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Eastwood v. United States

March 6, 2008

ELINA EASTWOOD, PLAINTIFF,
v.
UNITED STATES OF AMERICA AND THE INTERNAL REVENUE SERVICE, DEFENDANTS.



The opinion of the court was delivered by: Judge Mattice

MEMORANDUM AND ORDER

Before the Court is Defendants' Motion to Stay (Court Doc. 233). In support of their Motion to Stay, Defendants contend "that one or more of the critical witnesses in this civil action are now under criminal investigation relating to facts that are common to this civil case." (Defs' Mot Stay 1.) Defendants' memoranda in support and Plaintiff's memoranda in opposition to Defendants' motion are filed under seal. (See Court Doc. 235, Order of December 20, 2007; Court Doc. 250, Order of February 15, 2008.) Accordingly, the Court cannot fully disclose the factual basis for this Memorandum and Order. It can, however, provide direction to the parties with regard to the Court's concerns about indefinitely staying the instant case so as to permit them to address these concerns. Accordingly, and for the reasons set forth more fully below, the Court will RESERVE RULING on Defendants' Motion to Stay (Court Doc. 233).

I. STANDARD

Generally, "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," Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936). "[E]ntry of such an order ordinarily rests with the sound discretion of the District Court." Ohio Envtl Council v. United States. Dist. Court, So. Dist. of Ohio, Ea. Div., 565 F.2d 393, 396 (6th Cir. 1977). The Court's discretion is not normally cabined by the pendency of related criminal proceedings. See United States. v. United States. Currency, 626 F.2d 11, 16 (6th Cir. 1980). "Civil and criminal actions may be brought either simultaneously or successively 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., No. 91-3102, 1991 WL 158757, at *2 (6th Cir. Aug. 14, 1991) (citing S.E.C. v. Dresser Indus., Inc., 628 F.2d 1368, 1375 (D.C. Cir. 1980)). "[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[.]' " Dresser Indus., Inc., 628 F.2d at 1375 (quoting United States v. Kordel, 397 U.S. 1, 12 n.27 (1970)) (alterations in original). This standard "embodies 'a recognition of the power of the federal courts, after a balancing of interests in the particular case before them, to stay civil suits because of pending criminal charges.' " United States. Currency, 626 F.2d at 16 (quoting Arthurs v. Stern, 560 F.2d 477, 479 (1st Cir. 1977) and citing Kordel, 397 U.S. 1).

In exercising its discretion to stay a civil case to allow related criminal proceedings to go forward, a court must weigh the public and private interests that may be affected by its order. See United States Currency, 626 F.2d at 17-18 (addressing the concurrence of a criminal prosecution and a civil forfeiture proceeding, and affording weight to the criminal defendants' private interest in a prompt adjudication of the civil forfeiture ). A civil litigant-and particularly a plaintiff-has a private interest in prompt adjudication of his or her action, unhindered by a stay. On the other hand, as important, if not more important, see Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962), are the public interests at issue. "Denial of a stay [in the civil case] could impair a party's Fifth Amendment privilege against self-incrimination, extend criminal discovery beyond the limits set forth in Federal Rule of Criminal Procedure 16(b), expose the defense's theory to the prosecution in advance of trial, or otherwise prejudice the criminal case." Trs. of Plumbers & Pipefitters Nat'l Pension Fund v. Transworld Mech., Inc., 886 F. Supp. 1134, 1138 (S.D.N.Y. 1995).

II. FACTS

The following relevant facts are not under seal. In November of 2007, approximately fifteen months following Plaintiff's initiation of the instant civil lawsuit, the Government executed a search warrant on a storage locker allegedly rented by Edward Eastwood in the name of Violetta Gromova, Plaintiff's minor daughter, and seized a portion of its contents. (Court Doc. 237, Pla.'s Opp'n. to Defs.' Mot. Stay ¶ VII.) Defendants represent that "one or more of the critical witnesses in this civil action are now under criminal investigation relating to facts that are common to this civil case." (Defs' Mot. Stay 1). United States Magistrate Judge Dennis H. Inman has found that "there is probable cause to believe that at least two, and possibly more, criminal offenses have been committed by individuals involved in this civil case." (Report and Recommendation of Jan. 7, 2008, Court Doc. 247.)

III. ANALYSIS

In addressing Defendants' Motion to Stay, the Court must weigh the public interest in unhindered criminal justice with the public interest in ensuring a fair trial and the private interest in a speedy resolution of civil claims. Further, the Court must balance these competing interests in the context of the instant action for wrongful levy. What the parties must show by the evidence presented in a wrongful levy action has been summarized as follows.

Property is wrongfully levied if it does not, in whole or in part, belong to the taxpayer against whom the levy originated. In a wrongful levy action, the plaintiff must initially show that it has a legally cognizable interest in the property levied by the United States, and that the government levied on the property to collect someone else's taxes. If the plaintiff makes that initial showing, the burden shifts to the government to establish, by substantial evidence, a "nexus" or "connection" between the taxpayer and the property levied upon. The ultimate burden of proof remains on the plaintiff.

PBV, Inc. v. Rossotti, No. 98-3504, 1999 WL 220123, at *1 (6th Cir. April 6, 1999) (internal citations and quotations omitted). To better delineate the competing interests presented in this case, the Court will evaluate them from each party's perspective.

A. Plaintiff's Interests

Plaintiff has a private interest in speedy resolution of her civil action. The Court cannot discount or take lightly this interest. See United States Currency, 626 F.2d at 18 n.1 (emphasizing that staying the civil case will bring hardship on the plaintiff whose assets are seized). Further, this interest is heightened by the fact that Plaintiff currently suffers a cloud over the titles to her real property at the hand of Defendants, and that this case has been pending for almost one and one-half years.

Plaintiff also embodies the public interest in a fair and just criminal trial. The unsealed facts set forth above are sufficient to support a reasonable belief that Plaintiff could face the possibility of criminal prosecution. Conducting a civil case in which she could be compelled by the Court to testify may have serious implications as to her right against self incrimination under the Fifth Amendment, as well as any applicable marital privileges. Importantly, in this civil action, unlike in a criminal trial, Plaintiff may be compelled by the Government to take the witness stand to testify. And although Plaintiff may assert her Fifth Amendment privilege in the civil proceeding, the Court is permitted to infer that her refused testimony would have been detrimental to her civil case, and find facts against her accordingly. Baxter v. Palmigiano, 425 U.S. 308, 318-19 (1976). Thus, if Plaintiff's civil case were to go forward, she may be faced with ...


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