Medequa LLC v. O'Neill & Partners LLC

Background

Medequa LLC agreed to buy $10.2 million of personal protective equipment from SonerMed LLC for donation to the Federal Emergency Management Agency on behalf of the King Salman Humanitarian Aid and Relief Center. Medequa and SonerMed entered an escrow agreement with O’Neill & Partners LLC, which served as escrow agent. Medequa deposited $5.1 million.

SonerMed did not deliver the products. Medequa issued a cancellation notice and repeatedly requested the return of the escrow funds. O’Neill & Partners did not return them. The company at one point said it was concerned that the Relief Center or Saudi Arabia might be the true beneficial owner of the funds.

Medequa filed this civil action on July 16, 2021, asserting breach of contract, breach of fiduciary duty, and conversion. The court previously ordered O’Neill & Partners to deposit the full $5.1 million into the court registry. After the company failed to do so, the court held O’Neill & Partners and its managing partner, Brian O’Neill, in contempt. Brian O’Neill was taken into custody, later released, and did not provide satisfactory proof of the funds’ location or complete the deposit.

While O’Neill was in custody, Medequa moved for partial summary judgment, which is a request for judgment on some claims without a trial. Before O’Neill & Partners responded, Brian O’Neill was arrested and charged with wire fraud, making false statements to the FBI, and perjury. He was later indicted. O’Neill & Partners then moved to stay, or pause, the entire civil case until the criminal proceeding ended. Medequa opposed the motion.

Stay analysis

Judge Hellerstein applied six factors used to decide whether a civil case should be paused because of a related criminal case: the overlap between the two cases; the criminal case’s status; the plaintiff’s interest in moving forward and the harm from delay; the defendant’s interests and burdens; the courts’ interests; and the public interest. The party requesting the stay bears the burden on these factors.

The court found some similarity because both cases involved an alleged failure to return escrowed funds. But the civil case focused on the written escrow agreement and the alleged failure to perform it, while the criminal case addressed the elements of wire fraud, O’Neill’s state of mind, and alleged misappropriation. Other criminal charges involved a different alleged victim and alleged false statements under oath, matters not involved in the civil action.

The indictment weighed in favor of a stay, but only to a limited extent because O’Neill & Partners LLC itself was not indicted; Brian O’Neill was the criminal defendant. The remaining factors strongly weighed against pausing the civil case. The court emphasized that the case had already been delayed and that further delay could increase the risk that Medequa would obtain a judgment but be unable to collect it.

The court also found that O’Neill & Partners could oppose the partial-summary-judgment motion without requiring new discovery or placing Brian O’Neill’s constitutional rights at risk. As an LLC, O’Neill & Partners could not assert the Fifth Amendment privilege against self-incrimination. The company therefore had to respond to the motion or risk default. The court also found no undue pressure from the government because Medequa was a private entity and the government had not sought to intervene.

Ruling

The court denied O’Neill & Partners’ motion to stay the civil case. It also denied Medequa’s proposed six-month stay because that proposal could lead to additional stays and would involve the court in post-judgment proceedings before any judgment had been entered.

The court separately denied O’Neill & Partners’ request to hold Medequa’s motion for partial summary judgment in abeyance. The court ordered O’Neill & Partners to file any opposition by February 14, 2022, and directed the clerk to terminate the docket entries for the stay requests.