People v Richmond Capital Group LLC
Annotate this CaseDecided on September 29, 2020
Supreme Court, New York County
People of the State of New York, BY LETITIA JAMES, ATTORNEY GENERAL OF THE STATE OF NEW YORK, Plaintiff,
against
Richmond Capital Group LLC, RAM CAPITAL FUNDING LLC, VICEROY CAPITAL FUNDING INC. ALSO DOING BUSINESS AS VICEROY CAPITAL FUNDING AND VICEROY CAPITAL LLC, ROBERT GIARDINA, JONATHAN BRAUN, TZVI REICH, MICHELLE GREGG, Defendants.
451368/2020
For Petitioner, Letitia James, Attorney General of the State of New York, 28 Liberty Street, New York, NY 10005
For Respondents Richmond Capital Group LLC, Robert Giardina, and Michelle Gregg, Joseph Mure Jr. & Assoc., 26 Court St., Ste 2601, Brooklyn, NY 11242
Andrew Borrok, J.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 339, 345, 387 were read on this motion to/for PREL INJUNCTION/TEMP REST ORDR.
Upon the foregoing documents, Richmond Capital Group LLC, Robert Giardina, and Michelle Gregg's (collectively, the Moving Respondents) motion to stay this proceeding and to seal certain papers in support of this motion is denied, and the Moving Respondents are directed [*2]to upload unredacted versions of their supporting papers (NYSCEF Doc. Nos. 322-331) to NYSCEF within 20 days of this decision and order.
The Relevant Facts and Circumstances
A. Mr. Giardina and Ms. Gregg's Prior Petition to Stay Subpoenas
In the two years prior to this proceeding, the New York Attorney General conducted an extensive investigation of the Moving Respondents' business practices in advancing certain loans. During the course of this investigation, Mr. Giardina and Ms. Gregg were subpoenaed because of their respective roles as the Managing Partner, and the Managing Director and Director of Finance of Richmond Capital Group (NYSCEF Doc. No. 1, ¶¶ 29, 33).
Previously, Mr. Giardina and Ms. Gregg commenced a proceeding to stay enforcement of the subpoenas due to related federal and state criminal investigations in a petition captioned, Robert Giardina v Letitia James, Index No. 156209/2019 (the Prior Petition). In a decision and order dated October 29, 2019, the court (Kotler, J.) denied the motion to stay the subpoenas because Mr. Giardina and Ms. Gregg failed to demonstrate that any pending criminal investigations existed, and because, even if such investigations were ongoing, they failed to articulate a basis to warrant a stay (Matter of Giardina v James, 2019 WL 5788675, at *2 [Sup Ct, NY Cnty 2019]). The First Department affirmed the trial court's decision (Matter of Giardina v James, 185 AD3d 451 [1st Dept 2020], citing Sayre v Hoey, 113 AD3d 482, 482 [1st Dept 2014]).
B. The People of the State of New York's Petition
On June 10, 2020, (i) the People of the State of New York (the State) filed this special proceeding to permanently enjoin the Moving Respondents from advancing allegedly usurious loans under the guise of merchant cash advances, among other things, and, separately, (ii) the Federal Trade Commission commenced an action captioned, Federal Trade Commission v. RCG Advances, LLC et al, Case No. 20-CV-4432, concerning the Moving Respondents' allegedly deceptive and unfair small business financing practices in the United States District Court for the Southern District of New York (SDNY) (NYSCEF Doc. No. 325).
On or about June 25, 2020, New York City Police Department Detective Joseph Nicolosi advised the Moving Respondents' attorney that an Assistant United States Attorney (AUSA) commenced a criminal investigation into the alleged misconduct that is the basis of the instant proceeding and, on July 22, 2020, Detective Nicolosi and AUSA Louis Pellegrino confirmed the same to the Moving Respondents (NYSCEF Doc. No. 327, ¶¶ 4, 6).
On August 11, 2020, the Moving Respondents moved by order to show cause for a temporary restraining order (TRO) and a preliminary injunction to stay the instant proceeding. The court (Cohen, J.) denied the TRO:
The motion for a stay is going to be denied. I think the chronology here suggests that, you know, any kind of a motion like this could and should've been brought a long time ago. But putting that aside, I think that, you know, based on the precedents that have been cited in Giardina and Sayre versus Hoey, which is not a hundred percent on point but pretty close, that the fact that a criminal investigation is pending, or close to pending, or 90 percent pending versus 60 percent pending, but the point is is [sic] that staying an Attorney General investigation or case, at this point, based on, you know — with some [*3]open-ended argument that having these two things proceed in parallel is going to be prejudicial is, I think, beyond — at least in my understanding of my discretion, beyond what I can — and even if I can, beyond what I should do.(8/13/2020 Tr., NYSCEF Doc. No. 353, at 36-37).
Discussion
C. Motion for Stay
Pursuant to CPLR § 2201, unless otherwise prescribed by law, a court may grant a stay of proceedings upon such terms as may be just. In support of their application for a stay, and relying primarily on Britt v International Bus Servs., 255 AD2d 143 [1st Dept 1998], Mook v Homesafe Am., Inc. (144 AD3d 1116 [2d Dept 2016]), DeSiervi v Liverzani, (136 AD2d 527 [2d Dept 1988]), and Burgdorf v Kasper (83 AD3d 1553 [4th Dept 2011]), the Moving Respondents argue that a stay should be issued because they will be prejudiced by the need to invoke their Fifth Amendment rights in this proceeding given the ongoing criminal investigation by the SDNY. Their reliance is misplaced as these cases involve a pending criminal action, and not just the possibility of one.
