United States District Court, D. Colorado
Kristen L. Mix United States Magistrate Judge.
matter is before the Court on Defendants' Motion
to Stay Proceedings Pending Resolution of Criminal
Proceedings [#142] (the “Motion”).
Plaintiffs filed a Response [#148] in opposition to the
Motion [#142], and Defendants filed a Reply [#151].
Defendants seeks a stay of discovery in this matter until
completion of parallel criminal proceedings against them.
Motion [#139] at 2. Defendants explicitly request
that the stay not include resolution of pending fully-briefed
motions. Id. at 11-12.
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). To
determine 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 [and] 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)).
However, if the Court finds that a party's Fifth
Amendment constitutional rights will be
substantially prejudiced in the absence of a stay,
then the Court's discretion disappears and a stay of the
civil proceedings is required. Creative Consumer
Concepts, Inc. v. Kreisler, 563 F.3d 1070, 1080 (10th
Cir. 2009). The Court may also 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).
exercising its discretion, the Court considers the following
1) the extent to which the issues in the criminal case
overlap with those presented in the civil case; 2) the status
of the case, including whether the defendants have been
indicted; 3) the private interests of the plaintiff[ ] in
proceeding expeditiously weighed against the prejudice to
plaintiff[ ] 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).
respect to the first factor, i.e., the extent to which the
issues in the criminal case overlap with those presented in
the civil case, the parties agree that there is substantial
overlap between the criminal and civil proceedings with
regard to Defendants. Motion [#139] at 6-7
(“[T]here is complete, or near complete, overlap
between these cases . . . .); Response [#148] at 6
(“In this case, the grand jury subpoenas issued to the
Defendants suggest that there is overlap between the criminal
and civil proceedings.”). Based on the filings in this
matter, the Court agrees with the parties. Accordingly, the
Court finds that this factor weighs heavily in favor of
imposition of a stay of discovery.
respect to the second factor, i.e., the status of the
criminal case, the Court generally inquires whether the
criminal cases are in the pre- or post-indictment stages.
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 plaintiff[ ] 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)). “Though pre-indictment requests for a stay are
generally denied, a motion for a stay of a civil proceeding
should not be categorically denied solely because the
defendant has yet to be indicted in a criminal case.”
U.S. ex rel Magee v. Lockheed Martin Corp., No.
1:09CV324-HSO-JMR, 2010 WL 2816658, at *5 (S.D.Miss. July 16,
2010) (citing cases).
the criminal case against Defendants is in the pre-indictment
stage. However, Caleb Durling (“Durling”), an
attorney for some of the defendants here, has filed an
affidavit stating that he spoke with a Denver Assistant
District Attorney on July 16, 2019. [#139-1] ¶ 10. Mr.
Durling was told in that conversation “that if a
subpoenaed party had a notice of his/her/its rights listed on
the subpoena [to testify before a grand jury], then the party
was a target rather than a witness or victim.”
Id. Mr. Durling states that “[a]ll the
subpoenas received by the eight Defendants in this matter
include this notice and thus are targets.” Id.
Mr. Durling also asserts that the Denver Assistant District
Attorney told him “that he saw overwhelming evidence of
criminal violations and strongly suggested that indictments
would be forthcoming.” Id. ¶ 11.
AIG Life Insurance Company v. Phillips, the Court
found this factor to weigh in favor of a “limited
stay” where the defendants had asserted that the
Attorney General's office told them “that criminal
charges will be filed ‘within a matter of
weeks.'” 2007 WL 2116383, at *2. The Court noted
that “[b]ecause criminal charges appear imminent, the
risk to [the defendant] of being asked to make potentially
incriminating statements is high, while there is little
countervailing risk that the underlying action would be
postponed indefinitely.” Id. Here, three
Defendants testified before the grand jury on July 24, 2019,
and the other five are scheduled to testify on August 21,
2019. [#139-1] ¶ 10. Based on the foregoing, despite the
fact that the proceedings are in the pre-indictment stage,
the Court finds that the totality of the circumstances here
weighs in favor of imposition of a stay of discovery.
