Tuesday, June 25, 2013

Fifth Amendment Privilege in the Context of Parallel Civil and Criminal Proceedings (Nevada)

Determining how to proceed in response to a civil litigant's request for accommodation of his or her Fifth Amendment privilege against self-incrimination is a matter within the discretion of the district court.  Francis v. Wynn Las Vegas, 127 Nev. Adv. Op. 60 (October 6, 2011).  Therefore, a lift of a of a stay civil proceedings made in connection with such a request is similarly within this court’s discretion.  Federal Sav. and Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989).  "The Fifth Amendment privilege against self-incrimination may be invoked in both criminal and civil proceedings." Francis, 127 Nev. Adv. Op. 60 (October 6, 2011).
When parallel civil and criminal actions arising from the same transactions or issues have been instituted, a court is faced with a dilemma. On the one hand, a parallel civil proceeding can vitiate the protections afforded the accused in the criminal proceeding if the prosecutor can use information obtained from him through civil discovery or testimony elicited in the civil litigation. This also may cause him to confront the prospect of divulging information which may incriminate him. On the other hand, the pendency of a parallel criminal proceeding can impede the search for truth in the civil proceeding if the accused resists disclosure and asserts his privilege against self-incrimination and thereby conceals important evidence.  Milton Pollack, Sr. J., U.S. Dist. Ct., S.D.N.Y., Parallel Civil and Criminal Proceedings, 129 F.R.D. 201, 202 (Oct. 17-19, 1989).

Courts typically address this dichotomy by balancing the divergent interests implicated when a civil litigant invokes the Fifth Amendment. Francis, 127 Nev. at ____, 262 P.3d at 711.
Notwithstanding, a defendant has no constitutional right to a stay simply because a parallel criminal proceeding is in the works." Microfinancial, Inc. v. Premier Holidays Intern., 385 F.3d 72, 77-78 (1st Cir. 2004); see also, Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 98 (2d Cir. 2012) (observing that while the district court may stay a civil proceeding due to a related criminal matter, "the Constitution rarely, if ever, requires such a stay"); Molinaro, 889 F.2d at 902 ("While a district court may stay civil proceedings pending the outcome of parallel criminal proceedings, such action is not required by the Constitution.").
Courts have also observed that a stay of civil discovery pending the outcome of a related criminal matter should not be granted lightly because it "is an extraordinary remedy appropriate for extraordinary circumstances." Weil  v. Markowitz, 829 F.2d 166, 174 n.17 (D.C. Cir. 1987). Thus, "[a] movant (seeking a stay) must carry a heavy burden" in order to demonstrate that a stay is warranted. Microfinancial, 385 F.3d at 77; see, Alcala v. Texas Webb  County, 625 F. Supp. 2d 391, 397-98 (S.D. Tex. 2009) ("[T]here is a strong presumption in favor of discovery, and it is the party who moves for a stay that bears the burden of overcoming this presumption."). emphasis added.
The Ninth Circuit Court of Appeals has set forth a comprehensive framework for analyzing whether to grant a stay. Keating v. Office of Thrift  Supervision, 45 F.3d 322 (9th Cir. 1995). Under this framework, courts should analyze 'the extent to which the defendant's Fifth Amendment rights are implicated,'" Id. at 324 (quoting Molinaro, 889 F.2d at 902), as well as the following non-exhaustive factors: (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. Id. at 325.
This framework has been adopted by several jurisdictions. See, e.g., Alcala, 625 F. Supp. 2d at 398-99; S.E.C. v. Nicholas, 569 F. Supp. 2d 1065, 1068-69, 1072 (C.D. Cal. 2008); Sterling Nat. Bank v. A-1 Hotels Intern., Inc., 175 F. Supp. 2d 573, 576 (S.D.N.Y. 2001); Avant! Corp. v. Superior Court, 94 Cal. Rptr. 2d 505, 510­11 (Ct. App. 2000); King v. Olympic Pipeline Co., 16 P.3d 45, 52-53 (Wash. Ct. App. 2000).
