United States District Court, D. Colorado
AUTO-OWNERS INSURANCE COMPANY, a Michigan corporation, Plaintiff,
NEXT GENERATION ENERGY, LLC, a Colorado limited liability company, KREUTZMAN CONSTRUCTION, INC., a Colorado corporation, DAVID KREUTZMAN, an individual, STEPHEN MENDEZ, an individual, and LAURA MENDEZ, an individual, Defendants.
KRISTEN L. MIX, Magistrate Judge.
This matter is before the Court on Defendants' Motion for a Stay [#25] (the "Motion"). Plaintiff filed a Response [#35], and Defendants filed a Reply [#37]. Having reviewed the Motion, Response, Reply, the entire docket, and the applicable law, the Motion [#25] is GRANTED in part and DENIED without prejudice in part.
This declaratory judgment action turns on whether Plaintiff, an insurer, has duties to defend and indemnify Defendants in connection with two other legal proceedings. See Compl. [#1]. Defendants seek a stay of this matter until completion of the two other legal proceedings, which are an underlying state court civil action in Boulder County (the "Boulder County action") and a related criminal proceeding against Defendant Kreutzman. Motion [#25] at 1. As Plaintiff succinctly states, "[t]his insurance coverage suit seeks a determination of [Plaintiff's] duties to defend and indemnify three defendants (David Kreutzman, Kreutzman Construction, Inc. and Next Generation Energy, LLC) who were sued by the two remaining defendants, Mr. and Ms. Mendez, in a civil action filed in Boulder County.... Mr. Mendez also initiated a criminal case against David Kreutzman for second degree criminal assault in Broomfield County..., a suit for which [Plaintiff] also seeks a determination [that] it has no duty to defend." Response [#35] at 1-2 (footnote omitted). Mr. Kreutzman's criminal trial is set for January 20, 2015. Motion [#25] at 13.
I. Criminal Case
In the interest of justice, the Court may, at its discretion, stay a civil action until completion of parallel criminal proceedings. See AIG Life Ins. Co. v. Phillips, No. 07-cv-00500-PSF-MEH, 2007 WL 2116383, at *2 (D. Colo. July 20, 2007) (citing United States v. Kordel, 397 U.S. 1, 12 n.27 (1970)) (additional citations omitted). However, there is no constitutional right requiring a stay of civil proceedings pending the outcome of criminal proceedings, "absent substantial prejudice to a party's rights." Creative Consumer Concepts, Inc. v. Kreisler, 563 F.3d 1070, 1081 (2009).
In determining whether a stay is warranted in a particular case, the Court must generally balance the plaintiff's interests "in moving forward with the litigation against the interests of a defendant asserting Fifth Amendment rights who faces the choice of being prejudiced in the civil litigation if those rights are asserted or prejudiced in the criminal litigation if those rights are waived." See AIG Life Ins. Co., 2007 WL 2116383, at *2 (quoting In re CFS-Related Secs. Fraud Litig., 256 F.Supp.2d 1227, 1236 (N.D. Okla. 2003)).
When exercising its discretion to stay a case in light of pending criminal matters, the Court considers the following factors:
1) the extent to which the issues in the criminal case overlap with those presented in the civil case; 2) the status of the [criminal] case, including whether the defendants have been indicted; 3) the private interests of the plaintiffs in proceeding expeditiously weighed against the prejudice to plaintiffs caused by the delay; 4) the private interests of and burden on the defendants; 5) the interests of the courts; and 6) the public interest.
See AIG Life Ins. Co., 2007 WL 2116383, at *2 (quoting In re CFS, 256 F.Supp.2d at 1236-37). Further, the Court may consider alternatives to a general stay, including "the imposition of protective orders, sealed interrogatories, a stay for a finite period of time, or a stay limited to a specific subject matter." See AIG Life Ins. Co., 2007 WL 2116383, at *2 (quoting In re CFS, 256 F.Supp.2d at 1236).
