IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF FLORIDA
PENSACOLA DIVISION

WARD DEAN,	)
	)
Plaintiff,	)
	)
v.	)	No.3 :03 cv 00065 (LAC/MCR)
	)
UNITED STATES, et al.,	)
	)
Defendants.	)
	)

MEMORANDUM IN SUPPORT OF THE UNITED
STATES' MOTION TO STAY PROCEEDINGS
ISSUE PRESENTED

Concurrent to this civil action, the United States is conducting a criminal and grand jury investigation of plaintiff, and now plaintiff seeks information here through civil discovery relating to the ongoing criminal matters. But allowing plaintiff to take civil discovery would give him earlier access to information and evidence than he would otherwise be entitled to under Fed. R. Crim. P. 16. Also, from this information, plaintiff could construct defenses, tamper with potential evidence, intimidate potential witnesses and otherwise interfere with ongoing investigation and grand jury proceeding. As such, should this action be stayed pending the conclusion of the criminal investigation and proceedings so that plaintiff cannot use the liberal civil discovery rules to his advantage in the criminal proceedings?

INTRODUCTION

Ward Dean ("plaintiff' or "Dean") commenced this action on February 20,2003 by filing a complaint pursuant to 26 U.S.C. § 7431, in which plaintiff seeks to recover damages purportedly resulting from the alleged wrongful disclosures of his tax return information by an employee of the Internal Revenue Service ("Service"). In particular, the complaint alleges that Special Agent Tanya D. Burgess made disclosures of confidential tax return information in violation of26 U.S.C. § 6103 during the course of her criminal investigation of plaintiff. (Compl. Para. 15.) The United States filed an answer to the complaint on April 16, 2002.

On or about June 20, 2003, Dean served the United States with his first set of interrogatories, admissions and request for the production of documents as part of this civil litigation. (Burgess Decl. Para. 6., Ex. 1.) Again, on or about July 1,2003, Dean served the United States with a second set of interrogatories, admissions and request for the production of documents. (Burgess Decl. Para. 6., Ex. 2.) The requests seek information that is related to the ongoing criminal investigation that was instituted against Dean in October 2002 and grand jury proceeding. (Burgess Decl. Para. 2, 5.) Review of these requests compels the conclusion that Dean is attempting to learn in advance of any prosecution what information and evidence the Service has obtained against him. (Burgess Decl. Para. 7.) But regardless of Dean's intent, if the United States is required to respond to the discovery requests, information would be disclosed that would effect the ongoing criminal investigation by providing plaintiff earlier and greater access to evidence gathered during the investigation than he would otherwise be entitled to under Fed. R. Crim. P. 16. As a result, plaintiff could construct defenses, tamper with potential evidence, intimidate potential witnesses and otherwise interfere with the investigation, the grand jury proceeding and any future prosecution. (Burgess Decl. Para. 3, 8.)

ARGUMENT

It is well settled that the United States may seek, and the Court should stay a pending civil action in order to avoid interfering with a concurrent criminal prosecution or investigation. To this end, the courts have held that, when a pending civil action involves issues related to an ongoing criminal matter, "the government is ordinarily entitled to a stay of all discovery in the civil action until disposition of the criminal matter." United States v. One 1964 Cadillac Coupe DeVille, 41 F.R.D. 352,353 (S.D.N.Y. 1966); United States v. Kordel, 397 U.S. 1,12 n. 27 (1970).

The seminal case in support of this contention is Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962), cert. denied, 371 U.S. 955 (1963). In this case, the taxpayer brought a civil tax refund suit while he was under investigation by a Federal grand jury for alleged tax crimes, and the civil suit concerned the same matters as the criminal investigation. As part of the civil refund action, the taxpayer served discovery on the United States, seeking material related to the ongoing criminal investigation. The United States moved to stay the civil action on the grounds that to allow the taxpayer to take advantage of the liberal civil discovery rules would interfere with any forthcoming criminal prosecution. The trial court disagreed and refused to stay the civil case to await the outcome of the criminal matters.

In reversing the district court's refusal to stay the civil case pending the conclusion of the criminal case, the Fifth Circuit noted that a number of significant factors favored staying the civil case, while allowing the criminal prosecution to run its course:

There is a clear-cut distinction between private interests in civil litigation and the public interest in a criminal prosecution, between a civil trial and a criminal trial, and between the Federal Rules of Civil Procedure and the Federal Rules of Criminal Procedure.

The very fact that there is a clear distinction between civil and criminal actions requires a government policy determination of priority: which case should be tried first. Administrative policy gives priority to the public interest in law enforcement. This seems so necessary and wise that a trial judge should give substantial weight to it in balancing the policy against the right of a civil litigant to a reasonably prompt determination of his civil claims or liabilities. fu handling motions for a stay of a civil suit until the disposition of a criminal prosecution on related matters and in ruling on motions under the civil discovery procedures, a judge should be sensitive to the difference in the rules of disco,!ery in civil and criminal cases. While the Federal Rules of Civil Procedure have provided a well-stocked battery of discovery procedures, the rules governing criminal discovery are far more restrictive.

