five-factor test applies “to stay a federal action in light of a concurrently pending federal action (either because the claim arises from the same nucleus of facts or because the pending action would resolve a controlling point of law)”
How later courts described this case
- five-factor test applies “to stay a federal action in light of a concurrently pending federal action (either because the claim arises from the same nucleus of facts or because the pending action would resolve a controlling point of law)”
Written by the judges who cited it.
The opinion
MAYER | BROWN
Mayer Brown LLP
1221 Avenue of the Americas
New York, New York 10020-1001
United States of America
T: +1 212 506 2500
October 11, 2023 F: +1 212 262 1910
mayerbrown.com
BY ECF Christopher J. Houpt
Partner
The Honorable Laura Taylor Swain T: +1 212 506 2380
United States District Court for the chouignaverboove 830
Southern District of New York
Daniel Patrick Moynihan United States Courthouse
500 Pearl Street MEMO ENDORSED
New York, NY 10007
Re: Wells Fargo Securities, LLC v. LJM Investment
Fund, L.P., et al., No. 1:18-cv-02020-LTS-SLC
Dear Judge Swain:
I write on behalf of Plaintiff/Counter-Defendant Wells Fargo Securities, LLC (“WFS”) pursuant
to Paragraph A.1(e) of Your Honor’s Individual Practices respectfully seeking a stay of all pretrial
deadlines as set by the Court’s Pretrial Scheduling Order (Dkt. 225), including the deadline for
dispositive briefing, pending completion of discovery in the related action, LJM Fund
Management, Ltd. v. Wells Fargo Sec., LLC, No. 1:23-cv-07115 (LTS) (SLC) (“Two Roads’),
involving the Two Roads fund. The parties have conferred and agree that a stay is warranted but
disagree on the terms of the stay.
Background
WFS filed the above-captioned action on March 6, 2018 against Defendants LJM Investment Fund,
L.P. and LJM Partners, Ltd., seeking reimbursement for a $16 million debit balance in a clearing
account at WES. On May 2, 2018, LJM Investment Fund, L.P., LJM Master Trading Fund, L.P.,
LJM Offshore Fund, Ltd., and PFC-LJM Preservation and Growth Fund, L.P. (collectively “LJM’’)
brought counterclaims against WFS alleging that WFS breached the FCM Agreement by failing
to allow LJM sufficient time to liquidate or transfer the open positions for its various funds and
managed accounts. Dkt. 25. LJM subsequently amended its counterclaims twice. In February 2022,
LJM brought suit on behalf of two more funds in state court, purportedly to avoid destroying
diversity jurisdiction in this case.
It was not until August 11, 2023—following the close of fact and nearly all of expert discovery
and on the eve of the parties’ mediation before Magistrate Judge Cave—that LJM filed the Two
Roads complaint. That case arises out of the same transactions and events as the other two, and,
according to LJM’s counsel, involves a claim that is 38 times greater than all of the counterclaims
in the original case.
The parties agree that the issues in the cases overlap significantly, to such a degree that LJM does
not even seem to contemplate depositions occurring in Two Roads. For its part, WES (at LJM’s
Mayer Brown is a global services provider comprising an association of legal practices that are separate entities including
HOoctno.b Lear u1r1a, T2a0y2l3o r Swain
Page 2
insistence) produced all documents relevant to Two Roads in the original case. We learned late in
discovery, however, that, while LJM had not actively excluded Two Roads documents from its
own production, it maintains that it does not even have access to many documents that belong to
the Two Roads fund.1 WFS learned of this issue only when it received a production from the SEC
of documents that the SEC and CFTC had received in their own suit alleging fraud by LJM and its
principals. That production included a limited number of Two Roads board minutes, one of which
shows that LJM made no mention to the Two Roads board of WFS “coercing” liquidation or
futures trades and stated that it was “LJM’s intent . . . to close all open positions.” Those minutes
also point to other meetings with LJM and reports prepared by Two Roads, which WFS has not
received.
LJM also refused to present 30(b)(6) testimony that covered the Two Roads trust. For instance,
counsel for LJM shut down a line of questioning based on Two Roads not being a party to this
action. See McBride 30(b)(6) Dep. Tr. 54:11:23 (“It’s not combative, Matt. It’s just that, I think
that maybe you don’t appreciate there are a lot of different legal entities here and some of them,
for example – the Two Roads Trust – has nothing to do with this case and so your – if your question
encompasses things that are – that are not within the case that may have different treatment . . . ”).
