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Soroush v. Ali

October 28, 2009

MASOUD SOROUSH
v.
TYRON B. ALI, ET AL.



The opinion of the court was delivered by: O'neill, J

MEMORANDUM

Plaintiff brought claims against defendants alleging fraud and breach of contract arising out of a series of loans made by plaintiff to defendant. Presently before me is defendants' motion to stay these proceedings until the pending criminal investigation of the underlying events has been completed. For the following reasons I will deny the motion.

I. BACKGROUND

Defendant Tyron Ali is the owner and chief executive officer of American Minority Credit Counseling Association. Ali represented American to be an organization dedicated to helping individuals who had defaulted on their home mortgages restructure their mortgages and thereby remain in their homes. Ali solicited plaintiff to lend money to American. Plaintiff made four loans totaling $311,120.06. The loan agreements obligated American and Ali to repay those loans within three months. Initially, Ali and American failed to make any of the required payments. After repeated demands by plaintiff, defendants paid $8,000.00 but are in default for the remainder. Plaintiff alleges that American is not a legitimate company but merely an alter-ego of Ali used for the purpose of defrauding plaintiff.

In addition to this civil lawsuit, defendants are presently being investigated by a Pennsylvania grand jury for criminal violations arising out of the same conduct. Both defendants have been subpoenaed to produce American's business records and Ali has been subpoenaed to provide testimony. Ali avers that he will raise his Fifth Amendment privilege against self-incrimination and refuse to testify before the grand jury. Neither defendant is currently under indictment in connection with these activities.*fn1

II. DISCUSSION

Defendants urge that I stay these civil proceedings until the parallel criminal investigation of the same conduct has been completed. "It is within the discretion of [the District Court] to grant a stay when justice so requires." State Farm Mutual Automobile Ins. Co. v. BeckhamEasley, No. 01-5530, 2002 WL 31111766 at *1 (E.D. Pa. Sept. 18, 2002). However, a stay is an extraordinary remedy and the party seeking the stay bears the burden of establishing its necessity. Landis v. North American Co., 299 U.S. 248, 255 (1936); United States v. Breyer, 41 F.3d 884, 893 (3d Cir. 1994). When considering whether to grant a stay, District Courts ordinarily consider six factors: "(1) the extent to which the issues in the criminal and civil cases overlap; (2) the status of the [criminal proceedings], including whether the defendants have been indicted; (3) the plaintiff's interest in proceeding expeditiously weighed against the prejudice to the plaintiff caused by a delay; (4) the private interests of and burden on the defendants; (5) the interest of the court; and (6) the public interest." State Farm, 2002 WL 31111766 at *1, citing Walsh Securities, Inc. v. Cristo Property Management, LTD., 7 F. Supp. 2d 523, 527 (D.N.J. 1998) and Golden Quality Ice Cream Co. v. Deerfield Specialty Papers, 87 F.R.D. 53, 56 (E.D. Pa. 1980).*fn2

I will consider each in turn.

A. The Extent to which the Issues in the Criminal and Civil Cases Overlap

The extent to which the issues in the criminal and civil cases overlap is the most important factor in determining whether to grant a stay. Reyes v. Freebery, No. 02-1283, 2004 WL 1737683 at *3 (D. Del. July 30, 2004), citing Walsh Securities, Inc., 7 F. Supp. 2d at 527. "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 action involving the same matter." Id., quoting Javier H. v. Garcia Botello, 218 F.R.D. 72, 75 (W.D.N.Y. 2003).

In State Farm, the Court considered whether to grant a stay under circumstances similar to those presently at issue. 2002 WL 31111766 at *2. The defendants had not been indicted but they had received target letters from the grand jury. Id. Importantly, the defendants had not yet filed an answer to the complaint in the pending civil matter. Id. The Court held that without an indictment to define the parameters of the criminal case and an answer to define the parameters of the parallel civil case it was unable to determine the degree of overlap between the two proceedings. Id. It therefore found that the first factor militated in favor of denying the stay. Id.

In the present case, neither defendant has been indicted so there are no readily-definable criminal proceedings. Defendants have also not yet filed an answer to plaintiff's complaint. Because it is impossible for me to determine the degree of overlap between the two proceedings, I find that the first and most important factor weighs in favor of denying the stay.

B. The Status of the Criminal Proceedings

In examining this factor, the critical question is whether an indictment has been returned against defendants. State Farm, 2002 WL 31111766 at *2; Reyes, 2004 WL 1737683 at *4. While under indictment, the potential for self-incrimination by a defendant is greatest. Additionally, the right to a speedy trial reduces the potential for a long delay and in turn the resulting prejudice to the civil plaintiff. Id. On the other hand, during the pre-indictment stage the concern over self-incrimination is reduced. Id., citing Walsh Securities, Inc., 7 F. Supp. 2d at 527. Additionally, the Speedy Trial Act is inapplicable until an individual is indicted so a criminal investigation could potentially continue indefinitely. Id. The State Farm Court held that where an indictment had not been returned, ...


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