National Credit Union Administration Board v. Cumis Insurance Society Inc.
Filing
141
Memorandum Opinion & Order denying defendant's 139 Motion to Stay Proceedings. Signed by Magistrate Judge Greg White on 10/27/2015. (S,S)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
NATIONAL CREDIT UNION,
ADMINISTRATION BOARD,
as Liquidating Agent of
St. Paul Croatian Federal Credit Union,
Plaintiff,
v.
CUMIS INSURANCE SOCIETY, INC.,
Defendant.
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CASE NO. 1:11 CV 1739
MAGISTRATE JUDGE GREG WHITE
MEMORANDUM OPINION & ORDER
This matter is before the Court upon Defendant Cumis Insurance Society’s (“Cumis”)
Motion to Stay Proceedings (Doc. No. 139.)1 For the following reasons, Cumis’ Motion is
DENIED.
I.
Procedural History
On August 18, 2011, Plaintiff National Credit Union Administration Board, as
Liquidating Agent of St. Paul Croatian Federal Credit Union (hereinafter “Plaintiff” or
1
This case is before the Court upon consent of the parties entered November 28, 2011.
(Doc. No. 13.)
“Liquidating Agent”) filed a Complaint against Cumis. (Doc. No. 1.) Therein, Plaintiff alleges
that, on April 30, 2010, the National Credit Union Administration Board placed the St. Paul
Croatian Federal Credit Union (hereinafter “St. Paul”) into involuntary liquidation due to
insolvency and appointed itself the Liquidating Agent pursuant to 12 U.S.C. ¶ 1787(a)(1)(A). Id.
at ¶ 6. As Liquidating Agent, Plaintiff asserts it “assumed all right, title and interest of St. Paul
by operation of law.” Id. at ¶ 7. The Complaint contains one count, seeking a declaratory
judgment that CUMIS owes coverage under a fidelity bond it issued to St. Paul for losses arising
from employee or director dishonesty. Id. at ¶¶ 8-19, 32-34. CUMIS filed its Answer on
October 24, 2011. (Doc. No. 3.)
A case management conference was conducted on November 29, 2011, at which time the
Court set a discovery deadline of September 1, 2012 and a dispositive motions deadline of
October 1, 2012. (Doc. No. 14.) These deadlines were extended no less than seven times, in
large part due to the parties’ numerous discovery disputes.2 Ultimately, the discovery deadline
was extended to July 28, 2014 and the dispositive motions deadline was extended to October 29,
2014. See Non-Document Order dated April 15, 2014; Doc. No. 71.
During discovery, Cumis propounded discovery requests seeking documents relating to
communications between Plaintiff and the FBI and/or IRS regarding St. Paul Federal Croatian
Credit Union. A discovery dispute arose between the parties regarding these requests. On July
22, 2013, after discussion with the parties, the Court received, for in camera review, a disc from
2
The docket reflects the Court conducted conferences with counsel regarding discovery
disputes on nine (9) separate occasions between July 2012 and May 2014. See Doc. Nos. 20, 32,
34, 36, 42, 51, 55, 59, 63. In addition, the parties filed three discovery related motions and/or
motions to compel. See Doc. Nos. 44, 73, 75.
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Plaintiff containing documents responsive to Cumis’ requests. Several days later, on July 26,
2013, the Court conducted an in-person conference with counsel for the parties, as well as
counsel for the United States. During this conference, counsel for the U.S. indicated that none of
the in camera documents on the disc were responsive to Cumis’ discovery requests, as limited by
Cumis to the time period prior to April 2010. (Doc. No. 42.) On the basis of this representation,
Cumis withdrew its discovery requests relating to communications between Plaintiff and the FBI
and/or IRS, and the Court returned the in camera disc to counsel for Plaintiff.3
Nearly two years later, after the close of discovery and the Court’s denial of the parties’
cross motions for summary judgment (Doc. No. 102), Cumis asserted in a letter to this Court that
“whatever the NCUA learned [from the FBI and/or IRS] in January 2010 is an issue in this case
and may impact at least the additional $1 million in coverage obtained in February 2010.” See
Cumis’ letter to the Court dated May 21, 2015. Cumis maintained that the United States’
representation that the previously submitted in camera documents were not relevant “was not
accurate,” and, therefore, Cumis “renewed” its request for documents relating to “what the
NCUA was told by the FBI and/or the IRS in January 2010.” Id.
Plaintiff strenuously objected to Cumis’ letter. Among other things, Plaintiff argued that
Cumis’ prior discovery requests were specifically propounded to the Plaintiff, which is acting in
its capacity as Liquidating Agent rather than in its capacity as Regulatory Agency. Plaintiff
maintained that “the Liquidating Agent did not exist until April 30, 2010" and, thus, “it did not
participate in any alleged meeting between the [Agency] and the FBI and/or IRS in January
3
The Court did not conduct its own in camera review of these documents prior to
returning them to Plaintiff’s counsel.
