognized, “[t]he other factors do not significantly weigh in favor of
either outcome.” Fraser, 2009 U.S. Dist. LEXIS 50379, at *7-8 n.3.



1 Unless otherwise noted, the exhibits cited herein are attached to the

concurrently-filed request for judicial notice.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

3

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 6 of 16

2.

Circumstances Have Changed Considerably In The Last
Year

The beginning point must be the recognition of the circumstances that have
changed since June 2009, when the Watson-SEC Court denied DOJ’s prior motion
to stay the Watson-SEC matter. Those circumstances are many:

• Then, a trial date had not been set in the Watson-Criminal matter. But
now, Watson’s criminal trial is scheduled to begin June 7, 2011 (Ex. 1 at
13:21-22)—in less than six months and during a period that almost surely
will be consumed by the preparation of witnesses, exhibits, and motions in
limine.
• Then, no scheduling order was in place in the Watson-SEC matter and
thus the timing, pace, and scope of discovery was uncertain. But now, a
scheduling order is in place, with discovery not set to end until October 31,
2011, dispositive motions due by March 10, 2012, and trial at date
sometime beyond that outer date. (See Ex. 2 at 4:5-9.)
• Then, the Watson-SEC matter had entailed little more than the SEC’s
filing of its complaint and the filing of motions to dismiss. But now, the
Court has ruled on the motions to dismiss, a new complaint has been filed,
and the case is proceeding to full discovery absent a stay or limiting order.
• Then, the Jenkins matter had not even been filed. But now, the Jenkins
matter not only has commenced, but also has come to focus on the very
issue at the epicenter of both the Watson-SEC matter the Watson-Criminal
trial—namely, whether misconduct occurred at CSK.
• Then, CSK had no indication of the scope or pace of intended discovery
by Watson or Jenkins. But now, both points are clear—as Watson and
Jenkins, on parallel tracks, have indicated they intend to take the maximum
number of depositions permitted by the Court, have already noticed and
cross noticed at least eight of those depositions, and otherwise continue to
lodge upon CSK requests for documents.

3. The Watson-SEC Matter.

a.

CSK Will Be Substantially Prejudiced Without A
Stay Or Limit On Discovery.

Against the backdrop of these changed circumstances is an equally clear
consequence: if discovery proceeds, the financial burdens on CSK will mount.
These burdens are not abstract. Take, for example, the Watson-SEC matter, in
which Watson’s counsel already have been paid over $2.2 million in fees and

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

4

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 7 of 16

costs. Those payments followed ones of $750,000 for counsel’s representation of
Watson during the SEC investigation of CSK. Discovery moving forward means
that CSK will be responsible for advancing the fees and costs necessary to obtain
and review documents, respond to inevitable follow-up requests for additional
documents, prepare for and take depositions, and review the transcripts of those
depositions toward the end of identifying defense strategies and preparing
motions. Watson’s counsel has estimated these costs at $650,000 per month
($500,000 for legal fees and $150,000 for forensic accounting assistance), and
nothing prevents an upward modification of this estimate. (Groves Decl. ¶ 4.)
Indeed, depositions likely will prove particularly expensive, as CSK may be
expected to pay not only for counsel to the parties’ attendance, but also that of
counsel for O’Brien, Opper, and the company itself. Removing all doubt about
these potential burdens, Watson has indicated that he plans to take at least thirty-
five depositions and possibly sixty to seventy if allowed by the Court. (Groves
Decl. Ex. B at 4.)

Absent a stay or limiting order, the costs likely will not end there. Watson
has served subpoenas on O’Melveny & Myers LLP (which assisted CSK’s Audit
Committee with the company’s internal investigation), Ernst & Young (which
assisted O’Melveny in the course of its work), PricewaterhouseCoopers (CSK’s
auditor), and counsel for CSK. In doing so, Watson asked CSK to waive the
attorney client privilege, which CSK to date has declined to do. So, beyond the
burden of advancing legal fees and defense costs in the Watson-Criminal and
Watson-SEC matters, CSK also may well find itself incurring substantial costs to
litigate privilege issues.

