Opinion
8850/2005.
Decided May 22, 2006.
Michael P. Mezzacappa, Esq., Kaufman Borgeest Ryan LLP, Valhalla, NY, for Defendant 234 East.
Lori A. Manning, Esq., Assistant Corporation Counsel, New York, New York, for Defendant City of New York.
Michael A. Ciaffa, Esq., Meyer, Suozzi, English Klein, P.C., Mineola, NY, for Jeanette Meyran, as Executrix of the Estate of Curtis W. Meyran, Deceased, and Jeanette Meyran, individually.
Vito A. Cannavo, Esq., Sullivan, Papain, Block, McGrath Cannavo P.C., NYC, For all plaintiffs other than Jeanette Meyran, as Executrix, and Jeanette Meyran, individually.
ISSUE PRESENTED
Should a stay of tort civil proceedings be granted to a defendant pending a resolution of a related criminal proceeding? The appellate decisions appear to be inconsistent in the application of the discretion statutorily allotted to the courts by CPLR 2201.
RELIEF SOUGHT
Defendant 234 East 178th Street LLC (hereafter "LLC"), a limited liability company, moved to stay this action, or in the alternative, to stay the deposition of defendant LLC in this action. The defendant, the City of New York, as well as the plaintiffs, oppose LLC's motion and claim, among other things, that a stay is not justified and that they will be prejudiced by any delay in the prosecution of the civil proceedings.
BACKGROUND AND CONTENTIONS OF THE PARTIES
This action arises out of a fatal fire which occurred on January 23, 2005, at premises located at 236 East 178th Street in Bronx County, currently owned by defendant LLC. Two firefighters died and four were injured in this tragic occurrence which was widely reported in the press as "Black Sunday." This tort action was brought by the four surviving firefighters and the estates of the two deceased firefighters, alleging causes of action for personal injury and wrongful death against defendants LLC and the City of New York. In a pending related criminal proceeding, defendant LLC and three individuals are charged with manslaughter and reckless endangerment.
Another firefighter was also killed in an unrelated incident that same day.
It is alleged by plaintiffs that an electrical fire was started because of an illegal alteration and subdivision of apartments and a resultant overloading of the electric circuit. In addition, it is alleged that the six firefighters were trapped and forced to jump from a fourth floor window because the illegal partitions prevented them from locating and reaching the fire escapes. Plaintiffs also assert that building code and other violations arising from the illegal alterations of the premises contributed to and/or directly caused the deaths and injuries.
Defendant LLC asserts that the legal cause of the injuries has not been established, and that numerous other conditions and circumstances may yet be demonstrated to have been contributing proximate causes of the plaintiffs' damages, including a lack of water pressure and the failure to provide the fire fighters with safety lines.
On March 29, 2006, Bronx District Attorney Robert T. Johnson announced that an indictment was unsealed charging the defendant LLC and three individuals with manslaughter and reckless endangerment in connection with the deaths and injuries caused to the firefighters responding to the fire. It should be noted that, although the defendant LLC was indicted, none of its officers and employees have been charged. See, http://bronxda.nyc.gov/frames.html. The three individuals who were charged are the former owner of the premises, and two tenants who purportedly constructed and/or maintained the alleged illegal alterations. One tenant is alleged to have connected an electrical cord to the overloaded outlet, and the other is alleged to have erected illegal partitions.
Prior to the issuance of the indictments, defendant LLC sought a stay in this action pursuant to CPLR 2201, on the ground that the three non-party individuals as well as the defendant LLC, and its President Ms. Berman-O'Hara (who has not been indicted) will be constrained, during the pendency of the criminal proceedings, to invoke a 5th Amendment right not to give testimony in this civil action. The defendant LLC argues, in essence, that due to the anticipated assertion of the 5th Amendment by the above persons during the pendency of the criminal proceedings, LLC will be unable to assert a competent defense in this civil action; and that the minor inconvenience and delay to the plaintiffs resulting from the granting of a stay does not warrant compelling defendant to proceed at its peril in this action. The defendant argues that, if a stay is not granted, these non-party witnesses will also be unavailable at the trial as well as at the discovery proceedings, as it is apparent that these witnesses will invoke their 5th Amendment privileges at all stages in this civil action while the criminal proceedings are pending. In addition, it is argued, that the resolution of the criminal case might narrow the issues to be resolved in this action and/or assist in resolving the issue of apportionment of damages at trial under CPLR Article 16 with respect to the non-party tortfeasors who have been indicted.
