United States District Court, D. Arizona
ORDER AND OPINION
JOHN W. SEDWICK, Senior District Judge.
I. MOTION PRESENTED
At docket 76 defendant, counter-claimant, and third-party plaintiff Richard Jefferson ("Jefferson") moves for a stay of this action until the pending federal criminal investigation of third-party defendant Theodore Kritza ("Kritza") is resolved. Plaintiff and counter-defendant Western Alliance Bank ("Alliance") opposes Jefferson's motion at docket 80, and Kritza opposes it at docket 83. Jefferson's reply to Kritza's opposition is at docket 85, and his reply to Alliance's opposition is at docket 86. Oral argument was requested but would not assist the court.
This case began as a breach-of-contract action that Alliance brought against Jefferson in state court. Alliance's complaint alleges that on October 5, 2004, Alliance issued Jefferson a revolving line of credit in an original principal amount not to exceed $500, 000 ("LOC") that Jefferson failed to pay by its January 15, 2014 maturity date. Jefferson admits that his name is on the LOC agreement, but claims that his signature was forged.
After the case was removed to this court, Jefferson brought two negligence counterclaims against Alliance. First, Jefferson alleges that Alliance was negligent in failing "to implement and/or follow appropriate procedures to verify the authenticity of the signatures on documents purporting to name Jefferson" as a borrower. Second, Jefferson alleges that Alliance was negligent in supervising and training its agents.
At docket 16 Jefferson filed a ten-claim third-party complaint against Kritza alleging that Kritza forged his name on the LOC documents and used the LOC funds without his consent. Between 2001 and 2013, Kritza was employed as Jefferson's personal business manager. Jefferson concedes that during that time he granted Kritza authorization to access to his financial accounts, credit information, and related financial information. Alliance has submitted a durable power of attorney from 2003 that granted Kritza the power to "do any act" that Jefferson could do "with a bank or other financial institution, " including the power to borrow money from any banking or financial institution "if deemed necessary by" Kritza. Jefferson contends that his signature on this document was also forged and, alternatively, it is invalid under Arizona law because it is not notarized. Jefferson and Kirtza also dispute whether the powers that Jefferson granted Kritza extended to Kritza's actual use of the LOC money.
Jefferson states the Federal Bureau of Investigation ("FBI") began an investigation into Kritza's alleged fraud in 2013. He asserts that he has been unable to obtain the FBI's evidence relevant to his affirmative defenses and his ability to seek restitution while this investigation is pending. The FBI has written Jefferson a letter confirming that Jefferson "has been identified as a federal crime victim by the FBI Phoenix Field Office. The investigation was initiated on December 10, 2013 and, " as of March 30, 2015, the investigation is "open and active."
Jefferson's lawyer asserts that he made an "informational demand" on February 5, 2015, pursuant to the United States Department of Justice's "administrative procedure set forth in 28 C.F.R. Part 16, " but his demand was denied by "the government until the completion of the FBI's criminal investigation." Jefferson does not provide the court with a copy of the demand, but the demand apparently sought the FBI's audio recording of a telephone call between Jefferson and Kritza. According to Jefferson, during that call he and Kritza "had a conversation about the money that was missing" and "the line of credit that [Jefferson] did not know about." Jefferson contends that Kritza admitted to "stealing a couple million" dollars of Jefferson's money. Kritza denies that he made such statements.
Jefferson now moves for a stay of this case while the FBI's investigation is pending or, alternatively, for an indefinite stay of the discovery deadlines until the investigation is complete.
III. STANDARD OF REVIEW
Federal courts may defer "civil proceedings pending the completion of parallel criminal prosecutions when the interests of justice seemed to require such action." "The decision whether to stay civil proceedings in the face of a parallel criminal proceeding should be made in light of the particular circumstances and competing interests involved in the case.'" Courts should consider the following six factors: (1) "the extent to which the defendant's fifth amendment rights are implicated;" (2) "the interest of the plaintiffs in proceeding expeditiously with this litigation or any particular aspect of it, and the potential prejudice to plaintiffs of a delay;" (3) "the burden which any particular aspect of the proceedings may impose on defendants;" (4) "the convenience of the court in the management of its cases, and the efficient use of judicial resources;" (5) "the interests of persons not parties to the civil litigation;" and (6) "the interest of the public in the pending civil and criminal litigation."
Generally speaking, "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." Under such circumstances, the civil proceeding could undermine the criminal defendant'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."[26 ...