WFS did not press these issues because, at the time, there were no pending claims involving Two
Roads. Thus, WFS has obtained next to no discovery on the fund that now represents
approximately 97% of the claimed damages.
The parties agree that the two cases should be tried together and that some stay is warranted to
avoid duplicative briefing and trial on cases that are premised on the same events. WFS believes
that the stay should allow Two Roads to be litigated fully. That means allowing the parties to brief,
and the Court to decide, the motion to dismiss. It also means allowing for the amount of discovery
that is proportional to an $850 million-dollar claim, albeit one in which much relevant discovery
has already occurred. WFS expects that the Court would enter, and WFS would agree to, a
reasonable case management plan for the Two Roads case.
LJM believes that the Court should extend the trial date by a fixed period, regardless of whether
that is sufficient to complete pre-trial proceedings in Two Roads. The period that they proposed
was only two months, and LJM’s counsel accused WFS of bad faith for suggesting that fact and
expert discovery could be completed within one year and refusing to agree to what they call “a
short period of expedited discovery” (Ex. 2) on this massive new claim. If WFS does not agree to
expedited discovery, then LJM prefers to try the cases separately. As an initial matter, LJM
inexplicably waited almost six years to bring Two Roads into this dispute—all while shutting down
discovery efforts on the ground that “the Two Roads Trust has nothing to do with this case.” In
fact, discovery did not even begin until 2021—even a three-year delay by LJM would have put the
1 See Ex. 1, March 13, 2023 email from M. Press, stating that “there are materials that LJM does
not have in its possession, custody or control” that pertain to the Two Roads account because “[t]he
mutual fund was governed by Two Roads Shared Trust, a separate entity with its own separate
infrastructure.”
HOoctno.b Lear u1r1a, T2a0y2l3o r Swain
Page 3
two cases on the same schedule. Whatever strategy might have motivated that decision—perhaps
a desire to secure a second bite at the apple if LJM loses the first trial—it has already wasted party
and Court resources.
Moreover, LJM is unwilling to do anything to facilitate Two Roads discovery, let alone on any
expedited basis. For example, although LJM brings suit as the “agent” for the Two Roads Trust, it
asserts that WFS would have to subpoena Two Roads as a third party, and its counsel does not
have authority to accept service of such a subpoena on behalf of the intended beneficiary of the
suit. WFS and the Court should not have to endure duplicative trials, nor should LJM’s tactical
decision to delay filing constrain WFS’s ability to obtain discovery on by far the largest LJM fund.
LJM cannot suddenly feign urgency in getting these claims to trial.
Courts consider five factors when deciding a motion to stay: “(1) the private interests of the
plaintiffs in proceeding expeditiously with the civil litigation as balanced against the prejudice to
the plaintiffs if delayed; (2) the private interests of and burden on the defendants; (3) the interests
of the courts; (4) the interests of persons not parties to the civil litigation; and (5) the public
interest.” Id.; see also SST Global Technology, LLC v. Chapman, 270 F. Supp. 2d 444, 455
(S.D.N.Y. 2003) (five-factor test applies “to stay a federal action in light of a concurrently pending
federal action (either because the claim arises from the same nucleus of facts or because the
pending action would resolve a controlling point of law)”). In balancing these factors, “the basic
goal is to avoid prejudice” to either party. Laumann v. Nat'l Hockey League, 2013 WL 837640, at
*2 (S.D.N.Y. Mar. 6, 2013) (quoting In re OxyContin Antitrust Litig., 2012 WL 5184949, at *6
(S.D.N.Y. Oct. 19, 2012)) (internal quotation marks omitted).
Each of the five factors counsel in favor of staying this action pending the completion of discovery
in Two Roads. The private interests support a stay: the parties agree that a stay is warranted and
that the two cases should be tried together because the witnesses, documents, and legal issues are
largely the same and “arise[] from the same nucleus of facts.” SST Global Tech., LLC, 270 F. Supp.
2d at 455. The only possible prejudice to LJM from a stay is the predictable and entirely avoidable
consequence of their waiting to file the Two Roads complaint until after discovery was finished in
the first case. WFS, however, would be prejudiced if the Court were to impose an arbitrarily short
schedule to complete discovery with an uncooperative non-party in Two Roads. It would also be
prejudiced if it were forced to try the same claims twice, with Two Roads claiming the benefit of
any rulings against WFS while asserting its independence to avoid rulings against LJM.
