Abrams et al v. Tuberville et al
OPINION AND ORDER that defendant John David Stroud's motions to stay 50 & 53 are denied. Signed by Honorable Judge Myron H. Thompson on 3/6/2013. (Attachments: # 1 Civil Appeals Checklist)(jg, )
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION
JOHN A. ABRAMS, et al.,
THOMAS H. TUBERVILLE,
CIVIL ACTION NO.
OPINION AND ORDER
Plaintiffs John A. Abrams, Priscilla W. Abrams, Debra
Clark, Baron J. Lowe, Melanie D. Lowe, Fredrick Glen
Williams, Kristy A. Williams, and Flynn R. DuBose, Jr.,
all investors, brought this action naming as defendants
several investment companies (TS Capital Partners; TS
Capital Partners, LLC; TS Capital Management, LLC; TS
Capital Fund LP; and TS Capital GP, LLC) and the two
individuals who co-founded and controlled those companies
(Thomas H. Tuberville and John David Stroud).
claim violations of federal and state securities and
commodities exchange laws, breaches of fiduciary duties,
unjust enrichment, negligence and wantonness, fraud, and
Subject-matter jurisdiction is proper under
28 U.S.C. § 1331 (federal question), 7 U.S.C. § 25(c)
The case is now before this court on
Stroud’s motions to stay the litigation.
For the reasons
that follow, the motions will be denied.
Plaintiffs, all of whom sought to grow their savings for
investing their money; they came to regret that decision.
Savvy investors (which plaintiffs allegedly were not) may
have seen warning signs that plaintiffs overlooked.
example, plaintiffs allege that, while Tuberville and
Stroud purportedly did business as agents of various
entities, at least one of those entities was nonexistent
(it was never actually organized under the laws of any
State); that plaintiffs were solicited through various
regulatory requirements, but the claimed exemption was a
everything was in order with their accounts, the books
were regularly audited by a certified public-accounting
firm, all the necessary legal matters were handled by a
law firm, and the funds were administered by responsible
Plaintiffs now believe that was all
Plaintiffs further contend that, in fact, less than
half of their funds were ever invested; that Tuberville
and Stroud used the majority of their cash for personal
purposes; that, when plaintiffs’ accounts dried up under
Tuberville and Stroud’s mismanagement, the two sought to
telephone; and that, as of today, plaintiffs cannot say
where their funds have gone, although they believe that
it has been misappropriated, converted, and otherwise
squandered for the benefit of Tuberville and Stroud.
Stroud has not filed an answer with the
court and has not otherwise provided any indication of
whether he contests the claims brought against him.
Shortly after plaintiffs started this lawsuit, the
U.S. Commodity Futures Trading Commission instituted its
own case against Stroud (but not Tuberville) and his
companies in this court.
The commission alleged similar
facts as plaintiffs in this case.
Shortly after that,
Stroud (and not Tuberville) was criminally indicted by an
Alabama grand jury.
The indictment charged Stroud with
committing various sorts of fraud, misusing investors’
money for personal purposes, and failing to register with
the Alabama Securities Commission when he was legally
required to do so.
After the grand jury indicted Stroud, Tuberville
filed a motion with this court asking to have discovery
in this case stayed pending resolution of the criminal
charges brought against Stroud.
Tuberville stated that,
in a deposition taken of Stroud in connection with the
commission case, Stroud refused to answer substantively
all questions asked, instead invoking his Fifth Amendment
right against self-incrimination; Tuberville argued that
Stroud’s testimony was critical to his ability to defend
himself, and, until the criminal matter against Stroud
was resolved, Stroud would likely continue invoking his
right to remain silent when questioned; and, as such, if
this litigation were not stayed, Tuberville argues, he
Tuberville’s motion without issuing a written opinion.
Tuberville’s motion, Stroud filed with the court his own
motion to stay.1
He submitted the motion pro se (on his
own behalf, rather than through an attorney).
was an almost identical reproduction of Tuberville’s
previously denied motion; Stroud replaced a handful of
words in places throughout the document (mostly replacing
Tuberville’s name with his own), but largely reproduced
the prior motion’s text in its entirety.