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2010.” See Plaintiff’s letter to the Court dated June 5, 2015. Moreover, Plaintiff asserted it
“does not possess documents reflecting any meeting between the Regulatory Agency and the
FBI/IRS, other than what have already been provided to Cumis or which have been published as
a matter of public record.” Id. Accordingly, Plaintiff claimed Cumis’ discovery requests were
not properly propounded to the Liquidating Agent and Cumis should direct its requests to “one
or more of the entities possessing said information via the procedures set forth in the Code of
Federal Regulations.” Id.
On June 18, 2015, the Court conducted a telephonic status conference with counsel.
During that conference, Plaintiff agreed to inquire of the non-party National Credit Union
Administration, acting in its capacity as Regulatory Agency (hereinafter “Regulatory Agency” or
“NCUA”) “as to whether the NCUA has documents reflecting or relating to communications
between the NCUA and the FBI and/or IRS between January and April 2010 regarding St. Paul
Croatian Federal Credit Union.” (Doc. No. 112.) On June 25, 2015, Plaintiff advised the Court
that “subsequent to a reasonable inquiry of the information known or readily obtainable to it,
non-party, the National Credit Union Administration, has determined that no documents either
received by or and/or sent to the NCUA from/to the FBI and/or IRS such that would respond to
CUMIS’ request for information regarding the purported January meeting either exist or are
available.” See Plaintiff’s letter to the Court dated June 25, 2015. Cumis objected, arguing
Plaintiff had failed to comply with the Court’s Order because it did not inquire whether the
NCUA has documents “reflecting or relating to communications between the NCUA and the FBI
and/or IRS [regarding St. Paul] between January and April 2010." See Cumis’ letter to the Court
dated June 29, 2015.
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On June 30, 2015, the Court conducted a telephonic status conference with counsel for
the parties, as well as counsel for the Regulatory Agency. As reflected in a Minute Order issued
that date, the Court ordered the following:
As discussed during the conference, counsel for the NCUA will determine, in
accordance with this Court’s Minute Order dated June 18, 2015, whether the
NCUA has documents reflecting or relating to communications between the
NCUA and the FBI and/or IRS between January and April 2010 regarding St.
Paul Croatian Federal Credit Union. On or before Monday, July 20, 2015, counsel
for the NCUA will provide such documents to the Court for in camera review
subject to a proposed protective order. At that time, counsel for the NCUA may
raise written objections to the release of such documents.
(Doc. No. 114 at 1.)
Counsel for the Regulatory Agency thereafter delivered a set of original, unredacted
documents to the Court for in camera review, along with a Privilege Log and an ex parte brief
arguing the documents should not be produced because they are not relevant and are subject to
the deliberative process, attorney client, and/or work product privileges.
On August 13, 2015, the Court issued a Memorandum Opinion & Order, in which it
found that certain documents from the Regulatory Agency’s in camera production should be
produced to the parties in redacted form subject to the Stipulated Protective Order previously
entered in this matter. (Doc. No. 124.) The Regulatory Agency subsequently agreed to allow
Cumis to conduct a limited deposition of one of the individuals named in these documents; i.e.,
retired NCUA supervisory examiner Dale Turner.
After conducting that deposition, Cumis filed a Motion to Reopen Discovery. (Doc. No.
127.) Therein, Cumis asked the Court to reopen discovery for forty-five (45) days in order to
allow it to determine if any member of St. Paul’s Board of Directors or Supervisory Committee,
or any supervisory staff employee, “provided information to the FBI or IRS during their
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investigation of St. Paul which shows that a member of the Board, Supervisory Committee, or
supervisory staff knew prior to February 11, 2010, that Anthony Raguz (‘Raguz’) was
dishonest.” (Doc. No. 127-1 at 2.) Cumis asserted that, “[i]f so, coverage terminated for Raguz
prior to the inception of the February 11, 2010 policy on which the plaintiff has sued.” Id.
Moreover, Cumis argued that “any such knowledge may also trigger discovery and the
concomitant notice and limitations periods in the bond which, if not met, could also negate
coverage.” Id. Plaintiff filed a Brief in Opposition on October 1, 2015. (Doc. No. 131.)
Prior to ruling on the motion, the Court asked the Regulatory Agency to determine
“whether it has any records from the 2009 calendar year that indicate a [St. Paul] Board Member,
Supervisory Committee member, or supervisory staff member had knowledge that Anthony
Raguz had committed a dishonest or fraudulent act.” (Doc. No. 128.) In a letter dated October
9, 2015, counsel for the Agency advised the parties that the Agency had conducted a thorough
search of its records and determined it had no records meeting this description. (Doc. No. 133.)
