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denying motion for more definite statement because "the appropriate method to determine more specific information about the allegations is through the discovery process"
Summary of this case from Norwood v. United Parcel Serv.Opinion
No. 00-2111-KHV
July 6, 2000.
David W. Hauber, Boddington Brown, Chtd., Kansas City, KS, for plaintiff.
Jeffrey J. Simon, Blackwell Sanders Peper Martin; Leonard R. Frischer and Bradley S. Russell, Frischer Russell, Chtd., Overland Park, KS; Christopher Paul Gramling, Kansas City, MO, for defendants.
MEMORANDUM AND ORDER
In a June 28, 2000 scheduling telephone conference with the parties, the Court ruled upon the following pending motions:
(1) Defendants' Motion For a Stay of Discovery (doc. 21);
(2) Defendants' Motion to Quash Depositions (doc. 28);
(3) Defendants' Motion to Quash Subpoena (doc. 41); and
(4) Defendants' Motion for a More Definite Statement (doc. 44).
For the reasons stated below, each of the pending motions was denied.
Factual Background
Plaintiff Hix Corporation ("Plaintiff") brings this action against National Screen Printing Equipment, Inc. ("National"), Ben Swigart ("Swigart") and John Doe (collectively "Defendants") alleging Defendants unlawfully procured and used Plaintiff's trade secrets in the manufacture of a mug press machine. On March 10, 2000, the district court judge granted Plaintiff's request for a temporary restraining order barring National from producing the mug press at issue.
On April 21, 2000, Defendants requested the Court stay all discovery in this matter due to an alleged parallel criminal investigation involving Defendants' acquisition and use of Plaintiff's manufacturing plans for the mug press machine. Based on the criminal investigation, Defendants contend a stay is necessary to "avoid undermining [their] privilege against self-incrimination" and to prevent Plaintiff from aiding in the FBI's criminal investigation.
Plaintiffs oppose the motion for a stay of discovery, arguing, among other things, that (1) defendant National has no Fifth Amendment privilege because of its corporate status; and (2) defendant Swigart already waived his Fifth Amendment privilege during the Temporary Restraining Order hearing.
Discussion I. Motion for More Definite Statement
Pursuant to Fed.R.Civ.P. 12(e), Defendants move for a more definite statement from Plaintiff concerning the copyright infringement allegations in Count I of Plaintiff's Complaint. Defendants argue that the allegations as written are "so vague and lacking in specificity that defendants cannot reasonably be expected or required to frame a responsive pleading." Defendants' Motion at p. 1 (doc. 44). As a preliminary matter, Rule 12(e) motions are not favored by the courts and are properly granted only when a party is unable to determine the issues to which a response is required. Classic Communications, Inc. v. Rural Telephone Service Co., Inc., 956 F. Supp. 910, 923 (D.Kan. 1997). Upon review of the pleadings here, the Court finds the Complaint provides a satisfactory description of the issues to which a response is required, and the appropriate method to determine more specific information about the allegations is through the discovery process. Accordingly, Defendants' motion will be denied.
II. Motion to Stay Discovery
"Though not compelled to do so by the Constitution, a district court may stay civil proceedings pending the outcome of parallel criminal proceedings." Wilson v. Olathe Bank, 97-2458-KHV, 1998 WL 184470 at *7 (D.Kan. Mar. 2, 1998) (citing Securities Exchange Comm'n v. Dresser Indus., Inc., 628 F.2d 1368, 1375 (D.C. Cir.), cert. denied, 449 U.S. 993 (1980); United States v. Kordel, 397 U.S. 1 (1970)); see also Quinn v. City of Kansas City, 98-2236-KHV, 1998 WL 919129 (D.Kan. Nov. 6, 1998). "The Court should take into account the particular circumstances and competing interests involved in the case . . . including the extent to which [a defendant's] Fifth Amendment rights are implicated." Id. (citing Dresser Indus., 628 F.2d at 1375-76; Federal Sav. and Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902-903 (9th Cir. 1989)). The Court should also consider other factors:
(1) the interest of plaintiffs in proceeding expeditiously with this 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 [a defendant]; (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.Id. (citing Molinaro, 889 F.2d at 902-03; Golden Quality Ice Cream Co. v. Deerfield Specialty Papers, Inc., 87 F.R.D. 53, 56 (E.D.Pa. 1980); Kordel, 397 U.S. at 11-12; Dresser Indus., 628 F.2d at 1374-76).
