United States Securities and Exchange Commission v. Taylor

Background

The Securities and Exchange Commission alleged in an amended complaint that Joseph Abdul Noor El-Khouri was involved in an insider-trading scheme involving misappropriated material, non-public information from an investment bank. According to the allegations, Benjamin Taylor gave El-Khouri information received from Darina Windsor in exchange for cash or gifts from El-Khouri.

A parallel criminal case against El-Khouri involved the same alleged scheme and charged him with conspiracy, securities fraud, fraud connected to a tender offer, and wire fraud. At the time of the motion, El-Khouri had been arrested in the United Kingdom and extradition proceedings were pending there. The opinion states that the Government’s motion sought no relief concerning Taylor or Windsor.

The Government’s Motion

The United States asked to intervene, meaning to become a participant in the civil case for a specific purpose, under Federal Rule of Civil Procedure 24. It also asked the court to stay, or pause, all discovery against El-Khouri until the parallel criminal case concluded. El-Khouri consented to the motion, and the Commission took no position on it.

Intervention

The court held that the United States met the requirements for intervention as of right under Rule 24(a). The court found that the motion was timely, that the Government had an interest in preventing civil discovery from bypassing the narrower discovery rules in the criminal case, and that an unfavorable civil proceeding could impair the Government’s ability to protect that interest. The court also found that the Government’s interest was not adequately protected by the existing parties.

Alternatively, the court found that permissive intervention under Rule 24(b) was appropriate because the civil and criminal proceedings shared common questions of law and fact. The court further found that intervention would not unfairly delay or prejudice the original parties, particularly because El-Khouri consented and the Commission did not oppose the motion. The court therefore granted the branch of the motion seeking intervention.

Stay of Discovery

The court considered six factors for deciding whether to pause a civil case while a criminal matter proceeds: overlap between the cases; the criminal case’s status; the plaintiff’s interest in proceeding quickly; the defendant’s interests and burden; the courts’ interests; and the public interest.

The court found significant overlap because both cases concerned the same alleged insider-trading scheme involving the same six securities. El-Khouri had been indicted, which favored a stay. Although the Commission had an interest in proceeding quickly, it did not object to the requested stay. Because El-Khouri consented, the court found that his private interests also favored a stay. The court determined that a stay would promote judicial efficiency and protect the public interest in the criminal prosecution and its integrity.

Disposition

The court granted the Government’s motion to intervene and granted its motion to stay discovery against El-Khouri until the conclusion of the criminal case. The Clerk of Court was directed to stay the civil action as to El-Khouri. The Government was ordered to provide a status letter by April 26, 2021, additional updates every 90 days, and prompt notice when the criminal case was resolved.