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Stays in Parallel Proceedings

By Jodi Misher Peikin and James R. Stovall

For decades, the government has sought, usually successfully, to stay discovery in civil cases, including SEC actions, when it is prosecuting a related criminal case. It has relied primarily on three arguments: that a stay will preclude defendants from “circumventing” more restrictive criminal discovery rules, prevent defendants from learning information that would allow them to “tailor” their defense to the government's proof, and promote judicial economy because a conviction would likely resolve the civil case. In recent cases, however, several judges have rejected these arguments and denied stays, requiring the government not simply to invoke general rationales but to identify particular facts justifying a stay.

For example, prosecutors moved to stay an SEC action in Arizona on the familiar ground that civil discovery would give the defendants a “road map” of the government's criminal case, allowing them “to tailor their defense to what others say about them.” The court rejected this argument and denied the motion, finding the mere fact that the defendants would get more information in civil discovery did not constitute the specific prejudice required for a complete stay. The government's “generalized concern” did not outweigh the defendants' interest in quickly resolving the SEC case. SEC v. Fraser, No. 09 Civ. 443, Order (D. Ariz., May 29, 2009).

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