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Nelson Capital LLC v. Campbell

United States District Court, W.D. Washington, Seattle

May 15, 2019





         Plaintiff Nelson Capital, LLC, brings this complaint claiming that Defendants Kevin J. Campbell and Jonathan D. Lee offered and sold an unregistered security and committed securities fraud. Plaintiff further alleges breach of fiduciary duty, negligent misrepresentation, unjust enrichment, and violation of the Washington Consumer Protection Act. Currently before the Court is Defendants' motion for a temporary stay of this case while a related bankruptcy case proceeds. Plaintiff opposes the motion. Having reviewed the motion, the opposition thereto, the record of the case, and the relevant legal authorities, the Court will deny the motion.

         II. BACKGROUND[1]

         Plaintiff Nelson Capital is owned by Doug and Karina Nelson. The Nelsons sought investment advice from Defendants, investment advisors Kevin Campbell and Jonathan Lee, to prepare for the costs of funding college tuition for their children and to diversify their portfolio. Compl., Dkt. No. 1 at ¶¶ 17, 24. The Nelsons met several times with Defendants in Campbell's office, with Lee participating remotely through an internet meeting service. Id. at ¶ 20. Defendants recommended that the Nelsons invest in a company called 1 Global Capital LLC (“1 Global”). Defendants allegedly presented the Nelsons with investment statements of other investors enjoying highly profitable returns along with 1 Global's marketing materials. Further, Plaintiff alleges that Defendants assured them that “these guys are solid, ” that a 1 Global investment posed almost no risk, and that 1 Global had rigorous underwriting and electronic collection processes which guaranteed that investors would make a profit. Id. at ¶¶ 1, 29, 38, 39. Relying on this information, Nelson Capital invested $250, 000 in 1 Global on June 22, 2018. Id. at 1.

         On July 27, 2018, a little over one month later, 1 Global filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Florida. Id. at ¶ 3; In re: 1 Global Capital, 18-19121-RBR (Bankr. S.D. Fla.). The Securities and Exchange Commission filed a complaint against 1 Global, its owner, and others on August 23, 2018. Id. at ¶¶ 55, 56; Securities and Exchange Commission v. Carl Ruderman, No. 18-cv-61991-BB (S.D. Fla.).

         Plaintiff alleges that Lee received tens of thousands of dollars in finder's fees from 1 Global which he shared with Campbell but that neither disclosed this to the Nelsons, even when asked (id. at ¶¶ 3, 33, 34, 39, 40). Plaintiff further alleges that the 1 Global marketing materials that Defendants showed to Plaintiff were false and misleading (id. at ¶ 1). The Nelsons were among more than 3, 400 investors who invested a total of more than $287 million in 1 Global. Id. at ¶ 27.

         Plaintiff seeks actual damages against Defendants of “not less than $250, 000, less the value of Nelson Capital's proof of claim” in the bankruptcy case, interest, restitution, treble damages (for the Consumer Protection Act violation), and costs of investigation, suit, and attorneys' fees. Id. at ¶¶ 24, 25.


         This Court, through its inherent power to control its docket, has broad discretion over whether to stay proceedings. Clinton v. Jones, 520 U.S. 681, 706-07 (1997). The party seeking a stay bears the burden of establishing its need. Id. (citing Landis v. North American Co., 299 U.S. 248, 254 (1936)). In deciding whether or not to grant a stay, the Court must consider the potential harm of a proposed stay. If the stay will “work damage” to a party, the stay may be inappropriate unless the moving party demonstrates a clear case of “hardship or inequity.” Landis, 299 U.S. at 255.

         Guided by Landis, the Ninth Circuit holds that district courts should weigh three factors in deciding whether to stay a proceeding:

Where it is proposed that a pending proceeding be stayed, the competing interests which will be affected by the granting or refusal to grant a stay must be weighed. Among these competing interests are the possible damage which may result from the granting of a stay, the hardship or inequity which a party may suffer in being required to go forward, and the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.

Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (quoting CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962)).

         IV. ...

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