Securities and Exchange Commission v. Stubos
- Lewis Liman
- 1:22-cv-04674
- U.S. District Court · Southern District of New York
- 2
In Securities and Exchange Commission v. Stubos, Judge Liman denied George and Dori-Ann Stubos’s request to pause the case pending a Second Circuit decision.
The ruling directly affected defendants George Stubos and relief defendant Dori-Ann Stubos by requiring the case to continue rather than being paused. It also affected the Securities and Exchange Commission, which could continue the case and its discovery efforts.
What happened
In Securities and Exchange Commission v. Stubos, George Stubos and Dori-Ann Stubos asked the court to pause the case until the Second Circuit decided another Securities and Exchange Commission case scheduled for argument in January 2023.
The court found that the request was not strong enough to justify a pause. It said delaying the case could worsen problems caused by fading memories and lost evidence, and could delay consideration of the SEC’s request for an order barring violations of federal securities laws. The court also found that the initial discovery burden would fall on the SEC and that the defendants were not expected to face extensive discovery soon.
The court denied the motion for a stay. Judge Lewis J. Liman said the court would consider the defendants’ motion to dismiss the complaint separately.
The detailed version
- Securities and Exchange Commission v. Stubos · No. 1:22-cv-04674
- Lewis Liman
- Sept. 30, 2022
Background
Defendant George Stubos and relief defendant Dori-Ann Stubos moved to stay, or pause, the case while the Second Circuit considered SEC v. Ahmed. The Second Circuit had scheduled argument in that case for January 2023. At the initial pretrial conference, the court orally denied the motion and issued this order explaining its reasoning.
Legal standard
The court stated that a stay of discovery while a motion to dismiss is pending may be granted upon a showing of “good cause.” The court identified three considerations: the scope of the requested discovery, the prejudice that could result from continuing or pausing discovery, and the strength of the motion supporting the stay.
Court’s analysis
The defendants’ motion apparently relied in part on the possibility that claims in the SEC’s case were barred by the statute of limitations, which is the deadline for bringing a legal claim. The court noted that several courts had held that an extension of the limitations period in the National Defense Authorization Act for Fiscal Year 2021 applied retroactively. But the court said that, even if one or more claims were time-barred, it was unlikely that all claims and the entire action would be untimely.
The court concluded that the strength of the defendants’ position did not support a stay. The complaint alleged conduct from 2012 through April 2015, so delaying the case could aggravate the risks of fading memories and lost evidence. A stay could also prejudice the SEC and the public by delaying consideration of the SEC’s request for an injunction against violations of federal securities laws.
The court also found that the expected discovery did not justify a stay. The SEC would initially have to produce its lengthy investigative file, except for privileged documents, along with relevant and requested portions of a larger investigative file. The court had approved an extended case-management plan and saw no reason to expect that the defendants would soon be deposed or face extensive, burdensome discovery. If the SEC served overly broad discovery requests, the court noted that the Federal Rules of Civil Procedure provided a remedy through a protective order rather than a stay.
Disposition
The court denied the motion for a stay. It stated that it would take the motion to dismiss the complaint under advisement. Judge Lewis J. Liman signed the order.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.