Defendant City of New York argues that the court is not required to stay these proceedings, and that a stay is not warranted. The City argues that other witnesses, who have not been indicated, such as building managers or the superintendent, may be deposed, and that these witnesses will not assert a 5th Amendment privilege since they are presumably not facing or threatened with criminal charges. Both the City and the plaintiff Meyran argue that the LLC has no standing to raise the 5th Amendment rights of its officers and employees. Plaintiff Meyran argues in addition that the mere fact that a deponent may assert a privilege in itself provides no basis for a stay, and that the depositions should proceed, and the witnesses be compelled to answer questions or assert a privilege if so advised. The remaining plaintiffs similarly argue that the granting of a stay is a discretionary matter, and that the LLC defendant has not met its burden of establishing an entitlement to a stay.
LAW RELATING TO STAYS OF CIVIL ACTIONS PENDING CRIMINAL PROCEEDINGS
CPLR 2201 provides that "except where otherwise prescribed by law, the court in which the action is pending may grant a stay of proceedings in a proper case, upon terms as may be just." [emphasis added]. Despite the broad discretion given the court by CPLR 2201, the cases dealing with stays in civil cases, pending the outcome of a related criminal proceeding, are not entirely uniform or consistent. In Zonghetti v. Jeromack ( 150 AD2d 561, 541 NYS2d 235 [2nd Dept. 1989]) (which was later cited with approval by the First Department in Britt, infra), it was stated that, "It is well settled that a court has broad discretion to grant a stay in order to avoid the risk of inconsistent adjudications, application of proof and potential waste of judicial resources. (Citation omitted)." In Britt infra, where a stay was found appropriate, it was further noted by the First Department that "a compelling factor is a situation where a defendant will invoke his or her constitutional right against self incrimination." Nevertheless, the Courts (including the First Department) have reached seemingly inconsistent determinations when exercising that discretion. (See and compare, Access Capital Inc. v. DeCicco, 302 AD2d 48, 752 NYS2d 658 [1st Dept. 2002] with Britt v. International Bus. Servs. Inc., 255 AD2d 143, 679 NYS2d 616 [1st Dept. 1998]).
The First Department, in Britt, supra, unanimously reversed an order of the trial court which denied the defendant's application for a stay of a civil tort proceeding brought against the defendants arising out of a bus accident. The civil action was brought in Bronx County against the corporate owner and operator of the bus, while a criminal proceeding was pending in New Jersey against the defendant driver. The Appellate Division held:
"The principle is well settled that a motion pursuant to CPLR 2201 seeking to stay a civil action pending resolution of a related criminal action is directed to the sound discretion of the trial court ( Matter of Kopf [Doublekay Contr. Corp. — United States], 169 AD2d 428). Factors to consider include avoiding the risk of inconsistent adjudications, application of proof and potential waste of judicial resources ( Zonghetti v. Jeromack, 150 AD2d 561, 563). A compelling factor is a situation where a defendant will invoke his or her constitutional right against self incrimination ( DeSiervi v. Liverzani, 136 AD2d 527, 528).
"Although discovery may have been completed, which would militate against granting a stay, nothing in the record indicates that Benoit has given any deposition testimony. In the event plaintiff calls on Benoit to testify in the civil action, a likely event, Benoit's counsel has indicated that he clearly intends to invoke his right against self incrimination given the severity of the pending criminal charges against him. Defendants have demonstrated that without Benoit's critical and necessary testimony in the civil action they would be unable to assert a competent defense. Under these circumstances, while there may be prejudice to plaintiff by the delay, his prejudice is not as severe as defendants would suffer without a stay. Plaintiff retains the right to move to vacate the stay in the event the criminal proceeding is not commenced within a reasonable period of time." (Emphasis added).
On the other hand, in the more recent case of Access Capital, Inc. v. DeCicco (supra), the First Department (with one dissent) held that no stay was warranted, and granted summary judgment against the defendant. In that civil action the plaintiff sought to recover funds advanced to defendant on a loan; the individual defendant has been charged with theft by deception in a related criminal action which was pending in New Jersey. In finding that no stay was warranted, the First Department minimized the importance of the 5th Amendment privilege and held:
"[T]he circumstances of this case are readily distinguishable from those of Britt ( 255 AD2d at 144), in which the testimony of the witness invoking the privilege was found to be "critical and necessary" and without which the defendants "would be unable to assert a competent defense." In the context of civil litigation, a discretionary stay is appropriate to avoid prejudice to another party that would result from the assertion of the privilege against self-incrimination by a witness; however, no such accommodation need be extended to the party who invokes the constitutional privilege. Here, it is appellant DeCicco who has invoked the privilege, and he is the only defendant affected by that decision ( Marine Midland 50 NY2d at 45).
