Brown et al v. Tennison et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
U.S. Magistrate Judge S. Kato Crews
Civil Action No. 1:19-cv-00941-RM-SKC
DENNIS L. BROWN, and,
PAUL D. BROWN,
Plaintiffs,
v.
BRADLEY J. TENNISON,
FREDERICK ARIAS,
WAYNE EDWARD BELL,
TENNISON INVESTMENTS, INC., an Arizona corporation,
SHIELD DEFENSE SYSTEMS, INC., a Nevada corporation, and
JOHN DOES NUMBERS ONE THROUGH THREE,
Defendants.
ORDER GRANTING DEFENDANTS’ MOTION TO STAY DISCOVERY [ECF. #46]
This order addresses Defendants’ Bradley J. Tennison (“Tennison”) and Tennison
Investments, 	Inc. 	(“TII”) 	(collectively, 	the 	“Tennison 	Defendants”) 	Motion 	to 	Stay
Proceedings (the “Motion”) [#46].1 District Judge Raymond P. Moore referred the Motion
to this Court. [#47.] The Court has reviewed Plaintiffs’ Response [#49], the Tennison
Defendants’ Reply [#50], and the Tennison Defendants’ Status Report [#62]. The Court
has also reviewed relevant case law and the court file. No hearing is necessary. For the
following reasons, the Motion is GRANTED.
1 The Court uses “[# __ ]” to refer to entries in CM/ECF.
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A. 	BACKGROUND
1. 	The Alleged Scheme
According to Plaintiffs, this case arises out of a scheme in which they were lured
by Defendants into investing nearly $5,000,000.00 in an investment vehicle called “The
Joseph Project.” [#53 at p.3.] Relevant here, Plaintiffs invested in the project at the
direction, request, or solicitation of Tennison, who owned and operated TII. [Id.] In the
end, Plaintiffs never received the investment returns they were promised and lost
“substantially all of their investments in The Joseph Project . . . .” [#1 at ¶¶217-18.]
Plaintiffs brought this action asserting the following claims for relief: (1) “Securities
Fraud/Violation of Colorado Securities Act and Aiding and Abetting Securities Fraud in
Violation of [C.R.S.] §11-51-501 and §11-51-604”; (2) “Control Person Liability Pursuant
to C.R.S. §11-51-604(5)(a),(b), and (c)”; (3) “Breach of Fiduciary Duty”; (4) “Civil Theft
Pursuant to C.R.S. §18-4-405”; (5) “Negligence”; (6) “Participating in and Aiding and
Abetting Violations of the Colorado Organized Crime Control Act, C.R.S. §18-17-101, et
seq.; and (7) “Piercing the Corporate Veil and Reverse Veil Piercing.” [Id. at ¶¶219-94.]
2. 	Parallel Proceedings
Three other lawsuits involving Tennison bear on the Motion. The first is a civil
lawsuit filed in Arizona state court by Tennison and his family members in February 2019
(the “Destiny Trust Case”). [#50 at pp. 2-3.] In that case, Tennison sued several
individuals and entities whom he alleges stole money he and his family invested in the
Destiny Trust. [Id.] The claims are like those brought against Defendants in the present
case. [#49 at pp.7-8.] Tennison argues that the Destiny Trust Case “provided [him] the
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ability to subpoena bank accounts and trace and analyze both the Destiny Trust and
Joseph Project funds as the two were part of the same scheme being used by the persons
controlling the Joseph Project.” [#50 at p.3.]
The second is a civil lawsuit filed by Tennison and his family members in May 2019
in the Superior Court for the State of Arizona in and for the County of Maricopa (the
“Joseph Project Case”). [#49-1.] Tennison filed the case after he analyzed bank records
obtained through a subpoena in the Destiny Trust Case. [See #50 at p.5.] The Joseph
Project Case names The Joseph Project and other individuals and entities as defendants.
[Id.] Tennison has apparently informed Plaintiffs of the Joseph Project Case and offered
them the opportunity to join in the case. [Id.] In both cases—Destiny Trust Case and
Joseph Project Case—“[t]here has been no defense to the lawsuits” and “[n]o discovery
has been taken of Mr. Tennison or propounded amongst the parties in either lawsuit.”