As such, Stroud
argued that, because he would likely continue to invoke
develop evidence critical to his defense and that the
court should stay this litigation to protect Tuberville’s
A couple weeks later, Stroud filed with the
court a second motion that was identical to the first
Both motions are now before the court.
Although docketed after the court’s denial of
Tuberville’s motion, Stroud’s first motion was likely
created before the court’s order was issued.
The court must now decide for the second time whether
to stay this civil lawsuit pending resolution of the
criminal case against Stroud.
This court “has broad discretion to stay proceedings
as an incident to its power to control its own docket.”
Clinton v. Jones, 520 U.S. 681, 706 (1997).
to stay proceedings 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.
How this can be done
calls for the exercise of judgment, which must weigh
“[T]he court, in its sound discretion, must
assess and balance the nature and substantiality of the
injustices claimed on either side.”
Inc. v. A.S.P.C.A., 523 F. Supp. 2d 1, 3 (D.D.C. 2007)
(Sullivan, J.) (citation omitted).
Courts are often faced with circumstances similar to
this one, where a defendant in a civil action asks to
brought against him.
In such cases, “[i]t is the rule,
rather than the exception that [the] civil and criminal
Fresenius Medical Care North America, 571 F. Supp. 2d
758, 761 (W.D. Tex. 2008) (Martinez, J.) (quotation marks
and citation omitted).
“A court must stay a civil
proceeding pending resolution of a criminal prosecution
interests of justice.”
S.E.C. v. Wright, 261 F. App’x
259, 263 (11th Cir. 2008) (quoting United States v. Lot
5, Fox Grove, Alachua County, Fla., 23 F.3d 359, 364
(11th Cir. 1994)); see also S.E.C. v. Dresser Indus., 628
F.2d 1368, 1374 (D.C. Cir. 1980), cert. denied, 449 U.S.
993 (1980) (“In the absence of substantial prejudice to
the rights of the parties, such parallel proceedings are
circumstances, staying the litigation is unwarranted.
Courts have turned to a number of factors in these
cases to determine whether special circumstances are
present. Commonly cited considerations include: “(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.”
Yeomans v. Forster
& Howell, Inc., 2009 WL 2960387, at *1 (M.D. Ala. Sept.
10, 2009) (Albritton, J.) (citation omitted).
factors cannot be mechanically applied; how the court
balances competing considerations must ultimately be an
individual inquiry, tailored to the unique circumstances
of the case at hand.
See Volmar Distributors, Inc. v.
New York Post Co., Inc., 152 F.R.D. 36, 39 (S.D.N.Y.
case-by-case determination, with the basic goal being to
Stroud’s invocation of the Fifth Amendment is, without
more, sufficient to constitute special circumstances.
There is no question that “the blanket assertion of the
privilege against self-incrimination is an inadequate
Wright, 261 F. App’x
basis for the issuance of a stay.”
at 263; see also Alcala v. Texas Webb County, 625 F.
Supp. 2d 391, 401 (S.D. Tex. 2009) (“[T]o warrant a stay,
a defendant must make a strong showing that the two
proceedings will so overlap that either (1) he cannot
protect himself in the civil proceeding by selectively
invoking his Fifth Amendment privilege, or (2) effective
Investments, Inc., 11 F.3d 818, 823 (8th Cir. 1993)).
indicating that he will continue to invoke the Fifth
Amendment and by showing nothing more than that “blanket
assertion,” Stroud has plainly failed to meet his burden.
Amendment as a basis for staying this litigation, Stroud
expressly does so to protect the interests of his codefendant;
Tuberville’s private interests sufficiently compelling to
warrant staying this case, and, with Tuberville’s private
interests now asserted by a person other than Tuberville
2. The court finds it questionable whether Stroud
has standing to assert Tuberville’s interests since a
party “generally must assert his own legal rights and
interests, and cannot rest his claim to relief on the
legal rights or interests of third parties.”
Seldin, 422 U.S. 490, 499 (1975) (quoting Tileston v.
Ullman, 318 U.S. 44 (1943)).
But, that aspect of the
standing doctrine is prudential, rather than mandated by
Article III’s case-or-controversy requirement. Kowalski
v. Tesmer, 543 U.S. 125, 129 (2004).
circumstances of this case, the court finds it prudent to
put aside the standing issue and reach the merits of
himself, the court finds the argument for a stay less
Indeed, the record does not establish that, should
collateral attack on the judgment, and, as such, that the
refusing to testify will be obviated.
