Abrams et al v. Tuberville et al

Filing 72

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.,
Plaintiffs,
v.
THOMAS H. TUBERVILLE,
et al.,
Defendants.

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CIVIL ACTION NO.
3:12cv177-MHT
(WO)

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).

Plaintiffs

claim violations of federal and state securities and
commodities exchange laws, breaches of fiduciary duties,

unjust enrichment, negligence and wantonness, fraud, and
conversion.

Subject-matter jurisdiction is proper under

28 U.S.C. § 1331 (federal question), 7 U.S.C. § 25(c)
(Commodities

Exchange

(supplemental).

Act),

and

28

U.S.C.

§

1367

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.

I. BACKGROUND
A.
The

allegations

in

this

case

are

as

follows.

Plaintiffs, all of whom sought to grow their savings for
retirement,

entrusted

Tuberville

and

Stroud

with

investing their money; they came to regret that decision.
Savvy investors (which plaintiffs allegedly were not) may
have seen warning signs that plaintiffs overlooked.

For

example, plaintiffs allege that, while Tuberville and
Stroud purportedly did business as agents of various
entities, at least one of those entities was nonexistent

2

(it was never actually organized under the laws of any
State); that plaintiffs were solicited through various
documents

that

were

purported

to

be

exempt

from

regulatory requirements, but the claimed exemption was a
falsehood;

and

that

plaintiffs

were

assured

that

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
third parties.

Plaintiffs now believe that was all

untrue.
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
conceal

that

statements

fact,

and

sending

making

plaintiffs

doctored

misrepresentations

over

bank
the

telephone; and that, as of today, plaintiffs cannot say

3

where their funds have gone, although they believe that
it has been misappropriated, converted, and otherwise
squandered for the benefit of Tuberville and Stroud.
Tuberville

has

allegations.

generally

denied

all

of

plaintiffs’

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.

4

B.
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
would

be

unfairly

prejudiced.

The

court

denied

Tuberville’s motion without issuing a written opinion.
The

day

immediately

after

this

court

denied

Tuberville’s motion, Stroud filed with the court his own

5

motion to stay.1

He submitted the motion pro se (on his

own behalf, rather than through an attorney).

The motion

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
the

Fifth

Amendment,

Tuberville

would

be

unable

to

develop evidence critical to his defense and that the
court should stay this litigation to protect Tuberville’s
interests.

A couple weeks later, Stroud filed with the

court a second motion that was identical to the first
submission.

Both motions are now before the court.

1.
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.
6

C.
The court must now decide for the second time whether
to stay this civil lawsuit pending resolution of the
criminal case against Stroud.

II. STANDARD
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).

“[T]he power

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
competing

interests

Landis

North

(1936).

v.

and

American

maintain
Co.,

299

an

even

U.S.

balance.”

248,

265-66

“[T]he court, in its sound discretion, must

assess and balance the nature and substantiality of the
injustices claimed on either side.”

7

Feld Entertainment,

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
have

the

case

stayed

brought against him.

pending

a

criminal

prosecution

In such cases, “[i]t is the rule,

rather than the exception that [the] civil and criminal
cases

proceed

together.”

U.S.

ex

rel.

Gonzalez

v.

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
only

when

special

circumstances

interests of justice.”

so

require

in

the

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
8

unobjectionable.”).

Absent

a

showing

of

special

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).

Those

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.
9

1993)

(Conner,

J.)

(“Balancing

these

factors

is

a

case-by-case determination, with the basic goal being to
avoid prejudice.”).

III. DISCUSSION
The

court

first

disposes

of

the

argument

that

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
defense

of

both

impossible.”)

