The opinion of the court was delivered by: BASSLER
This matter comes before the Court upon the motion of several Defendants to stay the proceedings in this matter pending the outcome of related criminal investigations. Jurisdiction in this Court is pursuant to 28 U.S.C. § 1331 and 18 U.S.C. § 1964(c). For the reasons set forth below, Defendants' motion is granted and all interrogatories and depositions in this matter are stayed until November 1, 1998.
This lawsuit arises out of a series of allegedly fraudulent real estate transactions. According to Plaintiff Walsh Securities, Inc. ("Walsh"), each fraudulent transaction involved the purchase of a property at a low price that was immediately "flipped" or resold at a much higher price. In a typical transaction, Defendant William Kane ("Kane"), through his company Cristo Property Management ("Cristo"), purchased a house in a low income neighborhood for a low price.
(Compl., P 57(a).) Cristo or its principals then located a willing buyer. (Id. at P 57(b).) The property was appraised by licensed appraisers (including Defendants Richard Calanni, Richard DiBenedetto, James Brown, Thomas Brodo, or Roland Pierson) at an inflated value. (Id. at P 57(d).)
A mortgage loan application for the buyer was prepared by Defendant National Home Funding ("NHF") or Cristo and submitted to Plaintiff Walsh Securities, Inc. ("Walsh") for financing. The applications were submitted through Anthony D'Apolitto ("D'Apolitto"), a Walsh employee. Walsh asserts that the application contained false information, including the fraudulently inflated appraisal of the property's value, signed leases indicating that the property would be income-producing, statements that the buyer made a down payment, statements that the seller (Cristo) had provided a second mortgage on the property and representations that the buyer would own the entire property, among other things. These false statements, according to Walsh, were designed to make the loan seem like a better credit risk and to thereby induce Walsh into approving the loan. (Id. at P 57(e).) Walsh asserts that in exchange for transmitting the applications, D'Apolitto, through his company DAP Consulting ("DAP"), received cash payments totaling approximately $ 100,000 from Kane, through Cristo, and from Defendant Robert Skowrenski II, through NHF.
Walsh alleges that on the day of closing, the closing attorney collected and transmitted the proceeds of the mortgage loans, knowing that the preconditions to the loan had not been met. (Id. at P 57(g).) The closing attorney also recorded the various deeds associated with the transaction. (Id. at P 57(h).) Walsh asserts that once the transaction was complete, the buyer secretly transferred 60% of the ownership in the property to Defendant Capital Assets, without notifying Walsh. According to Walsh, this type of reconveyance is a default of the terms of its mortgage loan, and Walsh would not have financed the mortgage loan had it known of the plan to reconvey the interest in the property. (Id. at P 57(I).)
According to Walsh, Capital Assets pooled rental income from several properties to meet its mortgage obligations on each property. (Id. at P 57(j).) Walsh alleges that this same pattern of fraud occurred over two hundred times, with some variations. Some of the owners of these properties have now allegedly become delinquent in payments under the mortgage loans. Walsh claims that due to the false appraisals, Walsh will be unable to recover the full amount of its loans if it forecloses on these properties. (Id. at P 57(m).)
Walsh filed this suit alleging RICO violations against the Defendants (Cristo, NHF, Capital Assets, their principals, the appraisers, closing attorneys, title agents and insurance companies). Walsh also asserts common-law fraud claims against all defendants and breach of contract claims against NHF and the title insurers.
The United States Attorney's Office is also investigating whether these transactions amounted to criminal conduct. Several defendants have confirmed that they are targets of this investigation, including defendants Stanley Yacker ("Yacker", one of the closing attorneys), Cristo, DEK Homes, Oakwood Properties and William Kane. These defendants have moved for a stay of the civil proceedings pending the outcome of the criminal investigation. The individuals argue that they cannot fully participate in civil discovery and protect their Fifth Amendment rights. Defendants Roland Pierson, Richard Pepsny, D'Apolitto, DAP Consulting, Anthony Cicalese, Capital Assets and Gary Grieser (a principal of Capital Assets) join in the motion. Along with Walsh, Defendants NHF and Robert Skowrenski II oppose any stay of this action.
The Court heard oral argument on the motion on March 30, 1998. The United States Attorney's Office, although not a party to this matter, participated in oral argument. The Government has also submitted a sealed, in camera affidavit elaborating on the status of the criminal investigation. The Court has also considered the supplemental letter memoranda submitted by the parties.
A court has discretion to stay a case if the interests of justice require it. United States v. Kordel, 397 U.S. 1, 12 n.27, 25 L. Ed. 2d 1, 90 S. Ct. 763 (1970). A stay of a civil case where there are pending criminal proceedings is not constitutionally required, however, it may be warranted in certain circumstances. Trustees of Plumbers Pension Fund v. Transworld Mechanical, Inc., 886 F. Supp. 1134, 1138 (S.D.N.Y. 1995).
A stay of a civil case is an "extraordinary remedy." Weil v. Markowitz, 264 U.S. App. D.C. 381, 829 F.2d 166, 174 n.17 (D.C. Cir. 1987). The factors to be considered in deciding whether to grant a stay include: 1) the extent to which the issues in the criminal and civil cases overlap; 2) the status of the case, including whether the defendants have been indicted; 3) the plaintiff's interest in proceeding expeditiously weighed against the prejudice to plaintiff caused by a delay; 4) the private interests of and burden on defendants; 5) the ...