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Blanda v. Martin & Seibert, L.C.

United States District Court, S.D. West Virginia

January 5, 2017



          John T. Copenhaver, Jr. United States District Judge

         Pending is a motion to stay civil proceedings pending conclusion of related criminal proceedings, filed by defendants on February 24, 2016.

         I. Background

         The following facts are taken from plaintiff's complaint. Plaintiff Christine Blanda worked as an accounts receivable clerk at the defendants' law firm, Martin & Siebert, L.C. (“Martin & Seibert”), in Martinsburg, West Virginia, from 2005 until January 26, 2015. Pl. Compl. ¶ 4. She claims that, on January 26, 2015, defendants fired her because she complained to her supervisor about the firm's “excessive and unjustified billings to publicly traded companies, ” and because she “cooperat[ed] with other professionals to bring to the attention of the FBI the mail and wire fraud being committed by Defendant in the course of its billing practices.” Id. at ¶ 5. She helped “non-law-enforcement professionals” in their investigation of the firm's billing practices during her employment there. Id. at ¶ 8. On November 17, 2015, several months after she had been fired, the FBI executed a search warrant “to determine whether and the extent to which the Defendant had violated the mail and wire fraud statutes by billing publicly traded companies for hours that were not actually worked.” Id. at ¶ 7. Plaintiff also claims that some of the defendants have threatened her, along with other whistleblowers, by telling third parties of a plan to “mount a campaign to destroy them.” Id. at ¶ 9.

         Plaintiff's claims arise from several federal statutes and state tort law. In particular, she sued under 15 U.S.C. § 78u-6(h)(1)(A)i-iii, which protects whistleblowers from being fired for giving lawful assistance to the Securities and Exchange Commission;[1] under 18 U.S.C. § 1513(e), which prohibits any harmful retaliation against persons for “providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense”;[2] and under 18 U.S.C. § 1514A(a), which prohibits public companies or their contractors and agents from retaliating against an employee who provides information or assistance to an investigation when the employee reasonably believes there has been a violation of any of several enumerated laws, including the Wire Fraud statute.[3] She also sues for a violation of the common-law prohibition on retaliatory discharge, citing Harless v. First Nat'l Bank in Fairmont, 169 W.Va. 673, 289 S.E.2d 692 (1982).[4]

         Defendants have moved to stay the case pending conclusion of the related criminal proceedings. In their motion, defendants acknowledge that the FBI seized “electronic records” and “numerous documents” from their office on November 17, 2015, but they note that “the FBI and U.S. Attorney's Office have declined to provide Defendants with information regarding the status or scope of the investigation.” Def. Mot. to Stay at 2. They go on to state that, “[t]o the best of Defendants' knowledge, the investigation involves allegations of mail and wire fraud in connection with their billing practices.” Id. Further, they allege that if a stay is not granted, the individual defendants “would be faced with the impossible choice of either asserting their Fifth Amendment privilege against incrimination in this matter[, ]” from which an adverse inference may be drawn in this civil action, “or waiving that privilege and risking criminal repercussions.” Def. Memo. in Supp. of Mot. to Stay at 2. Plaintiff opposes the stay, arguing that it would unduly prejudice her and, if her lawsuit is successful, an indefinite stay would make it more difficult to recover from defendants in the future. Pl. Resp. to Mot. to Stay at 7-8.

         On August 19, 2016, the court held a telephone conference with the parties and requested that they engage in discussions to determine whether they could agree on any discovery matters. The parties filed a joint report with the court on September 7, 2016. See Joint Report of the Parties (ECF Doc. No. 14). The court held a second telephone conference with the parties on September 9, 2016, during which they confirmed that they were unable to come to an agreement as to any discovery matters.

         II. Legal Standard

         “‘[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.'” Maryland v. Universal Elections, Inc., 729 F.3d 370, 379 (4th Cir. 2013) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)). “The determination by a district judge in granting or denying a motion to stay proceedings calls for an exercise of judgment to balance the various factors relevant to the expeditious and comprehensive disposition of the causes of action on the court's docket.” United States v. Georgia Pac. Corp., 562 F.2d 294, 296 (4th Cir. 1977) (citing Landis, 299 U.S. at 254).

