The opinion of the court was delivered by: Arpert, U.S.M.J
MEMORANDUM OPINION AND ORDER
This matter having come before the Court on a Motion by Defendants Securi Enterprises, Inc. ("Securi"), Scott Sanders ("Mr. Sanders"), and Marcie Lyn Ury-Sanders ("Mrs. Sanders") (collectively, "Defendants") to stay this proceeding pending the outcome of an ongoing criminal investigation or, alternatively, staying the depositions of Mr. and Mrs. Sanders for six (6) months with such stay to be revisited at the end of that period [dkt. entry no. 46], returnable December 6, 2010. Plaintiff Continental Insurance Company ("Plaintiff") filed opposition on November 22, 2010 and Defendants filed a reply on November 29, 2010. For the reasons stated herein, Defendants' Motion to stay this proceeding is granted.
II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On August 27, 2009, Plaintiff filed a Complaint in the United States District Court for the Eastern District of New York ("Eastern District of New York") against Defendants. [dkt. entry no. 1] On January 8, 2010, Defendants filed a motion to transfer venue from the Eastern District of New York to the United States District Court for the District of New Jersey ("District of New Jersey"), a motion which Plaintiff did not oppose. [dkt. entry no. 19] By Order dated September 8, 2010, Defendants' motion to transfer venue was granted and this matter was transferred to the District of New Jersey. [dkt. entry no. 35] Between January 2010 and September 2010, the parties engaged in limited discovery, including the provision of answers to interrogatories by Mr. and Mrs. Sanders. See Pl.'s Opp'n Cert. of Nancy Lem ("Lem"), Exhs. G & H. On November 12, 2010, Defendants filed an Answer. [dkt. entry no. 45]
Plaintiff's Complaint against Defendants seeks rescission of the business automobile policy issued to Securi for the policy year April 2, 2008 to April 2, 2009 and declaratory relief against certain individual defendants who have asserted claims for damages against Securi and its drivers for automobile accidents involving vehicles that were covered under Plaintiff's policy. Specifically, Plaintiff alleges that Mrs. Sanders, acting as a New York licensed insurance broker, submitted a commercial insurance application on behalf of Securi through Zaloom Associates, Inc. ("Zaloom"), a New Jersey insurance agency, in which Securi was represented to be a New Jersey computer sales and service company. Based upon this application, Plaintiff issued a business automobile policy to Securi for the policy year of April 2, 2007 to April 2, 2008 which was renewed for the policy year April 2, 2008 to April 2, 2009. Importantly, Securi's sole director is Mr. Sanders.
During the 2008-2009 policy year, Plaintiff became aware of a series of automobile accidents that occurred in or around Brooklyn, New York involving vehicles owned by Securi. In November 2008, Zaloom alerted Plaintiff that the Securi auto fleet was "being used as a Limo/Livery service" and that it had "closed" Mrs. Sanders "from any further business" with Zaloom. See Pl.'s Opp'n Cert. of Lem, Ex. E. On December 2, 2008, Plaintiff issued a Notice of Cancellation to Securi effective January 5, 2009 based upon "material misrepresentation or nondisclosure of material fact" -- namely, Securi initially presented itself as a "Computer Repair Service" but "recent discovery...identified risks operations as a livery service". Id., Ex. F.
In fact, Securi was one (1) of one hundred ten (110) entities being investigated by the United States Attorney's Office for the Southern District of New York ("US Attorney") as early as March 2009. See Def.'s Cert. of Jeffrey Hoffman ("Hoffman") at ¶ 2; see also id., Ex. B. On March 24, 2009, the US Attorney issued nineteen (19) grand jury subpoenas to various entities, including the "Marcie Lynn Ury Sanders Insurance Agency". Id. at ¶ 2; see also id., Ex. A. These grand jury subpoenas included the production of documents related to Securi. Id. at ¶ 2; see also id., Ex. B. Additional materials were subpoenaed in June (Id. at ¶ 2; see also id., Ex. C) and September of 2009 (Id. at ¶ 2; see also id., Ex. D).
Defendants' attorney has met with the US Attorney and represents that a "mail and wire fraud investigation concerning Mr. Sanders and activities he was allegedly involved in related to owning and insuring vehicles in the livery industry" is ongoing. Id. at ¶ 3. More specifically, Defendants' attorney met the "new prosecutors who were handling the investigation on January 15, 2010" and represents that "Mr. Sanders [is] the target of the investgation". Id. at ¶ 3. On October 25, 2010, the US Attorney issued a subpoena to "CJO Consulting", Mr. and Mrs. Sanders' accounting firm, with a rider specifically requesting information about "any...entity controlled by Scott Eric Sanders, Marcy Ury-Sanders...or any work paid for by the same individuals for the period of January 1, 2000 through the present...". Id., Ex. E.