A stay would also serve the interest of the Court, interested parties, and the public: the parties are
“essentially the same,” the “causes of action asserted” and the legal issues presented are similar,
such that a stay would conserve judicial resources and allow the parties to resolve both cases at
one time. See Trikona Advisors Ltd. v. Kai-Lin Chuang, 2013 WL 1182960, at *3-4 (E.D.N.Y.
Mar. 20, 2013) (granting stay where “the plaintiff in both actions” “is the same,” “the defendants
are essentially the same,” “the same causes of action [are] asserted” and while the other action
“may not settle every question of fact and law at issue in [the suit], it will in all likelihood settle
many and simplify them all”). This is also true for non-party witnesses who may be called to testify
HOoctno.b Lear u1r1a, T2a0y2l3o r Swain
Page 4
(including many former LJM and WFS employees, as well as Two Roads directors), as they would
avoid the need to appear and testify twice on identical issues.
The Parties Have Met and Conferred.
After discussing the case plan at the August mediation and exchanging emails thereafter, the
parties met and conferred as to this request on October 10, 2023, pursuant to Paragraph A.1(e) of
Your Honor’s Individual Practices. Accordingly, WFS respectfully requests that the Court stay
pre-trial proceedings in this case, including the deadline for dispositive briefing, pending
completion of discovery in Two Roads. This is the first request for an adjournment related to
pretrial deadlines.
To the extent the Court is inclined to deny that request, WFS respectfully seeks a 30-day extension
of time (to November 30, 2023) to file dispositive briefing to accommodate conflicting filing
deadlines in other matters, including the motion to dismiss in the Two Roads case, which is due on
October 28.
Respectfully submitted,
/s/ Christopher J. Houpt
Christopher J. Houpt
The Court has reviewed the parties’ letters regarding their application for a stay. The
foregoing request is granted to the extent that this case, including all pretrial deadlines as set
forth in the Court’s Pretrial Scheduling Order (DE#225), is hereby ordered stayed, pending
completion of discovery in case no. 23-CV-7115. DE#226 resolved.
SO ORDERED.
October 25, 2023
/s/ Laura Taylor Swain, Chief USDJ
EXHIBIT
1
Alina
From: Matthew J. Press <mpress@presskoral.com>
Sent: Monday, March 13, 2023 9:59 AM
Artunian, Alina; Jason Koral
Fenn, Matthew E.; Houpt, Christopher J.; Nale, Lucia; Kluchenek, Matthew F.; Matthew J.
Press
Subject: RE: Wells Fargo Securities, LLC v. UM Investment Fund et al.,18-cv-2020- LIM [MB-
AMECURRENT.FID1969383]
for the delay in providing you with the complete document cites in Mr. Hoffman’s report. It should be another
day or so, but we are on top of this and will be getting you an amended Schedule B. To address your concerns, we
propose extending the deadline for the rebuttal reports by a week, to March 31.
to the second issue you raise, | believe WFS has a misunderstanding. There were no separate servers within IM. We
have searched everything that LIM has in its possession, custody or control. However, there are materials that LIM does
not have in its possession, custody or control. The mutual fund was governed by Two Roads Shared Trust, a separate
entity with its own separate infrastructure. We understand that Two Roads Shared Trust acted as the board for a
number of unrelated funds in addition to LM—hence, the word “shared” in its name. As we explained during our call,
don’t represent the trust, which has its own separate counsel.
Unlike the actions between LJM entities and WFS, the SEC action centers on the mutual fund. The SEC evidently
subpoenaed the trust and obtained documents we don’t have such as the board minutes, which bear a distinct bates
designation. We did not find those documents in our directory or searches. Such documents evidently were maintained
internally by the trust and not shared with the fund manager, LIM Funds Management, Ltd.
to the two entities in the state case, each was managed by LJM Partners and did not involve the Two Roads board,
only served as the board to the mutual fund. There are no separate or additional servers within LIM to search in
with state case. In connection with our agreement to consolidate discovery, we topped off the federal
production with some additional fund formation documents and management agreements related to the two entities in
state case, so you have everything we have related to the state case as well.
Best,
Matthew J. Press, Esq.
