United States Securities and Exchange Commission v. Salis et al

Filing 21

OPINION AND ORDER GRANTING 17 MOTION to Intervene and Stay Proceedings by Intervenor Department of Justice, Movant Department of Justice. This matter and all other pending motions are STAYED pending judgment in United States v. Salis, Case No. 2:16-CR-148. Signed by Chief Judge Philip P Simon on 12/14/16. (cc: Christopher Salis). (cer)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION,
Plaintiff,
v.
CHRISTOPHER SALIS, DOUGLAS
MILLER, EDWARD MILLER, and
BARRETT BIEHL,
Defendants.

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Cause No.: 2:16-cv-231

OPINION & ORDER
This is a civil action in which the Securities and Exchange Commission alleges
two insider trading schemes hatched by Christopher Salis. (DE 1.) One of those schemes
is the predicate for a 17-count indictment recently brought against Salis, Douglas Miller,
and Edward Miller. (Compare id., with United States v. Salis, No. 2:16-cr-148 (N.D. Ind.
Oct. 19, 2016) (DE 1).) In both matters, Salis is alleged to have fed his friend Doug Miller
material, nonpublic information about the pending acquisition of Concur Technologies,
Inc. by Salis’s employer, so that Miller and others could use that information to make
(and share with Salis) a quick profit on the expected increase in Concur’s stock price.
Because of the factual overlap between the cases, I asked the parties to brief
whether this matter should be stayed. (DE 16.) The SEC took no position, and Douglas
Miller and his brother Edward Miller don’t oppose a stay. (See DE 18; DE 19.) Salis also

