The opinion of the court was delivered by: DENNY CHIN
This is a case brought to collect contributions and other benefits allegedly owed to several employee benefit plans. Defendants Transworld Mechanical, Inc., Transworld Plumbing & Heating, Inc., Danica Plumbing & Heating Corp., Danica Mechanical, Inc., Thomas Andreadakis and Helen Andreadakis move 1) to stay this case pending the resolution of a related criminal matter in New York state court, 2) to stay this case pending the resolution of a related civil case in this Court, and 3) to dismiss certain claims. For the following reasons, the motion to stay this case until the resolution of the criminal matter is granted; the motion to stay pending the civil case, however, is denied. The motion to dismiss is granted in part and denied in part.
Plaintiffs are the Trustees of several employee benefit funds for Local No. 2, United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry (the "Local 2 Funds") and of the Plumbers and Pipefitters National Pension Fund (collectively, the Pension Fund"). The Trustees administer multi-employer employee benefit funds as defined by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1002(1) and (3). Local 2, a labor organization affiliated with the AFL-CIO, is also a plaintiff in this action.
Defendants are corporations engaged in the plumbing and pipefitting industry.
Plaintiffs allege that defendants Transworld Mechanical and Danica Plumbing are bound by a collective bargaining agreement with Local 2 that sets forth the terms and conditions for plumbing and gas fitting work performed by defendants' employees in Manhattan and the Bronx (the "Agreement"). The Agreement provides that defendants will remit contributions to the Funds for every hour worked by an employee. Plaintiffs allege that defendants, from 1988 to the present, failed to make adequate contributions for the hours worked by their employees, concealed the identity of the individuals employed by them, and misrepresented the hours worked by the employees who were listed. Defendants allegedly made these misrepresentations on reports made to the Industry Board and the Pension Fund. In addition, defendants allegedly failed to pay their employees the contractual wage rates as set forth in the Agreement and failed to make union assessment payments or promotion fund contributions.
Following the indictment, plaintiffs commenced this action (with an amended complaint filed on or about January 12, 1995), asserting violations of ERISA, the Labor Management Relations Act, 29 U.S.C. § 141 et seq., civil RICO, 18 U.S.C. § 1961 et seq., and common-law fraud. The wrongful conduct about which plaintiffs complain in this case is the same as in the Criminal Case.
Defendants move to stay this action pending resolution of the Criminal Case because, without a stay, they will be forced to choose between waiving their Fifth Amendment privilege and responding to discovery in the civil case, thereby risking self-incrimination, or invoking the privilege and facing a default in the civil case.
Defendants also move to stay this case pending the resolution of a related civil case that is currently before Judge Haight. That case, Brenner v. Transworld Mechanical, Inc., 93 Civ. 2198 (CSH), which was commenced before the indictment was issued, is a delinquent contribution action brought by the Local 2 Funds against defendants Transworld Mechanical and Helen Andreadakis (the "Brenner case"). After the Local 2 Funds learned of the other defendants' roles in the alleged fraud and embezzlement, it joined in the instant lawsuit. The Brenner case is currently on the suspense calendar, and counsel for plaintiffs has represented that Local 2 Funds is willing to discontinue it. (Pl. Mem. at 4).
Finally, defendants move to dismiss the RICO and fraud claims for failure to state a claim and failure to plead fraud with particularity.
It is well-settled that a court has the discretionary authority to stay a case if the interests of justice so require. See United States v. Kordel, 397 U.S. 1, 12 n.27, 90 S. Ct. 763, 770 n.27, 25 L. Ed. 2d 1 (1970); Kashi v. Gratsos, 790 F.2d 1050, 1057 (2d Cir. 1986) (citing SEC v. Dresser Industries, 202 U.S. App. D.C. 345, 628 F.2d 1368, 1375 (D.C. Cir.) (en banc), cert. denied, 449 U.S. 993, 101 S. Ct. 529, 66 L. Ed. 2d 289 (1980)) (holding that although "the Constitution . . . does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings . . . a court may decide in its discretion to stay civil proceedings"); Volmar Distributors, Inc. v. The New York Post Co., Inc., 152 F.R.D. 36, 39 (S.D.N.Y. 1993).