At every turn, then, the landscape for CSK is defined by cost—past,

present, and future.2 On the side of the balance lays Watson’s interest in this



2 Defendants may respond that CSK should not be heard to complain about fees

and costs as a substantial amount to date ultimately has been paid by D&O

[Footnote continued on next page]

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

5

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 8 of 16

matter proceeding alongside his criminal case. The balance tips decidedly in favor
of a stay or limiting order.

3.

Watson Will Suffer No Prejudice From A Stay Or Limit
On Discovery.

The prejudice assessment should start with recognition of the clarifying
impact that Watson’s criminal trial almost certainly will have on the scope of
necessary discovery in this civil matter. For example, if Watson is convicted, the
SEC would most likely move for summary judgment given the substantial overlap
between this case and the criminal one, which this Court has recognized. See, e.g.,
Fraser, 2009 U.S. Dist. LEXIS 50379, at *4 (observing that “there are a number
of questions of law and fact common to both the civil and criminal cases (namely,
whether Defendants violated various provisions of the securities laws)”). This
result almost certainly would obviate the need for discovery. On the other hand, if
Watson is acquitted, the SEC could drop all or some of its charges—again
resulting in significant savings because of the subsequent streamlining of issues
and discovery. See, e.g., Grubbs v. Irey, 2008 U.S. Dist. LEXIS 26758, at *15-16
(E.D. Cal. Mar. 28, 2008) (stating that “the outcome of the criminal proceedings
may guide the parties in settlement discussions and potentially eliminate the need
to litigate some or all of the issues in this case”) (emphasis added). In short,
“resolution of the parallel [criminal] proceedings will likely serve to narrow the
issues and streamline the discovery process in the civil action.” Id., at *15.

The prejudice to Watson of a stay or limiting order is minimal, if any. The

Watson-SEC Court previously denied the government’s motion to stay this case





[Footnote continued from previous page]

insurance. The existence of D&O insurance and whether a carrier has
reimbursed CSK is irrelevant, as the existence of coverage does not and should
not lead one to the conclusion that coverage is limitless, that there are no issues
associated with coverage, or that its existence gives defense counsel the right
to proceed at any cost when more cost-effective approaches to discovery—
especially the timing of discovery—are available.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

6

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 9 of 16

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

because the government’s claims of prejudice were outweighed by the
“substantial[] prejudice” to “Defendants’ interest in the speedy resolution of the
SEC’s claims against them.” Fraser, 2009 U.S. Dist. LEXIS, at *9, *12-14. As
explained, however, circumstances have changed considerably in the last year,
with there now being much certainty about the impact of discovery moving
forward in Watson-SEC and Jenkins. Watson has agreed to a schedule that pushes
resolution of this case years well into the future. His doing so shows that his
“interest in [a] speedy resolution” will not be prejudiced by a stay or limit on
discovery. Further, all the other relevant parties—the SEC, Opper, O’Brien, and
DOJ—support this motion and make no claims of prejudice; DOJ, in fact, has also
moved for a limitation on discovery. Moreover, the SEC has indicated its
willingness to agree to a reasonable modification of the discovery schedule should
this case be stayed and still proceed after resolution of the criminal case. Watson
would thus have a significant and meaningful opportunity to conduct discovery in
that situation and would not be prejudiced.

That Watson recently chose to testify in the SEC matter does not alter the
outcome. Nothing about that decision changes the schedule in place in the SEC
matter, the burdens Watson’s planned discovery would impose on CSK, or the fact
that his impending trial will almost certainly clarify the scope of, if not completely
eliminate the need for, discovery in this matter. The law requires a balancing of
interests in assessing stay applications precisely to enable appropriate
consideration of a multitude of factors, including the burdens parallel proceedings
would impose upon non-parties—here CSK and DOJ. Those burdens, as
explained, are acute and overwhelm Watson’s interests at this time in pursuing full
discovery in the SEC civil matter.