[#62 at p.2.]
The third case is a criminal matter against Tennison. On June 17, 2019, the
Arizona Attorney General indicted Tennison on eight counts, including two counts that
refer to the Plaintiffs in this case and the alleged theft of money Plaintiffs wired to
Defendants [#46 at pp.1-2]; those funds are also the subject of the Plaintiffs’ Complaint.
[See generally #1.] The remaining counts charge Tennison with crimes of (1) conspiracy
to commit theft and other crimes; (2) fraudulent schemes and artifices; (3) money
laundering in the first degree; (4) illegal control of an enterprise (The Joseph Project); and
(5) sale of unregistered securities. [#46-1 at pp. 2-8.] The Final Trial Management
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Conference in the criminal case is set for February 18, 2020, and trial is set to commence
on February 25, 2020. [#62 at p.2.]
Because of the criminal case, the Tennison Defendants filed the Motion seeking a
complete stay of this civil matter as it relates to these two defendants, citing Tennison’s
Fifth Amendment rights. [See generally #46.] It is not alleged that TII is the subject of any
criminal investigation or trial. [See generally #46-1.]
B. 	LEGAL STANDARD
“The Constitution does not generally require a stay of civil proceedings pending
the outcome of criminal proceedings, absent substantial prejudice to a party’s rights.”
Creative Consumer Concepts Inc. v. Kreisler, 563 F.3d 1070, 1080 (10th Cir. 2009).
Courts have the discretion to stay a civil action until completion of parallel criminal
proceedings in the interests of justice. United States v. Kordel, 397 U.S. 1, 12 n.27 (1970).
When deciding whether the interests of justice seem to require a stay, the
court must consider the extent to which a party’s Fifth Amendment rights
are implicated. However, a defendant has no absolute right not to be forced
to choose between testifying in a civil matter and asserting his Fifth
Amendment privilege. A district court may also stay a civil proceeding in
deference to a parallel criminal proceeding for other reasons, such as to
prevent either party from taking advantage of broader civil discovery rights
or 	to 	prevent 	the 	exposure 	of 	the 	criminal 	defense 	strategy 	to 	the
prosecution.
Creative Consumer Concepts Inc., 563 F.3d at 1080-81 (internal citations and quotations
omitted).
When applying this framework to a particular case, the Court must generally
balance the plaintiff’s interests “in moving forward with the litigation against the interests
of a defendant asserting Fifth Amendment rights who faces the choice of being prejudiced
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in the civil litigation if those rights are asserted or prejudiced in the criminal litigation if
those rights are waived.” AIG Life Ins. Co v. Phillips, No. 07-cv-00500-PSF-MEH, 2007
WL 2116383, at *2 (D. Colo. July 20, 2007) (quoting In re CFS-Related Secs. Fraud Litig.,
256 F.Supp.2d 1227, 1236 (N.D. Okla. 2003)). To that end, the Court considers the
following factors: (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 defendant
has 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. Bd. Of Cty. Comm’rs of Cty. of Adams v. Asay, Civ. No. 11-cv-02238-PAB-KLM,
2011 WL 5976144, at *2 (D. Colo. Nov. 29, 2011) (citing AIG Life Ins. Co., 2007 WL
2116383, at *2). Further, courts in the District of Colorado “may consider alternatives to
a general stay, including the imposition of protective orders, sealed interrogatories, a stay
for a finite period of time, or a stay limited to a specific subject matter.” Id. (internal
quotations omitted).
C. 	ANALYSIS
1. 	Overlap of Issues
The parties agree there is significant overlap between the criminal and civil
proceedings regarding the Tennison Defendants. [#46 at pp. 5-7; #49 at pp.5-6.] This
factor favors a stay.
