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`DOWNEY BRAND LLP
`CASSANDRA M. FERRANNINI (Bar No. 204277)
`cferrannini@downeybrand.com
`SANDRA L. SAVA (Bar No. 117415)
`ssava@downeybrand.com
`621 Capitol Mall, 18th Floor
`Sacramento, California 95814
`Telephone:
`916.444.1000
`Facsimile:
`916.444.2100
`Attorneys for Petitioners/Moving Parties, FRESH
`PAK PRODUCE, INC., SL ONE GLOBAL,
`INC., SMF GLOBAL, INC., NARI TRADING,
`INC., UNI FOODS, INC., and SEAN LOLOEE
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF CALIFORNIA, SACRAMENTO DIVISION
`
`FRESH PAK PRODUCE, LLC, SL ONE
`GLOBAL, INC., SMF GLOBAL, INC., NARI
`TRADING, INC., UNI FOODS, INC. and
`SEAN LOLOEE,
`Petitioners,
`
`Case No.
`POINTS AND AUTHORITIES IN
`SUPPORT OF MOTION TO QUASH
`ADMINISTRATIVE SUBPOENAS AND
`FOR PROTECTIVE ORDER
`
`v.
`U.S. DEPARTMENT OF LABOR,
`Respondent.
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`Case 2:21-at-01152 Document 1 Filed 12/07/21 Page 2 of 12
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`INTRODUCTION
`I.
`The Wage and Hour Division (“WHD”) of the United States Department of Labor is used to
`riding roughshod over employers. It is much easier when the employer is small and an easy target.
`But, there comes a time when enough is enough. Even a government agency’s abuse must end.
`Now is that time. The WHD initiated back-to-back investigations of a local supermarket chain after
`its principal, Sean Loloee, announced his candidacy for public office, began campaigning and won
`general and runoff elections for the Sacramento City Council. The first investigation did not occur
`through open, diligent and well-intentioned hard work on the part of the WHD. It was prompted by
`secretive communications between a WHD representative and union organizer who was hell-bent
`on smearing Loloee and defeating his election. Attacking his businesses was her objective, and she
`made it WHD’s objective too. Not surprisingly, the union organizer knew about the impending
`investigation before Mr. Loloee.
`After the two investigations were completed and reportedly closed, the WHD issued
`subpoenas to Cathay Bank and Five Star Bank for all banking records of the five supermarkets for
`a five-year period. To make matters worse, the WHD did not notify the supermarkets of the
`subpoenas or certify to the banks that it had complied with applicable laws. The reason is simple:
`the subpoenas are defective, overreaching and unenforceable, and the WHD knows it.
`The information sought from the banks is not relevant to any legitimate investigation. The
`WHD simply issued a “canned” subpoena with language that it always uses as a dragnet to obtain
`as many documents as possible. When all is said and done, the WHD does not really want or need
`the information sought by the “canned” subpoenas. It already has the financial records because Mr.
`Loloee previously produced them. No doubt the WHD will submit “canned” declarations, void of
`any meaningful facts, to justify the subpoenas. If the subpoenas were justifiable, the WHD could
`and should have provided that justification long before. But, it didn’t. It ignored moving parties
`and their counsel, misrepresented the production date of the Cathay Bank subpoena, and avoided
`meet and confer efforts.
`Although Federal Courts, like this one, frequently uphold administrative subpoenas, this case
`is an exception and deserves careful consideration. The Right to Financial Privacy Act is at stake
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`A.
`
`and protects the records of one at least one market. Well-established case law from the United States
`Supreme Court, the Ninth Circuit Court of Appeals, and a number of district courts protects the
`records of all entities from disclosure. At a minimum, this Court should issue a protective order to
`prevent disclosure of moving parties’ banking, financial and business information to third parties.
`II.