In the end, then, a stay of Watson-SEC is fully warranted, appropriate, and

necessary to protect CSK’s interests. Watson’s counsel has been unable and
indeed unwilling to identify any particular prejudice flowing from a different

Gibson, Dunn &
Crutcher LLP

7

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 10 of 16

conclusion. Indeed, in response to an express request to identify prejudice (see
Groves Decl. Ex. A), Watson’s counsel indicated that Watson wants to press
ahead in the civil case in order to benefit his criminal case—a clearly
impermissible purpose, as DOJ emphasizes in its moving papers.

The JenkinsMatter.

3.
The Jenkins matter should also be stayed, or discovery should be limited,

because of the prejudice that CSK will suffer should the matter be allowed to
proceed. As in the Watson-SEC matter, the company will be forced to incur costly
legal expenses that could be obviated by the resolution of the Watson-Criminal
matter. Jenkins has conceded that one of the key issues underlying his case—
whether misconduct occurred at CSK during his tenure as CEO—cannot be
resolved until after the criminal case is resolved. (Ex. 1 at 13:21-27, 7:3-5.) Thus,
“the outcome of the criminal proceedings may . . . potentially eliminate the need to
litigate some or all of the issues in this case.” Grubbs, 2008 U.S. Dist. LEXIS
26758, at *15-16.

In addition, because the criminal trial will be public, an abundance of

evidence will be available to Jenkins during the proceedings. CSK thus should not
be forced to pay for discovery on issues that may be mooted by the Watson-
Criminal trial. Further, if the Watson-SEC action is stayed, that also warrants a
stay of the Jenkins matter because Jenkins and Watson seek to depose many of the
same witnesses, who should not have to be deposed—and inconvenienced—twice.
Nor should CSK be forced to foot legal bills inflated by such unnecessary
depositions.

Jenkins will suffer no prejudice from a stay. He has already acknowledged
that, regardless of whether a stay is granted, he must wait for the resolution of the
Watson-Criminal case and that his trial cannot proceed before that occurs. In light
of the minimal prejudice—if any—that Jenkins will suffer from a stay, and the

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

8

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 11 of 16

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

substantial, but likely unnecessary costs that may be forced upon CSK, this motion
should be granted.

If the Court determines that a limit of discovery is more appropriate than a

stay, CSK respectfully requests that the taking of depositions be stayed until
resolution of the criminal case.

4.

Judicial Economy Favors A Stay Or Limitation Of
Discovery.

Principles of judicial economy also support a stay or limit on discovery.

The Court previously stated this factor did not weigh in favor of granting or
denying a stay because “while proceedings in the criminal case might refine issues
in the civil case, the opposite could also be true, and thus judicial economy may
just as well be served by conducting the civil case together with the criminal
case.” Fraser, 2009 U.S. Dist. LEXIS, at *7-8 n.3. But, as noted, the criminal
case will be tried before this matter (Ex. 1 at 13:21-22; Ex. 2 at 4:5-9), so only
issues here will be refined. See Grubbs, 2008 U.S. Dist. LEXIS 26758, at *15 (a
stay would “serve the interests of judicial economy because the resolution of the
parallel [criminal] proceedings w[ould] likely serve to narrow the issues and
streamline the discovery process in the civil action”); Lizarraga v. City of Nogales,
2007 U.S. Dist. LEXIS 90055, at *6 (D. Ariz. Nov. 28, 2007) (“[t]he potential
dispositive or clarifying effect of the resolution of [the] criminal case on the civil
proceeding also may weigh in favor of a stay”) (internal quotation marks omitted).
Further, because it is clear that the criminal case will be tried first, the Court will
not be “rely[ing] upon fortuitous events to manage its docket.” Fraser, 2009 U.S.
Dist. LEXIS, at *7-8 n.3.