2. 	Status of Tennison’s Criminal Case
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The second factor requires the Court to consider whether the criminal case is in
the pre- or post-indictment stages. See AIG Life Ins. Co., 2007 WL 2116383, at *2. “A
stay is more likely warranted if an indictment has already been issued because (1) ‘the
likelihood that a defendant may make incriminating statements is greatest after an
indictment has issued,’ and (2) ‘the prejudice to the plaintiffs in the civil case is reduced
since 	the 	criminal 	case 	will 	likely 	be 	quickly 	resolved 	due 	to 	Speedy 	Trial 	Act
considerations.’” Id. (quoting M.D. Diet Weight Loss & Nutrition Clinic, L.C. v. Absolute
Weight Loss & Nutrition Ctr., LLC, No. 2:05–CV–605 TS, 2006 WL 2471524, at *1 (D.
Utah Aug. 24, 2006)).
The criminal case against Tennison is in the post-indictment stages and trial is set
for February 25, 2020. [See #46 at p. 8; #62 at p.2.] Thus, this factor favors a stay. See
AIG Life Ins. Co., 2007 WL 2116383, at *2.
3. 	Plaintiffs’ Interests
Plaintiffs have a general interest in the expeditious resolution of their case. See
Alattar v. Bell, No. 13-cv-02990-MSK-KMT, 2014 WL 2566271, at *2 (D. Colo. June 5,
2014). This right “should not be denied except under the most extreme circumstances.”
Commodity Futures Trading Comm’n v. Chilcott Portfolio Mgmt., 713 F.2d 1477, 1484
(10th Cir. 1983). Considering Tennison’s February 25, 2020 trial date, it could be said
that the burden on Plaintiffs’ interests would be limited. [Cf. #62 at p.2.] However, the
criminal court may continue the trial date due to ongoing negotiations between Tennison
and Arizona prosecutors. [#62 at p.2.] Thus, there is uncertainty either way.
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Perhaps for this reason, the Motion seeks an indefinite stay. But an indefinite stay
would 	place 	a 	serious 	infringement 	on 	Plaintiffs’ 	interest 	to 	resolve 	this 	matter
expeditiously. The uncertainty concerning the duration of a stay premised on resolution
of Tennison’s criminal matter disfavors a stay.
4. 	Tennison Defendants’ Interests and Burden
Turning to the fourth factor, the Parties agree that Tennison has an interest in a
stay in order to avoid being forced to choose between exercising his Fifth Amendment
right and jeopardizing his defense in the criminal proceedings. [See #49 at pp.9-10.] But
Plaintiffs assign little value to Tennison’s interest in not being forced to choose between
testifying in a civil matter and asserting his Fifth Amendment privilege because he
continues to participate as a plaintiff in both the Destiny Project Case and the Joseph
Project Case, post-indictment. [#49 at p.10.] Plaintiff relies on In re: Matter of East 51st
St. Crane Collapse Litig., wherein the court held that a witness who “foregoes the
protection of the Constitutional privilege against self-incrimination by giving testimony to
his advantage or to the advantage of his friends cannot in the same proceeding assert
the privilege and refuse to answer questions that are to his disadvantage or the
disadvantage of his friends.” 916 N.Y.S.2d 471, 534-35 (N.Y. Sup. Ct. 2010).
Plaintiffs’ reliance on this case is misplaced. First, Crane Collapse Litigation
concerns the waiver and subsequent exercise of the Fifth Amendment privilege in the
same 	proceeding. 	See 	id. 	Here, 	Plaintiffs’ 	argument 	straddles 	three 	separate
proceedings, and therefore, the analysis in Crane Collapse Litigation would seem
inapposite. Second, the party in the Crane Collapse Litigation who asserted his privilege
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against self-incrimination tried a sword-and-shield approach to the right—he invoked the
right to avoid answering certain questions, but answered other questions over which he
could have invoked the right. Id. at 534. The court determined that the party waived his
right to assert the Fifth Amendment because he failed to invoke it as to all questions
respecting the same subject matter. Id.
