Brown v. Tennison

          ORDER GRANTING DEFENDANTS' MOTION TO STAY DISCOVERY [ECF. #46]

          S. Kato Crews United States Magistrate Judge.

         This order addresses Defendants' Bradley J. Tennison (“Tennison”) and Tennison Investments, Inc. (“TII”) (collectively, the “Tennison Defendants”) Motion to Stay Proceedings (the “Motion”) [#46].^[1] District Judge Raymond P. Moore referred the Motion to this Court. [#47.] The Court has reviewed Plaintiffs' Response [#49], the Tennison Defendants' Reply [#50], and the Tennison Defendants' Status Report [#62]. The Court has also reviewed relevant case law and the court file. No. hearing is necessary. For the following reasons, the Motion is GRANTED.

         A. BACKGROUND

         1. The Alleged Scheme

         According to Plaintiffs, this case arises out of a scheme in which they were lured by Defendants into investing nearly $5, 000, 000.00 in an investment vehicle called “The Joseph Project.” [#53 at p.3.] Relevant here, Plaintiffs invested in the project at the direction, request, or solicitation of Tennison, who owned and operated TII. [Id.] In the end, Plaintiffs never received the investment returns they were promised and lost “substantially all of their investments in The Joseph Project . . . .” [#1 at ¶¶217-18.] Plaintiffs brought this action asserting the following claims for relief: (1) “Securities Fraud/Violation of Colorado Securities Act and Aiding and Abetting Securities Fraud in Violation of [C.R.S.] §11-51-501 and §11-51-604”; (2) “Control Person Liability Pursuant to C.R.S. §11-51-604(5)(a), (b), and (c)”; (3) “Breach of Fiduciary Duty”; (4) “Civil Theft Pursuant to C.R.S. §18-4-405”; (5) “Negligence”; (6) “Participating in and Aiding and Abetting Violations of the Colorado Organized Crime Control Act, C.R.S. §18-17-101, et seq.; and (7) “Piercing the Corporate Veil and Reverse Veil Piercing.” [Id. at ¶¶219-94.]

         2. Parallel Proceedings

         Three other lawsuits involving Tennison bear on the Motion. The first is a civil lawsuit filed in Arizona state court by Tennison and his family members in February 2019 (the “Destiny Trust Case”). [#50 at pp. 2-3.] In that case, Tennison sued several individuals and entities whom he alleges stole money he and his family invested in the Destiny Trust. [Id.] The claims are like those brought against Defendants in the present case. [#49 at pp.7-8.] Tennison argues that the Destiny Trust Case “provided [him] the ability to subpoena bank accounts and trace and analyze both the Destiny Trust and Joseph Project funds as the two were part of the same scheme being used by the persons controlling the Joseph Project.” [#50 at p.3.]

         The second is a civil lawsuit filed by Tennison and his family members in May 2019 in the Superior Court for the State of Arizona in and for the County of Maricopa (the “Joseph Project Case”). [#49-1.] Tennison filed the case after he analyzed bank records obtained through a subpoena in the Destiny Trust Case. [See #50 at p.5.] The Joseph Project Case names The Joseph Project and other individuals and entities as defendants. [Id.] Tennison has apparently informed Plaintiffs of the Joseph Project Case and offered them the opportunity to join in the case. [Id.] In both cases-Destiny Trust Case and Joseph Project Case-“[t]here has been no defense to the lawsuits” and “[n]o discovery has been taken of Mr. Tennison or propounded amongst the parties in either lawsuit.” [#62 at p.2.]

         The third case is a criminal matter against Tennison. On June 17, 2019, the Arizona Attorney General indicted Tennison on eight counts, including two counts that refer to the Plaintiffs in this case and the alleged theft of money Plaintiffs wired to Defendants [#46 at pp.1-2]; those funds are also the subject of the Plaintiffs' Complaint. [See generally #1.] The remaining counts charge Tennison with crimes of (1) conspiracy to commit theft and other crimes; (2) fraudulent schemes and artifices; (3) money laundering in the first degree; (4) illegal control of an enterprise (The Joseph Project); and (5) sale of unregistered securities. [#46-1 at pp. 2-8.] The Final Trial Management Conference in the criminal case is set for February 18, 2020, and trial is set to commence on February 25, 2020. [#62 at p.2.]

         Because of the criminal case, the Tennison Defendants filed the Motion seeking a complete stay of this civil matter as it relates to these two defendants, citing Tennison's Fifth Amendment rights. [See generally #46.] It is not alleged that TII is the subject of any criminal investigation or trial. [See generally #46-1.]

         B. LEGAL STANDARD

         “The Constitution does not generally require a stay of civil proceedings pending the outcome of criminal proceedings, absent substantial prejudice to a party's rights.” Creative Consumer Concepts Inc. v. Kreisler, 563 F.3d 1070, 1080 (10th Cir. 2009). Courts have the discretion to stay a civil action until completion of parallel criminal proceedings in the interests of justice. United States v. Kordel, 397 U.S. 1, 12 n.27 (1970).

When deciding whether the interests of justice seem to require a stay, the court must consider the extent to which a party's Fifth Amendment rights are implicated. However, a defendant has no absolute right not to be forced to choose between testifying in a civil matter and asserting his Fifth Amendment privilege. A district court may also stay a civil proceeding in deference to a parallel criminal proceeding for other reasons, such as to prevent either party from taking ...