Thereafter, during a status conference on October 15, 2015, Cumis advised the Court that
it had recently served Touhy requests on the FBI and the IRS for deposition testimony regarding
(1) information received from any member of the St. Paul Board or Supervisory Committee, or
employee of St. Paul, regarding possible dishonest and/or fraudulent activity at St. Paul; (2)
information received from members of St. Paul about loans they did not receive or possible
dishonest and/or fraudulent activity at St. Paul; and, (3) information received from or provided to
the Agency regarding possible dishonest and/or fraudulent activity at St. Paul. Cumis further
reported that its Touhy requests were denied via letter dated October 13, 2015. (Doc. No. 133 at
2.)
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On October 19, 2015, this Court issued a Memorandum Opinion & Order denying
Cumis’ Motion to Reopen Discovery. (Doc. No. 135.) Therein, the Court noted as follows:
* * * Defendant has already obtained discovery from both Plaintiff and the
Agency regarding FBI and/or IRS communications relating to St. Paul. While
Defendant may wish to appeal the denial of his Touhy requests to the FBI and
IRS, the Court finds any such appeal to be distinct from the instant case and not a
basis to re-open discovery herein. The discovery deadline in this matter was
extended seven times over the course of this litigation. (Doc. Nos. 20, 51, 55; and,
Non-document Orders dated December 21, 2012, May 7, 2013, July 18, 2013, and
April 15, 2014.) With trial now less than two months away, the Court will not
reopen discovery to allow Defendant to continue to pursue this line of inquiry,
particularly where it has already received responsive documents on the very same
topic from both Plaintiff and the Agency.
(Doc. No. 135 at 4.)
On October 26, 2015, Cumis filed the instant Motion to Stay Proceedings. (Doc. No.
139.)
II.
Legal Standard
As the Sixth Circuit has explained, “‘[t]he power to stay proceedings is incidental to the
power inherent in every court to control the disposition of the causes in its docket with economy
of time and effort for itself, for counsel and for litigants, and the entry of such an order ordinarily
rests with the sound discretion of the District Court.’” Federal Trade Commission v. E.M.A.
Nationwide, Inc., 767 F.3d 611, 627 (6th Cir. 2014) (quoting Ohio Envtl. Council v. U.S. Dist.
Court, S. Dist. of Ohio, E. Div., 565 F.2d 393, 396 (6th Cir. 1977)).
A stay of civil proceedings due to a pending criminal investigation “is an extraordinary
remedy.” Id. See also Pullen v. Howard, 2015 WL 145091 at * 2 (S.D. Ohio Jan. 12, 2015);
Chao v. Fleming, 498 F.Supp.2d 1034, 1037 (W.D. Mich. 2007); McCullaugh v. Krendick, 2009
WL 2929306 at * 1 (N.D. Ohio Sept. 9, 2009). Indeed, it is well-established that “‘nothing in the
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Constitution requires a civil action to be stayed in the face of a pending or impending criminal
indictment,’ Chao v. Fleming, 498 F. Supp.2d 1034, 1037 (W.D. Mich. 2007), and ‘there is no
requirement that a civil proceeding be stayed pending the outcome of criminal proceedings,’
S.E.C. v. Novaferon Labs, Inc., No. 91-3102, 941 F.2d 1210, 1991 WL 158757, at * 2 (6th Cir.
Aug. 14, 1991).” E.M.A. Nationwide, Inc., 767 F.3d at 627. Thus, district courts have “broad
discretion” in determining whether to stay a civil action while a criminal action is pending. Id.
See also Chao, 498 F.Supp.2d at 1037; McCloskey v. White, 2011 WL 780793 at * 1 (N.D. Ohio
March 1, 2011); McCullaugh, 2009 WL 2929306 at * 1; Baird v. Daniels, 2013 WL 493236 at *
1 (S.D. Ohio Feb. 7, 2013).
Generally, in evaluating whether to stay a civil action while a criminal action is pending,
courts consider and balance the following factors:
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.
E.M.A. Nationwide, Inc., 767 F.3d at 627. In addition to these factors, district courts “should
consider ‘the extent to which the defendant's fifth amendment rights are implicated.’” Id.
(quoting Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995)). The most
important factor is the balance of the hardships, but “‘[t]he district court must also consider
whether granting the stay will further the interest in economical use of judicial time and
resources.’” Id. (quoting Int'l Bhd. of Elec. Workers v. AT & T Network Sys., 879 F.2d 864, 1989
WL 78212, at *8 (6th Cir. July 17, 1989)).
Ultimately, the burden is on the party seeking the stay to show there is “pressing need for
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delay, and that neither the other party nor the public will suffer harm from entry of the order.”
Ohio Envtl. Council, 565 F.2d at 396. See also E.M.A. Nationwide, Inc., 767 F.3d at 627; Pullen,
2015 WL 145091 at * 2.
III.
