COURT MAY STAY CIVIL CASE PENDING OUTCOME OF CRIMINAL CHARGES BUT
DECLINES TO DO SO HERE
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
"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.