Travelers Casualty and Surety Company of America v. Hammerman & Gainer, Inc.

Filing 19

ORDER AND REASONS denying 11 Motion to Stay Discovery and to Continue Scheduling Conference. Further Ordered that the parties are to contact the Court's case manager as set forth in document. Signed by Judge Ivan L.R. Lemelle. (ijg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA

CIVIL ACTION

VERSUS

NO. 14-2251

HAMMERMAN & GAINER, INC.

SECTION “B”(3)

ORDER AND REASONS
I.

NATURE OF MOTION AND RELIEF SOUGHT
Before the Court is Defendant’s, Hammerman & Gainer, Inc.,

“Motion to Stay Discovery and to Continue Scheduling Conference”
(Rec. Doc. 11), which requests that the Court enter an order
staying discovery in this matter during the pendency of related
criminal proceedings in the United States District Court for the
Southern District of Texas. Plaintiff, Travelers Casualty and
Surety Company of America, opposes the motion. (Rec. Doc.14).
Defendant has filed a reply. (Rec. Doc. 18). For the reasons
that follow, IT IS ORDERED that the Motion is DENIED.
II. FACTS AND PROCEDURAL HISTORY
Plaintiff
$2,000,000

initiated

paid

by

Corporation,

for

Rise.

Doc.

(Rec.

deficient

this

Travelers

loss
14

performance

action

to

sustained
at

4).

under

its
by

seeking

insured,
GRD’s

Plaintiff

a

Claims

to

GRD

Holding

subsidiary,
alleges

Service

recover
I

Garden

Defendant’s

Agreement

with

Garden Ridge caused the loss. (Rec. Doc. 4). A related criminal

1

prosecution is presently pending in the Southern District of
Texas, wherein Natalie Jeng, an employee of HGI, and Sandra
Johnson, an employee of Garden Ridge, have been indicted for
conspiring to funnel fraudulent claims through HGI’s third-party
administration process without detection by HGI. (See Rec. Doc.
14 at 4; United States v. Sandra Johnson, et al., No. H-14-251-S
(S.Dt. Tex. Jun 19, 2014)). The Court initially set this matter
for a Scheduling Conference on March 26, 2015. On the eve of
that conference,1 Defendant filed the instant motion requesting
continuance of the scheduling conference and further requesting
stay of discovery pending resolution of the pending criminal
prosecution.2
III. CONTENTIONS OF MOVANT
Defendant
primary

argues

grounds.

in

First,

favor

of

Defendant

staying
argues

discovery
HGI

on

provided

two
“all

records” concerning the criminal matter to the United States
Attorney’s Office in connection with its investigation and those
records have not yet been returned to HGI, “presumably because
the criminal proceeding is still pending.” (Rec. Doc. 11-4 at
2).

Defendant

argues

in

its

motion

that

sentencing

for

the

1

Defense counsel is warned that the Court entertained the prospect of issuing
an order to show cause why sanctions should not be imposed for failure to
file this motion in a more timely fashion.

2

Defendant notes that all defendants in the criminal case have pled guilty
and remain merely to be sentenced. (See Rec. Doc. 11 at 2).
2

defendants in that matter was scheduled for May 11, 2015, and
therefore, requests a stay of all discovery until May 25, 2015.3
Second, Defendant notes that an item was recently filed
under

seal

in

the

criminal

matter.

Defendant

argues

it

is

impossible to tell at this juncture what that item might be, but
suggests that it could contain “proffers made by the defendants
at the time of their guilty pleas, or pre-sentencing reports.”
(Rec. Doc. 11-4 at 3). According to Defendant, “[e]ither would
be highly relevant in any discovery to be conducted in this
action.” Id.
IV. CONTENTIONS OF OPPONENTS
Plaintiff argues Defendant has failed to show “good cause”
as

required

for

the

Court

to

stay

discovery

in

this

case.

Rather, Plaintiff argues, the parties should resolve the instant
discovery dispute by the traditional methods prescribed under
the Federal Rules of Civil Procedure.4 Plaintiff further contends
the requested stay is unlikely to achieve the results alleged by
Defendant.
First, Plaintiff notes that the sentencing of one of the
criminal defendants was recently continued to June 15, 2015.
3

Defendant suggests that the two week delay following sentencing should
afford time for the documents at issue to be released and the documents filed
under seal to be made public.

