22 F. Supp. 3d 1042
C.D. Cal.2014Background
- Plaintiff ESG Capital Partners sued defendant Troy Stratos in March 2013 alleging fraud tied to a 2010–2012 scheme to sell pre-IPO Facebook shares; the government later indicted Stratos on related criminal charges.
- The criminal indictment alleges Stratos told ESG’s agent Burns he represented a buyer (Soumaya Securities/Carlos Slim) and caused ESG to wire $11,250,000 that was allegedly diverted for Stratos’s personal use.
- Stratos testified extensively at a January 2012 criminal detention hearing about the ESG transaction without invoking the Fifth Amendment.
- Stratos moved to stay the civil case pending resolution of the related criminal prosecution, arguing discovery and civil testimony would jeopardize his Fifth Amendment privilege.
- The civil action had been pending since March 2013 and was set for a July 2014 trial; the related criminal trial dates were later and/or not set for the ESG-related counts, creating potential delay if stayed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to stay the civil case pending criminal resolution | ESG: deny stay to avoid delay, preserve ability to discover additional defendants, and protect statute-of-limitations rights | Stratos: stay needed because civil discovery and testimony risk self-incrimination and could be used in his criminal case | Denied — court exercised discretion under Keating factors and refused stay |
| Extent of Fifth Amendment prejudice | ESG: adverse inference risk insufficient to require stay | Stratos: overlapping facts and indictment create serious self-incrimination risk | Court: Fifth Amendment implicated but not dispositive; prior testimony undermined need for stay |
| Prejudice to plaintiff from delay | ESG: staying would prejudice its ability to prosecute, identify other defendants, and meet statutes of limitation | Stratos: delay would ease his burden in parallel criminal defense | Court: prejudice to ESG weighs heavily against a stay |
| Judicial efficiency and docket management | ESG: favor moving forward to resolve case | Stratos: parallel criminal case argues for coordination | Court: judicial efficiency favors denying stay because civil docket should proceed and criminal trial date for related counts is uncertain |
Key Cases Cited
- Keating v. Office of Thrift Supervision, 45 F.3d 322 (9th Cir. 1995) (multi-factor test for stays of civil proceedings pending related criminal matters)
- Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899 (9th Cir. 1989) (stay disfavored where docket-clearing interests weigh against delay)
- Doe ex rel. Rudy-Glanzer v. Glanzer, 232 F.3d 1258 (9th Cir. 2000) (adverse inference may be drawn in civil cases from invocation of Fifth Amendment)
- Sec. & Exch. Comm'n v. Dresser Indus., 628 F.2d 1368 (D.C. Cir. 1980) (recognizing stays where indictment and factual overlap strongly favor postponement)
- Chao v. Fleming, 498 F. Supp. 2d 1034 (W.D. Mich. 2007) (stay is an extraordinary remedy but may be warranted in some cases)