United States District Court, S.D. New York
MEMORANDUM OPINION & ORDER
J. NATHAN, District Judge
Securities and Exchange Commission ("SEC")
initiated this action against David B. Blaszczak, Christopher
M. Worrall, and Theodore J. Huber alleging civil violations
of the Securities Act of 1933 ("Securities Act")
and the Securities Exchange Act of 1934 ("Exchange
Act") on May 24, 2017. See Complaint, Dkt. No.
1. Also on May 24, 2017, the U.S. Attorney's Office for
the Southern District of New York filed a criminal indictment
against Defendants Blaszczak, Worrall, and
Huber. See United States v. Blaszczak et
al. ("Criminal Case"), No. 17-cr-0357, Dkt.
No. 1. On August 22, 2017, the Government filed a motion to
intervene in this civil case and partially stay the matter
(by staying certain discovery) until the conclusion of the
Criminal Case. See Motion, Dkt. No. 31. The parties
consent to the Government's intervention and the staying
of some discovery but oppose staying the production of the
SEC's "witness materials" pending the
resolution of the Criminal Case. See Joint
Memorandum of Law in Opposition to the Motion
("Opp."), Dkt. No. 37, at 2-4. For the reasons
articulated below, the Government's motion is granted in
Motion to Intervene
Federal Rule of Civil Procedure 24(a)(2), the court must
allow a party to intervene if it "claims an interest
relating to the . .. 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." Fed.R.Civ.P. 24(a)(2).
In this case, all parties consent to the Government's
intervention, see Memo, in Support of Motion
("Support"), Dkt. No. 32, at 2, and the Court
concludes that it must grant the motion because the
Government has "a discernible interest in intervening in
order to prevent discovery in the civil case from being used
to circumvent the more limited scope of discovery in the
criminal matter, " SEC v. Chestman, 861 F.2d
49, 50 (2d Cir. 1998); see also SEC v. Downe, No.
92-cv-4092 (PKL), 1993 WL 22126, at *11 (S.D.N.Y. Jan. 26,
1993) ("It is well-established that the United States
Attorney may intervene in a federal civil action to seek a
stay of discovery when there is a parallel criminal
proceeding, which is anticipated or already underway, that
involves common questions of law or fact.").
Motion to Partially Stay Discovery
district court may stay civil proceedings when related
criminal proceedings are imminent or pending, and it will
sometimes be prudential to do so." Louis Vuitton
Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 98 (2d Cir.
2012). The district court's power to do so "is
incidental to the power inherent in every court to control
the disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for
litigants." Id. at 96 (quoting Landis v. N.
Am. Co., 299 U.S. 248, 254 (1936)). When deciding
whether to stay civil proceedings pending imminent criminal
proceedings, courts of this Circuit consider six factors:
1) the extent to which the issues in the criminal case
overlap with those presented in the civil case; 2) the status
of the case, including whether the defendants have been
indicted; 3) the private interests of the plaintiffs in
proceeding expeditiously weighed against the prejudice to
plaintiffs caused by the delay; 4) the private interests of
and burden on the defendants; 5) the interests of the courts;
and 6) the public interest.
Id. at 99 (quoting Trs. of Plumbers &
Pipefitters Nat'l Pension Fund v. Transworld Mech,
Inc., 886 F.Supp. 1134, 1139 (S.D.N.Y. 1995)). The
Second Circuit has recognized, however, that this multifactor
test, "no matter how carefully refined, can do no more
than act as a rough guide for the district court as it
exercises its discretion." Id. The party
seeking a stay "bears the burden of establishing its
need." Id. at 97 (quoting Clinton v.
Jones, 520 U.S. 681, 708 (1997)).
Court concludes that the Government has met its burden of
establishing the need to partially stay discovery in this
civil matter pending resolution of the Criminal Case.
first factor - the overlap of issues between the criminal and
civil cases - counsels in favor of a partial stay. As both
parties recognize, the civil and criminal cases arise from
the same facts and involve nearly identical issues. Support
at 11-12; Opp. at 2-3. Because there is "a substantial
overlap between the civil and criminal proceedings, "
this factor "weighs in favor of a stay." Transcript
of Nov. 1, 2016 Proceedings ("Block
Order"), SEC v. Block, No. 16-cv-7003 (LGS),
Dkt. No. 41, at 8.
second factor - the status of the criminal case - also weighs
in favor of a partial stay. "A stay of a civil case is
most appropriate where a party to the civil case has already
been indicted" in the criminal case because "the
prejudice to the plaintiffs in the civil case is reduced
since the criminal case will likely be quickly resolved due
to Speedy Trial Act considerations." Trs. of
Plumbers & Pipefitters Nat'l Pension Fund, 886
F.Supp. at 1139. Here, the Defendants were indicted on May
24, 2017 - the same day on which the civil complaint was
filed by the SEC. Moreover, trial in the Criminal Case is
scheduled to begin on April 9, 2018. Support at 8; Transcript
of June 12, 2017 Proceeding, Criminal Case Dkt. No. 58, at
15. As a result, the civil case will not be prolonged an
unreasonable amount of time. See Trs. of Plumbers &
Pipefitters Nat'l Pension Fund, 886 F.Supp. at 1140
(holding in May of 1995 that "the Criminal Case should
be completed by the end of this year, which would not
unreasonably prolong this case").
third factor - the burden to the Plaintiff- does not weigh
for or against a partial stay. This factor "is neutral
if the SEC does not oppose the government's motion."
Block Order at 9; see also SEC v. Treadway,
No. 04-cv-3464 (VM) (JCF), 2005 WL 713826, at *3 (S.D.N.Y.
Mar. 30, 2005) (stating that where the SEC does not take a
position on a Government motion for a stay, it "has not
articulated an interest that requires consideration").
The SEC has taken no position on the Government's ...