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Scipar Inc. v. Simses

June 21, 2007

SCIPAR INC., PLAINTIFF,
v.
CAROLYN A. SIMSES, DEFENDANT.



The opinion of the court was delivered by: Hon. Hugh B. Scott

Decision & Order

Before the Court are the following motions: the defendant's motion to stay discovery (Docket No. 16); the plaintiff's motion for discovery in aid of attachment (Docket No. 20).

Background

The plaintiff, Scipar, Inc. ("Scipar"), alleges that defendant Carolyn Simses*fn1 was employed by Scipar in an accounting capacity. It is alleged that in that capacity Simses paid the Scipar corporate taxes, made deposits, handled payroll, and paid the expenses of the company (she was allegedly authorized to write checks of up to $10,000.00). (Docket No. 1 at ¶ 7). Scipar asserts that from 1998 until her resignation in May of 2006, Simses undertook a scheme to misappropriate, embezzle and steal corporate funds. The plaintiff alleges that Simses provided a written statement to law enforcement officials stating that she "would create a false bill and invoice and issue a check to [herself] and make a false entry in company Quick Books indicating it was paid to a vendor supplier." (Docket No. 1 at ¶¶ 13). Scipar is currently attempting to determine the exact amount of the purported misappropriated funds, but a alleges that it equals or exceeds $213,934.00. (Docket No. 1 at ¶ 15). It appears that Simses is the subject of a criminal investigation into the alleged fraudulent activities.

Scipar instituted the instant action based upon diversity jurisdiction asserting state law claims of breach of fiduciary duty, conversion, unjust enrichment, and fraud.

Motion to Stay Discovery / Motion for Discovery in Aid of Attachment

Simses has filed a motion seeking to stay all discovery pending the resolution of the investigation by the Erie County District Attorney into the misappropriated funds. (Docket No. 16). Simses has asserted her Fifth Amendment right against self-incrimination with respect to the criminal investigation. (Docket No. 16 at ¶ 4). She now seeks a stay of all discovery from her individually, as well as all third party discovery (at the time of the motion, Scipar had issued several subpoenas to various financial institutions). (Docket No. 16 at ¶ 5).

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, 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)) (although not required a court may decide in its discretion to stay civil proceedings pending the resolution of related criminal 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 Pharmaceutical, 133 F.R.D. at 13. "The Constitution ... does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings." Kashi v. Gratsos, 790 F.2d 1050, 1057 (2d. Cir. 1986).

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 ...


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