`BACKGROUND
`The Wage and Hour Investigation
`Sean Loloee (“Loloee”) was born in Iran, immigrated to the Unites States in 1984, and
`became a citizen in 1985.1 In an effort to pursue the “American Dream” and become a productive
`member of his community, he began working in the grocery industry and founded a supermarket
`chain with locations in culturally diverse and underserved areas of Sacramento, Rancho Cordova
`and Dixon.2 The supermarkets do business as Viva Supermarket and are separate legal entities:
`Fresh Pak Produce, LLC (“Fresh Pak”), SL One Global, Inc. (“SL One”), SMF Global, Inc. (“SMF
`Global”), Nari Trading, Inc. (“Nari”), and Uni Foods, Inc. (“Uni”).3 Loloee is the only member of
`Fresh Pak and the sole shareholder of SL One, SMF Global, Nari and Uni.4
`To further serve his community, Loloee ran for and was elected as a member of the
`Sacramento City Council on November 3, 2020.5 Shortly after the election, on November 12, 2020,
`Michael H. Ontiveros (“Ontiveros”) of the Wage and Hour Division of the U.S. Department of
`Labor (“WHD”) notified Loloee that it was conducting an investigation into “your compliance with
`the Families First Coronavirus Response Action” (“FFCRA”).6 Ontiveros’ letter also mentioned
`
`1 Declaration of Sean Loloee (“Loloee Decl.”), ¶ 2
`
`2 Loloee Decl., ¶ 3
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`3 Loloee Decl., ¶ 3
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`4 Loloee Decl., ¶ 3
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`5 Loloee Decl., ¶ 7
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`6 Loloee Decl., ¶ 7; Letter from Michael H. Ontiveros, dated November 12, 2020, Exhibit B to
`Loloee Decl.
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`the FLSA but not prominently or clearly. The letter was addressed to SL One but personally directed
`to Loloee. The investigation is identified as Case No. 1922130.
`On February 19, 2021, the WHD requested 24 categories of documents, including bank
`records, for four of the Viva Supermarket locations for the period “November 2, 2017 to Present.”7
`Even though the investigation related to SL One, the February 19 letter expressly referred to SL One
`in the introductory paragraph, and not all locations were part of SL One, Loloee provided responsive
`information for all locations.8
`On March 12 and April 2, 2021, Ontiveros confirmed that
`information had been provided.9 At no time did the WHD formally notify Loloee that the
`investigation had expanded to all entities or to other compliance subjects.10
`The WHD had conducted an earlier investigation of SL One (Case No. 1903788) which
`covered the period February 2, 2018 to February 12, 2020.11 It “conveniently” commenced after
`Loloee announced his candidacy for the Sacramento City Council and after a local union organizer,
`who was affiliated with Loloee’s opponent, accused him of criminal wrongdoing and attempted to
`pressure him into unionizing the markets. The union organizer admittedly had been in contact with
`the WHD a few weeks before the investigation started, spoke with the investigator, later telephoned
`Loloee and reported to him that “you’re getting investigated; you’d better watch out.”12 SL One
`cooperated in the first investigation, produced requested records, and entered into an agreement in
`
`7 Loloee Decl., ¶ 8; Letter from Brandon Nuess, dated February 19, 2021, Exhibit C to Loloee
`Decl.
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`8 Loloee Decl., ¶ 8
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`9 Loloee Decl., ¶ 8; Letters and email from Michael H. Ontiveros, dated March 12 and April 2,
`2021, Exhibits D and E to Loloee Decl.
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`10 Loloee Decl., ¶8
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`11 Loloee Decl., ¶6; Letter from Veronica Villamor, dated February 11, 2020, Exhibit A to Loloee
`Decl.
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`12 Loloee Decl., ¶4
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`May 2020.13
`B.
`The Subpoenas
`Despite Loloee’s production of financial information, including bank records, to the WHD
`in Case No. 1922130 and previously in Case No. 1903788, the WHD issued subpoenas to Cathay
`Bank and Five Star Bank on or about October 18, 2021.14 Except for the bank recipient and date of
`production, the subpoenas are identical. Compliance was to be made to Brandon Nuess (“Nuess”),
`Assistant Director of the WHD in Sacramento. The “Subject Period” is the same: October 23, 2017
`to the date of production. All eight definitions are the same. Each defines “Employer” as:
`Fresh Pak Produce, LLC and SMG Global, Inc. (sic), SL One Global, Inc., Uni
`Foods, Inc., and Nari Trading, Inc., doing business as Viva Supermarket at 4211
`Norwood Avenue, Sacramento, CA 95838; 925 North Adams Street, Dixon, CA
`95620; 10385 Folsom Blvd., Rancho Cordova, CA 95670; and 3845 Marysville
`Blvd., Sacramento, CA 95838.