4

Specifically, Plaintiff should tender discovery, Defendant may then object,
the parties would meet and confer, and, in the event of a failure to resolve
the dispute, Plaintiff would file a motion to compel, allowing Magistrate
Judge Shushan to rule on the merits of Defendant’s objections.
3

(Rec. Doc. 14 at 2). Because continuances are common in criminal
proceedings, Plaintiff argues a continuance until resolution of
the related proceedings would unduly deprive Plaintiff of its
entitlement to reasonably prompt determination of the merits of
its claims. (Rec. Doc. 14 at 2).
Second,

Plaintiff

argues

resolution

of

the

criminal

proceedings is unlikely to result in the sealed record entries
becoming unsealed and further that, in the event such entries
reflect

pre-sentencing

reports,

such

items

are

infrequently

approved for disclosure to the public or civil litigants.
Third, Plaintiff argues Defendant has made no showing that
the records furnished to the U.S. Attorney are inaccessible to
it; either by establishing that it did not retain copies of such
records or that the third-party electronic discovery consulting
firm, Avansic, which served as an intermediary between Defendant
and

the

U.S.

Attorney,

is

unable

to

make

those

records

accessible to Defendant for the instant litigation. (Rec. Doc.
14 at 2-3).
Finally, Plaintiff argues that the focus of discovery in
the instant litigation is as to HGI’s conduct in supervising its
employees

and

performing

its

obligations

under

the

Claims

Service Agreement. (Rec. Doc. 14 at 6). Accordingly, Plaintiff
argues Defendant fails to explain how it is necessary to await
termination of the criminal prosecution of HGI Employees and
4

others in order for HGI to tender discovery relating to its own
conduct. (Rec. Doc. 14 at 7).
Alternatively,

if

the

Court

grants

the

requested

stay,

Plaintiff requests the opportunity to immediately depose Avansic
and HGI for the limited purpose of determining the extent to
which relevant documents are unavailable.
V. DISCUSSION
“[A] district court has a general discretionary power to
stay proceedings before it in the control of its docket and in
the interests of justice.” McKnight v. Blanchard, 667 F.2d 447,
479 (5th Cir. 1982). The entry of such a discretionary stay,
however, is in error when it is “immoderate or of an indefinite
duration.” Id; In re Ramu Corp., 903 F.2d 312, 318 (5th Cir.
1990). In civil litigation, “there is a strong presumption in
favor of discovery, and it is the party who moves for a stay
that bears the burden of overcoming this presumption.” Alcala v.
Texas Webb County, 625 F. Supp. 2d 391, 397-98 (S.D. Tex. May 1,
2009); Gonzalez v. Fresenius Med. Care North America, 571 F.
Supp. 2d 758 (S.D. Tex. Aug. 14, 2008). In the case of parallel
criminal

and

civil

proceedings,

such

a

stay

“contemplates

‘special circumstances’ and the need to avoid ‘substantial and
irreparable prejudice.’” U.S. v. Little Al, 712 F.2d 133, 136
(5th Cir. 1983).

5

Under the present circumstances, Defendant has failed to
overcome the presumption favoring discovery in civil litigation.
The mere fact of pending parallel criminal proceedings does not
represent ‘special circumstances’ and Defendant has failed to
articulate any degree of prejudice, let alone the ‘substantial
and irreparable prejudice’ required for a stay of discovery in
the

instant

proceedings.

Moreover,

the

prospect

of

repeated

continuances in criminal proceedings presents the potential for
a stay of immoderate duration. Finally, Defendant has made no
showing

as

to

the

likely

relevance

to

the

instant

civil

proceedings of the sealed entries in the criminal prosecution,
nor

that

such

entries

would

somehow

become

unsealed

at

the

conclusion of those proceedings (or that Defendant would succeed
in meeting the high standard required for unsealing pre-sentence
investigation reports should the sealed items prove to be such).
See,

e.g.,

U.S.

2012)(recognizing
policy

v.

Iqbal,

that

considerations”

disclosure,

and

PSR

684

F.3d

507,

confidentiality

supporting

requiring

a

a

510-11
reflects

presumption

showing

of

(5th

Cir.

“powerful
against

“compelling,

particularized need for disclosure”). Accordingly, Defendant has
entirely failed to establish that discovery in the instant civil
proceedings should be stayed.
VI. CONCLUSION

6

In

light

of

Defendant’s

failure

to

establish

special

circumstances and articulate specific anticipated prejudice to
result from a failure to stay the instant proceedings pending
resolution of related criminal proceedings, IT IS ORDERED that
Defendant’s Motion is DENIED.
IT IS FURTHER ORDERED that the parties are to contact the
Court’s case manager immediately for purposes of conducting a
Scheduling Conference and to fix discovery deadlines consistent
with

this

Order

and

Reasons.

Should

particularized

discovery

disputes arise, the Federal Rules of Civil Procedure provide the
applicable process and remedy for resolution of same.
New Orleans, Louisiana, this 6th day of May, 2015.

____________________________
UNITED STATES DISTRICT JUDGE

7