United States District Court, W.D. Washington, Seattle
JAMES S. FARR, on behalf of himself and all others similarly situated, Plaintiff,
PRIVATE ADVISORY GROUP, LLC, et al., Defendants.
Honorable Richard A. Jones United States District Judge.
matter comes before the Court on Defendants Private Advisory
Group, LLC (“PAG”), Douglas Reed Bean, S.
Christopher Bean, and Jonathan David Bishop's Motion to
Dismiss. Dkt. # 19. For the reasons that follow, the Court
GRANTS in part and DENIES in part Defendants' motion.
a securities class action. Plaintiff James S. Farr alleges
that Defendants participated in and perpetrated a Ponzi
scheme involving the sale of securities issued by Aequitas
Holdings, LLC or its affiliated entities
(“Aequitas”). Dkt. # 4 (“Am.
which is not named as a defendant in the instant matter, was
the central player in the alleged Ponzi scheme. Id.
When the scheme collapsed, the Securities Exchange Commission
(“SEC”) filed an enforcement action against
Aequitas in the U.S. District Court for the District of
Oregon. SEC v. Aequitas Mgmt., LLC, No. 16-438-PK,
Dkt. # 1.
April 14, 2016, the District of Oregon entered an order
establishing a receivership over Aequitas' assets.
Id., Dkt. # 156. The receivership order imposes a
broad “Stay of Litigation” (“Litigation
Stay”). Id. at 10. Among other things, the
Litigation Stay applies to:
All civil legal proceedings of any nature, including, but not
limited to, bankruptcy proceedings, arbitration proceedings,
foreclosure actions, default proceedings, or other actions of
any nature involving . . . (b) any Receivership Property,
wherever located; (c) any of the Receivership Entity . . .
(such proceedings are hereinafter referred to as
Id. “Receivership Entity” is defined by
reference to a list of entities that includes Aequitas.
Id. at 2, 18. “Receivership Property” is
defined to include “monies, funds, securities, credits,
effects, goods, chattels, lands, premises, leases, claims,
rights and other assets, together with all rents, profits,
dividends, interest or other income attributable thereto, of
whatever kind, which the Receivership Entity own, possess,
have a beneficial interest in, or control directly or
indirectly.” Id. at 5. The Litigation Stay
further provides that “[a]ll Ancillary Proceedings are
stayed in their entirety, and all Courts having any
jurisdiction thereof are enjoined from taking or permitting
any action until further Order of this Court.”
Id. at 10.
October 6, 2016, several months following the entry of the
Litigation Stay, Farr filed this lawsuit. As alleged in his
complaint, Aequitas owns Defendant PAG through a subsidiary.
Am. Compl. ¶ 16 (“Aequitas, though a subsidiary,
owns an interest in PAG.”); ¶ 4 (“PAG is a
registered investment advisor in which Aequitas owns a
controlling interest.”); ¶ 26 (“Aequitas had
a conflict of interest because it owns a controlling interest
in PAG.”); id. (“Aequitas owned a
controlling interest in PAG.”).
on the Litigation Stay, Defendants filed the instant motion
requesting that the Court dismiss Farr's action under
Federal Rule of Civil Procedure 41(b) because he filed it in
violation of the Litigation Stay. Dkt. # 19. In the
alternative, Farr requests that the Court stay the action
until the District of Oregon lifts the Litigation Stay.
Id. Farr opposes the motion. Dkt. # 27.
Scope of Litigation Stay
contend that PAG is “Receivership Property”
subject to the District of Oregon's Litigation Stay. Farr
contends that it is not because none of the defendants named
in this action ...