`Each contains the same five instructions, and each seeks the same four categories of documents
`to be produced:
`1. All bank statements and other documents showing transactions for all business
`accounts of the Employer, to include the following full/partial accounts with account
`numbers ending in: [account numbers excluded]. In addition to .pdf files of these
`statements, the statements should be produced electronically in Extensible Markup
`Language (XML) format.
`2. Photocopies of the fronts and backs of all cancelled checks written from or cleared
`under all business accounts held by the Employer.
`3. All signature authorization cards and documents establishing all business accounts
`held by the employer.
`4. All loan or credit applications by the Employer.
`Neither subpoena was served upon Loloee or any other representative of Fresh Pak. No
`notice, as required by 12 U.S.C. §3405, was provided to Loloee, Fresh Pak or any of the other
`entities.15
`
`13 Loloee Decl., ¶ 6
`
`14 Loloee Decl., ¶¶ 9-10; Subpoena to Cathay Bank, Exhibit F to Loloee Decl.; Subpoena to Five
`Star Bank, Exhibit G to Loloee Decl.
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`15 Loloee Decl., ¶¶9-10
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`A.
`
`Once counsel for Loloee and the entities learned of the subpoenas, she delivered a letter to
`Nuess, objected to the subpoenas, and requested that they meet and confer.16 Nuess did not respond.
`Counsel reached out to him again by email and telephone, but he still did not respond.17
`In the
`meantime, Nuess granted extensions to Cathay Bank and Five Star Bank. On November 30, 2021,
`counsel telephoned Nuess and finally made contact. Nuess admitted that the Solicitor told him he
`did not have to respond to counsel’s letter, he thought Loloee’s prior production was deficient but
`could not say how, and the subpoenas were a “canned thing.”18 Nuess also represented that the
`extension date for the Cathay Bank subpoena was December 7, 2021.19
`III.
`ARGUMENT
`The Subpoenas for Fresh Pak Bank Records Must Be Quashed Because They Violate
`the RFPA’s Notice Requirements.
`The Right to Financial Privacy Act of 1978 (“RFPA”), 12 U.S.C. §§ 3401-3422, was enacted
`by Congress in 1978 following the Supreme Court’s ruling in United States v. Miller (1976) 425
`U.S. 435, in which the Court held that bank customers have no Fourth Amendment right to privacy
`for financial information held by financial institutions. (Hunt v. U.S. Securities & Exchange
`Commission, 520 F.Supp. 580, 601 (1981).) As enacted, the RFPA now affords protection to bank
`customers and establishes specific procedures that a government agency must follow when seeking
`to subpoena financial records from financial institutions (12 U.S.C. §3403(b).) To that end, the
`agency may only obtain financial records of bank customers if it provides a written notice of the
`government’s intent to obtain financial records, an explanation of the purpose for which the records
`are sought, and a statement setting forth the procedures customers must follow if they wish to
`challenge the subpoena.
`(12 U.S.C. §§ 3405-3408 (notice requirements).) Section 3403 of the
`
`16 Declaration of Cassandra M. Ferrannini (“Ferrannini Decl.”), ¶ 2; Letter from Cassandra M.
`Ferrannini, dated November 5, 2021, Exhibit A to Ferrannini Decl.
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`17 Ferrannini Decl., ¶ 3
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`18 Ferrannini Decl., ¶ 4
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`19 Ferrannini Decl., ¶ 4
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`RFPA also requires that the government certify in writing to the financial institution that it has
`complied with the provisions of the Act before the financial institution may release any of the
`requested documentation or information. (Hunt v. U.S. Securities & Exchange Commission, 520 F.