There is no merit to appellant DeCicco's alternative argument that a stay should be granted on equitable grounds because his discovery efforts will be impeded until the criminal proceeding against him is resolved. It is settled that invoking the privilege against self-incrimination is generally an insufficient basis for precluding discovery in a civil matter ( see State of New York v. Carey Resources, 97 AD2d 508, 509, 467 NYS2d 876, see also Stuart v. Tomasino, 148 AD2d 370, 373, 539 NYS2d 327). As the Court of Appeals stated in Steinbrecher v. Wapnick ( 24 NY2d 354, 365, 300 NYS2d 555, 248 NE2d 419 rearg denied 24 NY2d 1038): "When a defendant fails to present evidence on his own behalf in a civil case . . . but chooses instead to assert his constitutional privilege, he places himself at an obvious disadvantage. Moreover . . . the courts need not permit a defendant to avoid this difficulty by staying the civil action until a pending criminal prosecution has been terminated. (See Langemyr v. Campbell, 21 NY2d 796, 235 NE2d 770, 288 NYS2d 629; cf. Oleshko v. New York State Liq. Auth., 21 NY2d 778, 288 NYS2d 474, 235 NE2d 447)." (Emphasis added).
It should be noted that in the Britt and Zonghetti cases, supra, the Fifth Amendment privilege against self incrimination was found to be a compelling factor, and it was a defendant that was granted a stay of the civil proceedings while related criminal proceedings were pending against each said defendant.
In the Second Department, it was also held that the constitutional right against self-incrimination was more important than the inconvenience and delay caused to the plaintiff by waiting for a resolution of the criminal proceeding (De Siervi v. Liverzani, 136 AD2d 527, 523 NYS2d 147, [2nd Dept 1988]). In DeSiervi, supra, the Second Department affirmed the granting of a stay of a civil action against the defendant (plaintiff's former attorney) pending the completion of the criminal prosecution in which the defendant attorney was charged with forgery. The Court held:
"We find that the Supreme Court did not abuse its discretion in staying the action pending the resolution of the criminal proceeding (CPLR 2201; Bank of New York v. Levy, 123 AD2d 589; Rye Psychiatric Hosp. Center v. Doniger, 110 AD2d 695, lv dismissed 65 NY2d 603, 784). Although the pendency of a criminal proceeding does not give rise to an absolute right under the United States or New York State Constitutions to a stay of a related civil proceeding (United States v. Kordel, 397 U.S. 1; Langemyr v. Campbell, 21 NY2d 796, remittitur amended 21 NY2d 969, rearg denied 21 NY2d 1040, cert denied 393 U.S. 934), it has also been held that "[there] is no question but that the court may exercise its discretion to stay proceedings in a civil action until a related criminal dispute is resolved. See, e.g., United States v. Kordel [supra]; DeVita v. Sills, 422 F.2d 1172" (Klitzman, Klitzman Gallagher v. Krut, 591 F Supp 258, 269-270, n. 7, affd 744 F2d 955).
"While the stay of the instant action pending the resolution of the criminal prosecution may cause inconvenience and delay to the plaintiff, the protection of Mr. Cavalier's constitutional right against self-incrimination is the more important consideration (see, Dienstag v. Bronsen, 49 FRD 327). Moreover, a prior determination of the criminal action could possibly have collateral estoppel effect in the subsequent civil case and could well serve to reduce the scope of discovery and to simplify the issues therein (see, Merchants Mut. Ins. Co. v. Arzillo, 98 AD2d 495; Texaco, Inc. v. Borda, 383 F2d 607; Clark v. United States, 481 F Supp 1086, appeal dismissed 624 F2d 3). In addition, plaintiff has not shown that he will be prejudiced by the stay, particularly in view of the fact that the Supreme Court has stated that it will review the status of the criminal case periodically." (Emphasis added).
