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Parallel Civil And Criminal Cases

What should a person or company do when confronted with two proceedings about the same conduct, one criminal and the other civil?  Although the answer will be different in different cases, courts have long been sensitive to the unfairness and threat to constitutional rights posed by allowing criminal investigations and civil actions concerning similar claims to proceed at the same time.  Although it is well settled a defendant in a civil action may assert the Fifth Amendment in response to discovery requests, that civil defendant nonetheless may be subjected to two distinct forms of fundamental unfairness if forced to testify in a civil matter while parallel criminal investigation is pending:  (1) the impossibility of anticipating all of the types of information which provides prosecutors with some “link in the chain of evidence” needed for the criminal case (Hoffman v. United States, 341 U.S. 479, 486 (1951)), and; (2) the debilitating disadvantage in the civil action the defendant will suffer by asserting the Fifth Amendment.  Seee.g.London v. Patterson, 463 F.2d 95, 97-98 (9th Cir. 1972), cert. denied, 411 U.S. 906 (1973)).

In London, the appellate court affirmed the convictions against the defendant even though his responses from the civil deposition were read to the jury because he could have taken steps to postpone civil discovery with a protective order until the criminal action terminated.  Id. at 98, citing United States v. Kordel, 397 U.S. 1, 8-9 (1970).  Federal courts consistently recognize civil proceedings––including deposition discovery––should be stayed in appropriate circumstances pending the resolution of a parallel criminal proceeding. Kordelsupra, 397 U.S. at n.27; Afro-Lecon, Inc. v. United States, 820 F.2d 1198, 1204 (Fed. Cir. 1987) (“it has long been the practice to ‘freeze’ civil proceedings when a criminal prosecution involving the same facts is warming up or under way”); SEC v. Dresser Indus., Inc., 628 F.2d 1368, 1375 (D.C. Cir. 1980) (en banc) (in the case of parallel criminal proceedings, “a court may decide in its discretion to stay civil proceedings, postpone civil discovery, or impose protective orders and conditions when the interests of justice seem to require such action”), cert. denied, 449 U.S. 993 (1980).

The Ninth Circuit has held a postponement of civil proceedings until the conclusion of the related criminal investigation is the preferred alternative to the dilemma facing defendants in parallel cases.  SeeLondonsupra, 463 F.2d at 98.  Other circuits have concurred in this approach.  Seee.g.In re Grand Jury Subpoena, 836 F.2d 1468, 1476 (4th Cir. 1988) (stating Fourth Circuit rule as a “preference for stays” of civil actions), cert. denied, 487 U.S. 1240 (1988); Kashi v. Gratsos, 790 F.2d 1050, 1057 (2d Cir. 1986) (district court exercised “sound discretion” in staying civil trial until U.S. Attorney declined to prosecute); Wehling v. CBS, 608 F.2d 1084, 1089 (5th Cir. 1979) (recognizing that protection of parties’ rights may require staying civil discovery despite resulting inconvenience); Texaco, Inc. v. Borda, 383 F.2d 607, 608 (3d Cir. 1967) (approving stay of civil antitrust action that alleged same conspiracy as pending criminal action); In re Grand Jury Subpoena Duces Tecum, 659 F.Supp. 628, 634 (D. Md. Apr. 21, 1987) (recognizing a “preference that a court stay civil proceedings when there is a risk of self-incrimination by a party”).[1]

In evaluating whether a stay of civil proceedings is warranted during the pendency of a criminal investigation, federal courts typically consider three primary factors:  (1) whether there are “substantially similar or related issues in both cases”; (2) whether parallel proceedings pose a “clear hardship on the defendant”; and (3) whether the “duration of the requested stay” presents unique hardships to the plaintiff, the efficiency of the court, or the interests of third parties and the public.  See, e.g.C3, Inc. v. United States, 5 Cl. Ct. 659, 660-62 (1984).

The Ninth Circuit has articulated these concerns in a five-pronged approach focusing on “(1) the interest of the plaintiffs in proceeding expeditiously with the litigation or any particular aspect of it, and the potential prejudice to plaintiffs of a delay; (2) the burden which any particular aspect of the proceedings may impose on defendants; (3) the convenience of the court in the management of its cases, and the efficient use of judicial resources; (4) the interests of persons not parties to the civil litigation; and (5) the interest of the public in the pending civil and criminal litigation.”  FSLIC v. Molinaro, 889 F.2d 899, 903 (9th Cir. 1989) (quoting Golden Quality Ice Cream Co. v. Deerfield Specialty Papers, Inc., 87 F.R.D. 53, 56 (E.D. Pa. 1980)); accord Keating v. OTS, 45 F.3d 322, 325 (9th Cir. 1995).

Nonetheless, a relatively few decisions that have declined to stay civil proceedings because of significant prejudice to plaintiffs.  Seee.g.Molinarosupra, 889 F.2d at 903 (upholding denial of stay because defendant was dissipating assets and potentially depriving the government of recovery).

© 2014 Knut S. Johnson & Emerson Wheat.  May not be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

[1]          Likewise, in the leading California case on the subject, Pacers, Inc. v. Superior Court, 162 Cal.App.3d 686 (1984), the Court of Appeal held a stay of civil discovery pending the completion of a parallel criminal investigation was “in accord with federal practice where it has been consistently held that when both civil and criminal proceedings arise out of the same or related transactions, an individual is entitled to a stay of discovery in the civil action until disposition of the criminal matter.”  Id. at 690 (emphasis added).

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