Press Koral LLP
641 Lexington Avenue, 13th Floor
New York, NY 10022
(212) 922-1111
(347) 342-3882
(347) 419-0983
mpress@presskoral.com
http://www.presskoral.com
To: Jason Koral <jkoral@presskoral.com>; Matthew J. Press <mpress@presskoral.com>
Cc: Fenn, Matthew E. <MFenn@mayerbrown.com>; Houpt, Christopher J. <CHoupt@mayerbrown.com>; Nale, Lucia
<LNale@mayerbrown.com>; Kluchenek, Matthew F. <MKluchenek@mayerbrown.com>
Subject: RE: Wells Fargo Securities, LLC v. LJM Investment Fund et al.,18-cv-2020- LJM [MB-AMECURRENT.FID1969383]
Matt & Jason,
Following on my email below, can you please let us know when we can expect the updated Appendix B to the Hoffman
report and a production of the documents relied upon that were not previously produced or publicly available? As you
are well aware, WFS is entitled to this information under the Federal rules, and a delay in production of documents that
Mr. Hoffman relied upon in his report that are not available to WFS (publicly or through production in this action) is
prejudicial to WFS.
Separately, and as a continuing effort to meet and confer on the issues raised in our letters to the court, we have a few
additional questions about LJM’s discovery and production efforts in this litigation. During our meet and confer
concerning certain documents produced to us by the SEC as exhibits to the SEC/CFTC transcripts (for example, the Two
Roads board minutes), you had informed us that documents related to separate LJM funds are “segregated” on separate
servers and so the search terms and custodians that were applied for document discovery in this action would not have
captured those documents. Can you please confirm whether our understanding is correct, and if so, can you please
explain (1) what these “servers” are and how they segregate LJM’s data (since this is the first we are hearing of this), and
(2) how LJM’s productions in this action included data related to Two Roads and other non-party accounts, at the
exclusion of those documents available in the SEC’s production?
Additionally, given this information about the segregation of documents by LJM fund, we are separately concerned that
the collection of documents in the federal case may not have captured documents related to the LJM funds at issue in the
state case. Please confirm that (1) all servers relating to the state funds were searched for the purposes of discovery, and
(2) any documents produced in the federal case includes documents related to the funds in the state case.
Thanks,
Alina
From: Artunian, Alina
Sent: Thursday, March 2, 2023 11:06 AM
To: Jason Koral <jkoral@presskoral.com>; Matthew J. Press <mpress@presskoral.com>
Cc: Fenn, Matthew E. <MFenn@mayerbrown.com>; Houpt, Christopher J. <CHoupt@mayerbrown.com>; Nale, Lucia
<LNale@mayerbrown.com>; Kluchenek, Matthew F. <MKluchenek@mayerbrown.com>
Subject: RE: Wells Fargo Securities, LLC v. LJM Investment Fund et al.,18-cv-2020- LJM [MB-AMECURRENT.FID1969383]
Jason & Matt,
Separately, we’re following up on yesterday’s discussion about the Matthew Hoffman expert
report. As discussed, a significant number of documents that were listed in Appendix B to the
Hoffman report—reflecting documents that were reviewed and considered by your expert—were
either not produced or not identified properly in the appendix.
Attached is an extracted version of Appendix B to your expert’s Report, which includes our
highlighting the documents for which we need identifying Bates numbers (for example, the Daily
EXHIBIT
2
Alina
eee
From: Matthew J. Press <mpress@presskoral.com>
Wednesday, October 11, 2023 2:38 PM
Artunian, Alina
Jason Koral; Houpt, Christopher J.; Watt, Anjanique M.; Nale, Lucia; Fenn, Matthew E.;
Matthew J. Press
Re: Remaining Discovery Items Per Conference with Mag. Cave
If you can’t come up with a good faith proposal for a short period of expedited discovery followed by a joint trial, then
answer is two trials, not the delay of a trial the court wants done now.
Matthew J. Press, Esq.
Press Koral LLP
7 World Trade Center, 46th Floor
New York, New York 10007
(212) 922-1111
(347) 342-3882
(347) 419-0983
mpress@presskoral.com
http://www.presskoral.com
On Oct 11, 2023, at 2:23 PM, Artunian, Alina <AArtunian@mayerbrown.com> wrote:
Matt,
What you said “definitively” is the point that we disagree on. The Two Roads case does need to proceed
on its own track, and it needs to complete discovery before both cases can be tried. That stay would not
be “indefinite’—we would hope that the work needed to be done would be completed within a year—but
it would have to be tied to actually completing pre-trial proceedings in the Two Roads case, rather than
some arbitrary fixed deadline.
Unfortunately, it is impossible to know how long that will take, as LIM is taking the position that the party
for whose benefit it is bringing the case is a third-party—we do not know whether Two Roads will
cooperate, how long it will take it to produce documents, or the number or identities of its witnesses. We
also do not agree that expert discovery in a supposedly $850 million case can be handled by simply
tacking on another table to a report that was served in a case a fraction of that size.
