United States of America v. Bauer

Filing 16

MEMORANDUM re dft's MOTION to Stay 9 (Order to follow as separate docket entry)Signed by Chief Judge Christopher C. Conner on 10/30/14. (ma)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICA,
Plaintiff
v.
KURT BAUER,
Defendant

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CIVIL ACTION NO. 1:14-CV-1660
(Chief Judge Conner)

MEMORANDUM
Presently before the court is a motion (Doc. 9) by defendant Kurt Bauer
(“Bauer”) requesting a stay of the above-captioned civil proceedings based on his
present status as a target of an ongoing criminal investigation. The parties are in
agreement that this civil action and the criminal investigation involve the same or
substantially similar subject matter. Bauer asserts that, absent such a stay, he will
be forced to choose between invoking his Fifth Amendment privilege and risking
liability in this matter or complying with the United States‟ discovery requests and
risking criminal liability. Bauer alternatively asks the court to enter a protective
order precluding the use of an adverse inference against him in the event that he
does invoke his Fifth Amendment right. (See id.) The government vigorously
opposes both requests. (See Doc. 12). For the reasons that follow, the court will
deny Bauer‟s motion in its entirety.

I.

Background
The United States of America (“United States”) instituted this action against

defendant Kurt Bauer (“Bauer”) with the filing of a complaint on August 26, 2014.
(Doc. 1). The United States asserts a statutory civil claim for violation of the False
Claims Act, 31 U.S.C. § 3729(a)(1), in addition to common law claims for payment
under mistake of fact, common law fraud, and unjust enrichment. (Id.) According
to the complaint, Bauer submitted false claims to Medicare while excluded from
Medicare participation. (See Doc. 1 ¶¶ 66-68). The parties agree that these same
allegations are the subject of an ongoing criminal investigation currently being
conducted by the United States. (See Doc. 10 at 4-5; Doc. 12 at 9). Bauer filed the
instant motion (Doc. 9) to stay these civil proceedings pending completion of that
criminal investigation on October 5, 2014. The motion is fully briefed (Docs. 10, 12)
and ripe for review.
II.

Discussion
Bauer‟s motion asks the court to stay this litigation entirely and indefinitely

pending completion of the ongoing criminal investigation being conducted by the
United States.1 Inherent in the district court‟s power to control the disposition of
civil matters appearing on its docket is the power to stay proceedings when judicial
economy or other interests so require. Landis v. N. American Co., 299 U.S. 248, 254

1

Bauer‟s proposed order seeks only a partial stay of discovery. (See Doc. 9 at 1
(proposing “all discovery [be] stayed with respect to Defendant Kurt Bauer until the
resolution of the pending parallel criminal investigation”). However, the bulk of his
supporting brief makes clear that what he really seeks is a complete stay of this civil
action. (See Doc. 10 passim).
2

(1936). A stay is an extraordinary measure, see Walsh Secs., Inc. v. Cristo Prop.
Mgmt., LTD, 7 F. Supp. 2d 523, 526 (D.N.J. 1998), and the decision to impose a stay
rests within the sound discretion of the district court. See In re Adelphia, 2003 WL
22358819, at *2 (citing Landis, 299 U.S. at 254-56). In determining whether to stay a
civil case pending resolution of a related criminal proceeding, courts consider the
following factors:
(1) the extent to which the issues in the civil and criminal
cases overlap; (2) the status of the criminal proceedings,
including whether any defendants have been indicted; (3)
the plaintiff‟s interests in expeditious civil proceedings
weighed against the prejudice to the plaintiff caused by the
delay; (4) the burden on the defendants; (5) the interests of
the court; and (6) the public interest.
Shrey v. Kontz, No. 10-CV-1420, 2011 WL 94416, at *1 (M.D. Pa. Jan. 11, 2011)
(quoting In re Adelphia Commc‟ns Secs. Litig., No. 02-CV-1781, 2003 WL 22358819,
at *3 (E.D. Pa. May 13, 2003)). The court will address each of these six factors in
turn.
The first factor—the degree of overlap between the pending criminal and
civil cases—has been deemed “the most important threshold issue” in determining
whether or not to impose a stay. State Farm Mut. Auto Ins. Co. v. Beckham-Easley,
No. 01-5530, 2002 WL 31111766, at *2 (citing Walsh, 7 F. Supp. 2d at 527)). The
parties agree that Bauer is currently the target of a federal criminal investigation
directly related to the subject matter of the United States‟ complaint sub judice.

3

(See Doc. 10 at 4-5; Doc. 12 at 9). Hence, this factor weighs in favor of granting the
requested stay. 2
However, the balance of the remaining factors weighs against Bauer‟s
motion. The court next considers the status of criminal proceedings, particularly
whether the defendant has been indicted. Beckham-Easley, 2002 WL 31111766, at
*5-6. A court is most likely to grant a stay when a grand jury has returned an
indictment against the moving party. See Walsh, 7 F. Supp. 2d at 527 (“The
strongest case for a stay of discovery in the civil case occurs during a criminal
prosecution after an indictment is returned.”) (quoting MILTON POLLACK, PARALLEL
CIVIL AND CRIMINAL PROCEEDINGS, 129 F.R.D. 201, 203 (1989)); see also BeckhamEasley, 2002 WL 31111766, at *5-6 (reasoning that the “potential for selfincrimination is greatest at this stage”). Pre-indictment requests to stay parallel
civil litigation are routinely denied. Beckham-Easley, 2002 WL 31111766, at *5-6
(“[B]ecause the risk of self-incrimination is reduced at the pre-indictment stage,
and because of the uncertainty surrounding when, if ever, indictments will be
issued . . . pre-indictment requests for a stay are typically denied.”) (citing Walsh, 7
F. Supp. 2d at 527); see also United States v. Private Sanitation Indus. Ass‟n of
Nassau/Suffolk, Inc., 811 F. Supp. 802, 805-06 (E.D.N.Y. 1992). Indeed, when the
party seeking a stay has not yet been indicted, the court may deny the motion “on
that ground alone.” Beckham-Easley, 2002 WL 31111766, at *5-6 (citing Private
2