Before examining these factors, the Court addresses Plaintiff's argument that "[t]his Court can determine, without a stay, whether a duty to defend exists, as that determination is made from the underlying pleadings." Response [#35] at 4. This is true-but only to an extent. "Under the complaint rule, the insurer's duty to defend is determined by examination of solely the policy and the [underlying] complaint." Pompa v. Am. Family Mut. Ins. Co., 520 F.3d 1139, 1145 (10th Cir. 2008). "[I]f the insurer wishes to avoid the cost of a defense before the underlying litigation has concluded... by bringing a declaratory judgment action while the litigation is proceeding... its duty to defend is determined under the complaint rule." Id. at 1146. Based on this authority, Plaintiff argues that "the duty to defend analysis should proceed as that determination is independent and separable' from the underlying action." Response [#35] at 3. However, Plaintiff has not squarely placed this issue before the Court, as no dispositive motion has been filed. Regarding the timing of any adjudication of the duty to defend, a dispositive motion on that issue could not be fully briefed and adjudicated prior to the expected termination of the criminal action in late January. As a practical matter, therefore, it is highly unlikely that the Court will adjudicate whether or not Plaintiff has a duty to defend Defendants Kreutzman, Kreutzman Construction, Inc. and Next Generation Energy, LLC before completion of Mr. Kreutzman's criminal trial. Hence, staying this case until the conclusion of the criminal trial is not likely to result in any significant delay in determining whether Plaintiff has a duty to defend.
Moreover, once the criminal trial is concluded, Plaintiff may "rely on facts outside of the complaint to show that the incident resulting in liability was not covered by the policy." Id. at 1145-46 (quoting Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 827 (Colo. 2004) (internal quotations omitted). Plaintiff will not be limited to arguing against the duty to defend based on the complaint and policy alone. These two reasons, therefore, generally support entry of a stay until conclusion of the criminal trial.
The Court next examines the factors enunciated in AIG Life Ins. Co. v. Phillips, as cited above. With respect to the first factor, Defendants assert that the complaints in this case and in the criminal case both "center around the alleged assault and battery on February 7, 2014." Motion [#25] at 13. Plaintiff responds that the proceedings only slightly overlap because the "criminal suit... involves the physical contact between Mr. Kreutzman and Mr. Mendez that took place on February 7, 2014, " and thus that the overlap is "limited solely to one underlying defendant and one piece of his conduct" while "coverage determinations involving employment status, workers compensation, and the ownership divestiture have no overlap in the criminal suit." Response [#35] at 11-12. While the Court acknowledges that not all issues in the criminal suit and in the present action overlap, the Court finds that the key issue in the criminal action, i.e., whether Mr. Kreutzman is guilty of criminal assault and battery, substantially overlaps with a key issue in his lawsuit, i.e., whether Mr. Kreutzman's actions relieve Plaintiff of the duty to defend him. As noted above, by the time any dispositive motion regarding Plaintiff's duty to defend could be determined, the criminal action will likely be concluded. In addition, both the evidence presented during the criminal case and its outcome may be relevant to the duty-to-defend issue. See Pompa, 520 F.3d at 1145-46. Accordingly, the Court finds that this factor weighs in favor of imposition of a stay.
With respect to the second factor, the Court generally inquires whether the criminal case is in the pre- or post-indictment stage. See AIG Life Ins. Co., 2007 WL 2116383, at *2. "A stay is more likely warranted if an indictment has already been issued because (1) the likelihood that a defendant may make incriminating statements is greatest after an indictment has issued, ' and (2) the prejudice to the plaintiffs in the civil case is reduced since the criminal case will likely be quickly resolved due to Speedy Trial Act considerations.'" Id. (quoting M.D. Diet Weight Loss & Nutrition Clinic, L.C. v. Absolute Weight Loss & Nutrition Ctr., LLC, No. 2:05-CV-605 TS, 2006 WL 2471524, at *1 (D. Utah Aug. 24, 2006)). Here, the criminal case against Defendant Kreutzman is in the post-indictment stage and is proceeding to trial in late January. Motion [#25] at 13; Response [#35] at 12. Accordingly, the Court finds that the second factor weighs in favor of imposition of a stay.
With respect to the third factor, Plaintiff argues that it has an interest in the expeditious resolution of its case. ...