Separate policies and objectives support these different rules-

A litigant should not be allowed to make use of the liberal discovery procedures applicable to a civil suit as a dodge to avoid the restrictions on criminal discovery and thereby obtain documents he would not otherwise be entitled to for use in his criminal suit. Judicial discretion and procedural flexibility should be utilized to harmonize the conflicting rules and to prevent the rules and policies applicable to one suit from doing violence to those pertaining to the other. Id., 307 F .2d at 487 -88; Turley v. United States, 2002 WL 31097225, at*2 (W .D. Mo. Aug. 22, 2002).

Just like in Campbell, the Service is currently conducting an ongoing Federal criminal investigation of plaintiff and a grand jury proceeding, which have not yet proceeded to the point of indictment. (Burgess Decl.Para. 2, 5.) And it also is likely here that further proceedings in the civil case would allow Dean to obtain earlier and greater access to the evidence in the potential criminal case than he would otherwise be entitled to under Fed. R. Crim. P. 16. The case here stands on all fours with the facts in Campbell, and a stay should also be imposed.

The Court of Appeals further observed that the premature disclosure of the criminal file in the civil proceeding was especially undesirable: A taxpayer about to be indicted for fraud carries a heavy burden when he asks to inspect the Government's criminal files containing reports especially prepared with criminal prosecution in mind. Id. In fact, Special Agent Burgess states that requiring the United States to respond to plaintiffs discovery requests would require the disclosure of the criminal filings being maintained and developed on plaintiff. (Burgess Decl. Para. 4, 7.) Thus, the potential damaging consequences of disclosure in this case weighs heavily in favor of granting the stay and protecting the evidence relating to the United States' criminal investigation.

Since the Campbell decision, other circuit courts have signaled their agreement with this reasoning. See United States v. Tison, 780 F.2d 1569,1572-73 (llth Cir. 1986); United States v. Mellon Bank, N.A., 545 F.2d 869 (3d Cir. 1976). In each of these decisions, the courts were especially concerned with potential abuse created by a plaintiff’s ability to use the liberal civil discovery rules to obtain information and documents which he could not obtain in the parallel criminal proceeding. In Russell v. United States, the Tenth Circuit commented favorably upon the trial court's decision to give, ...great weight to the government's demonstrated concern for the interference with the criminal proceeding which would accompany investigation and use of the more liberal discovery procedures available in a civil case, as well as to the potential for violation of Russell' s fifth Amendment rights. Id., 76-1 U.S. Tax Cas (CCH) ~ 9377 (10th Cir. 1976).

Even the Supreme Court recognizes the validity of the government's concerns in this regard: The Government is on stronger ground in suggesting the criminal
prosecution against Degen might be compromised by his participation
in the forfeiture case. The problem stems from the differences between the discovery privileges available to Degen in each case. (citing Campbell v. Eastland.) A criminal defendant is entitled to rather limited discovery, with no general right to obtain the statements of the Government's witnesses before they have testified. Fed. R. Crim. P. 16(a)(2),26.2. ill a civil case, by contrast, a party is entitled as a general matter to discovery of any information sought if it appears 'reasonably calculated to lead to the discovery of admissible evidence.’ Degen v. United States, 517 U.S. 820,825-26 (1996).1/

In sum, the law is well-established that where discovery in a civil case would result in premature disclosure of information gathered by the United States in an ongoing criminal proceeding, the prudent course of action is to stay the civil case until the criminal matter has ended.

The Court of Appeals in Campbell made other important points with respect to the staying the civil matter, both ofwhich apply directly to this case. First, the court noted that it could not see how the taxpayer could be prejudiced by granting a stay until the criminal case had ended.

1/ Many other courts have applied this general rule and stayed civil actions indefinitely pending the completion of the related criminal proceeding or investigation. See, e.g., Integrated Generics, Inc. v. Bowen, 678 F.Supp. 1004 (E.D.N.Y. 1988); White v. Mapco Gas Products, Inc., 116 F.R.D. 498 (E.D. Ark. 1987); LaRouche Campaign v. Federal Bureau of Investigation, 106 F.R.D. 500 (D. Mass. 1985); United States v. Steffes, 35 F.R.D. 24 (D. Mont. 1964); United States v. Maine Lobstermen 's Association, 22 F .R.D. 199; United States v. Linen Supply Institute of Greater New York, 18 F.R.D. 452 (S.D.N.Y. 1955); United States v. Bridges, 86 F. Supp. 931 (N.D. Cal. 1949); United States v. A.B. Dick Co., 7 F.R.D. 442; Penn v. Automobile Insurance Co., 27 F. Supp. 336 (D. Ore. 1939). Id., 307 F.2d at 489. Indeed, the Court implied that such a stay would aid the taxpayer, because any discovery sought in the civil case after the conclusion of the criminal case would "be unaffected by the complicating factor of a parallel criminal proceeding." Id., 307 F .2d at 492. Other courts have also held that the subjects of the ongoing criminal case could not be prejudiced by the stay. See United States v. MaineLobstermen'sAsso'c., 22 F.R.D. 199 (D. Me. 1958); United States v. A.B. Dick Co., 7 F.R.D. 442 (N.D. Ohio 1947).

