United States v. Any & All Assets of that Certain Business Known As Shane Co.

147 F.R.D. 99, 1992 U.S. Dist. LEXIS 21761, 1992 WL 454847
CourtDistrict Court, M.D. North Carolina
DecidedAugust 24, 1992
DocketNo. 6:91CV00338
StatusPublished
Cited by7 cases

This text of 147 F.R.D. 99 (United States v. Any & All Assets of that Certain Business Known As Shane Co.) is published on Counsel Stack Legal Research, covering District Court, M.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Any & All Assets of that Certain Business Known As Shane Co., 147 F.R.D. 99, 1992 U.S. Dist. LEXIS 21761, 1992 WL 454847 (M.D.N.C. 1992).

Opinion

ORDER

ELIASON, United States Magistrate Judge.

This matter comes before the Court on the government’s motion to stay all proceedings until the completion of the criminal investigation involving several claimants in this case or to issue a protective order prohibiting discovery until said criminal matters have been concluded. Claimants Grady J. Mitchell and Brian K. Thomas oppose the motion.

In July 1991, complaints of forfeiture and warrants for the arrest of properties issued with respect to the Shane Company, a trucking business located in Surry County, North Carolina. In addition, real property connected with that company and/or individuals of Shane Company were also seized. In September 1991, the Court rejected claimants’ request for a preliminary injunction against the forfeiture proceedings. The Court permitted the government to proceed and has allowed it to file under seal portions of the affidavits supporting the forfeitures. In addition, the Court permitted the interlocutory sale of the assets of the Shane Company.

The government argues that a stay of the discovery in this civil proceeding is necessary to prevent claimants from compromising the criminal investigation which focuses upon them. An FBI agent has filed an affidavit indicating that allowing claimants to have unrestricted access to the criminal investigative files could endanger informants, witnesses and compromise the government’s ability to conclude its investigations. Plaintiff particularly argues that the claimants cannot be adversely affected since, in denying claimants’ request for a preliminary injunction, the Court found that the Shane Company had been run as a sham and was not a profitable corporation. The government further points out that the parties have agreed to a public sale of the assets of the Shane Company and that the proceeds are now in an interest bearing account. Next, the government points out that because claimants themselves are the targets of a criminal investigation, it might be awkward for them to proceed with discovery in this forfeiture action since they would be in a position of possibly incriminating themselves. Finally, the government urges that the Court not permit discovery under the circumstances of this case because it would merely provide claimants with an attempt to obtain discovery in the pending criminal investigation which they are otherwise not entitled to have.

Claimants argue that criminal indictments have not been issued in this case and that the investigation has apparently been inactive since the fall of 1991. Thus, claimants conclude that even if the Court accepts the government’s argument that discovery could prejudice its criminal case, because of the already lengthy time of investigation in this case, there is no reason to believe that the investigation might not continue for a substantially longer time period, thereby prejudicing the claimants. Furthermore, claimants complain that after they sent their discovery requests, the United States did not object to them, but rather sought a continuance until April 14, 1992. Only after that date was reached, did the government move for a protective order. Thus, claimants inferentially indicate that the government may not be proceeding in good faith, or at least did not act responsibly by not seeking a stay in the first instance. This second argument causes the Court some concern and the government has not supplied an adequate re[101]*101sponse. Making last minute motions to stay in such fashion does raise doubts about plaintiffs good faith.1 However, that alone does not convince the Court that the government’s motion should be denied in its entirety.

This Court has authority to stay civil proceedings pending the resolution of criminal investigations. St. Paul Fire and Marine Ins. v. United States, 24 Cl.Ct. 513 (1991); Campbell v. Eastland, 307 F.2d 478 (5th Cir.1962), cert. denied, 371 U.S. 955, 83 S.Ct. 502, 9 L.Ed.2d 502 (1963). However, such stays should not be indefinite ones. United States v. Banco Cafetero Panama, 797 F.2d 1154 (2d Cir.1986). The motion to stay, in reality, seeks a protective order pursuant to Fed.R.Civ.P. 26(c) and thus the petitioner must show good cause for such an order. Board of Gov. of Federal Reserve Sys. v. Pharaon, 140 F.R.D. 642 (S.D.N.Y. 1991).

The public has an interest in law enforcement which may, under proper circumstances, be given priority over concurrent civil proceedings. St. Paul Fire and Marine Ins. Co. v. United States, supra. When such joint proceedings are pending, there are inevitably conflicts which arise from such joint investigations because of their different focus and purpose. In addition, there is a great disparity in the discovery process. Id. Criminal investigations have a much narrower scope of discovery and courts may protect that difference on behalf of the public. Id.; Campbell v. Eastland, supra.

When a civil proceeding may interfere with a criminal investigation, it is not uncommon that the United States will seek to stay discovery in the civil action in order to protect the criminal investigation. In such circumstances, the stay is often sought until an indictment is returned or until the conclusion of the criminal trial. Such requests are presumptively reasonable, nothing else appearing. See St. Paul Fire and Marine Ins. Co. v. United States, supra. However, the defendant also has due process rights and the grant of a stay should not be indefinite. Id.; United States v. Banco Cafetero Panama, supra.

In order to show good cause to support a stay of civil discovery, the government must show that the two proceedings are related and substantially similar so that the same evidentiary material likely will be involved and that the government’s case may be compromised. When such a showing is made, the Court should consider granting a stay so long as it is not indefinite in either scope or duration. Id. In determining the length and breadth of a stay, the Court may consider whether the party opposing the stay itself is ready and able to fully participate in the discovery process. Board of Gov. of Federal Reserve Sys. v. Pharaon, supra. If that party is not in a position to provide discovery, the Court may look more favorably upon staying all discovery in order to prevent overreaching by or unfairness to any one party. Notwithstanding, the Court must also balance any substantial harm to the claimant and his interest in obtaining a prompt and fair resolution of the civil action concerning property in which he may have an interest against the government’s interest in preserving the integrity of its criminal investigation and the narrow scope of criminal discovery. United States v. Mellon Bank, N.A., 545 F.2d 869, 871-73 (3d Cir.1976).

The Court could either stay civil discovery pending resolution of the criminal matter, allow discovery to proceed without restrictions, or allow discovery to proceed but tailor the discovery to minimize its effect on the criminal matters. In the instant case, claimants argue that the Court should allow [102]

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Cite This Page — Counsel Stack

Bluebook (online)
147 F.R.D. 99, 1992 U.S. Dist. LEXIS 21761, 1992 WL 454847, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-any-all-assets-of-that-certain-business-known-as-shane-ncmd-1992.