Moreover, a stay or discovery limitation would also “allow civil discovery

to proceed more smoothly than would otherwise be possible” because “the
termination of a parallel criminal case can be expected to remove the predicate for
the assertion of the Fifth Amendment right against self-incrimination by potential

Gibson, Dunn &
Crutcher LLP

9

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 12 of 16

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

deponents in the civil case.” Grubbs, 2008 U.S. Dist. LEXIS 26758, at *16. This
would benefit both Watson and the SEC. Finally, a stay or discovery limitation
would also allow this Court to focus on more pressing matters, rather than on, for
example, the numerous discovery disputes that will undoubtedly arise here but that
ultimately may be mooted by the resolution of the criminal case.

All the relevant factors thus weigh in favor of granting CSK’s motion to
stay proceedings or limit discovery in both Watson-SEC and Jenkins matter until
completion of the Watson-Criminal trial. If the Court determines that a limit of
discovery is more appropriate than a stay, CSK respectfully requests that the
taking of depositions be stayed until resolution of the criminal case.

B.

CSK May Intervene In The Watson-SEC and JenkinsCases As
A Matter Of Right.

As part of granting the requested stay, the Court also should grant CSK’s

accompanying request to intervene pursuant to Fed. R. Civ. P. 24(a)(2).

Legal Standards.

1.
The Court “must permit anyone to intervene who . . . claims an interest
relating to the property or transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical matter impair or impede the
movant’s ability to protect its interest, unless existing parties adequately represent
that interest.” Fed. R. Civ. P.. 24(a)(2) (emphasis added). As a practical matter, a
four-part test governs the pertinent inquiry:

(1) the motion must be timely; (2) the applicant must claim a “significantly
protectable” interest relating to the property or transaction which is the
subject of the action; (3) the applicant must be so situated that the
disposition of the action may as a practical matter impair or impede its
ability to protect that interest; and (4) the applicant’s interest must be
inadequately represented by the parties to the action.

Forest Conservation Council v. United States Forest Serv., 66 F.3d 1489, 1493
(9th Cir. 1995); see also Southwest Ctr. for Biological Diversity v. Berg, 268 F.3d
810, 817 (9th Cir. 2001).

Gibson, Dunn &
Crutcher LLP

10

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 13 of 16

It is further settled that “[c]ourts generally construe Rule 24(a) liberally in

favor of potential intervenors and focus on practical considerations rather than
technical distinctions.” Ctr. for Biological Diversity v. Kempthorne, 2009 U.S.
Dist. LEXIS 125509, at *5 (D. Ariz. Jan. 15, 2009); see also Forest Conservation
Council v. United States Forest Serv., 66 F.3d 1489, 1493 (9th Cir. 1995) (“This
court interprets [FRCP 24(a)] broadly in favor of intervention.”). In addition,
“[c]ourts are to take all well-pleaded, nonconclusory allegations in the motion to
intervene . . . as true absent sham, frivolity or other objections.” Berg, 268 F.3d at
819-20.
2.

CSK Satisfies The Test For Interventions Of Right.
a.

CSK’s Motion Is Timely.

The Watson-SEC and Jenkins matters are not set for trial until, at the

earliest, 2012—long after completion of the Watson-Criminal trial. Discovery in
both cases has proceeded slowly but is now ramping up. Now, then, is the right
time for CSK to intervene so that discovery in the cases may be properly
coordinated under the Court’s sound discretion. See, e.g., Home Builders Ass’n of
N. Cal. v. U.S. Fish and Wildlife Service, 2006 U.S. Dist. LEXIS 37749, at *10
(E.D. Cal. May 24, 2006). There being no delay in CSK’s requested stay, the
company’s motion to intervene is timely and reflects no delay. See, e.g., Fraser,
2009 U.S. Dist. LEXIS 50379, at *4.

b.

CSK’s Protectable Interests Are Clear.

As a proposed intervenor, CSK also must show that it has a significantly
protectable interest relating to the action. Forest Conservation, 66 F.3d at 1493.
“It is generally enough that the interest asserted is protectable under some law,”
LG Elecs., Inc. v. Q-Lity Computer, Inc., 211 F.R.D. 360, 364 (N.D. Cal. Dec. 4,
2002) (internal quotations marks and citations omitted), and “a ‘non-speculative,
economic interest may be sufficient.’” Home Builders, 2006 U.S. Dist. LEXIS

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

11

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 14 of 16

37749, at *13 (quoting United States v. Alisal Water Corp., 370 F.3d 915, 919-20
(9th Cir. 2004)) (emphasis added).