For example, in the seminal case of Britt v Intl. Bus Servs., Inc., the plaintiff, along with other bus passengers, was seriously injured when their bus, driven by one of the defendants in a snowstorm, spun out of control, struck a guardrail, and overturned on the parkway (255 AD2d at 144). The defendant bus driver was indicted. All the defendants then moved to stay the civil action in view of the unresolved criminal proceedings against the bus driver and because the bus driver intended to assert his Fifth Amendment right against self-incrimination in the civil action, which would hinder all of the defendants in their defense. The trial court denied the motion to stay and the First Department reversed, finding that the defendants had demonstrated that the bus driver defendant's testimony was critical and necessary, and that, without it, the other defendants would be unable to assert a competent defense. Under those circumstances, the First Department held that the defendants were entitled to a stay, provided that the plaintiff retained the right to move to vacate the stay if the criminal proceeding was not resolved within a reasonable period of time (id.). The First Department explained that it is within the sound discretion of the trial court to determine whether a stay of a civil action should be granted pending resolution of a related criminal action and courts may consider factors such as avoiding the risk of inconsistent adjudications, application of proof, and potential waste of judicial resources to decide whether a stay is appropriate (id., citing Zonghetti v Jeromack, 150 AD2d 561, 563 [2d Dept 1989]). The Britt court further noted that a compelling factor for consideration is when a defendant will invoke his or her constitutional right against self-incrimination (id., citing DeSiervi v Liverzani, 136 AD2d at 528).
Here, however, the Moving Respondents have not been indicted and the mere possibility that they may be indicted in the future is an insufficient basis to grant a stay (Sayre v Hoey, 113 AD3d 482, 482 [1st Dept 2014]; see also Stuart v Tomasino, 148 AD2d 370, 373 [1st Dept 1989] [noting that trial court properly denied motion to stay and directed defendants to appear for examination before trial subject to their right to invoke the privilege against self-incrimination because such privilege was not basis for precluding civil discovery and, notwithstanding a pending criminal investigation, there was no criminal action against defendants at the time]).
Mook v Homesafe Am., is similarly unavailing (144 AD3d at 1117). In Mook, one of the defendants was indicted on federal criminal charges in connection with a fraudulent mortgage scheme that was also the subject of a civil action. This defendant moved for a stay of the civil action based on his stated intent to invoke his Fifth Amendment right against self-incrimination. The trial court granted the motion and the Second Department affirmed, finding that a stay was appropriate because the civil proceeding and the criminal proceeding arose from the same facts, and the failure to grant a stay would cause the defendant to suffer the severe prejudice of being deprived of a defense pending resolution of the criminal proceeding against him (id.). In other words, in Mook, as in Britt, there was a pending criminal action, not the mere possibility of one.
De Siervi v Liverzani also does not support the imposition of a stay (136 AD2d at 528). De Siervi involved a criminally indicted defendant who was accused in both a civil and a criminal proceeding of forging an assignment of a mortgage (id.). The Second Department held that the trial court did not abuse its discretion in staying the action pending resolution of the criminal proceeding (id.). The De Siervi court noted that while "the pendency of a criminal proceeding does not give rise to an absolute right under the United States or New York State Constitutions to a stay of a related civil proceeding," a court may stay the action in the exercise of its discretion. De Siervi found that under the circumstances of that case, a stay was warranted as (i) a prior determination of the criminal action would possibly have collateral estoppel effect, thus simplifying discovery and other issues in the civil action and (ii) no prejudice to the plaintiff from the stay would ensue (id. at 528). Here, in contrast, as discussed above, not only is there no currently pending criminal proceeding, but there would be prejudice from delaying this proceeding brought by the Petitioner on behalf of the State.
Finally, and for completeness, Burgdorf v Kasper also does not appear to support the Moving Respondents' position as the Burgdorf court affirmed trial court's stay of action pending resolution of a criminal proceeding (83 AD3d at 1556). Indisputably, here, the Moving Respondents are not currently subject to any criminal action. Notably, the Moving Respondents invoked these same arguments in the Prior Petition, filed over a year ago and which arguments were rejected by both the trial court and First Department, and no criminal charges have materialized since.
To the extent that the Moving Respondents assert that they will invoke their Fifth Amendment rights in the instant proceeding should it continue, this is simply one factor to consider in determining whether a stay should be granted and, in any event, the invocation of privilege against self-incrimination is generally an insufficient basis for precluding discovery in a civil matter (see Stuart, supra; 3A Weinstein-Korn-Miller, NY Civ Prac ¶ 3101.39). Considering the other factors, such as the prejudice to the Petitioner from the resulting delay, and the fact that, in any event, the right against self-incrimination would not apply to the corporate Respondents in this action (United States v White, 322 US 694, 698-99 [1944]), a stay in this action on these facts is simply not warranted. Accordingly, the branch of the Moving Respondents' motion for a stay and a preliminary injunction is denied.
D. Motion to Seal
The Moving Respondents also seek leave to seal redacted papers submitted in support of the instant motion. However, the Moving Respondents fail to address why there is good cause for any redactions or sealing of their papers pursuant to Part 216 of the Uniform Rules for the Trial Courts. Accordingly, the branch of their motion to seal is also denied and the Moving [*4]Respondents are directed to upload unredacted versions of their supporting papers (NYSCEF Doc. Nos. 322-331) to NYSCEF within 20 days of this decision and order.
Accordingly, it is
ORDERED that the Moving Respondents' motion is denied; and it is further
ORDERED that the Moving Respondents are directed to upload unredacted versions of their supporting papers (NYSCEF Doc. Nos. 322-331) to NYSCEF within 20 days of this decision and order.
DATE 9/29/2020
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