`Supp. at 602.)
`Failure by the government to comply with the RFPA’s notice requirements is fatal and
`warrants denial of the subpoena. (Hunt v. U.S. Securities & Exchange Commission, 520 F. Supp.
`at 603; Chang v. Tennessee Valley Authority, 82 F.Supp.2d 817, 820-821 (2000); cf. J.B.; P.B. v.
`United States, 916 F.3d 1161 (9th Cir. 2019 (noting the importance of complying with notice
`requirement and holding that failure to give advance notice of administrative subpoena to taxpayer
`under tax laws justifies quashing subpoena).) Should the government fail to comply with the
`RFPA’s notice requirements, a financial institution may not release records because it, like the
`government, has a concomitant duty to comply with the RFPA. (Hunt v. U.S. Securities & Exchange
`Commission, 520 F. Supp. at 602.)
`A “customer” is any person or authorized representative of that person who utilized or is
`utilizing any service of a financial institution. (12 U.S.C. § 3401(5).) “Person” means “an individual
`or partnership of 5 or fewer individuals.” (12 U.S.C. § 3401(4))
`The analysis here is straightforward. The WHD issued subpoenas to Cathay Bank and Five
`Star Bank for financial records relating to Fresh Pak. Fresh Pak is a limited liability company with
`fewer than 5 individuals.
`It has one member, and that person is Loloee. Therefore, Fresh Pak
`qualifies as a “customer” under the RFPA. Loloee is its authorized representative, and the WHD
`knew that because it directed correspondence to him and communicated with him about all entities.
`As such, the WHD was obligated to provide Loloee with the subpoenas, notices, and information
`required by section 3405 of the RFPA. But, the WHD did nothing; it provided no subpoenas and
`no notices.
`Its failure violates the RFPA. Consequently, both subpoenas must be quashed, and
`neither bank may produce Fresh Pak records.
`///
`///
`///
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`B.
`
`The Subpoenas For All Entity Records Must Be Quashed Because They Are
`Unenforceable.
`The subpoenas for all Viva Supermarket entities’ records are deficient because they do not
`satisfy the Powell 20 requirements and, therefore, must be quashed.
`For administrative investigative subpoenas to be judicially enforceable, the government
`agency must demonstrate that:
`(1) the administrative investigation is conducted pursuant to a
`lawfully authorized legitimate purpose; (2) the subpoena seeks information reasonably relevant to
`the investigation; (3) the information sought is not already within the agency’s possession; and, (4)
`all administrative requirements are satisfied. (United States v. Powell, 379 U.S. at 57-58; United
`States v. Jose, 131 F.3d 1325, 1327-1328 (9th Cir. 1997); Solis v. Forever 21, Inc., 2013 WL
`1319769 (2013) )
`“Even if these factors are shown by an agency, the subpoena will not be enforced if it is too
`indefinite or broad. See id. (reasoning that subpoena will not be enforced if agency's inquiry is
`unreasonable because it is overbroad); NLRB v. International Medication Sys., 640 F.2d 1110, 1114
`(9th Cir.1981) (reasoning that a court will enforce an agency subpoena if, inter alia, it “is not
`needlessly broad”), cert. denied, 455 U.S. 1017, 102 S.Ct. 1712, 72 L.Ed.2d 134 (1982); General
`Ins. Co. v. EEOC, 491 F.2d 133, 136 (9th Cir.1974) (affirming district court's refusal to enforce
`agency's demand for access to evidence because it was unduly broad); Morton Salt Co., 338 U.S. at
`652, 70 S.Ct. at 369 (stating that an agency's inquiry is sufficient if, inter alia, “the demand is not
`too indefinite”); see also Midwest Growers Co-op. v. Kirkemo, 533 F.2d 455, 461 (9th Cir.1976).
`An administrative subpoena thus may not be so broad so as to be in the nature of a “fishing
`expedition”. (Peters v. United States, 853 F.2d 692, 700 (9th Cir. 1988).)
`Moving parties dispute that the WHD can satisfy the Powell test, much less the first prong.