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does not oppose a stay, but he seeks a ruling on Millers’ pending motion to dismiss
first. (DE 20.) Finally, the Department of Justice, the entity charged with prosecuting the
criminal case, moves to intervene in this matter for the limited purpose of seeking a stay
of the case. (DE 17.) For the reasons below, the DOJ’s motion to intervene is granted,
and this civil matter is stayed pending judgment in the criminal case.
DOJ’s Motion to Intervene
Under Federal Rule of Civil Procedure 24(a)(2), a party may intervene as a matter
of right if: (1) the motion is timely; (2) the would-be intervenor has an interest related to
the subject matter of the action; (3) that interest might be impaired by the disposition of
the case; and (4) the interest will not be adequately protected by the existing parties. See
Ligas ex rel. Foster v. Maram, 478 F.3d 771, 773 (7th Cir. 2007). Those requirements are
met here.
First, the DOJ’s motion, which was filed during the time frame given to the
parties for weighing in on the question of staying this matter, is timely. In addition, it’s
clear that the DOJ has an interest in this matter that might be impaired, seeing as the
DOJ brought the parallel criminal case and “discovery in the civil case [could be] used
to circumvent the more limited scope of discovery in the criminal matter.” SEC v.
Chestman, 861 F.2d 49, 50 (2d Cir. 1988) (per curiam). Last, although both agencies
represent the interests of the United States, the SEC’s and the DOJ’s interests are
different, and the SEC can’t be expected to protect the interests of the DOJ. See Sec. &
Ech. Comm’n v. Ott, 2006 U.S. Dist. LEXIS 86541, at *6 (D.N.J. Nov. 29, 2006) (stating that
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the SEC’s interests in enforcing the Securities Exchange Act of 1934 are not the same as
the government’s interest in a criminal prosecution); see also generally Sec. & Exch.
Comm’n v. Dresser, Inc., 628 F.2d 1368, 1377 (D.C. Cir. 1980); 21st Century Corp. v.
LaBianca, 801 F. Supp. 1007, 1011 (E.D.N.Y. 1992).
Even if the DOJ hadn’t met the criteria for intervention as a matter of right, I
would have granted permissive intervention under Rule 24(b)(1)(B) because the DOJ’s
criminal matter shares common questions of fact with this matter and because the
intervention will not “unduly delay or prejudice the adjudication of the original parties’
rights.” Fed. R. Civ. P. 24(b)(1)(B); see also Sec. & Exch. Comm’n v. Downe, 1993 WL 22126,
at *11 (S.D.N.Y. Jan. 26, 1993) (granting DOJ motion to intervene and stay); First Merchs.
Enter., Inc. v. Shannon, 1989 WL 25214, at *3 (S.D.N.Y. Mar. 16, 1989) (same); Sec. & Exch.
Comm’n v. One or More Unknown Purchaser of Sec. of Global Indus., 2012 WL 5505738, at *2
(S.D.N.Y. Nov. 9, 2012) (granting motion to intervene and stay even though indictment
was possibly six months away). Accordingly, the DOJ’s motion to intervene for the
limited purpose of moving for a stay is granted.
Staying the Civil Matter
I asked the parties to brief whether this case should be stayed pending resolution
of the criminal case because I had concerns that concurrent proceedings in the two
matters might hamstring the criminal defendants’ ability to fully exercise their Fifth
Amendment rights. “The court has the inherent power to stay civil proceedings,
postpone civil discovery, or impose protective orders when the interests of justice so
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dictate.” Horton v. Pobjecky, No. 12-C-7784, 2013 WL 791332, at *3 (N.D. Ill. Mar. 4, 2013)
(citing Doe v. City of Chicago, 360 F. Supp. 2d 880, 881 (N.D. Ill. 2005)). However, a stay is
not required just because there is a parallel criminal proceeding. See U.S. v. Certain Real
Prop., Commonly Known as 6250 Ledge Rd., Egg Harbor, 943 F.2d 721, 729 (7th Cir. 1991)
(citations omitted); but see generally Sec. & Exch. Comm’n v. Shanahan, 2007 WL 3232248,
at *2 (E.D. Mo. Oct. 30, 2007) (staying civil discovery where one party had been indicted
for the same conduct); see also generally Dresser, 628 F.2d at 1376.
The bottom line in this case is that the civil and criminal matters involve nearly
identical allegations. Indeed, three of the defendants in this case have also been indicted
in the criminal matter. In all likelihood, they would want to invoke their rights under
the Fifth Amendment when responding to discovery in this case, whether when
answering interrogatories or being deposed. In a civil action, unlike a criminal case, a
jury may draw adverse inferences against a defendant who invokes his Fifth
Amendment right to remain silent. See Baxter v. Palmigiano, 425 U.S. 308, 318 (1976);
Harris v. City of Chicago, 266 F.3d 750, 753 (7th Cir. 2001). That puts the defendants in an
untenable position in this case. And let’s be realistic: they face substantial prison terms
if they are convicted. Given their present predicament, the defendants should be
devoting their time, resources, and full attention to the criminal matter in an effort to
avoid incarceration.
Ordinarily, the interests of the SEC would be on the other side of the equation,
but here the SEC will not be prejudiced by a stay and doesn’t oppose one. (See DE 18.)
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Further, a stay would conserve judicial resources by allowing overlapping factual issues
to be resolved or narrowed in the criminal matter first. See United States v. All Meat &
Poultry Prods. Stored at Lagrou Cold Storage, 2003 WL 22284318, at *5 (N.D. Ill. Oct. 3,
2003); Sec. & Exch. Comm’n v. Offill, 2008 WL 958072, at *3 (N.D. Tex. Apr. 9, 2008). In
addition, Salis—the only party who opposes the stay—objects only insomuch as he
wants the Millers’ motion to dismiss to be handled first. Of course, Salis is not a party to
the Millers’ motion to dismiss, and, in any event, I disagree with him that it makes sense
to dedicate judicial resources to deciding that motion now, when the outcome of the
criminal matter may resolve some issues that need to be decided in this matter and may
change the parties’ thinking about how to proceed in this case.
Finally, staying the civil matter is in the public interest. For one thing, discovery
in criminal cases is by design more narrow than civil discovery, and “[t]he public has an
interest in ensuring the criminal discovery process is not subverted” Morris v. Am. Fed’n
of State, Cnty, & Mun. Emps., 2001 WL 123886, at *2 (S.D.N.Y. Feb. 9, 2001). In addition,
the public has an interest in “the effective prosecution of those who violate the
securities laws” that counsels in favor of temporarily putting off the civil matter until
after the criminal investigation and prosecution are resolved. See In re Worldcom, Inc.
Sec. Litig., 2002 WL 31729501, at *8 (S.D.N.Y. Dec. 5, 2002); see also Campbell v. Eastland,
307 F.2d 478, 487 (5th Cir. 1962) (“Administrative policy gives priority to the public
interest in law enforcement.”).
For all of these reasons, a stay of this civil matter is in the interests of justice.
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Conclusion
Accordingly, the Department of Justice’s Motion to Intervene and Stay
Proceedings (DE 17) is GRANTED, and this matter and all other pending motions are
STAYED pending judgment in United States v. Salis, No. 2:16-cr-148 (N.D. Ind. Oct. 19,
2016).
SO ORDERED.
Entered: December 14, 2016.
s/ Philip P. Simon
CHIEF JUDGE
UNITED STATES DISTRICT COURT

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