However, in the Fourth Department the constitutional privilege against self incrimination was determined to be of lesser importance than the speedy prosecution of the related civil proceedings. (Walden Marine, Inc. v. Walden, 266 AD2d 933, 698 NYS2d 185 [4th Dept. 1999]). In Walden, the Fourth Department held and stated that:
"The Supreme Court did not abuse its discretion in refusing to stay defendants' depositions until completion of a related criminal case ( see, CPLR 2201). Defendants contend that they will be irreparably harmed if the depositions go forward because the jury in the present action will be permitted to draw a negative inference from their assertion of the privilege against self-incrimination ( see, Marine Midland Bank v. Russo Produce Co., 50 NY2d 31, 42-43). It is well settled, however, that the fact that a "witness may invoke the privilege against self incrimination is not a basis for precluding civil discovery" ( State of New York v. Carey Resources, 97 AD2d 508, 509; see, Stuart v. Tomasino, 148 AD2d 370, 373; see also, Steinbrecher v. Wapnick, 24 NY2d 354, 365, rearg denied 24 NY2d 1038; Staten Island-Arlington v. Wilpon, 154 AD2d 589).
"Defendants' reliance upon Britt v. International Bus Servs. ( 255 AD2d 143) is misplaced. Britt involved an essential nonparty witness who intended to invoke the privilege and had not yet been deposed. The defendants demonstrated that, without the testimony of that witness, they would be unable to assert a competent defense. Finally, we reject defendants' contention that the court erred in determining that plaintiffs had priority in conducting examinations before trial ( see, CPLR 3106 [a])." [emphasis added]
It should be noted however, that in Walden, supra the Fourth Department mistakenly distinguished the Britt case since it mis-characterized defendant Britt as an "essential non-party witness", when in fact Britt was a defendant in the civil proceeding. It was this witness who intended to invoke his 5th Amendment privilege in Britt; and it was this circumstance to which the First Department referred when it said that "a compelling factor is a situation where a defendant will invoke his or her constitutional right against self incrimination."
Despite the confusion created by the above inconsistent appellate decisions, trial courts have nevertheless rather consistently found the privilege against self-incrimination to be a compelling factor and therefore found it appropriate to stay related civil cases during the pendency of criminal prosecutions. (See, e.g., Garden City Irrigation, Inc. v. Salamanca, 7 Misc 3d 1014 A, 801 NYS2d 234 [Supreme Court, Nassau County, 2005 Austin, J.]; Budget Mortg. Bankers, LTD v. Maza, 5 Misc 3d 1031 A, 799 NYS2d 159 [Supreme Court, Nassau County 2004, Austin, J.]; See also, J.P Morgan Chase Bank v. Pelosi, N.Y.L.J., Dec. 26, 2003, at 19, col. 3 [Supreme Court, Suffolk County, Jones, J.).
Thus, in Garden City Irrigation ( supra), in an action to enjoin the defendant (a former employee) from transferring property, the civil action was stayed upon application of the defendant employee in the civil proceeding, pending a criminal prosecution against said employee for grand larceny. The court concluded that the stay was justified because "the resolution of the criminal action may result in this case either not requiring discovery or a trial, or significantly simplify and streamline discovery and trial".
In Budget Mortgage Bankers ( supra), in an action against an attorney for misappropriating funds from mortgage closings, the civil action was stayed, upon application of the plaintiff in the civil proceeding, pending disposition of grand larceny charges against the attorney, based on the possibility of inconsistent verdicts, and/or the conservation of judicial resources, as a conviction might obviate the need for a trial as to liability in the civil case.
DISCUSSION STAYS — ASSERTION OF THE 5TH AMENDMENT
The 5th Amendment — By Officers or Employees of a Party
It is, of course, axiomatic that the LLC has no 5th Amendment privilege, and has no standing to assert any privilege on the part of its present or former officers or employees. In re Nassau County Grand Jury [Doe Law Firm], 4 NY3d 665, 797 NYS2d 790; EDP Medical Computer Sys. v. Sears, Roebuck Co, 193 AD2d 645, 597 NYS2d 461 [2nd Dept. 1993]; Big Apple Concrete Corp. v. Abrams, 103 AD2d 609, 481 NYS2d 335 [1ST Dept. 1984] [corporations and partnerships may not invoke Fifth Amendment privilege]; see also, 4-12 Bender's New York Evidence § 12.02.) The Court notes that LLC (not its officers or employees) has been indicted. Although the holding in Access Capital, supra suggests that a party facing prejudice as a result of its own invocation of the privilege is not entitled to a stay, Access Capital is obviously distinguishable. It is only its non-party officers and employees that would assert the privilege. However, one of the ancillary issues now presented is whether the LLC defendant is subject to an adverse inference charge if (as expected) any of its officers and/or employees assert the privilege.