         “‘Because of the frequency with which civil and regulatory laws overlap with criminal laws, American jurisprudence contemplates the possibility of simultaneous or virtually simultaneous parallel proceedings and the Constitution does not mandate the stay of civil proceedings in the face of criminal proceedings.'” Universal Elections, 729 F.3d at 370 (quoting Ashworth v. Albers Med., Inc., 229 F.R.D. 527, 530 (S.D.W.V. 2005)). “Stays generally are not granted before an indictment has issued.” Id. But “[i]t is still possible to obtain a stay, even though an indictment or information has not yet been returned, if the Government is conducting an active parallel criminal investigation.” Walsh Sec. v. Cristo Prop. Mgmt., 7 F.Supp.2d 523, 527 (D.N.J. 1998) (citation and internal quotation marks omitted). Several district courts have indeed granted stays even though no indictment has yet issued, where the civil defendant is a target of the criminal investigation or is about to be indicted. See Walsh, 7 F.Supp.2d 523 (granting a stay when search warrants and subpoenas had been issued to several of the civil defendants, the civil defendants were informed that they were targets of the investigation, and the government had indicated to the court that the investigation was continuing); SEC v. Healthsouth Corp., 261 F.Supp.2d 1298 (N.D. Ala. 2003) (granting a stay when others involved in the criminal scheme had pled guilty, the FBI had raided a defendant's office, and “everyone assume[d]” the civil defendants would be indicted “in the near future”); Brumfield v. Shelton, 727 F.Supp. 282 (E.D. La. 1989) (granting a stay when the civil defendant was a target of a grand jury investigation).

         Federal courts have applied a variety of tests to decide whether to stay civil actions pending criminal proceedings. The Fourth Circuit has not explicitly endorsed any particular test.

         In Ashworth, this court relied on the Ninth Circuit's test articulated in Keating v. OTS that considered five factors in determining whether to grant a stay:

(1) the interest of the plaintiffs in proceeding expeditiously with [the] litigation or any particular aspect of it, and the potential prejudice to plaintiffs of a delay, (2) the burden which any particular aspect of the proceedings may impose on defendants; (3) the convenience of the court in the management of its cases, and the efficient use of judicial resources; (4) the interests of persons not parties to the civil litigation; and (5) the interest of the public in the pending civil and criminal litigation.

Ashworth, 229 F.R.D. at 530 (citing Keating, 45 F.3d 322, 325 (9th Cir. 1995)). The court in Ashworth considered, in addition to these five factors, the “relatedness” of the criminal and civil proceedings, asking whether they “involve substantially similar issues.” 229 F.R.D. at 531. These six factors will guide the analysis in this matter.

         III. Discussion

         A. Application of the Relevant Factors

         1. Relatedness

          “As a preliminary matter, the requirement of the existence of a nexus between the parallel proceedings sufficient to show that such proceedings are related and involve substantially similar issues is the threshold factor for a stay.” Ashworth, 229 F.R.D. at 531. Without this nexus, “the myriad of tangible concerns in favor of a stay, including the protection of a defendant's Fifth Amendment interest and the deleterious effect of civil discovery on the prosecution or defense, dissipates.” Id.

         Defendants argue that the civil and criminal proceedings are sufficiently related and involve substantially similar issues, warranting a stay. Def. Memo. in Supp. of Mot. to Stay at 4-5. According to them, “[w]hether fraudulent practices took place (or whether Plaintiff had a good-faith basis to believe they did) and whether Plaintiff did, in fact report those practices to the FBI go to the heart of her retaliatory discharge claim.” Id. at 5. Further, they state that plaintiff's claim that defendants' conduct amounts to threatening a witness in an ongoing federal criminal investigation “clearly relates directly to the government's criminal investigation.” Id.

         Plaintiff's claims, as noted, are pursuant to 15 U.S.C. § 78u-6(h)(1)(A)i-iii, 18 U.S.C. § 1513(e), and 18 U.S.C. § 1514A(a) for “retaliatory discharge as an employee of an agent and/or contractor of [a] publicly traded corporation.” Pl. Compl. at 1. In addition, she alleges violation of the common-law prohibition on retaliatory discharge. Id. at 1-3. Plaintiff also alleges that defendants threatened her, which she states amounted to the threatening of a federal witness, in violation of 18 U.S.C. § 1514(e) and 18 U.S.C. § 1503.[5] Id. at 3.

         As to the potential criminal charges against defendants, plaintiff alleges in her complaint that she participated in helping “non-law-enforcement professionals” investigate defendants' excessive and unjustified billing practices, which constituted mail or wire fraud. Id. at 2.

         Some of plaintiff's causes of action may be unrelated, or minimally related, to whether defendants committed mail or wire fraud. The claim under § 1514A(a), however, turns on whether the employee has acted “to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of” various statutes, including the Wire Fraud Act. 18 U.S.C. § 1514A (emphasis added). It is difficult to imagine how the litigants will develop the case as to whether the employee “reasonably believed” that the defendants were engaged in criminal activity without confronting the core question of whether they were engaged in the criminal activity proscribed by 1514A(a). The claim under § 1513(e) similarly turns on whether defendants took “any action harmful to [plaintiff]” for plaintiff's “providing . . . [of] any truthful information relating to the commission or possible commission of any Federal offense.” 18 U.S.C. § 1513(e) (emphasis added). Proving a violation thereof will require showing that the information plaintiff provided to the government was truthful. Much of the same testimony regarding their actions, and the same documentary evidence, will be required in dealing with those same issues. The two proceedings are plainly related.[6]

         2. Prejudice to ...

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