Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

U.S. v. EBERHARD

March 30, 2004.

UNITED STATES OF AMERICA, -against- TODD EBERHARD, Defendant


The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant Todd Eberhard ("Eberhard") has moved for a stay of certain securities arbitration proceedings until the conclusion of the criminal case pending against him in this Court, renewing an application previously denied without prejudice by the Honorable Richard M. Berman in the related civil enforcement proceedings, SEC v. Eberhard, S.D.N.Y., No. 03 Civ. 0813 (RMB).*fn1 For the reasons set forth below, Eberhard's motion to stay the pending securities arbitrations is denied.*fn2

 Prior Proceedings and Background

  On February 4, 2003, the government commenced a criminal action against Eberhard, alleging that over the span of several years he defrauded certain individual investors for whom he performed investment advisory and security brokerage services, and charging him with conspiracy, investment advisor fraud, and wire fraud. Eberhard is alleged to have conducted investment advisory business through Eberhard Investment Associates and its predecessor Page 2 entity Eberhard Investment Advisers (collectively, "EIA"), and managed client accounts through Clearing Services of America, inc. ("CSA"), a registered broker-dealer, and through Park South Securities, LLC ("PSS"), a limited liability company of which he was a part owner.

  On February 5, 2003, the Securities and Exchange Commission ("SEC") commenced a civil enforcement action against Eberhard, alleging that he, along with his broker-dealer firm, PSS, and his investment advisory firm, EIA, violated various federal securities laws. On that same date, the SEC also obtained an order to show cause and temporary restraining order ("the February 5, 2003 Order") according to which assets belonging to Eberhard and EIA were frozen pending a preliminary injunction hearing.

  On February 13, 2003, the court in the related civil action granted the SEC's unopposed request, and issued a preliminary injunction and order freezing assets and granting other relief ("the February 13, 2003 Order") to keep the asset freeze in place indefinitely and to appoint a Receiver for EIA, among other items. The February 13, 2003 Order enjoins all creditors and claimants from taking "any action" that would interfere with the Court's jurisdiction over the Receivership estate. (February 13, 2003 Order at ¶ XI.) Page 3

  The February 13, 2003 Order was thereafter amended on April 18, 2003, when the court in SEC v. Eberhard issued an order amending preliminary receivership order ("the April 18, 2003 Order"). This third order provides for the receiver to take possession and control over all of Eberhard's assets, including his personal assets.

  On October 16, 2003, Eberhard moved the court in the civil enforcement proceeding for a stay of certain securities arbitration proceedings then pending before the National Association of Securities Dealers, Inc. ("NASD").*fn3 Following briefing by the SEC and the receiver as well as by various non-party claimants involved in the NASD arbitration proceedings ("the NASD arbitrations" or "the arbitrations"), the court denied Eberhard's motion without prejudice to the renewal of his application in this Court. In denying Eberhard's motion, the court stated that the NASD arbitrations " (at least prior to the entry of judgment) do not conflict with the Court's prior orders, dated February 5, 2003, February 13, 2003, and April 18, 2003." (December 9, 2003 Order at ¶ 1.) Page 4 Eberhard renewed his application for a stay of the pending NASD arbitrations on January 12, 2004, and oral arguments were held on January 22, 2004. At the Court's direction, Eberhard thereafter submitted an order to show cause why a stay of the NASD arbitrations should not issue, setting a return date of February 4, 2004 to ensure that all interested parties received appropriate notice prior to the entry of any stay. Following receipt by this Court of the motion papers filed on the previous application as well as various materials in opposition to Eberhard's request submitted on behalf of non-party claimants in the arbitration proceedings, oral argument on the renewed application was held on February 4, 2004. The instant motion was marked fully submitted at that time.

 Discussion

  Eberhard argues that the NASD arbitrations should be stayed on the grounds that the NASD claimants are covered by the February 5, 2003 Order, the February 13, 2003 Order and the April 18, 2003 Order ("the Receivership Orders"), and that any further arbitration action would violate these Orders. Eberhard also argues that this Court should issue a stay of the NASD arbitrations because he otherwise will be compelled to assert his Fifth Amendment privilege during the course of the NASD arbitrations, thereby rendering him unable to defend himself effectively therein. Finally, Eberhard contends that any findings made in the course of Page 5 the NASD arbitrations could be considered res judicata or collateral estoppel and would therefore undermine Eberhard's ability to have a full and fair trial in either of the civil or criminal actions pending against him, thus justifying a stay of the NASD arbitrations.

  Eberhard has not moved to enjoin the NASD arbitrations, but instead would have this Court stay the arbitrations pursuant to either the Federal Arbitration Act or the inherent powers of the district court.

  I. The Receivership Orders

  In response to Eberhard's previous application to stay the NASD arbitrations, the court in the civil enforcement proceedings held that the arbitrations "do not conflict with the Court's prior orders." (December 9, 2003 Order at ¶ 1.) Even assuming this Court were inclined to disturb Judge Herman's considered conclusion, which it is not, Eberhard has demonstrated no basis for doing so.

  By their own terms, the Receivership Orders prohibit creditors or claimants from taking any action "to interfere with the taking control, possession, or management of the Receivership Assets . . . nor interfere in any way with the exclusive jurisdiction of this Court over the receivership estate." (April 18, 2003 Page 6 Order at ¶ XI; see also February 13, 2003 Order at ¶ XI.) Thus, the Receivership Orders prohibit interference with the Receivership itself. They do not, as Eberhard argues, bar "any claimants from seeking claims against the defendants in any place other than the District Court." (Def. Mem. at 2.) Nor do the Receivership Orders prohibit claimants from establishing in arbitration the dollar amount of any purported liability. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.