Opinion ID: 2724252
Heading Depth: 2
Heading Rank: 2

Heading: Defendants’ Motion to Stay Proceedings

Text: “The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes in its docket with economy of time and effort for itself, for counsel and for litigants, and the entry of such an order ordinarily rests with the sound discretion of the District Court.” Ohio Envtl. Council v. U.S. Dist. Court, S. Dist. of Ohio, E. Div., 565 F.2d 393, 396 (6th Cir. 1977) (citation and internal quotation marks omitted). See also Clinton v. Jones, 520 U.S. 681, 706 (1997) (“[T]he District Court has broad discretion to stay proceedings as an incident to its power to control its own docket.”). As a result, this Court reviews a district court’s decision denying a party’s motion to stay trial proceedings for abuse of discretion. See Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 96 (2d Cir. 2012). This is a highly deferential standard, Hardyman v. Norfolk & W. Ry. Co., 243 F.3d 255, 267 (6th Cir. 2001), especially because “[a] stay of civil proceedings due to a pending criminal investigation is an extraordinary remedy,” United States v. Ogbazion, No. 3:12–cv–95, 2012 WL 4364306, at  (S.D. Ohio Sept. 24, 2012) (internal quotation marks omitted). “An abuse of discretion occurs if the district court relies on clearly erroneous findings of fact, applies the wrong legal standard, misapplies the correct legal standard when reaching a conclusion, or No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 16 makes a clear error of judgment.” Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 536 (6th Cir. 2012). See also Plain Dealer Publ’g Co. v. City of Lakewood, 794 F.2d 1139, 1148 (6th Cir. 1986) (“Under the abuse of discretion standard, an appellate court may overturn a lower court’s ruling only if it finds that the ruling was arbitrary, unjustifiable or clearly unreasonable.”).
It is clear that “nothing in the Constitution requires a civil action to be stayed in the face of a pending or impending criminal indictment,” Chao v. Fleming, 498 F. Supp. 2d 1034, 1037 (W.D. Mich. 2007), and “there is no requirement that a civil proceeding be stayed pending the outcome of criminal proceedings,” S.E.C. v. Novaferon Labs, Inc., No. 91-3102, 941 F.2d 1210, at  (6th Cir. Aug. 14, 1991).10 As a result, district courts have “broad discretion in determining whether to stay a civil action while a criminal action is pending or impending.” Chao, 498 F. Supp. 2d at 1037. District courts generally consider and balance certain factors when determining whether a stay of civil proceedings is appropriate in a given case: 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 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. Id. (internal quotation marks omitted). In addition to those factors, district courts “should consider ‘the extent to which the defendant’s fifth amendment rights are implicated.’” Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (quoting Fed. Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989)). “[T]he burden is on the party seeking the stay to show that there is pressing need for delay, and that neither the other party nor the public will suffer harm from entry of the order.” Ohio Envtl. Council, 565 F.2d at 396. The most important factor is the balance of the hardships, but “[t]he district court must also consider 10 See also S.E.C. v. Dresser Indus., Inc., 628 F.2d 1368, 1374 (D.C. Cir. 1980) (“The civil and regulatory laws of the United States frequently overlap with the criminal laws, creating the possibility of parallel civil and criminal proceedings, either successive or simultaneous. In the absence of substantial prejudice to the rights of the parties involved, such parallel proceedings are unobjectionable under our jurisprudence.”). No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 17 whether granting the stay will further the interest in economical use of judicial time and resources.” Int’l Bhd. of Elec. Workers v. AT&T Network Sys., No. 88–3895, 879 F.2d 864, at  (6th Cir. Jul. 17, 1989) (internal citations omitted). In the instant case, Defendants assert that the renewed motion to stay made clear that: (1) a criminal indictment was imminent and a stay was necessary to protect Mr. Michaels’ Constitutional rights; (2) granting a stay would promote the interests of the court in judicial economy and preventing discovery abuses; (3) a stay would not cause any harm to the public interest as EMA Defendants were enjoined from—and did not intend to—pursue their respective businesses, and the imminent criminal prosecution would serve to further the public interest; and (4) a stay was crucial in this case because EMA Defendants still had no access to the vital discovery necessary to defend against the FTC’s claims. Defs.’ Br. at 41. Basically, Defendants’ argument regarding the motion to stay is twofold: (1) a stay would have saved the district court from having to deal with issues likely to arise in the event that criminal and civil proceedings went forward simultaneously; and (2) a stay would have protected Defendants from discovery abuses and infringement on Michaels’ Fifth Amendment rights. An analysis of the factors listed above demonstrates that the district court did not abuse its discretion in denying Defendants’ motion. The first factor regarding the overlap of issues in criminal and civil proceedings does not weigh in favor of either party. Even now, more than a year after the district court denied Defendants’ motion, there has yet to be a criminal case or even an indictment filed. As a result, it is unclear which crimes Michaels would be charged with. Even if they were to overlap, because there is not yet a criminal case, it cannot be said that this factor weighs in Defendants’ favor. Similarly, the second factor regarding the status of the criminal case does not weigh in favor of either of the parties. A stay of a civil case is most appropriate where a party to the civil case has already been indicted for the same conduct for two reasons: first, the likelihood that a defendant may make incriminating statements is greatest after an indictment has issued, and second, 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. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 18 Trs. of Plumbers & Pipefitters Nat. Pension Fund v. Transworld Mechanical, 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995). Therefore, courts generally do not stay proceedings in the absence of an indictment. Id. In the instant case, an indictment had not yet issued at the time the district court denied Defendants’ renewed motion to stay the proceedings. As a result, this factor and the concerns associated with it do not weigh in favor of granting the motion. The third factor regarding the plaintiff’s interests clearly weighs in favor of denying the motion. Although the FTC does not have a personal interest in moving swiftly through the case, the FTC pursued claims on behalf of consumers whose interactions with Defendants caused them to suffer great financial hardship. After following Defendants’ instructions and failing to make mortgage payments, many of these individuals were able to save their homes from foreclosure by borrowing money from family or friends, but they now face worse circumstances than before they signed up and paid for Defendants’ services. Some still faced foreclosure as of the time they provided their declarations. Many of Defendants’ customers suffered hefty losses after paying for services that they never received. This factor weighs heavily in favor of denying the motion for a stay of proceedings because these individuals are desperate to recover their lost funds as quickly as possible. On the other hand, the fourth factor weighs in Defendants’ favor. As Defendants have repeatedly asserted, they were unable to obtain their own records from the Canadian government until it was too late to respond to the FTC’s motion for summary judgment. At the time the district court denied the stay, the judge knew that the Canadian authorities had agreed to provide some of the files, but it was unclear how long that might take. Because there was no indictment, however, the Fifth Amendment concerns expressed by Defendants are not very compelling. The fifth and sixth factors do not weigh strongly in either party’s favor. It was unclear at the time the motion was filed how long a stay might last. If the court had waited for an indictment, for example, the stay would continue to this day, causing unnecessary delay for the court. Although there may have been a minimal risk of continued misconduct by Defendants because they entered into a stipulated injunction with the FTC, Defendants’ former customers were in dire need of the funds that were wrongly taken from them. The public interest is furthered where individuals’ injuries are remedied in a timely manner. No. 13-4169 Fed. Trade Comm’n v. E.M.A. Nationwide, Inc., et al. Page 19 Because the factors, when considered together, do not weigh heavily in either party’s favor, it cannot be said that the district court abused its discretion in denying Defendants’ renewed motion for a stay of proceedings.