Here, there is no indication that Tennison has yet waived his Constitutional
privilege against self-incrimination by way of the other two pending civil matters. [See #62
at p.2.] Tennison has not engaged in discovery or otherwise been required to seriously
contemplate waiving his Fifth Amendment right in those cases. [Id.] No one has directed
this Court to any statements he’s made in either case which demonstrate a selective
invocation of the privilege on his part. Indeed, should Tennison face such a decision in
those lawsuits, he has indicated he “would assert his Fifth Amendment privilege or
withdraw from the case. He has no other choice.” [#50 at p.7.] Of note, both civil actions
were filed before Tennison’s indictment. [Id.] Thus, this is not a matter of Tennison
“pick[ing] and choos[ing] the cases that are stayed, depending on whether [he] has
exposure of civil or administrative liability or whether he stands to gain a financial
advantage.” [Id. at p.4.] At least at the present, the Court finds no inconsistency with
Tennison’s status as a plaintiff in the two related civil matters and the present case. This
factor favors a stay.
5. 	Court Interests
The fifth factor considers the interests of the Court. “The Court has a strong interest
in keeping litigation moving to conclusion without unnecessary delay.” In re CFS, 256
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F.Supp.2d at 1241. An ill-advised stay may inconvenience courts by making the “docket
less predictable and, hence, less manageable.” Stone v. Vail Resorts Dev. Co., Civil
Action No. 09-cv-02081-WYD-KLM, 2010 WL 148278, at *3 (D. Colo. Jan. 7, 2010).
However, resolution of the parallel criminal proceedings could increase the possibility of
settlement in this case, at least as to the Tennison Defendants. See AIG Life Ins. Co.,
2007 WL 2116383, at *4. Further, the scope of discovery may be reduced by evidence
from the criminal case, or based on the result of those proceedings. See id. (citing
Trustees of Plumbers & Pipefitters Nat'l Pension Fund v. Transworld Mech., Inc., 886
F.Supp. 1134, 1138 (S.D.N.Y.1995)). This factor favors a stay.
6. 	Public Interests
With respect to the sixth factor, the public’s only interest in this case is a general
interest in its efficient and just resolution. See Waisanen v. Terracon Consultants, Inc.,
Civil Action No. 09-cv-01104-MSK-KMT, 2009 WL 5184699, at *2 (D. Colo. Dec. 22,
2009). The Court finds that this factor is neutral considering these goals.
D. 	CONCLUSION
Weighing the relevant factors, the Court concludes that a stay as to Mr. Tennison
and TII is warranted.2 	Accordingly, IT IS ORDERED that the Tennison Defendants’
2 Corporations do not have a Fifth Amendment privilege against self-incrimination. Dreier
v. United States, 221 U.S. 394, 399-400 (1911). Therefore, a stay would typically not be
warranted in favor of TII under these circumstances. See e.g., Starlight Intern., Inc. v.
Herlihy, No. 97-2329-GTV, 1998 WL 560045, at *2 n.1 (D. Kan. Aug. 4, 1998). However,
the 	Complaint 	alleges 	that 	TII 	has 	“no 	independent 	corporate 	existence 	that 	is
distinguishable from that of” Tennison. [#1 at ¶285; see also #1 at ¶68 and ¶¶284-94.] It
further alleges that Tennison used TII as a mere “alter ego” for his personal benefit. [#1
at ¶291.] As a result, it appears to the Court that TII’s ability to defend itself in this action
is significantly (if not solely) dependent upon Tennison, who intends to plead the Fifth.
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Motion 	[#46] 	is 	GRANTED. 	Discovery as 	to 	Defendant 	Bradley J. 	Tennison and
Defendant Tennison Investments Inc. is stayed pending resolution of Mr. Tennison’s
criminal matter.
IT IS FURTHER ORDERED that the Parties shall file a Joint Status Report
indicating the efficacy of this litigation proceeding against the remaining Defendants, or
of administrative closure of the case, subject to reopening, upon the conclusion of
Tennison’s criminal proceedings. The Joint Status Report is due by no later than January
31, 2020.
DATED: January 13, 2020.
BY THE COURT:
S. Kato Crews
United States Magistrate Judge
The Court can only conclude that TII will be unable to defend itself without Tennison’s
assistance, and as a result, will suffer prejudice if Tennison invokes his Fifth Amendment
privilege. See Am. Express Bus. Fin. Corp. v. RW Prof’l Leasing Servs. Corp., 225 F.
Supp. 2d 263, 265-66 (E.D.N.Y. 2002). The interests of justice warrant that the stay also
apply to TII.
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