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ASPEN FINANCIAL SERVICES v. DIST. CT.

December 6, 2012

ASPEN FINANCIAL SERVICES, INC., A NEVADA CORPORATION; ASPEN FINANCIAL SERVICES, LLC, A NEVADA LIMITED LIABILITY COMPANY; ASPEN BAY FINANCIAL, LLC, A NEVADA LIMITED LIABILITY COMPANY; AND JEFFREY B. GUINN, AN INDIVIDUAL, PETITIONERS, V. THE EIGHTH JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA, IN AND FOR THE COUNTY OF CLARK; AND THE HONORABLE MARK R. DENTON, DISTRICT JUDGE, RESPONDENTS, AND KENNETH GRAGSON AND YVONNE GRAGSON, TRUSTEES OF THE KENNETH GRAGSON AND YVONNE GRAGSON FAMILY TRUST; NORTH MAIN, LLC, A NEVADA LIMITED LIABILITY COMPANY; BONNIE H. GRAGSON AND KENNETH RAY GRAGSON, TRUSTEES OF THE GRAGSON 1988 TRUST; RODNEY F. REBER, AS GENERAL PARTNER OF THE RODNEY F. REBER FAMILY LIMITED PARTNERSHIP; LINDA REBER, INDIVIDUALLY; LOIS LEVY, TRUSTEE OF THE LOIS LEVY FAMILY TRUST, DTD 2/11/93; CHARLES E. THOMPSON, TRUSTEE OF THE CHARLES E. THOMPSON 1989 TRUST; CONNIE LAVERNE THOMPSON, INDIVIDUALLY AND AS TRUSTEE OF THE CONNIE LAVERNE THOMPSON FAMILY TRUST, DTD 12/12/05; DAWN J. GERKE, TRUSTEE OF THE BLAKELY CHARITABLE REMAINDER TRUST, DTD 5/2/97; JAMES B. GERKE AND DAWN J. GERKE, TRUSTEES OF THE BYRON TRUST, DTD 5/2/85; DAVID J. WILLDEN, TRUSTEE OF THE DAVID J. WILLDEN CHARITABLE REMAINDER UNI TRUST DATED 12/23/87; CHERYL ROGERS-BARNETT AND LARRY BARNETT, TRUSTEES OF THE ROGERS-BARNETT FAMILY TRUST, DTD 11/28/03; DAVID A. SMITH, AN INDIVIDUAL; KIRSTI D. RICE, TRUSTEE OF THE RICE GRANDCHILDREN EDUCATION TRUST; RUSSELL DAVIES, AN INDIVIDUAL; JOY DAVIES, AN INDIVIDUAL; AND CHARLES BEARUP AND BERNARDINE BEARUP, REAL PARTIES IN INTEREST.


The opinion of the court was delivered by: By the Court, Saitta, J.:

Before the Court En Banc.

_______________________________

OPINION

Parties facing a civil proceeding and a simultaneous criminal investigation often confront unpleasant choices. They may, for instance, be put to the choice of providing testimony in the civil proceeding that might be used by criminal investigators, or asserting their Fifth Amendment privilege against self-incrimination to the detriment of their defense of the civil suit. Yet while such a situation may require a party to make difficult decisions, and although the district court has the power to stay the civil proceeding in the interest of fairness, it is constitutionally permissible for both matters to proceed concurrently. Ultimately, the district court's determination regarding whether a stay is warranted is a discretionary decision that comes at the end of a careful balancing of the interests involved. Here, after evaluating the factors relevant to this determination, we conclude that the district court did not abuse its discretion in denying petitioners' motion to stay.

FACTS

Petitioners Aspen Financial Services, Inc.; Aspen Financial Services, LLC; Aspen Bay Financial, LLC; and Jeffrey B. Guinn (collectively, when possible, "the Aspen defendants") are corporate entities and an individual that service and broker loans for the acquisition and development of real property in Southern Nevada. In 2005 and 2006, dozens of investors, including real parties in interest Kenneth and Yvonne Gragson, et al. (collectively, "the Gragson plaintiffs"), provided millions of dollars to the Aspen defendants to finance loans for the development of certain real property located in Las Vegas known as the Milano property. In 2008, one of these loans went into default, and the Gragson plaintiffs and other investors suffered substantial losses. Although the Aspen defendants attributed these losses to the general decline in the Las Vegas real estate market, the Gragson plaintiffs believed that the Aspen defendants had defrauded them by operating, in essence, a real estate Ponzi scheme. The Gragson plaintiffs therefore brought suit against the Aspen defendants in district court.

After nearly all other discovery had been completed, the Gragson plaintiffs noticed the depositions of Sean Corrigan, the president of one of the corporate Aspen defendants, and Jeffrey Guinn, one of the individual Aspen defendants. Shortly before these depositions were to be taken, the Aspen defendants filed a motion with the district court to stay any depositions and written discovery that would require their employees and officers or Guinn to make testimonial statements. The Aspen defendants asserted that the Federal Bureau of Investigation (F.B.I.) had initiated a criminal investigation into their activities at the behest of the Gragson plaintiffs. They further asserted that they had been served with a federal grand jury subpoena seeking information about various subjects, including the loans for the Milano property. In addition, the Aspen defendants argued that the Gragson plaintiffs had been, and would continue, funneling discovery obtained in the civil proceeding to the F.B.I. After an extensive hearing, the district court issued a written order summarily denying the motion without prejudice. The Aspen defendants now petition this court for a writ of mandamus or prohibition directing the district court to grant their motion to stay.