`The “investigation” that was initially communicated to Loloee for Case No. 1922130 was limited
`to SL One’s compliance with the FFRCA and arguably the Fair Labor Standards Act (“FLSA”). It
`never was formally expanded, and to the extent that the WHD internally expanded it,
`that never
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`20 United States v. Powell, 379 U.S. 48 (1964) (Powell)
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`was formally communicated to Loloee. Instead, the WHD continued to identify SL One as the entity
`subject
`to investigation but required Loloee to provide it with all records relating to all
`supermarkets.
`In essence, the purpose of the investigation became a moving target that changed
`with the whims of the WHD. As it progressed, the investigation had no definite “legitimate purpose”
`and certainly not one that was “lawfully authorized” beyond SL One.
`On November 12, 2020, Ontiveros expressly represented in his letter addressed to SL One
`that the “Wage and Hour Investigation, Case ID # 1922130” was to inform it and/or Loloee of the
`“WHD’s plans to determine your compliance with the FFCRA.” Ontiveros did not identify any
`other entities. Nuess’ February 19, 2021, also expressly referred to the “investigation of SL One
`Global, Inc” and identified the same case number. For reasons which are not clear, and certainly
`not justified, the investigation somehow morphed into a “mega-investigation” between February
`2021 and March 12, 2021. The WHD, through Ontiveros and Nuess, began demanding information
`about all entities, without formally and properly notifying those entities why they were part of the
`SL One investigation or any investigation at all. Just because Loloee complied with the WHD’s
`demands for information and documents does not mean he knew or appreciated the nature of the
`investigation and/or his related compliance duties. It was his nature to cooperate, just like he had
`before, and do as the WHD demanded, even if it did not inform him of the true purpose of the
`investigation.
`Without a clear “legitimate purpose,” this Court cannot determine whether and to what
`extent the investigation was “lawfully authorized.” It similarly cannot determine that the subpoenas
`seek information reasonably relevant to that investigation. A court's authority to review a
`subpoena's relevance is limited to determining whether the evidence sought “touches a matter under
`investigation.”
`(Sandsend Fin. Consultants Ltd. v. Federal Home Loan Bank Bd., 878 F.2d 875,
`882 (5th Cir.1989); Brooklyn Manor, 1999 WL 1011935, at *2; see also NLRB v. Frederick Cowan
`& Co., Inc., 522 F.2d 26 (2d Cir.1975).)
`Even assuming that an “investigation” directed at “SL One” for compliance with FFCRA
`and FLSA -- the words used by the WHD to describe its investigation -- was the WHD’s purpose,
`that purpose is limited and implicates a limited scope of relevant information. Despite the reference
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`to SL One as the target of the investigation, the subpoenas seek information about four other and
`separate entities
`-- Fresh Pak, SMF Global, Nari and Uni.
`Simply asking for and receiving
`information from Loloee does not make the subpoenaed records relevant
`to the SL One
`investigation.
`If anything, the WHD’s actions demonstrate that it stepped beyond the realm of
`relevancy, call into question its true motivation, and reflect an improper purpose. (United States v.
`Garden National Bank, 607 F.2d 61, 71-73 (3rd Cir. 1979) (discussing need for evidentiary hearing
`when facts showing government abuse are presented).)
`Here, the improper purpose and government abuse are clear. Both investigations (Case No.
`1903788 and Case No. 1922130) coincide with Loloee’s candidacy, election for the Sacramento
`City Council, and time-related accusations by a local union organizer about the supermarkets’
`allegedly illegal employment practices. In February 2020, Loloee was campaigning and spoke at
`events where the organizer accused him of illegal activities, including violations of labor laws.
`During the same time, the organizer also contacted supermarket personnel and made similar
`comments to them. The organizer also communicated with the WHD about Loloee and the
`supermarkets and made sure to tell Loloee that an investigation was coming his way. Immediately
`thereafter, the WHD commenced its first investigation. Loloee won the general election on March
`3, 2020, and began preparing for the runoff election on November 3, 2020.
