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Windham v. Snyder

United States District Court, D. Utah

August 28, 2018

MARIA E. WINDHAM, as Receiver for MARQUIS PROPERTIES, LLC, et al., Plaintiff,
v.
JEFFREY PAUL SNYDER, an individual; JP SNYDER, INC., a Florida Corporation; JUDITH J. SNYDER, an individual; JOSEPH L. SIMONDS, an individual; ANNUITY THINK TANK, LLC, an expired Texas limited liability company; and SIMONDS HOLDINGS, LLC, a dissolved Texas limited liability company; and JOHN DOES 1-5, Defendants.

          ROBERT J. SHELBY DISTRICT JUDGE

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR STAY OF CIVIL CASE PENDING COMPLETION OF A PARALLEL CRIMINAL INDICTMENT (ECF NO. 29)

          EVELYN J. FURSE UNITED STATES MAGISTRATE JUDGE

         Defendants Jeffrey Paul Snyder, Judith Snyder, and JP Snyder, Inc. (collectively, “Snyder Defendants”) move to stay this case pending the completion of a parallel criminal indictment brought against Defendant Jeffrey Snyder. (Mot. for Stay of Civil Case Pending Completion of Parallel Criminal Indictment (“Mot. to Stay”), ECF No. 29.) The Snyder Defendants argue that a stay is necessary because proceeding with parallel civil and criminal cases will substantially prejudice Mr. Snyder, forcing him to choose between asserting his Fifth Amendment rights and potentially receiving an adverse inference in this case, or testifying in this case and potentially incriminating himself in the criminal case. (See id.) Plaintiff Maria E. Windham as Receiver for Marquis Properties, LLC (“Receiver Windham”) opposes the Motion, arguing that her suit is not parallel to Mr. Snyder's criminal indictment and that the requested stay is not in the public interest or in interests of justice. (Mem. in Opp'n to Snyders' Mot for Stay of Civil Case Pending Completion of a Parallel Criminal Indictment (“Opp'n”), ECF No. 34.) In particular, Receiver Windham argues that a stay may deny the investors whose interests she represents the opportunity to obtain the return of the allegedly fraudulent transfers at issue in this case if the receivership is terminated before the stay ends. (Id. at 8-9.) Defendants Joseph L. Simonds, Annuity Think Tank, LLC, and Simonds Holdings, LLC (“Simonds Defendants”) did not join in the Motion to Stay or otherwise respond to the Motion.

         As set forth in more detail below, the Court[1] finds that the interests of justice require a stay at this time as to the Snyder Defendants only. Accordingly, the Court GRANTS IN PART the Motion to Stay and will stay this action as to the Snyder Defendants pending the completion of Mr. Snyder's criminal matter. However, the Court DENIES IN PART the Motion to Stay since it seeks a stay of the entire action. The case may proceed as to the Simonds Defendants, as the Snyder Defendants do not articulate a reason that a stay of the entire case is appropriate, and the Simonds Defendants have not joined in the Motion to Stay or otherwise argued in favor of staying the entire case. Further, the Court agrees with Receiver Windham that investors may suffer prejudice if the receivership is terminated before the stay in this case as to the Snyder Defendants ends. Therefore, if the receivership is nearing completion and this case is still stayed as to the Snyder Defendants, Receiver Windham may move to lift the stay.

         FACTUAL BACKGROUND

         Receiver Windham filed the Complaint in this matter on January 18, 2018. (Compl., ECF No. 2.) This is an ancillary proceeding to the Securities and Exchange Commission action pending in this District, No. 2:16-cv-00040-JNP, which involves an alleged real estate Ponzi scheme perpetrated by Chad Deucher (“Deucher”) through Marquis Properties, LLC (“Marquis Properties”). (Id. at 2, 7.) The Complaint in this case alleges that Marquis Properties solicited individuals to invest in turnkey real estate properties in the form of promissory notes with the guarantee that they would receive returns of principal and returns on their investments in the form of rental income, interest payments, and/or profits from the sale of the properties. (Compl., ¶¶ 10-11.) However, the Complaint claims that Mr. Deucher failed to disclose to investors that the properties offered as collateral were not owned by Marquis Properties, were substantially encumbered, and/or were in uninhabitable or blighted condition, that Marquis Properties was insolvent and unable to make investor interest and principal payments according to terms of agreements, and that investor returns were being paid from the funds of new investors. (Id., ¶ 14.) Receiver Windham alleges that while Marquis Properties was insolvent, Mr. Deucher caused payments of commissions and other payments directly or indirectly to the Snyder Defendants and Simonds Defendants from Marquis Properties bank accounts where investors funds were deposited. (Id., ¶ 27.)