The Nevada Supreme Court has adopted this framework as well.  “Because this framework carefully accounts for the interests that are involved when a party brings a motion to stay in connection with a request for accommodation of their Fifth Amendment privilege, we believe that it supplies the appropriate rubric for considering such motions.”  Aspen Fin. Servs. v. Eighth Judicial Dist. Court of Nev., 289 P.3d 201 (2012 Nev.)
Implication of the Fifth Amendment privilege
The extent to which a party's Fifth Amendment privilege against self-incrimination is implicated is generally determined by reference to the overlap between the civil and criminal cases and the status of the criminal matter. Alcala, 625 F. Supp. 2d at 400. The degree of overlap between the issues in the civil and criminal matters has been described as "[t]he most important factor at the threshold" in considering whether to grant a stay. Pollack, supra, at 203. The extent of overlap is relevant because "[i]f there is no overlap, there would be no danger of self-incrimination and accordingly no need for a stay." Trustees of Plumbers  Pen. Fund v. Transworld Mech., 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995). Conversely, a significant overlap increases the risk of self-incrimination and heightens the need for a stay. Alcala, 625 F. Supp. 2d at 400 n.8. "Thus a stay is most appropriate where the subject matter of the parallel civil and criminal proceeding or investigation is the same." King, 16 P.3d at 55.
Here, the criminal proceedings and the civil proceedings center around the very same issues and conduct. But, as one court noted: "it would be perverse if plaintiffs who claim to be the victims of criminal activity were to receive slower justice than other plaintiffs because the behavior they allege is sufficiently egregious to have attracted the attention of the criminal authorities." Sterling, 175 F. Supp. 2d at 575.  As courts in other jurisdictions have recognized, there is "no reason why those victims who have the resources and willingness to pursue their own investigation and enforce their own rights should be precluded either from doing so or from sharing the fruits of their efforts with law enforcement agencies." International Business Machines Corp.  v. Brown, 857 F. Supp. 1384, 1389 (C.D. Cal. 1994); see, King, 16 P.3d at 58.
Moreover, as the Nevada Supreme Court indicated in Aspen, “the possibility that a private plaintiff may share information with the government "is hardly the same thing" as the situation in which the government is a party in parallel criminal and civil proceedings. Id. at 579. After all, it must be remembered that private entities and the government have differing interests. Id.
Plaintiffs' interests and potential prejudice
A stay would cause substantial prejudice to the interests of the Plaintiff. Plaintiffs to civil suits have "an obvious interest in proceeding expeditiously," Microfinancial, Inc. v. Premier Holidays Intern., 385 F.3d 72, 78 (1st Cir. 2004). The delay resulting from a stay may also "duly frustrate a plaintiff's ability to put on an effective case" because as time elapses, "witnesses become unavailable, memories of conversations and dates fade, and documents can be lost or destroyed." Aspen Fin. Servs. v. Eighth Judicial Dist. Court of Nev., 289 P.3d 201, 209 (Nev. 2012) quoting Alcala v. Texas Webb County, 625 F. Supp. 2d 391, 405 (S.D. Tex. 2009).
In addition, because plaintiffs are often "entitled to preserve the fact that they were deprived of information" due to a defendant's invocation, a stay may impede a plaintiff's ability to obtain these "negative inferences." Aspen Fin. Servs. v. Eighth Judicial Dist. Court of Nev., 289 P.3d 201, 209 (Nev. 2012) quoting In re CFS-Related Securities Fraud  Litigation, 256 F. Supp. 2d 1227, 1239 (N.D. Okla. 2003).
The delay caused by a stay would greatly prejudice the Plaintiff’s ability to present an effective case in view of the time sensitive nature of the claims and the likelihood the Defendant has or would flee or depart the jurisdiction. A stay would also delay or preclude Plaintiff’s ability to draw the adverse inference of the Defendant’s invocation—that is, that he was deprived of information by the central figure in the civil proceedings. Thus, the prejudice that a continued stay would pose to Plaintiff is severe.
