Opinion ID: 381789
Heading Depth: 2
Heading Rank: 1

Heading: Parallel Investigations

Text: 21 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. 19 In the absence of substantial prejudice to the rights of the parties involved, such parallel proceedings are unobjectionable under our jurisprudence. As long ago as 1912 the Supreme Court recognized that under one statutory scheme that of the Sherman Act a transaction or course of conduct could give rise to both criminal proceedings and civil suits. Standard Sanitary Manufacturing Co. v. United States, 226 U.S. 20, 52, 33 S.Ct. 9, 16, 57 L.Ed. 107 (1912). The Court held that the government could initiate such proceedings either simultaneously or successively, with discretion in the courts to prevent injury in particular cases. Id. It explained: 22 The Sherman Act provides for a criminal proceeding to punish violations and suits in equity to restrain such violations, and the suits may be brought simultaneously or successively. The order of their bringing must depend upon the Government; the dependence of their trials cannot be fixed by a hard and fast rule or made imperatively to turn upon the character of the suit. Circumstances may determine and are for the consideration of the court. An imperative rule that the civil suit must await the trial of the criminal action might result in injustice or take from the statute a great deal of its power.    23 Id. 24 The Supreme Court returned to this theme in United States v. Kordel, 397 U.S. 1, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970). In that case the Food and Drug Administration (FDA) investigated a company and certain of its officers in connection with possible violations of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq. Early in the investigation the FDA recommended and the United States Attorney filed an in rem action in federal district court seeking civil seizure of certain products. In connection with this suit the FDA filed extensive interrogatories with the company. Before the company had responded the FDA notified it that the agency was contemplating a criminal proceeding against it in connection with the same alleged violations of the statute. The company therefore moved to stay civil proceedings or, in the alternative, to extend the time for answering the interrogatories until after disposition of the criminal proceedings. The District Court denied this motion. Thereafter, but still before the company had filed its answers to the interrogatories, the regional and divisional offices of the FDA formally recommended criminal prosecution to the General Counsel. After it received the answers, the Department of Health, Education, and Welfare formally recommended criminal prosecution to the Justice Department. Justice obtained an indictment, and subsequently convictions. The case reached the Supreme Court upon appeal of the convictions of several of the company's officers. 25 The officers in Kordel argued that use of the civil discovery process to compel answers to interrogatories that could be used to build the government's case in a parallel criminal proceeding reflected such unfairness and want of consideration for justice as to require reversal. 397 U.S. at 11, 90 S.Ct. at 769. The Supreme Court did not agree. The Court noted that the government had not brought the civil action solely to obtain evidence for its criminal prosecution, id. at 11-12, 90 S.Ct. at 769, or without notice to the defendants that it contemplated a criminal action, id. at 12, 90 S.Ct. at 769. Moreover, the defendant was not unrepresented by counsel, id., and had no reason to fear prejudice from adverse pretrial publicity or other unfair injury, id. Nor were there any other special circumstances suggesting that the parallel proceedings were unconstitutional or improper. Id. In the absence of such special circumstances the Court recognized that prompt investigation of both civil and criminal claims can be necessary to the public interest. It said: 26 The public interest in protecting consumers throughout the Nation from misbranded drugs requires prompt action by the agency charged with responsibility for administration of the federal food and drug laws. But a rational decision whether to proceed criminally against those responsible for the misbranding may have to await consideration of a fuller record than that before the agency at the time of the civil seizure of the offending products. It would stultify enforcement of federal law to require a governmental agency such as the FDA invariably to choose either to forgo recommendation of a criminal prosecution once it seeks civil relief, or to defer civil proceedings pending the ultimate outcome of a criminal trial. 27 Id. at 11, 90 S.Ct. at 769 (footnote omitted). 28 The Constitution, therefore, does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings. See Baxter v. Palmigiano, 425 U.S. 308, 98 S.Ct. 1551, 47 L.Ed.2d 810 (1976); DeVita v. Sills, 422 F.2d 1172, 1181 (3d Cir. 1970). Nevertheless, a court may decide in its discretion to stay civil proceedings, postpone civil discovery, or impose protective orders and conditions when the interests of justice seem( ) to require such action, sometimes at the request of the prosecution,    sometimes at the request of the defense(.) United States v. Kordel, supra, 397 U.S. at 12 n.27, 90 S.Ct. at 770 (citations omitted); see Horne Brothers, Inc. v. Laird, 463 F.2d 1268, 1271-1272 (D.C.Cir.1972). The court must make such determinations in the light of the particular circumstances of the case. 29 Other than where there is specific evidence of agency bad faith or malicious governmental tactics, the strongest case for deferring civil proceedings until after completion of criminal proceedings is where a party under indictment for a serious offense is required to defend a civil or administrative action involving the same matter. The noncriminal proceeding, if not deferred, might undermine the party's Fifth Amendment privilege against self-incrimination, expand rights of criminal discovery beyond the limits of Federal Rule of Criminal Procedure 16(b), expose the basis of the defense to the prosecution in advance of criminal trial, or otherwise prejudice the case. 20 If delay of the noncriminal proceeding would not seriously injure the public interest, a court may be justified in deferring it. See, e.g., United States v. Henry, 491 F.2d 702 (6th Cir. 1974); Texaco, Inc. v. Borda, 383 F.2d 607, 608-609 (3d Cir. 1967); Silver v. McCamey, 221 F.2d 873, 874-875 (D.C.Cir.1955). 21 Such cases have frequently arisen in the tax field, following the leading case of United States v. O'Connor, 118 F.Supp. 248 (D.Mass.1953). Cf. Boren v. Tucker, 239 F.2d 767, 772-773 (9th Cir. 1956) (distinguishing IRS summons enforcement before and after indictment). In some such cases, however, the courts may adequately protect the government and the private party by merely deferring civil discovery or entering an appropriate protective order. Gordon v. FDIC, 427 F.2d 578, 580-581 (D.C.Cir.1970). The case at bar is a far weaker one for staying the administrative investigation. No indictment has been returned; no Fifth Amendment privilege is threatened; Rule 16(b) has not come into effect; and the SEC subpoena does not require Dresser to reveal the basis for its defense.