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TWENTY FIRST CENTURY CORP. v. LABIANCA

September 25, 1992

TWENTY FIRST CENTURY CORPORATION and TWENTY FIRST CENTURY/ALLIED CORPORATION, Plaintiffs, against JOSEPH LaBIANCA, RICHARD REDZINSKI, STEPHEN KLEMAS, MICHAEL J. MALPIEDI, JOHN AHERN, RICHARD MANDEL, ROBERT GOLDFINE, LUCILLE MALPIEDI GOLDFINE, STEPHEN DELLI BOVI, LINDA CITRYNELL a/k/a "Linda Drost," DELLI BOVI CONSTRUCTION CORP. d/b/a "B.G. Improvement," J.M. MASONRY & TILE WORKS, INC., ALLEN CITARELLA d/b/a "Backflow Specialties," ANGELO VIGNOLA, D & D ELECTRIC CO., JAMES M. AHERN, JAMES MICHAELS, INC. and LILLIAN TESI, Defendants.


The opinion of the court was delivered by: I. LEO GLASSER

MEMORANDUM AND ORDER

 GLASSER, United States District Judge:

 Defendant Richard Redzinski seeks an order staying all civil proceedings in this action pending completion of the related criminal trial. The government moves to intervene for the same purpose -- to move for a stay of all civil discovery. For the reasons set forth below, these motions are granted.

 FACTS

 Plaintiff in this action, Twenty-First Century Corporation, Inc. ("21st Century"), is a New Jersey corporation primarily engaged in the ownership and maintenance of thirty eight McDonald's franchises throughout the metropolitan area. In September of 1990, a grand jury sitting in the Eastern District of New York began investigating alleged criminal activities of plaintiff's then current and former employees. On June 19, 1992, the grand jury returned an indictment charging many of the defendants named in this case with criminal activity arising from and during their employ at 21st Century. That indictment, numbered 92-CR-579, is presently pending in this court and is set for trial on November 30, 1992.

 Plaintiff filed this action in June of 1992 to recover from defendants damages sustained by reason of the following: alleged fraudulent conduct; breach of fiduciary duties; misappropriation of assets; acts of commercial bribery; and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. ยงยง 1961-68. More specifically, the complaint alleges that defendants created sham corporations for the purposes of submitting fraudulent and inflated construction and security invoices; all funds diverted from the corporation allegedly were kicked back to the defendants. These claims are substantially similar to those charged in the criminal indictment. No civil discovery has yet taken place; however, defendant LaBianca issued a notice of deposition on defendant Redzinski, now postponed pending resolution of these motions.

 There are several motions currently at issue. First, the government moves to intervene pursuant to Rule 24 of the Federal Rules of Civil Procedure for the limited purpose of moving to stay of discovery until completion of the criminal trial. The government has attempted to obtain the consent of all parties to its motion to intervene and stay discovery; several of the defendants have refused to consent, but the plaintiff has agreed.

 Redzinski has cooperated and continues to cooperate in the United States' investigation of the scheme to defraud 21st Century, and the government believes that he will be an important witness in the criminal case. Accordingly, they seek to prevent premature disclosure of the confidential information provided by Redzinski. Aware of the competing interests at stake, the government promises to "make every effort to minimize the effects of a stay on this action. The United States is prepared to go to trial . . . on the scheduled date and expects that the trial will last approximately three to four weeks." (Okula Aff., P 10).

 DISCUSSION

 United States' Motion To Intervene

 Under Rule 24(a) of the Federal Rules of Civil Procedure a party may intervene as of right in an action when he "claims an interest relating to the transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest . . . ." Fed. R. Civ. R. 24(a)(2). Rule 24(b) alternatively permits permissive intervention "when an applicant's claim or defense and the main action have a question of law or fact in common." Fed. R. Civ. R. 24(b)(2).

 As a rule, district courts in this Circuit have allowed the government to intervene in civil actions -- especially when the government wishes do so for the limited purpose of moving to stay discovery. For example, in First Merchants Enterprises, Inc. v. Shannon, 1989 U.S. Dist. LEXIS 2512, *5 (March 14, 1989), the government contended that its ongoing criminal investigation would be prejudiced if civil discovery concerning the same facts and circumstances were allowed to proceed. Judge Haight granted the government's motion pursuant to Rule 24(b), although he refused to express a view as to the propriety of intervention as of right. Id.; see also Board of Governors of the Federal Reserve System v. Pharaon, 140 F.R.D. 634, 638 (S.D.N.Y. 1991) (allowing state prosecutor to intervene in civil action when pending criminal action involved common questions of law or fact); Radutzky v. Walert, 87-CV-4340 (E.D.N.Y. June 15, 1989) (Nickerson, J.) (finding both forms of intervention appropriate because "the United States, charged with enforcing federal criminal law, has an interest in the subject matter of [the civil] action.").

 While the Second Circuit has not squarely held that such intervention is always appropriate, in Securities and Exchange Commission v. Chestman, 861 F.2d 49, 50 (2d Cir. 1988), it recognized in dicta the government's interest. The Chestman court stated that the government has a "discernible interest in intervening in order to prevent discovery in [a] civil case from being used to circumvent the more limited scope of discovery in the criminal matter." Accordingly, it found that ...


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