DISCUSSION

Because writ relief is an extraordinary remedy, "the decision to entertain a writ petition lies within our discretion." Haley v. Dist. Ct., 128 Nev. ___, ___, 273 P.3d 855, 858 (2012). "A writ of mandamus is available to compel the performance of an act that the law requires as a duty resulting from an office, trust, or station or to control an arbitrary or capricious exercise of discretion." International Game Tech. v. Dist. Ct., 124 Nev. 193, 197, 179 P.3d 556, 558 (2008) (citations omitted); NRS 34.160. A writ of prohibition, in turn, "serves to stop a district court from carrying on its judicial functions when it is acting outside its jurisdiction." Sonia F. v. Dist. Ct., 125 Nev. 495, 498, 215 P.3d 705, 707 (2009); NRS 34.320. Neither form of relief is available when an adequate and speedy legal remedy exists. NRS 34.170; NRS 34.330. And, although "a writ of prohibition is a more appropriate remedy for the prevention of improper discovery," Valley Health System v. Dist. Ct., 127 Nev. ___, ___ n. 5, 252 P.3d 676, 678 n. 5 (2011), we have explained that "writs are generally not available to review discovery orders." Id. at ___, 252 P.3d at 678. In some narrow instances, however, writ relief may be available when it is necessary to prevent discovery that would cause privileged information to irretrievably lose its confidential nature and thereby render a later appeal ineffective. Id. at ___, 252 P.3d at 678-79; Wardleigh v. District Court, 111 Nev. 345, 350-51, 891 P.2d 1180, 1183-84 (1995).

Here, if discovery is not stayed, Guinn, in particular, will face a difficult choice when the Gragson plaintiffs depose him. He can either waive his Fifth Amendment privilege and risk revealing incriminating information to criminal investigators, see Volmar Distributors v. New York Post Co., 152 F.R.D. 36, 39-40 (S.D.N.Y.1993), or he can assert his privilege and forego the opportunity to deny the allegations against him under oath, thereby "effectively forfeiting the civil suit." See id. at 39. Thus, there may not be an adequate remedy here, apart from writ relief, if, as the Aspen defendants claim, the district court improperly denied their motion to stay. See Valley Health, 127 Nev. at ___, 252 P.3d at 679 (writ relief may be available to prevent the discovery of allegedly privileged materials "because once such information is disclosed, it is irretrievable"); Meyer v. District Court, 95 Nev. 176, 177, 591 P.2d 259, 260 (1979) (considering a petition for a writ of prohibition seeking to bar the enforcement of a district court order that precluded a party from testifying at a custody hearing unless the party waived her Fifth Amendment privilege and answered certain discovery questions); see also Brunzell Constr. v. Harrah's Club, 81 Nev. 414, 419, 404 P.2d 902, 905 (1965) (holding that an order granting or denying a stay of proceedings is not appealable), superseded by statute as stated in Casino Operations, Inc. v. Graham, 86 Nev. 764, 765, 476 P.2d 953, 954 (1970). Accordingly, we exercise our authority to entertain this writ petition.

The district court did not abuse its discretion in denying the Aspen defendants' motion to stay

"Determining how to proceed in response to a civil litigant's request for accommodation of his or her Fifth Amendment privilege against self-incrimination is a matter within the discretion of the district court." Francis v. Wynn Las Vegas, 127 Nev. ___, ___, 262 P.3d 705, 710 (2011). Therefore, the denial of a motion to stay civil proceedings made in connection with such a request is reviewed for an abuse of discretion. Federal Sav. and Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir.1989).

At the outset, we note that the corporate Aspen defendants enjoy no Fifth Amendment privilege against self-incrimination. See Afro-Lecon, Inc. v. U.S., 820 F.2d 1198, 1206 (Fed.Cir.1987) ("It is well settled that a corporation does not possess a fifth amendment right against self-incrimination."). They nonetheless argue that a stay should be extended to them because they would not otherwise be able to defend themselves if their employees, officers, and Guinn are forced to assert their privilege against self-incrimination. While stays are occasionally extended to encompass corporate defendants under some circumstances, see, e.g., Volmar, 152 F.R.D. at 42, the corporate Aspen defendants' argument presupposes that a stay was necessary as to their employees, officers, and Guinn. For the reasons explained below, we believe that the district court acted well within its discretion in determining that such a stay was unnecessary.

As we have recognized, "[t]he Fifth Amendment privilege against self-incrimination may be invoked in both criminal and civil proceedings." Francis, 127 Nev. at ___, 262 P.3d at 711. A predicament arises, however, when a litigant invokes his or her privilege due to parallel civil and criminal matters:

When parallel civil and criminal actions arising from the same transactions or issues have been instituted, a court is faced with a dilemma. On the one hand, a parallel civil proceeding can vitiate the protections afforded the accused in the criminal proceeding if the prosecutor can use information obtained from him through civil discovery or testimony elicited in the civil litigation. This also may cause him to confront the prospect of divulging information which may incriminate him. On the other hand, the pendency of a parallel criminal proceeding can impede the search for truth in ...


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