The court notes that no criminal proceedings have been formally initiated
against Bauer. At this juncture, the court‟s determination that the criminal
investigation and this action overlap is necessarily based on the parties‟
representations alone.
4

Sanitation Indus. Ass‟n, 811 F. Supp. At 805-06). Given the preliminary nature of
the related criminal investigation, this factor weighs against granting a stay.
The third factor examines the risk of prejudice to the plaintiff if a stay were
imposed. Clearly, the United States has an interest in the expeditious resolution of
its civil claims. Without diminishing the importance of promptly resolving such
claims, the court notes that the United States has not highlighted any interests so
substantial or time-sensitive as to require immediate resolution. The indefinite
nature of the requested stay may place some burden on the United States, but that
burden is slight. By comparison, courts have recognized a compelling interest in
preserving evidence. In the instant matter, the United States does not identify any
similar, time-sensitive concerns. See Beckham-Easley, 2002 WL 31111766, at *6-7
(holding that plaintiffs must “establish more „prejudice‟ than simply „the right to
pursue his case and vindicate his claim expeditiously” and evidence of dissipation
of assets satisfies that requirement). Accordingly, this factor is largely a wash.
The final three factors, however, weigh considerably in the United States‟
favor. Regarding the fourth factor, Bauer contends that he will be prejudiced by
being forced to choose between asserting or waiving his Fifth Amendment right
against self-incrimination. (Doc. 10 passim). However, nothing precludes Bauer
from asserting his Fifth Amendment right throughout this litigation as he and his
counsel deem fit—indeed, Bauer has already done so in responding to the United
States‟ complaint. (See Doc. 5 ¶¶ 6, 12, 23-48, 50-59, 61, 67-68, 70-72, 74-76, 78-79).
With respect to the final two factors, both the court and the public have a
compelling interest in efficient resolution of cases and judicial economy. See
5

Manning, 2014 U.S. Dist. LEXIS 30217, at *8; Shrey, 2011 U.S. Dist. LEXIS 2411, at
*6. At this stage, there is no indication when—or if—criminal proceedings will be
initiated, and any stay the court might impose would be indefinite “because there is
no way to predict when the criminal investigation would end.” Walsh, 7 F. Supp. 2d
at 528-29 (observing that this “uncertainty weighs against a stay” but ultimately
granting the motion because the presence of multiple defendants, only some of
whom were asserting the privilege, outweighed the efficiencies of proceeding); see
also Manning, 2014 U.S. Dist. LEXIS 30217, at *8; Shrey, 2011 U.S. Dist. LEXIS
2411, at *6. These factors weigh against granting Bauer‟s motion.3

3

Bauer alternatively requests an order permitting him to assert his Fifth
Amendment privilege without the penalty of the adverse inference approved by the
Supreme Court in Baxter v. Palmigiano, 425 U.S. 308 (1976). See Baxter, 425 U.S. at
318-19 (“[T]he Fifth Amendment does not forbid adverse inferences against parties
to civil actions when they refuse to testify in response to probative evidence offered
against them: the Amendment „does not preclude the inference where the privilege
is claimed by a party to a civil cause.‟” (quoting 8 J. WIGMORE, EVIDENCE 439
(McNaughton rev. 1961)); see also Rad Servs., Inc. v. Aetna Casualty & Surety Co.,
808 F. 271, 274 (3d Cir. 1986) (adopting Baxter and observing that “the privilege
against compelled self-incrimination operates differently in civil and criminal
proceedings”). The law in this Circuit is clear that when a defendant asserts the
Fifth Amendment privilege in the face of probative evidence against him or her, the
jury is permitted to draw an adverse inference from his or her silence. See In re
Grand Jury, 286 F.3d 153, 160-61 (3d Cir. 2002) (“We have held that „reliance on the
Fifth Amendment in civil cases may give rise to an adverse inference against the
party claiming its benefits.‟” (quoting S.E.C. v. Graystone Nash, Inc., 25 F.3d 187,
190 (3d Cir. 1994))). Any ruling on the propriety of an adverse inference instruction
would necessarily be premature at this juncture. Accordingly, Bauer must comply
with all discovery requests and assert his Fifth Amendment privilege at his own
peril, subject obviously to the advice of counsel.
6

III.

Conclusion
For all of the above reasons, the court will deny Bauer‟s motion (Doc. 9) to

stay of the above-captioned civil proceedings based on his present status as a target
of an ongoing criminal investigation related to this action. The motion will be
denied without prejudice to the refiling thereof in the event that formal criminal
proceedings are commenced against Bauer. An appropriate order shall issue.

/S/ CHRISTOPHER C. CONNER
Christopher C. Conner, Chief Judge
United States District Court
Middle District of Pennsylvania
Dated:

October 30, 2014