The record also
does not establish that, if the state prosecution ends
prosecuted in federal court, under federal law, and that
thus he has no reasonable grounds to fear as much,
especially given that federal officials are investigating
his past conduct; or even that he will not be subject to
different criminal statute than was used in the first
Given those possibilities, Stroud would
surely continue exercising his right to remain silent.
Stroud’s pleading guilty, but there is nothing in the
record to suggest that he is likely to do so.
invoking his Fifth-Amendment privilege any time in the
Another consideration the court finds highly relevant
in this case is the nature of Tuberville and Stroud’s
sophisticated financial fraud, and Stroud is criminally
accused of the same.
“[T]here are many reasons why it
Business Machines Corp. v. Brown, 857 F. Supp. 1384, 1391
(C.D. Cal. 1994) (Letts, J.).
Generally speaking, in the
case of pending civil and criminal proceedings, “[i]t is
bringing to justice the perpetrators of crimes should
ever take precedence over the direct interest of the
victims of crimes to obtain redress for their losses.”
But in the particular case of fraud--where “[i]t is
to be expected that as soon as the defrauder learns that
he is under suspicion, he will undertake to abscond with,
spend or hide the fraud proceeds”–-the victims’ interests
The concern is illustrated well in this case.
the indictment against Stroud was issued, plaintiffs
state that he left his residence in Auburn, Alabama and
moved to an undisclosed location.
Since then, plaintiffs
have had difficulty serving documents on Stroud (although
plaintiffs’ process server eventually located him in
Uriah, Alabama and personally served an amended version
of the complaint on him).
As noted above, Stroud has not
yet filed an answer to plaintiffs’ complaint in this
case; his sole participation in the lawsuit has been the
two motions to stay that are now before the court.
those motions, Stroud flagrantly violated Rule 11 of the
Federal Rules of Civil Procedure by failing to provide
telephone number, or any other contact information.
Fed. R. Crim. P. 11(a) (“Every ... written motion must be
signed ... by [an unrepresented] party personally ....
address, and telephone number.”).
Stroud’s minimal participation this litigation, he has
If that is the case, Stroud’s misrepresentation
See Fed. R.
constitutes a separate violation of Rule 11.
Civ. P. 11(b)(3) (“By presenting to the court a ...
written motion ... an ... unrepresented party certifies
that to the best of the person's knowledge, information,
and belief ... the factual contentions have evidentiary
In the first paragraphs of Stroud’s two
motions, he stated that, “The undersigned has contacted
oppose the relief requested by Stroud.”
(Doc. Nos. 50 & 53) at 1.
That sentence was copied
almost identically from Tuberville’s earlier motion; all
Plaintiffs stated to the court that Stroud’s contention
about contacting them was a “bald-faced lie”; Stroud had
made no contact with plaintiffs or their counsel.
Memo in Opp. (Doc. No. 56) at 6.
Given this pattern of elusive behavior and lack of
meaningful participation in this lawsuit, plaintiffs’
interests in having the litigation proceed (and having
the opportunity to ask the court for a default judgment
if Stroud’s non-cooperation continues) are compelling.
Cf. Int’l Business Machines Corp., 857 F. Supp. at 1391
(“[A] stay of this action would delay and likely hinder
any possible recovery that [the plaintiff] may obtain.”).
through Stroud), the decision to deny Stroud’s motion to
stay is not a close one.
Moreover, the interest in
alleged defrauder does not lie solely with plaintiffs;
interest that victims of fraud be able to pursue recovery
in cases like this one.
“To require the victim[s] to
indeterminate period, while awaiting the ... outcome
an investigation done in pursuit of broader interests,
seems unnecessary and unfair.”
The court holds that, at this time, based on the
unwarranted and unjust.
If circumstances materially
consider staying the litigation in light of the changed
See U.S. ex rel. Gonzalez, 571 F. Supp.
2d at 766 (“Of course, if circumstances change, the
parties are free to request that the Court reconsider the
propriety of a stay.”).
Accordingly, it is ORDERED that defendant John David
Stroud’s motions to stay (Doc. Nos. 50 & 53) are denied.
DONE, this the 6th day of March, 2013.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
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