The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
Order Granting in Part Defendant's Motion to Stay Civil Contempt Proceedings
This matter is presently before the Court on the motion filed by Defendant Alfred Louis Vassallo, Jr. ("Vassallo") to stay the civil contempt proceedings until the criminal charges against him are resolved. Upon consideration of the parties' arguments, for the reasons explained herein, the Court GRANTS IN PART Vassallo's motion.
By order filed October 26, 2010, the Court found there was clear and convincing evidence Vassallo violated the August 23, 2005 permanent injunction in this case by failing to pay disgorgement, civil penalties, and the Receiver's costs. The Court bifurcated the SEC's allegations that Vassallo had violated the permanent injunction by engaging in conduct in violation of federal securities laws, and referred that matter to the United States Attorney for prosecution of criminal contempt under Fed. R. Crim. P. 42 and 18 U.S.C. § 401. The government has not yet filed charges based on that referral. In addition, the government is conducting an investigation to determine whether to file independent criminal conspiracy charges against Vassallo, in either this District or the Central District of California, based upon conduct relating back to the Presto Telecommunica-tions fraud in 2004 and earlier.
"The Constitution does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings." Keating v. OTS, 45 F.3d 322, 324 (9th Cir. 1994). However, the court may exercise its discretion to stay a civil proceeding "when the interests of justice seem [to] require such action." SEC v. Dresser Indus., 628 F.2d 1368, 1375 (D.C. Cir. 1980).
The strongest case for deferring civil proceedings until after completion of criminal proceedings is where a party under indictment for a serious offense is required to defend a civil or administrative action involving the same matter. The non-criminal proceeding, if not deferred, might undermine the party's Fifth Amendment privilege against self-incrimination, expand rights of criminal discovery beyond the limits of Federal Rule of Criminal Procedure 16(b), expose the basis of the defense to the prosecution in advance of trial, or otherwise prejudice the case.
In determining whether to stay the civil proceedings in the face of a parallel criminal proceeding, the first consideration is "the extent to which the defendant's fifth amendment rights are implicated." Keating, 45 F.3d at 325 (citing FSLIC v. Molinaro, 889 F.2d 899, 902 (9th Cir. 1989)). The court should also consider the following factors:
(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 interests of the public in the pending civil and criminal litigation. Keating, 45 F.3d at 325.
Vassallo argues the Court should stay these civil contempt proceedings because he is unable to demonstrate his inability to pay the amounts set forth in the permanent injunction without waiving his Fifth Amendment rights. Vassallo is facing incarceration as the certain penalty for his civil contempt, and the only way he could purge himself of that contempt would be to waive his Fifth Amendment rights. ...