Defendants currently are not the subject of a criminal proceeding related to the events in this civil case, nor have they been indicted by a grand jury. Defendants have not been advised that an indictment is pending. Defendants merely have discovered through a newspaper article that the FBI currently is investigating the issues underlying this suit. The fact that there are no ongoing criminal proceedings weighs in favor of not granting a stay. See Dresser, 628 F.2d at 1376 (finding where there has been no indictment, the case for staying discovery is weaker).
Even if Defendants were presently the subject of criminal proceedings, the Court would reach the same conclusion. The fact that a person has been indicted "cannot give him a blank check to block all civil litigation on the same or related underlying subject matter." Wilson v. Olathe Bank, 1998 WL 184470 at *8 (citing Gordon v. Federal Deposit Ins. Corp., 427 F.2d 578, 580 (D.C. Cir. 1970)). Indeed, "[t]he overall interest of the courts that justice be done may very well require that the compensation and remedy due a civil plaintiff should not be delayed (and possibly denied). The court, in its sound discretion, must assess and balance the nature and substantiality of the injustices claimed on either side." Id.
With regard to protection of Defendants' Fifth Amendment rights, the Court notes defendant National has no Fifth Amendment privilege to protect, because it is a corporation. See Hale v. Henkel 201 U.S. 43 (1906) (holding a corporation has no Fifth Amendment privilege), overruled in part on other grounds by Murphy v. Waterfront Comm'n of New York Harbor, 378 U.S. 52 (1964). Therefore, even if defendant Swigart is granted a stay of discovery in this matter, Plaintiff could obtain discovery from other sources with regard to the facts underlying this matter and relevant to a prospective criminal proceeding. See Wilson v. Olathe Bank, 1998 WL 184470 at *8. Notably, defendant Swigart did not waive his Fifth Amendment privilege when he testified in the Temporary Restraining Order hearing. See In re Beery, 680 F.2d 705, 720 n. 17 (10th Cir. 1982) (holding waiver of the Fifth Amendment privilege is limited to the particular proceeding where the testimony was given). Thus, Swigart still may make the decision to invoke his privilege during a subsequent proceeding if a stay is not imposed.
Swigart argues that if he chooses to assert his Fifth Amendment privilege, he may suffer from negative inferences. The Fifth Amendment allows adverse inferences against parties in a civil action who invoke their Fifth Amendment right. See Wilson, 1998 WL 184470 at *8 (citing Baxter v. Palmigiano, 425 U.S. 308 (1976)). Defendants do have the right to invoke the privilege at trial, but if they do, they must accept the adverse inference. Id. (citing Mid-America's Process Serv. v. Ellison 767 F.2d 684, 686 (10th Cir. 1985)). A plaintiff, however, may also suffer disadvantage by defendant's invocation of Fifth Amendment privilege in cases where a defendant asserts his privilege in discovery, but just before trial decides to waive the privilege. See Securities and Exchange Comm'n v. Graystone Nash, Inc., 25 F.3d 187, 191 (3d Cir. 1994).
In support of a stay, Defendants claim permitting the suit to go forward imposes a burden upon them, because Plaintiff will act as an agent or "stalking horse" for the FBI in their investigation. Defendants, however, have failed to show the government is using Plaintiff's civil action to circumvent criminal discovery limitations. Absent such a showing, any speculation regarding this matter will not be considered a factor.
On the other hand, a stay in the proceedings risks prejudice to Plaintiff's interest in going forward expeditiously with discovery. Indeed, Plaintiffs have yet to identify the source and extent of the leak of their confidential trade secrets to National. As noted in Gordon v. Federal Deposit Ins. Corp., 427 F.2d at 580, the "overall interest of the courts that justice be done may very well require that the compensation and remedy due a civil plaintiff should not be delayed." A stay in discovery may impair Plaintiff's ability to determine the nature and extent of its damages and to pursue information about the breach of fiduciary duty by one of its employees.
Under the circumstances presented here, and upon balance of the competing interests implicated, the Court will deny Defendants' Motion to Stay Civil Discovery (doc. 21). For these same reasons, Defendants' Motion to Quash Depositions (doc. 28) and Defendants' Motion to Quash Subpoena (doc. 41) also will be denied.
Conclusion
Based on the discussion above, it is hereby ORDERED that
(1) Defendants Motion For a Stay of Discovery (doc. 21) is denied;;
(2) Defendants' Motion to Quash Depositions (doc. 28) is denied;
(3) Defendants' Motion to Quash Subpoena (doc. 41) is denied; and
(4) Defendants' Motion for a More Definite Statement (doc. 44) is denied.
IT IS SO ORDERED.
Dated in Kansas City, Kansas on this 6th day of ____.