-Alina
From: Matthew J. Press <mpress@presskoral.com>
Sent: Wednesday, October 11, 2023 12:51 PM
To: Artunian, Alina <AArtunian@mayerbrown.com>
Cc: Jason Koral <jkoral@presskoral.com>; Houpt, Christopher J. <CHoupt@mayerbrown.com>; Watt,
Anjanique M. <AWatt@mayerbrown.com>; Nale, Lucia <LNale@mayerbrown.com>; Fenn, Matthew E.
<MFenn@mayerbrown.com>; Matthew J. Press <mpress@presskoral.com>
Subject: Re: Remaining Discovery Items Per Conference with Mag. Cave
Alina -
To be clear, we said we were open to discussing an appropriate period of time to complete discovery in
the mutual fund case before going to a joint trial, which we thought was two months. All we said
definitively is that we don’t agree to a stay that puts off trial indefinitely while the mutual fund case
proceeds on its own track. We are awaiting your proposal on how long you need for expedited discovery
in the mutual fund case. Also, we are quite willing to try the cases separately, as they are bench trials
and the court can handle two separate trials more easily than if they were jury trials.
We don’t believe you have adequately met and conferred on these issues before going to the court.
Best,
Matthew J. Press, Esq.
Press Koral LLP
7 World Trade Center, 46th Floor
New York, New York 10007
tel: (212) 922-1111
fax: (347) 342-3882
cell: (347) 419-0983
mpress@presskoral.com
http://www.presskoral.com
On Oct 11, 2023, at 12:42 PM, Artunian, Alina <AArtunian@mayerbrown.com> wrote:
Matt, Jason — we cannot agree to your proposal of staying this case to start and finish
discovery in Two Roads within two months (with an anticipated trial date for both cases in
March or April 2024). We would of course agree to a reasonable discovery schedule on
Two Roads, but we cannot agree to a fixed deadline to go to trial in both cases,
regardless of whether Two Roads is trial-ready. In the interest of time, given the
upcoming deadlines and the fact that we seem to be in agreement about the need for
the stay in principle but disagree on the terms of the stay, we plan to file a letter motion
seeking a stay and adjournment of pretrial deadlines later today or tomorrow.
Thanks,
Alina
From: Matthew J. Press <mpress@presskoral.com>
Sent: Friday, October 6, 2023 2:51 PM
To: Artunian, Alina <AArtunian@mayerbrown.com>
Cc: Jason Koral <jkoral@presskoral.com>; Houpt, Christopher J.
<CHoupt@mayerbrown.com>; Watt, Anjanique M. <AWatt@mayerbrown.com>; Nale,
Lucia <LNale@mayerbrown.com>; Fenn, Matthew E. <MFenn@mayerbrown.com>
Subject: Re: Remaining Discovery Items Per Conference with Mag. Cave
Any time Tuesday works for me. How is 1 pm.
Matthew J. Press, Esq.
Press Koral LLP
7 World Trade Center, 46th Floor
New York, New York 10007
tel: (212) 922-1111
fax: (347) 342-3882
cell: (347) 419-0983
mpress@presskoral.com
http://www.presskoral.com
On Oct 6, 2023, at 2:47 PM, Artunian, Alina
<AArtunian@mayerbrown.com> wrote:
Our Monday afternoon is pretty tight. What about Tuesday? We're free
12:30-2pm, and after 3pm.
From: Matthew J. Press <mpress@presskoral.com>
Sent: Friday, October 6, 2023 2:24 PM
To: Artunian, Alina <AArtunian@mayerbrown.com>
Cc: Jason Koral <jkoral@presskoral.com>; Houpt, Christopher J.
<CHoupt@mayerbrown.com>; Watt, Anjanique M.
<AWatt@mayerbrown.com>; Nale, Lucia <LNale@mayerbrown.com>;
Fenn, Matthew E. <MFenn@mayerbrown.com>
Subject: Re: Remaining Discovery Items Per Conference with Mag. Cave
Is 2 possible? | will be driving in the morning and need to anticipate the
possibility of traffic.
Matthew J. Press, Esq.
Press Koral LLP
7 World Trade Center, 46th Floor
New York, New York 10007
tel: (212) 922-1111
fax: (347) 342-3882
cell: (347) 419-0983
mpress@presskoral.com
http://www.presskoral.com