Courts are afforded this discretion because the denial of a stay could impair a party's Fifth Amendment privilege against self-incrimination, extend criminal discovery beyond the limits set forth in Federal Rule of Criminal Procedure 16(b), expose the defense's theory to the prosecution in advance of trial, or otherwise prejudice the criminal case. See In re Par Pharmaceutical, Inc., 133 F.R.D. 12, 13 (S.D.N.Y. 1990) (citing Dresser, 628 F.2d at 1376); Brock v. Tolkow, 109 F.R.D. 116, 119 (E.D.N.Y. 1985). A stay of the civil case, however, is an extraordinary remedy. In re Par Pharmaceuticals, 133 F.R.D. at 13.
There are numerous factors that should be considered in determining whether a stay is warranted, including: 1) the extent to which the issues in the criminal case overlap with those presented in the civil case;
2) the status of the case, including whether the defendants have been indicted;
3) the private interests of the plaintiffs in proceeding expeditiously weighed against the prejudice to plaintiffs caused by the delay; 4) the private interests of and burden on the defendants; 5) the interests of the courts; and 6) the public interest.
Balancing these factors, I conclude that a stay is appropriate in this case as to Helen and Thomas Andreadakis so as not to interfere with their Fifth Amendment rights. To avoid duplication of discovery efforts, the case will also be stayed as to the corporate defendants until the Criminal Case is resolved with respect to the Andreadakises.
A. Stay as to Helen and Thomas Andreadakis
The first question to be resolved is the extent to which the issues in the criminal case overlap with those present in the civil case, since self-incrimination is more likely if there is a significant overlap. See Volmar Distributors, Inc., 152 F.R.D. at 39 (quoting Parallel Proceedings, E129 F.R.D. at 203F) ("The most important factor at the threshold is the degree to which the civil issues overlap with the criminal issues."). If there is no overlap, there would be no danger of self-incrimination and accordingly no need for a stay. See Parallel Proceedings, E129 F.R.D. at 203F.
Reading the criminal indictment and the amended civil complaint together reveals that the wrongful conduct alleged in both cases is the same: defendants Helen and Thomas Andreadakis, through their companies, failed to make contributions to union pension funds, failed to pay union assessments, and concealed the employment of non-union employees, all in violation of the collective bargaining agreement between defendants and Local 2 and state and federal law. Indeed, plaintiffs concede that the indictment "obviously played a role in the Plaintiffs' decision to bring this action" since, according to the indictment, "the Funds have been defrauded out of thousands, if not millions, of dollars in fringe benefit contributions." (Pl. Mem. at 4). Accordingly, this factor weighs in favor of granting a stay.
2. The Status of the Criminal Case
The second factor to be considered is the status of the criminal case. A stay of a civil case is most appropriate where a party to the civil case has already been indicted for the same conduct for two reasons: first, the likelihood that a defendant may make incriminating statements is greatest after an indictment has issued, and second, the prejudice to the plaintiffs in the civil case is reduced since the criminal case will likely be quickly resolved due to Speedy Trial Act considerations. See In re Par Pharmaceutical, Inc., 133 F.R.D. at 13 ("The weight of authority in this Circuit indicates that courts will stay a civil proceeding when the criminal investigation has ripened into an indictment") (citing cases); Parallel Proceedings, 129 F.R.D. at 203-04; Volmar, 152 F.R.D. at 39 (citing Dresser, 628 F.2d at 1375-76); Brock, 109 F.R.D. at 119. Accordingly, stays will generally not be granted before an indictment is issued. See, e.g., Citibank v. Hakim, 1993 U.S. Dist. LEXIS 16299, 1993 WL 481335 (S.D.N.Y. 1993) ("Although defendant Hakim allegedly is a target of a continuing grand jury investigation, he does not claim to have been indicted. ...