Analysis
In its Motion, Cumis asks the Court to stay in the instant proceedings “until the criminal
investigation related to St. Paul Croatian Federal Credit Union is concluded.” (Doc. No. 139 at
1.) Cumis states it “wishes to depose FBI Special Agent Sloan and IRS Special Agent Thatcher
because both agents participated in a criminal investigation related to [St. Paul] under the
supervision of the [DOJ], and, therefore, possess information relevant to the discovery,
termination, and estoppel issues in this case.” Id. at 2. Cumis asserts that, in denying Cumis’
Touhy requests for these depositions, the DOJ “did not deny such information existed; instead it
refused Cumis the right to depose the agents invoking a panoply of privileges some of which may
not be applicable, but all of which would be severely undercut when the pending criminal
investigation ends.” Id. Cumis argues it would be “severely prejudiced by proceeding without
the currently inaccessible important information it seeks from the federal government and
plaintiff will only be minimally inconvenienced by a stay.” Id. at 1.
For the following reasons, the Court finds a stay is not warranted. The basis for Cumis’
motion is its belief that the federal criminal investigation of St. Paul may have uncovered
information that a St. Paul Board member, Supervisory Committee member, or supervisory staff
member had knowledge of possible dishonest and/or fraudulent activity at St. Paul. However, as
detailed above and in this Court’s Opinion denying Cumis’ Motion to Reopen Discovery, Cumis
has already obtained discovery from both Plaintiff and the Regulatory Agency regarding FBI
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and/or IRS communications relating to St. Paul. Indeed, the record reflects Cumis deposed
numerous former St. Paul board members, supervisory committee members, and/or employees,
during which it had the opportunity to ask (and often did ask) about FBI/IRS communications.
Moreover, the non-party Regulatory Agency thoroughly searched its files (on two separate
occasions); produced information relating to this issue from the time period 2009 and January
through April 2010 for in camera review; and, allowed a limited deposition of one of its former
supervisory examiners.
Despite the above, Cumis insists a stay is necessary because “the federal government is
preventing Cumis from obtaining critical information.” (Doc. No. 139 at 1.) Cumis’ insistence
that this matter should be stayed in order to further pursue this line of inquiry, however, is
supported by nothing more than speculation that it can somehow obtain additional information
from the FBI and/or IRS that it has not already obtained from Plaintiff and/or the Regulatory
Agency. In short, Cumis has not demonstrated that staying this matter until the conclusion of
federal criminal proceedings relating to St. Paul would result in the discovery of relevant
information that it has not already had the ability to obtain.
Moreover, Cumis has not persuaded the Court that the balance of hardships weighs in
favor of a stay. The Court is not convinced that Cumis will be “severely prejudiced” by allowing
this matter to proceed, particularly in light of the extensive discovery it has already obtained from
Plaintiff and the Regulatory Agency regarding this issue. Plaintiff, on the other hand, would
undoubtedly be prejudiced by an indefinite stay of the instant proceedings. The Complaint in this
matter was filed over four years ago. Given the extensive discovery and briefing conducted in
this case, the Court can only imagine the time, effort, and resources that Plaintiff has expended in
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its efforts to resolve the issue of coverage under the fidelity bond at issue. The Court finds that
imposing an indefinite stay, particularly so late in the litigation, would prejudice Plaintiff’s
interest in a swift resolution of its claims.
Similarly, the Court finds that granting an indefinite stay would not further the Court’s
interest in effective management of its docket. While Cumis maintains that “it is in the interest of
the Court that all relevant information is before it when it makes it decision,” Cumis has failed to
convince the Court that the discovery it has already obtained is inadequate. To the contrary, the
Court notes it has been extremely generous in allowing the parties to pursue all necessary
discovery in this case. Indeed, the Court extended the deadlines on seven occasions for that very
purpose. Moreover, the Court assisted Cumis in obtaining discovery from the non-party
Regulatory Agency, even after the discovery deadline in this matter passed. Thus, Cumis’
argument that a stay is necessary to ensure that the Court has “all relevant information before it”
is without merit.
Finally, Cumis has not demonstrated it would be an economical use of judicial time and
resources to stay the instant case. As noted above, this matter has been pending for over four
years and has involved a significant expenditure of judicial resources. Cumis has not sufficiently
articulated why it could not have sought a stay earlier, nor has it persuaded the Court that a stay
would benefit either the Court’s or the public’s interest.
Accordingly, and for all the reasons set forth above, Cumis’ Motion to Stay Proceedings
(Doc. No. 139) is without merit and denied.
IV.
Conclusion
For all the foregoing reasons, Defendant Cumis Insurance Society’s Motion to Stay
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Proceedings (Doc. No. 139) is DENIED.
IT IS SO ORDERED.
/s/ Greg White
U.S. Magistrate Judge
Date: October 27, 2015
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