CSK easily clears this hurdle. With its assets being used to pay Watson’s
and Jenkins’s legal expenses, the company’s interests are concrete, particular, and
capable of being protected by a stay. See LG Elecs., 211 F.R.D. at 364 CSK’s
interests are also “related to the underlying subject matter of [both] action[s].”
Home Builders, 2006 U.S. Dist. LEXIS 37749, at *13; see also Fed. R. Civ. Pro.
24(a)(2). Courts have defined the term “action” in FRCP 24(a) as “any ruling of
the trial court,” Northrop Grumman Info. Tech., Inc. v. United States, 74 Fed. Cl.
407, 414 (Fed. Cl. 2006) (emphasis added),3 including “collateral discovery
issues,” United States v. American Tel. & Tel. Co., 642 F.2d 1285, 1292 (D.C. Cir.
1980); see also Formulabs, Inc. v. Hartley Pen Co., 275 F.2d 52, 55-57 (9th Cir.
1960). With CSK shouldering the defense costs for all civil discovery activity, the
company’s concrete economic interests are directly related to the scope, substance,
and timing of discovery, but also to the entire progression of litigation. CSK thus
meets the second prong of the intervention test.

c.

Intervention Allows CSK To Protect Its Interests.

The law also requires CSK to show that the “disposition of the action may

as a practical matter impair or impede its ability to protect [its] interest[s].” Forest
Conservation, 66 F.3d at 1493. Here, if not allowed to intervene, CSK will be
“substantially affected in a practical sense” by litigation in both actions. Berg, 268
F.3d at 820. The legal bills it must pay will continue to rise, with little, or likely
no, recourse for the company. CSK thus will be unable to protect its economic
interests without intervention.



3 Although Northrop involved Rule 24(a)(2) of the Rules of the U.S. Court of

Federal Claims (“RCFC”), the court cited and relied on cases involving Fed. R.
Civ. P. 24(a)(2), as the latter was was “nearly identical” to RCFC 24(a)(2) and
“cases interpreting Federal Rule 24(a) are persuasive in interpreting RCFC
Rule 24(a).” Id. at 412 n.4.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

12

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 15 of 16

d.

The Parties Do Not Adequately Represent CSK’s
Interests.

Finally, CSK must establish that its interests are not adequately represented

by the existing parties. Forest Conservation, 66 F.3d at 1493. Here, neither the
SEC, Watson, nor Jenkins purport to represent CSK’s interests, and neither party
will “undoubtedly make all[, or, indeed, any, of CSK’s] arguments.” Berg, 268
F.3d at 822. CSK thus easily satisfies this prong. LG Elecs., 211 F.R.D. at 365
(“The burden of showing inadequacy is minimal.”).

III. CONCLUSION

For these reasons, CSK respectfully requests that the Court grant this

motion to intervene and to stay proceedings or limit discovery pending resolution
of the related criminal action.

DATED this 11th day of January 2011.

GIBSON, DUNN & CRUTCHER LLP
Douglas M. Fuchs
333 South Grand Avenue
Los Angeles, CA 90071
By:

/s/Douglas M. Fuchs



LEWIS AND ROCA LLP

By /s/ Dale Danneman
Dale Danneman
40 N. Central Avenue
Phoenix, Az. 85004

Attorneys for CSK Auto Corporation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

13

Case 2:09-cv-01510-GMS Document 98 Filed 01/11/11 Page 16 of 16

CERTIFICATE OF SERVICE

I hereby certify that on January 11, 2011 I electronically filed the foregoing

with the Clerk of the Court for the United States District Court for the District of
Arizona using the CM/ECF system. Participants who are registered CM/ECF
users will be served by the CM/ECF system.

By/s/ June Yourgulez______________

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Gibson, Dunn &
Crutcher LLP

14