## Facts

- A federal grand jury indicted Joseph F. Doody IV for insider trading based on alleged trading on nonpublic information about a pending merger between BetzDearborn, Inc. and Hercules Incorporated, allegedly obtained from his girlfriend, Diane Neiley.
- The Securities and Exchange Commission (SEC) filed a parallel civil enforcement action against Doody IV, Joseph F. Doody Sr., and Neiley alleging the same insider-trading scheme.
- The SEC alleged that Neiley tipped Doody IV; Doody IV traded and then tipped Doody Sr.; and Doody Sr. traded on the information.
- In the civil action, Doody Sr. pursued broad discovery, including written discovery to the SEC and a noticed deposition of Neiley, and was expected to seek depositions of likely criminal-trial witnesses.
- The criminal trial of Doody IV was scheduled to begin within weeks in the same district.
- The United States, through the U.S. Attorney’s Office, moved to intervene in the civil action for the limited purpose of seeking a stay of certain civil discovery and disclosures pending completion of the related criminal proceedings.
- Doody Sr. opposed, asserting personal and employment-related harm from delay while the SEC charges remained pending.

## Issues

1. Whether the United States could intervene in the SEC civil enforcement action for the limited purpose of seeking a stay to protect a parallel criminal prosecution.
2. Whether the court should stay specified civil discovery and disclosure obligations pending completion of related criminal proceedings to prevent prejudice to the criminal case.

## Decision

- The court granted the United States’ motion to intervene for the limited purpose of seeking a stay.
- The court granted a stay, in substantial part, of civil discovery and disclosures pending completion of the related criminal proceedings.
- The stay covered: production of transcripts of prior witness depositions and interview notes, initial disclosures of witness lists and related information under Rule 26(a)(1)(A), and depositions in the civil action.

## Legal Principles

- A court may permit the United States to intervene in a civil action to protect interests implicated by a related criminal prosecution, including preventing civil discovery from impairing the criminal process.
- Federal courts have inherent authority to manage their dockets and may stay civil proceedings, or discrete discovery components, when parallel criminal proceedings create a substantial risk of prejudice to the criminal case.
- In deciding whether to stay civil matters due to parallel criminal proceedings, courts balance the government’s interest in preserving the integrity of the criminal prosecution and avoiding premature disclosure of evidence or strategy against the civil defendant’s asserted prejudice from delay.
- A tailored stay that targets discovery most likely to reveal witness identities, statements, or the government’s theory may be favored when the criminal case is imminent and the risk of end-run criminal discovery is concrete.

## Conclusion

The court permitted limited government intervention and stayed key civil discovery and disclosures in the SEC enforcement action to prevent civil discovery from functioning as an end-run around criminal discovery and to protect the integrity of the imminent insider-trading prosecution, finding the asserted delay-related harms insufficient to outweigh those interests.


SEC v. Doody, 186 F. Supp. 2d 379 (S.D.N.Y. 2002)