On November 12, 2010, Defendants filed the present Motion to stay this proceeding pending the outcome of the criminal investigation or, alternatively, staying the depositions of Mr. and Mrs. Sanders for six (6) months with such stay to be revisited at the end of that period. [dkt. entry no. 46]
A. Defendants' Arguments in Support of the Motion to Stay
1. The Court should stay this action pending the outcome of the criminal investigation.
Citing Walsh Secs., Inc. v. Cristo Prop. Mgt., Ltd., 7 F. Supp. 2d 523, 526 (D.N.J. 1998), United States v. Kordel, 397 U.S. 1, 12 n.27 (1970), Tucker v. N.Y. Police Dept., 2010 WL 703189, at *6 (D.N.J. 2010), Kress v. City of Ventor, 2009 WL 750103, at *2 (D.N.J. 2009), Warner v. Kozub, 2007 WL 162766, at *2 (D.N.J. 2007), and In re NJ Affordable Homes Corp., 2007 WL 869577, at *5 (Bankr. D.N.J. 2007), Defendants contend that the "court has discretion to stay a case if the interests of justice require it" and should evaluate a particular case based upon the following six (6) factors: (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 interests of the court; and (6) the public interest. See Def.'s Br. at 4-5. Plaintiff argues that "all of these factors, taken together, favor staying this action pending the outcome of criminal proceedings." Id. at 5.
(a) There is an overlap of issues in the civil and criminal cases.
Citing Walsh, 7 F. Supp. 2d at 527 and Parallel Civil and Criminal Proceedings, 129 F.R.D. 201, 203 (1989), Defendants maintain that the overlap of issues in the pending civil and criminal cases favors staying this matter. Defendants note that "the criminal investigation is inquiring into the activities of Mr. and Mrs. Sanders...and Securi". Id. Specifically, Defendants point out that nineteen (19) grand jury subpoenas have been issued "seeking information concerning Securi, Mr. and Mrs. Sanders, the issuance of insurance, and the Taxi and Limousine Commission", including a subpoena issued to "Mr. Sanders' accountant". Id. Defendants argue that because the Complaint in this matter deals directly with the same issues -- "an alleged fraudulent scheme involving obtaining insurance coverage for automobiles registered by Securi...which were used as taxis and/or private limousines for hire...and in which Mr. and Mrs. Sanders allegedly participated" -- a stay is warranted. Id.
(b) The status of the criminal case may result in Mr. and Mrs. Sanders asserting their Fifth Amendment privileges and former Securi employees serving as government witnesses.
Citing Walsh, 7 F. Supp. 2d at 527-28, Tucker, 2010 WL 703189, at *7, Warner, 2007 WL 162766, at *2, Parallel Proceedings, 129 F.R.D. at 204, Volmar Distribus., Inc. v. N.Y. Post Co., 152 F.R.D. 36, 38 (S.D.N.Y. 1993), and In re NJ Affordable Homes Corp., 2007 WL 869577, at *5, Defendants maintain that it is "still possible to obtain a stay" in this matter even though an indictment has not been returned because "the Government is conducting an active parallel criminal investigation". Id. at 5-6. Defendants compare the present matter to the circumstances at issue in Walsh, where a civil action was filed while "the U.S. Attorney in New Jersey was investigating...and, although no indictments had...been handed down, the Government had executed search warrants[,]...issued subpoenas to several defendants[, and]...the defendants had been notified that they were targets of the criminal investigation". Id. at 6. Defendants note that a stay was issued in Walsh based upon the likelihood that the "defendants were likely to feel compelled to assert their Fifth Amendment privilege...[and the fact that] the status of the criminal investigation would likely lead to complications in the civil case". Id. Here, Defendants argue that "although no indictments have been issued..., the U.S. Attorney in the Southern District of New York is actively investigating Defendants in connection with the matters alleged in the Complaint, having issued nineteen grand jury subpoenas concerning Securi, Mr. and Mrs. Sanders, the obtaining of insurance and the Taxi and Limousine Commission...". Id. at 6-7. Defendants note that their counsel "has been notified that Mr. Sanders is a target of the criminal investigation" and that a grand jury subpoena has been issued to "Mr. and Mrs. Sanders' accountant". Id. at 7. Defendants argue that all of this "signals that the investigation is reaching a terminal phase that will likely result in the issuance of indictments against Mr. Sanders and possibly others involved in this case". Id. As a result, Defendants contend that "Mr. and Mrs. Sanders will almost certainly assert their Fifth Amendment privilege" and discovery may be sought from other witnesses, such as employees of Securi, who may also be "potential Government witnesses". Id. Defendants argue that this action should be stayed "rather than try to unravel [this] Gordian Knot". Id.
(c) Plaintiff will not suffer undue prejudice as a result of any delay caused by a stay.
Citing Walsh, 7 F. Supp. 2d at 528, Defendants maintain that the fact that Plaintiff will not suffer undue prejudice or delay favors staying this matter. Id. Defendants note that Mr. Sanders has already asserted his Fifth Amendment privilege in response to certain discovery requests. Id. Defendants argue out that "delays in civil cases are fairly common" and, in any event, Plaintiff is protected from any "financial losses" suffered due to any delay "by its ability to obtain interest as part of its ultimate judgment". Id. at 7-8. Defendants further argue ...