Securities Exchange Commission v. River North Equity LLC
1:19-cv-01711
| N.D. Ill. | May 8, 2025Background
- SEC filed a civil action in 2019 alleging violations of the Securities Act and Exchange Act related to a stock distribution and market manipulation scheme involving NTEK and NTGL.
- Indictment in related criminal case against David Foley and Bennie Blankenship was filed January 11, 2021, with a stay of the civil case to permit resolution of the parallel proceedings.
- November 4, 2024, a jury convicted Foley of two securities fraud counts and acquitted him on eight wire fraud counts; sentencing set for May 28, 2025.
- Court lifted the stay on December 16, 2024; discovery in the civil case is underway, with fact discovery nearly complete and depositions constrained by Fifth Amendment assertions.
- Foleys (joined by Liceaga and River North) moved for an additional stay; the court applied a six-factor test and denied the stay, noting the prior lengthy stay and the near-complete discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a further stay is warranted pending the criminal case. | SEC argues stay is justified to avoid duplicative effort and protect Fifth Amendment issues. | Foleys contend continued parallel proceedings prejudice them and warrant a stay. | Stay denied; factors weighed against further stay. |
| Overlap between civil and criminal proceedings affects stay analysis. | There is substantial overlap between the civil and criminal claims. | Overlap exists but does not compel a stay; rights and burdens differ. | Factor weighs slightly in favor of some overlap but not enough to grant stay. |
| Indictment status and strength of the criminal case support for a stay. | Criminal proceeding status supports a stay to avoid interference. | Indictment status is less compelling given Foley’s conviction and other cases not indicted. | Weighs against stay; third factor weakens stay argument. |
| Public interest in prompt civil resolution vs. integrity of criminal process. | Prompt civil resolution serves investors and enforcement of securities laws. | Preserve integrity of criminal process by avoiding civil distractions. | Public interest favors prompt resolution; does not support stay. |
| SEC's interest in expeditious resolution and potential burden on defendants. | SEC has strong interest; lengthy stay would jeopardize restitution and testimony. | Defendants face burdens coordinating two complex cases; extension feasible. | SEC interest weighs against stay; burden factor does not overcome other factors. |
Key Cases Cited
- Texas Indep. Producers & Royalty Owners Ass'n v. EPA, 410 F.3d 964 (7th Cir. 2005) (stay power is incidental to court's docket management and must be justified by factors)
- Landis v. North American Co., 299 U.S. 248 (Supreme Court 1936) (district court has broad discretion to stay proceedings to control its docket)
- Clinton v. Jones, 520 U.S. 681 (Supreme Court 1997) (district court has broad discretion to stay as incident to docket control)