`Immediately after
`winning the runoff, the WHD commenced its second investigation. Although Loloee was not born
`in the United States and English is not his first language, he is smart enough and understands the
`system well enough to know that the investigations did not materialize out of thin air. They are
`directly tied to his candidacy and election and were prompted to discredit his campaign and him as
`a public officer.
`The WHD’s use of a “canned” subpoena that was not tailored for SL One, much less any of
`the entities, cannot pass the relevancy test. A “canned” subpoena is just that -- “canned.” It is a
`“cut and paste” form that the WHD hopes will fit all circumstances without regard to the specific
`investigation, the specific issues at hand, or the specific entities whose records are sought.
`That Loloee did provide the WHD with requested bank information about the entities, that
`the WHD did confirm receipt of that information, and that no more information was needed is telling
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`and prevents the WHD from satisfying the third Powell factor. Subpoenas for the same financial
`information that it already has are unenforceable.
`The WHD cannot satisfy the fourth Powell factor as to Fresh Pak because it did not follow
`all administrative requirements. It failed to provide notice to Fresh Pak required by §§ 3405-3408
`of the RFPA.
`C.
`The Court Should Issue a Protective Order to Prevent Disclosure of the Subpoenaed
`Records to Third Parties.
`As a general rule, the district court may issue any protective order “which justice requires to
`protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense,”
`including any order prohibiting the requested discovery altogether, limiting the scope of the
`discovery, or fixing the terms of disclosure. FED.R.CIV.P. 26(c). The burden is upon the party
`seeking the order to “show good cause” by demonstrating harm or prejudice that will result from
`the discovery. (Rivera v. NIBCO, Inc., 364 F.3d 1057, 1063 (9th Cir. 2004); McLaughlin v. Service
`Employees Union, et al., 880 F.2d 170 (9th Cir. 1989) (protective order may be appropriate with
`respect to an administrative subpoena).) The burden is on the party seeking a protective order to
`show good cause by demonstrating harm or prejudice that will result if no protective order is granted.
`(Phillips ex. rel. Estates of Byrd v. General Motors Corp., 307 F.3d 1206, 1210-1211 (9th Cir. 2002).
`As demonstrated above and it the Declaration of Sean Loloee, he is an elected official who
`has been subjected to accusations of criminal conduct. His status as an official and a business owner
`coincides with both of the WHD investigations and attempts to smear him. If the financial records
`of his businesses are not protected from disclosure to third parties, particularly his political
`opponents and critics, that information -- presumably and arguably only being sought in connection
`with WHD investigations -- likely will be used for unrelated and improper reasons and shared with
`persons who have no right or purpose in having that information. Financial and banking information
`is sensitive and protected in many different ways -- RFPA and right to privacy. There is no reason
`not to protect it now, given the prior nefarious exchange of information between the union organizer
`and the WHD. Counsel for moving parties attempted to meet and confer with Nuess about the
`subpoenas before seeking a protective order, but he resisted.
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`DOWNEYBRANDLLP
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`Case 2:21-at-01152 Document 1 Filed 12/07/21 Page 12 of 12
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`CONCLUSION
`III.
`This Court can and should quash all subpoenas because they are deficient in one way or
`another. The subpoenas for Fresh Pak’s records are unenforceable because the WHD failed to
`comply with the notice requirements of the RFPA. All subpoenas are unenforceable because they
`do not satisfy each and every one of the Powell factors and are so intertwined with Loloee’s
`campaign, election and public office that they wreak of an improper purpose. At a minimum, this
`Court should issue a protective order so that the financial records are not disclosed to or used by
`anyone other than authorized representatives of the WHD.
`
`DATED: December 7, 2021
`
`Respectfully submitted,
`
`DOWNEY BRAND LLP
`
`By:
`
`/s/ Sandra L. Sava
`SANDRA L. SAVA
`Attorneys for Petitioners/Moving Parties, FRESH
`PAK PRODUCE, INC., SL ONE GLOBAL, INC.,
`SMF GLOBAL, INC., NARI TRADING, INC.,
`UNI FOODS, INC., and SEAN LOLOEE
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`DOWNEYBRANDLLP
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