Thursday, February 12, 2015

When should a federal court stay a civil case pending the outcome of a criminal case?

In Skinner v. Armet Armored Vehicles, Judge Kiser of the W.D. Va. denied the defendants' motion for a stay of their False Claims Act case pending the outcome of the criminal case against them. Judge Kiser's analysis makes it sound like a stay should rarely be granted. In some other courts, there is almost a presumption in favor of such a stay in some circumstances, and Judge Jones granted a stay in the one case where I raised the issue, even though the result was a delay of some years in the civil cases.

At the time, I wrote something like this:

"The determination by a district judge in granting or denying a motion to stay proceedings calls for an exercise of judgment." United States v. Georgia Pac. Corp., 562 F.2d 294, 296 (4th Cir. 1977). Many courts have recognized that a stay of a civil case is most appropriate when the civil defendant has been indicted over the same subject matter. See In re Julmice, 458 B.R. 657, 662 (Bankr. E.D.N.Y. 2011) ("When an indicted criminal defendant is also a defendant in a related civil action, courts in this Circuit generally grant a stay of the civil matter."); Avalonbay Communities, Inc., v. San Jose Water Conservation Corp., CIV A 07-306, 2007 WL 2481291 (E.D. Va. Aug . 27, 2007), aff'd, 325 Fed. App'x 217 (4th Cir. 2009) ("a stay is most appropriate in situations where a party is under indictment for a serious offense") (citing SEC v. Dresser Indus. Inc., 628 F.2d 1368, 1376 (D.C. Cir. 1980)); Trustees of Plumbers & Pipefitters Nat. Pension Fund v. Transworld Mech., Inc., 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995) ("A stay of a civil case is most appropriate where a party to the civil case has already been indicted for the same conduct"); Volmar Distributors, Inc. v. New York Post Co., Inc., 152 F.R.D. 36, 39 (S.D.N.Y. 1993) (“The strongest case for granting a stay is where a party under criminal indictment is required to defend a civil proceeding involving the same matter.”); In re Par Pharm., Inc. Sec. Litig., 133 F.R.D. 12, 13 (S.D.N.Y. 1990) (“The weight of authority in this Circuit indicates that courts will stay a civil proceeding when the criminal investigation has ripened into an indictment”). When the individuals who own and operate business entities are indicted, courts granting a stay for the individuals will often do the same for any unindicted co-defendant business  entities. See, e.g., Am. Express Bus. Fin. Corp. v. RW Prof’l Leasing Services Corp., 225 F. Supp. 2d 263, 265-66 (E.D.N.Y. 2002).  

Indeed, the fact that the indictment has been returned is critical because it dictates both the degree of risk of self-incrimination and the length of potential delay to the civil case. See U.S. S.E.C. v. Trujillo, 09-CV-00403-MSK-KMT, 2010 WL 2232388 (D. Colo. June 1, 2010) (holding that after an indictment is returned, “The potential for self-incrimination is greatest during this stage, and the potential harm to civil litigants arising from delaying them is reduced due to the promise of a fairly quick resolution of the criminal case under the Speedy Trial Act.”); Parker v. Dawson, 06-CV-6191 JFB WDW, 2007 WL 2462677 (E.D.N.Y. Aug. 27, 2007) (“although a stay pending resolution of the criminal action may result in an immediate delay in the progress of the civil actions, it is likely that the resolution of the criminal action will, ultimately, further this Court’s interest in the efficient disposition of the civil actions.”); Crawford & Sons, Ltd. v. Besser, 298 F. Supp. 2d 317, 319 (E.D.N.Y. 2004) (“A stay would promote efficiency and avoid duplication as this Court and the parties would have the benefit of the transcripts and rulings in the criminal action. In addition, the public’s interest is also served by preserving the integrity of the criminal case.”); Sterling Nat. Bank v. A-1 Hotels Int’l, Inc., 175 F. Supp. 2d 573, 577 (S.D.N.Y. 2001) (“When a defendant has been indicted, his situation is particularly dangerous, and takes a certain priority, for the risk to his liberty, the importance of safeguarding his constitutional rights, and even the strain on his resources and attention that makes defending satellite civil litigation particularly difficult, all weigh in favor of his interest. Moreover, if the potential prejudice to the defendant is particularly high post-indictment, the prejudice to the plaintiff of staying proceedings is somewhat reduced, since the criminal litigation has reached a crisis that will lead to a reasonably speedy resolution.”)."

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