respect to the third factor, i.e., the private interests of
Plaintiff in proceeding expeditiously weighed against the
prejudice to Plaintiff caused by a delay, the Court first
notes that Plaintiff is opposed to a stay. Response
[#148] at 10. Plaintiff states that its “interest is to
get civil relief before Defendants have an opportunity to
hide or spend their assets and make them unavailable”
to Plaintiff. Id. (citing information that some
ownership interests have been sold since the inception of
this lawsuit). Defendants, on the other hand, believe that
Plaintiff “has elected to seek to impose criminal
penalties on Defendants” and therefore “must live
with the consequences of this action . . . which is a delay
in resolving the civil case.” Motion [#139] at
9; see also Reply [#151] at 6-7 (providing a list of
Plaintiff-driven delays in this case). The information
provided by the parties does not strongly show a need for
Plaintiff to proceed expeditiously at this time or that
Plaintiff will incur substantial prejudice as the result of
any delay. However, given the totality of the information
provided, and Plaintiff's general interest in the
expeditious resolution of its case, the Court finds that this
factor weighs slightly against imposition of a stay of
respect to the fourth factor, i.e., the private interests of
and burden on Defendants, Defendants generally have an
interest in avoiding the conflict between waiving their Fifth
Amendment rights and, in essence, compromising their defense
in this civil matter. See, e.g., Mid-Am.'s
Process Serv. v. Ellison, 767 F.2d 684, 686 (10th Cir.
1985) (“The individual petitioners unquestionably may
assert a Fifth Amendment privilege in this civil case and
refuse to reveal information properly subject to the
privilege, in which event they may have to accept certain bad
consequences that flow from that action.”);
Creative Consumer Concepts, 563 F.3d at 1080
(“A defendant has no absolute right not to be forced to
choose between testifying in a civil matter and asserting his
Fifth Amendment privilege.”). Plaintiff argues that
Defendant Adam Hirschfeld has also waived his Fifth Amendment
privilege by previously testifying on substantive matters in
this lawsuit in connection with the preliminary injunction
hearing. Response [#148] at 11. Importantly, the two
corporate Defendants may not assert Fifth Amendment
privileges. AIG Life Ins. Co., 2007 WL 2116383, at
*3. Regardless, “the Supreme Court has implied that
postponing discovery may be appropriate when a demand for
testimonial discovery has been addressed to an entity and no
one can respond ‘without subjecting himself to a
“real and appreciable” risk of
self-incrimination.'” Id. (quoting
United States v. Kordel, 397 U.S. 1, 9 (1970)).
five individual Defendants, “[t]he [movants] should at
least be required to make a specific showing of the harm
[they] will suffer without a stay and why other methods of
protecting [their] interests are insufficient.” In
re Ramu Corp., 903 F.2d 312, 320 (5th Cir. 1990).
“A district court may also stay a civil proceeding in
deference to a parallel criminal proceeding for other
reasons, such as to prevent either party from taking
advantage of broader civil discovery rights or to prevent the
exposure of the criminal defense strategy to the
prosecution.” Creative Consumer Concepts, 563
F.3d at 1080. Although the Court makes no finding on this
issue, Defendants have raised non-frivolous concerns that
Plaintiff has been funneling documents to the Denver District
Attorney in violation of the Court's September 8, 2017
protective order. See [#20]; Reply [#151]
at 8. Defendants also generally cite to the time and effort
required to prepare for their rapidly-approaching grand jury
testimony, including collecting the documents they must
produce there. Reply [#151] at 8-9. The Court also
notes the close relationship between the entity Defendants
and the individual Defendants. See generally Second Am.
Compl. [#82]. The Court cannot find, based on the record
before it, that Defendants will be subject to
substantial prejudice if a stay is not imposed here.
See Creative Consumer Concepts, 563 F.3d at 1080
(stating that a stay is required if a party shows substantial
prejudice to his civil rights in the absence of a stay).
However, based on the totality of these considerations, the
Court finds that this factor weighs in favor of imposition of
a stay of discovery.
respect to the fifth factor, “[t]he Court has a strong
interest in keeping litigation moving to conclusion without
necessary delay.” In re CFS, 256 F.Supp.2d at
1241. On the other side of the scale, final resolution of the
parallel criminal proceedings could increase the possibility
of settlement in this case. See ...