Burdens on the defendants
The primary burden posed by parallel criminal and civil matters is the danger of undermining a defendant's Fifth Amendment privilege against self-incrimination.  [T]he Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them."). Such an inference may be drawn only "when independent evidence exists of the fact to which the party refuses to answer." Doe ex rel. Rudy-Glanzer v. Glanzer, 232 F.3d 1258, 1264 (9th Cir. 2000). Though not binding on this court, the court in King v. Olympic  Pipeline Co., 16 P.3d 45, 54 (Wash. Ct. App. 2000), provides guidance by expressing that an adverse inference arising from a defendant's invocation, and its effect on the defendant's interest, should be considered when balancing the competing interests involved in this type of case. Here, to the extent that an adverse inference may be drawn and detrimentally affect Defendant, such an effect does not change the fact that a stay is not warranted in light of the other factors that disfavor a stay.
In addition, continuing with civil discovery in the face of a criminal investigation may burden a defendant because, by invoking the privilege to certain questions, a defendant may inadvertently "reveal[ ] his weak points to the criminal prosecutor." Afro-Lecon, Inc. v.  U.S., 820 F.2d 1198, 1203 (Fed. Cir. 1987). Other burdens include the diversion of resources needed to defend a possible criminal action, White v.  Mapco Gas Products, Inc., 116 F.R.D. 498, 502 (E.D. Ark. 1987), or "the likelihood that the materials unearthed during civil discovery may eventually inure to the benefit of the government prosecution," thereby effectively broadening the scope of criminal discovery. King v. Olympic  Pipeline Co., 16 P.3d 45, 58 (Wash. Ct. App. 2000).
To be sure, these are heavy burdens. But the fact remains that a public record exists of Defendant’s prior inconsistent statement before a court and tribunal that as a result would judicially estop him from now claiming he had an ownership interest in the subject property.
Convenience and efficiency of the district court
This court has an interest in convenience and efficiency. The district court's interest is, of course, "deserving of substantial weight." Microfinancial, Inc. v. Premier Holidays Intern., 385 F.3d 72, 79 (1st Cir. 2004). "[C]onvenience of the courts is best served when motions to stay proceedings are discouraged."  Aspen, 289 P.3d 201, 210 (Nev. 2012) quoting U.S. v. Private Sanitation Industry Ass'n, 811 F. Supp. 802, 808 (E.D.N.Y. 1992). In addition, "a policy of freely granting stays solely because a litigant is defending simultaneous multiple suits would threaten to become a constant source of delay and an interference with judicial administration." Id. quoting Paine, Webber, Jackson &  Curtis, Inc. v. Malon S. Andrus, Inc., 486 F. Supp. 1118, 1119 (S.D.N.Y. 1980).
The stay in effect grinds this case to a halt. It would further frustrate the district court's interest in managing its caseload and expeditiously resolving the underlying suit given that it had already been pending for over a year and a half.
Interest of the public in the civil and criminal matters
There is a "presumption that the public has an interest in prompt resolution of civil cases."  Aspen, 289 P.3d 201, 211 (Nev. 2012) quoting, Microfinancial, 385 F.3d at 79 n.4 (citing FRCP 1, the federal counterpart to NRCP 1).  Plaintiff has alleged that the Defendant committed willful acts of theft embezzlement and conversion. It appears as though there was sufficient probably cause so as to warrant the return of the subject property to its rightful owner, Plaintiff.  Defendant’s former landlord appears to have suffered similarly as a result of item stolen from the premises rented to Defendant.  The public undoubtedly has an interest in rooting out such activity. The stay has halted the civil proceeding indefinitely, without any way to forecast when it could return to the district court's active docket. The delay flowing from a stay would shake the public's confidence in the administration of justice. See, Keating  v. Office of Thrift Supervision, 45 F.3d 322, 326 (9th Cir. 1995) (holding that the public's interest in speedily resolving a case outweighed the defendant's interest in a stay because, among other things, a delay "would have been detrimental to public confidence)  see alsoAvant! Corp., 94 Cal. Rptr. 2d at 513, ("Clearly, the public has a significant interest in a system that encourages individuals to come to court for the settlement of their disputes."). Thus, as with most of the other applicable factors, the public's interest in the prompt resolution of the civil proceeding weighs against a stay.

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