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667The Rogak Report: 01 August 2005 ** Stay of Litigation Pending Criminal Case **

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  • Lawrence Rogak
    Aug 1, 2005

      JHW Greentree Capital L.P. v. Whittier Trust Co., NYLJ 08/01/05
      (USDC - SDNY) (BAER, j)

      The defendant in this civil action moved to stay the litigation
      pending the outcome of criminal charges against him.

      "It is well settled that a court has the authority to stay an action
      pending criminal investigation," held the Court. It is also clear
      that a stay is not constitutionally required whenever a litigant
      finds himself facing the dilemmas inherent in pursuing civil
      litigation while being the subject of a related criminal
      investigation. To determine whether a stay is appropriate, the
      following factors are generally considered:"

      "(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 defendant has 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 defendant; (5) the public
      interest; and (6) the interest of the Court in the efficient
      management of cases."

      "In general, however, absent an indictment, a stay is an
      extraordinary remedy and disfavored."

      "Here, an examination of the aforementioned factors indicates that a
      stay of the instant proceeding is inappropriate. First, Loftis has
      not been indicted. Absent indictment, the scope and nature of the
      criminal investigation is unknown. Thus, this Court cannot determine
      the extent to which an indefinite criminal case overlaps with a
      pending civil action. As such, the first factor, "overlapping
      issues," advocates against granting a stay."

      "Second, while Loftis indicates that he has received a 'target
      letter,' as already discussed, he has not been indicted. While not
      dispositive, the difference between being a 'target' of an
      investigation and indicted weighs significantly against the granting
      of a stay. As such, the second factor, 'status of the case,' again
      favors denying Loftis's request for a stay."

      "Third, Plaintiffs, JHW Greentree Capital, L.P., and TMI Integrated
      Holdings Corp., argue a stay would frustrate a speedy resolution of
      this action. Greentree fears that the indefinite stay of this case
      would frustrate any real recovery should they succeed. Accordingly,
      the third factor, 'Plaintiffs' interest,' weighs indubitably against
      a stay."

      "Fourth, in stark contrast to the burden Greentree faces from a stay,
      the burden on Loftis of continuing this litigation is minimal. Oft
      times, the plaintiff in the civil case is merely a machination of the
      movant in the criminal case - the government - and the defendant
      fears providing evidence to the government in the civil context that
      will be used against him in the criminal context. Here, however, that
      concern is greatly diminished if not eliminated. The parties have
      agreed to stay oral discovery pending the resolution of Defendants'
      motions to dismiss and, as Loftis acknowledged, 'other defendants,
      and third parties, not Mr. Loftis possess the bulk of documents which
      will provide evidence in this matter.' Accordingly, the fourth
      factor, 'Defendant's interest,' militates against granting a stay."

      "Fifth, the public interest in the administration of justice is
      served by preventing an indefinite delay of this civil proceeding.
      Therefore, the fifth factor, the 'public's interest,' favors denying
      Loftis's request for a stay."

      "Sixth, this Court's interest is in managing its cases and docket
      efficiently and resolving this litigation. The parties have already
      agreed to a Pretrial Scheduling Order and Defendants have submitted
      to Chambers a fully briefed motion to dismiss. A stay would
      indefinitely delay the resolution of this action and, therefore, the
      sixth factor, the 'Court's interest,' weighs against a stay."

      "Upon careful consideration of each factor, the Court finds that, on
      balance, the relevant considerations favor denying Loftis's motion
      for a stay of this civil action and proceeding with the instant
      action in accordance with the Pretrial Scheduling Order."

      The Motion for a stay was denied.

      Larry Rogak