United States District Court, D. Colorado
DENNIS L. BROWN, and, PAUL D. BROWN, Plaintiffs,
v.
BRADLEY J. TENNISON, FREDERICK ARIAS, WAYNE EDWARD BELL, TENNISON INVESTMENTS, INC., an Arizona corporation, SHIELD DEFENSE SYSTEMS, INC., a Nevada corporation, and JOHN DOES No. ONE THROUGH THREE, Defendants.
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
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