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May 4, 2001


The opinion of the court was delivered by: Lynch, District Judge.


In this civil RICO action, plaintiff Sterling National Bank alleges that defendants submitted over two hundred fraudulent and unauthorized credit card charges in the course of a scheme to purposefully defraud plaintiff and a third-party credit card processor. For details of the allegations of the complaint, see Sterling National Bank v. A-1 Hotels International, Inc., No. 00 Civ. 7352(GEL), 2001 WL 282687 (S.D.N.Y. March 22, 2001). On May 1, 2001, defendants moved to stay the imminent depositions of defendants Norman Goldstein and Jacob Laufer, pending resolution of a federal criminal investigation of matters related to this case. For the reasons set forth below, the motion is denied.


Sterling is in the business of providing, among other services, "credit card services to merchants." (Compl. ¶¶ 2, 11.) Defendant Jacob Laufer is the President and sole or majority shareholder of defendant A-1 Hotels International Inc. (id. ¶ 4), a New York corporation engaged in the principal business of booking hotel reservations for corporations and individuals throughout the United States and in resort areas outside the United States (id. ¶ 10). Defendant Norman Goldstein is the operating and managing officer and Vice President of A-1 Hotels. (Id. ¶ 5.) Essentially, Sterling alleges that in December 1996, A-1 Hotels entered into an agreement with Sterling, under which A-1 Hotels would accept customer charges on Visa and MasterCard, reserve hotel rooms for customers, and pay the hotel, while Sterling agreed to process and purchase the debt resulting from such customer charges (Id. ¶¶ 11-12.) Although the agreement guaranteed the validity of all charges presented by A-1 Hotels to Sterling (id. ¶ 14), Sterling charges that sometime in 1998, defendants Laufer and Goldstein began intentionally to submit charges they knew to have been unauthorized by customers of A-1 Hotels. (Id. ¶ 17.) Laufer and Goldstein allegedly submitted in excess of two hundred such charges to Sterling over the course of approximately two years. (Id. ¶ 18 & Ex. 1). As a result, Sterling alleges it was defrauded in an amount exceeding $750,000. (Id. ¶ 22.)

On March 22, 2001, the Court for the most part denied the motion to dismiss. Sterling National Bank, 2001 WL 282687.*fn1 Although document discovery has now been provided, defendants now move to stay the scheduled depositions of Laufer and Goldstein, for at least six months. Citing a grand jury subpoena duces tecum served in January 2001 on defendant A-1 Hotels, and subsequent inquiries by a special agent of the Federal Bureau of Investigation, they argue that they will be prejudiced if discovery is allowed to proceed, by being put to the choice of providing testimony that might assist the grand jury's criminal inquiries, or asserting their Fifth Amendment privilege, to the detriment of their defense of the instant civil suit. Plaintiff responds that it is entitled to proceed to resolution of its claims against defendants, by whom it claims it was defrauded, rather than being compelled to wait for what may turn out to be an indefinite period of time, while the government and grand jury complete its inquiries, perhaps bring an indictment, and then litigate the resulting criminal case.


There is no question that parties who face both civil litigation and criminal investigation face difficult choices. At the same time, parties who claim to have been victimized by frauds or other crimes are entitled to pursue their civil remedies, and it would be perverse if plaintiffs who claim to be the victims of criminal activity were to receive slower justice than other plaintiffs because the behavior they allege is sufficiently egregious to have attracted the attention of the criminal authorities.*fn2 The dilemma recurs with sufficient regularity that a consensus has developed on the principles to be applied by district judges in determining motions to stay civil actions while criminal litigation is conducted.

First, it is common ground that the Court has the power to enter such a stay:

The power to stay a civil proceeding by reason of a pending criminal investigation is within a court's inherent discretionary power, although a defendant must show "undue prejudice . . . or interference with his constitutional rights . . . [to] prevent plaintiff from expeditiously advancing its claims."

Citibank, N.A. v. Hakim, No. 92 Civ. 6233(MBM), 1993 WL 481335, at *1 (S.D.N.Y. Nov. 18, 1993) (quoting Paine, Webber, 486 F. Supp. at 1119).

Second, it is equally well understood that such a stay is not constitutionally required whenever a litigant finds himself facing the dilemmas inherent in pursuing civil litigation while being the subject of a related criminal investigation:

The Constitution does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings. Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989); Securities & Exchange Commission v. Dresser Indus., 628 F.2d 1368, 1375 (D.C.Cir. 1980). "In the absence of substantial prejudice to the rights of the parties involved, [simultaneous] parallel [civil and criminal] proceedings are unobjectionable under our jurisprudence." Dresser, 628 F.2d at 1374.

Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (bracketed insertions in original). See also Nosik v. Singe, 40 F.3d 592, 596 (2d Cir. 1994) ("Nothing in the Constitution forbids contemporaneous civil and criminal proceedings ...

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