Second, the good faith of the taxpayer in bringing the civil suit was wholly irrelevant as to deciding whether a stay is proper:
[T]he trial judge held that the suit for refund was a bona fide suit, and as such, it was completely independent of the criminal case. If a taxpayer files suit in bad faith, it is an abuse of process; but his good faith on a suit for refund does not sanctify the motion for discovery. We take the view that whether or not the suit, as distinguished from the motion, was bona fide, the effect of granting the motion was to give pre-trial discovery of documents denied the taxpayer in the criminal case. The order nullified the effect of [ 18 U.S.C.] section 3500. It was an open invitation to taxpayers under criminal investigation to subvert the civil rules into a device for obtaining pre-trial discovery against the Government in criminal proceedings. Id., 307 F.2d at 488; Turley, 2002 WL 31097225, at*3.

As noted above, a request to stay a civil proceeding involves balancing the individual's right to prepare his case promptly against the public interest in withholding disclosure of information developed and to be used in the criminal investigation or proceeding. The simultaneous pendency of related civil and criminal matter poses inherent conflicts, which generally require trial courts to take special precautions to protect the criminal proceeding.

The same issues are present here and support an order by this Court staying this matter until the completion of the criminal matters involving the plaintiff. The plaintiff filed this lawsuit to challenge the conduct of the Service's law enforcement officers during the course of an ongoing criminal investigation. Plaintiff already demonstrated his intention to use discovery to require the United States to disclose information and documents gathered during the course of that criminal investigation. And by obtaining this infOftt1ation, plaintiff could construct defenses, tamper with potential evidence, intimidate potential witnesses and otherwise interfere with both the investigation and any future prosecution. {Burgess Decl. ~8.) Also, Special Agent Burgess learned that plaintiff, if fact, has contacted and attempted to discourage third-parties from cooperating with the investigation. {Burgess Decl. ~3.) In a~dition, to defend against plaintiffs action, the United States will have to disclose the names of actual and potential witnesses, the identities of the individuals contacted by Special Agent Burgess, the evidence those individuals provided and Special Agent's analysis of that evidence. {Burgess Decl. ~~4, 7, 8.) In balancing the detriment to the United States against the benefit to plaintiff, the Court should protect the United States from having to compromise its criminal investigation to defend a civil lawsuit under these circumstances.

An additional consideration present here weighs heavily in favor of staying this civil case. While plaintiff seeks discovery from the United States and other third-parties, it is likely that, if and when the United States seeks discovery from plaintiff, the pendency of the criminal investigation may prompt the assertion of his Fifth Amendment privilege against self incrimination. This Court should simply not afford the plaintiff the opportunity to use civil discovery as a sword against the criminal investigation and, at the same time, wield the Fifth Amendment as a shield to ward off discovery in this civil case.

And plaintiff would also benefit from staying this matter. If plaintiff should raise a Fifth Amendment privilege in this civil lawsuit, the finder of fact is permitted to draw negative inferences against him and is unable to weigh all the evidence. Campbell, 307 F .2d at 492; Turley, 2002 WL 31097225, at*3. Only after the criminal proceedings are concluded can the unrestricted, full disclosure of the facts occur, which benefits to both plaintiff and the Court by allowing for a determination of the issues based upon all the available evidence. Finally, no prejudice befalls plaintiff if the stay is granted because this civil action at the conclusion of the criminal proceedings may be resumed. In short, plaintiff will not suffer continued or greater harm or damage as a result of a stay.

CONCLUSION

The Court should grant the United States' motion and stay this case pending conclusion of all criminal matters stemming from the Service's ongoing investigation. Indeed, plaintiffs discovery requests seek information received and developed during the that ongoing criminal investigation, and the disclosure of this information would seriously impair the criminal investigation or future proceedings. As such, the harm to the United States and the public interest far outweighs any benefit to plaintiff by allowing this matter to proceed.

DATED: July 25,2003 Respectfully submitted,

GREGORY R. MILLER
United States Attorney
LINDSEY W. COOPER, JR.
(TN Bar No.0207 5, DC Bar 73895)
Trial Attorney, Tax Division
U.S. Department of Justice
P .0. Box 227, Ben Franklin Station
Washington, DC 20044
Telephone: (202) 307-6528
Facsimile: (202) 514-6866
Attorney for the United States