         With respect to the Snyder Defendants in particular, Receiver Windham alleges that they are not licensed to sell securities, but nevertheless entered into an agreement with the Simonds Defendants and another individual pursuant to which they agreed to cooperate in soliciting investors into Marquis Properties and to split the commissions that they expected to receive from Marquis Properties. (Compl., ¶ 33.) The Complaint further alleges that the Snyder Defendants successfully solicited more than ten (10) investors to invest money in Marquis Properties, and received commissions and other transfers from Marquis Properties, which were made from investor funds. (Id., ¶¶ 34- 42.)

         Through the lawsuit, Receiver Windham seeks to “claw back” into the Marquis Properties Receivership Estate commission payments that Marquis Properties transferred to the Snyder Defendants and Simonds Defendants, along with other payments and assets that Marquis Properties transferred to them, when the Snyder Defendants and Simonds Defendants had reason to know that Marquis Properties fraudulently transferred those payments and assets or failed to provide reasonably equivalent value. (Compl. at 2-3.) Receiver Windham asserts claims for fraudulent transfer, unjust enrichment, constructive trust, and accounting against all Defendants. (Id., ¶¶ 55-80.) As relevant here, Receiver Windham alleges in connection with her unjust enrichment claim that the Defendants, including Mr. Snyder, “did not have a license to sell securities and/or each Defendant otherwise sold securities in violation of applicable securities laws, ” and that they could not legally accept commissions for bringing investors into the Ponzi scheme in violation of securities laws.” (Id., ¶¶ 66-67.) Further, as part of her constructive trust claim, Receiver Windham alleges that “[t]he commissions, fees, and other funds paid to each of the Defendants are proceeds that were unlawfully obtained from investors by means of artifice and fraud, ” and are therefore “impressed with a constructive trust.” (Id., ¶ 70.)

         On April 16, 2018, the State of Utah served Mr. Snyder with an Affidavit of Probable Cause which accused him of, among other things, committing securities fraud. (Aff. Of Probable Cause, Ex. 1 to Mot. to Stay, ECF No. 29-1.) Count 2 of the of the Affidavit asserts that Mr. Snyder committed securities fraud in violation of Utah Code Ann. § 61-1-1 with respect to the Marquis Properties investment. (Id. at 10-14.) Among other things, the State of Utah asserts that Mr. Snyder offered and sold securities in the form of promissory notes on behalf of Marquis Properties to a Utah investor, and that he was not licensed to or qualified to offer any advice or sell securities investments. (Id. at 4-5.) In addition, the state court docket attached to the back of the Affidavit indicates that Mr. Snyder was formally charged on Count 2 and the Information/Indictment filed on April 16, 2018. (See Docket, Ex. 1 to Mot. to Stay, ECF No. 29-1 at 17-18.)

         DISCUSSION

         A trial court has the inherent power to stay civil proceedings. See Pet Milk Co. v. Ritter, 323 F.2d 586, 588 (10th Cir. 1963) (“It is well settled that the district court has the power to stay proceedings pending before it . . .”). “The Constitution does not generally require a stay of civil proceeding pending the outcome of criminal proceedings, absent substantial prejudice to a party's rights . . . 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.” Creative Consumer Concepts, Inc. v. Kreisler, 563 F.3d 1070, 1080 (10th Cir. 2009).

         For the Court to grant a stay, “a party must demonstrate a clear case of hardship or inequity if even a fair possibility exists that the stay would damage another party.” Ben Ezra, Weinstein, & Co. v. Am. Online Inc., 206 F.3d 980, 987 (10th Cir. 2000) (internal quotations omitted). In determining whether to grant a stay, the Court considers a combination of six 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 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.

M.D. Diet Weight Loss & Nutrition Clinic, L.C. v. Absolute Weight Loss & Nutrition Ctr., LLC, No. 2:05-CV-605, 2006 WL 2471524, at *1 (D. Utah Aug. 24, 2006) (unpublished). Considering these factors, the Court finds a stay necessary at ...


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