[the

(citing

criminal
Koester

and
v.

civil
American

cases]

Republic

Investments, Inc., 11 F.3d 818, 823 (8th Cir. 1993)).
10

is

By

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.
Moreover,

in

asserting

his

invocation

of

the

Fifth

Amendment as a basis for staying this litigation, Stroud
expressly does so to protect the interests of his codefendant;
interests.2

he

does

not

purport

The

court

did

to
not

protect

his

previously

own
find

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.”
Ward v.
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).
Given the
circumstances of this case, the court finds it prudent to
put aside the standing issue and reach the merits of
Stroud’s motion.
11

himself, the court finds the argument for a stay less
persuasive.
Indeed, the record does not establish that, should
the

criminal

conviction,

prosecution
he

will

against
proceed

not

Stroud
with

an

end

with

appeal

a
or

collateral attack on the judgment, and, as such, that the
likelihood

of

his

invoking

the

Fifth

refusing to testify will be obviated.

Amendment

and

The record also

does not establish that, if the state prosecution ends
with

an

acquittal,

Stroud

cannot

nevertheless

be

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
subsequent

prosecution

in

the

state

courts

under

a

different criminal statute than was used in the first
prosecution.

Given those possibilities, Stroud would

surely continue exercising his right to remain silent.
Finally

and

admittedly,

there

is

the

possibility

of

Stroud’s pleading guilty, but there is nothing in the
12

record to suggest that he is likely to do so.
there

is

no

reason

to

think

that

Stroud

In short,
will

stop

invoking his Fifth-Amendment privilege any time in the
near future.
Another consideration the court finds highly relevant
in this case is the nature of Tuberville and Stroud’s
alleged

wrongdoing.

Both

are

civilly

accused

of

sophisticated financial fraud, and Stroud is criminally
accused of the same.
may

be

against

particularly
defendants

“[T]here are many reasons why it
undesirable
accused”

of

to
such

stay

civil

wrongs.

cases
Int’l

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
hard

to

see

why

the

indirect

societal

interest

in

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.”
Id.

But in the particular case of fraud--where “[i]t is

to be expected that as soon as the defrauder learns that
13

he is under suspicion, he will undertake to abscond with,
spend or hide the fraud proceeds”–-the victims’ interests
in

having

their

especially strong.

rights

expeditiously

declared

are

Id.

The concern is illustrated well in this case.

After

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.

With

those motions, Stroud flagrantly violated Rule 11 of the
Federal Rules of Civil Procedure by failing to provide
the

court

with

his

mailing

address,

e-mail

address,

telephone number, or any other contact information.

See

Fed. R. Crim. P. 11(a) (“Every ... written motion must be
14

signed ... by [an unrepresented] party personally ....
The

paper

must

state

the

signer's

address,

e-mail

address, and telephone number.”).
The

court

also

finds

it

relevant

that,

despite

Stroud’s minimal participation this litigation, he has
seemingly
court.

already

made

one

misrepresentation

to

the

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
support ....”).

In the first paragraphs of Stroud’s two

motions, he stated that, “The undersigned has contacted
Plaintiffs’

counsel,

who

has

stated

that

oppose the relief requested by Stroud.”
(Doc. Nos. 50 & 53) at 1.

Plaintiffs
Def.’s Mot.

That sentence was copied

almost identically from Tuberville’s earlier motion; all
Stroud

changed

was

Tuberville’s

name

to

his

own.

Plaintiffs stated to the court that Stroud’s contention
15

about contacting them was a “bald-faced lie”; Stroud had
made no contact with plaintiffs or their counsel.

Pls.’

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.”).
Balanced

against

Tuberville’s

interests

(as

conveyed

through Stroud), the decision to deny Stroud’s motion to
stay is not a close one.
plaintiffs’

ability

to

Moreover, the interest in

seek

recovery

against

their

alleged defrauder does not lie solely with plaintiffs;
rather,

the

court

finds

it

decidedly

in

the

public

interest that victims of fraud be able to pursue recovery
in cases like this one.
forgo

the

pursuit

of

“To require the victim[s] to
[their]
16

own

rights

for

an

indeterminate period, while awaiting the ... outcome

of

an investigation done in pursuit of broader interests,
seems unnecessary and unfair.”

Id.

The court holds that, at this time, based on the
record

before

it,

a

unwarranted and unjust.
change,

Tuberville

or

stay

in

this

case

would

be

If circumstances materially
Stroud

may

ask

the

court

to

consider staying the litigation in light of the changed
circumstances.

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