It has been held that an adverse inference may be drawn against a party in a civil action who invokes the Fifth Amendment, in the same manner that a missing witness charge may be employed against a party who fails to call a material witness ( see Marine Midland Bank v. John E. Russo Produce Co., 50 NY2d 31, 42, 405 NE2d 205, 427 NYS2d 961). Generally no adverse inference is permitted against a party when the invocation of the privilege is by a nonparty witness ( see Access Capital v. DeCicco, 302 AD2d 48, 52, 752 NYS2d 658; State of New York v. Markowitz, 273 AD2d 637, 646, 710 NYS2d 407 [3rd Dept. 2000], lv denied 95 NY2d 770, 745 NE2d 393, 722 NYS2d 473). However, there are exceptions to this general rule.
In State of New York v. Markowitz ( supra), the Third Department held that, under the circumstances presented in that case, sufficient evidence had not been presented to permit a negative inference against the corporate defendant based on the exercise of its employee of the privilege against self-incrimination at a deposition. However, the Court stated:
Initially, we recognize that the use of deposition testimony of an employee of a party is permitted for any purpose by any adversely interested party ( see, CPLR 3117 [a] [2]). However, while a party's invocation of the privilege against self-incrimination can be used to draw an adverse inference against that party in a civil case ( see, Marine Midland Bank v. Russo Produce Co., 50 NY2d 31, 42-43; Matter of Rauss v. Johnson, 243 AD2d 849; Matter of De Bonis v. Corbisiero, 155 AD2d 299, lv denied 75 NY2d 709, cert denied 496 US 938; Fritz v. Fritz, 88 AD2d 778; see also, Matter of Commissioner of Social Servs. v. Philip De G., 59 NY2d 137, 141; Matter of Steiner v. De Buono, 239 AD2d 708, lv denied 90 NY2d 808), "[n]o inference arises from the invocation of the privilege by a nonparty witness" (Prince, Richardson on Evidence § 5-710, at 303 [Farrell 11th ed]; cf., Califano v. City of New York, 212 AD2d 146, 153-155; Bikowicz v. Sterling Drug, 161 AD2d 982, 985-986)."Although corporate employees may in certain circumstances be considered parties along with their corporate employer, it does not follow that corporate employees are automatically parties ( see, Niesig v. Team I, 76 NY2d 363). Here, the record is insufficient to support the treatment of this employee as the alter ego of East 138th Street so as to permit treating him as a party inseparable from East 138th Street ( see, id., at 374) and, in any event, plaintiff did not make the requisite showing on the record effectively entitling it to a missing witness inference (see, Marine Midland Bank v. Russo Produce Co., supra, at 42-43; see also, People v. Gonzalez, 68 NY2d 424, 427-428). [Emphasis supplied.]
Although no inference was employed in Markowitz, the cases clearly leave open the possibility that under appropriate circumstances an adverse inference may be permitted against a party such as the LLC defendant herein, if the opposing party establishes (1) that the corporate employee is an alter ego of the corporation, and/or (2) that the employee constitutes a "missing witness." It was represented by LLC's counsel at oral argument in this case that the LLC's has only two officers/employees and thus under the reasoning set forth in Markowitz, it is more likely under the present circumstances that an adverse inference charge may be appropriate.
The 5th Amendment — By Unrelated Witnesses
The indicted tenants and former owner (although non-parties in the civil proceeding) may ultimately be found to be at fault in this action, in whole or part, and their degree of fault, if any, for the tragic events of January 23, 2005, may supplant or reduce the liability of defendant LLC. As it is anticipated that those non-party witnesses will also exercise their 5th Amendment rights and refuse to give testimony in this action, defendant LLC will be hampered in preparing a defense if forced to go to trial in this civil action at this time. Even if this court were to construe Access Capital, Inc. v. DeCicco ( supra), as meaning that an organization should not be granted a stay when its high ranking employees invoke the 5th Amendment, here, other witnesses not in the employ of the LLC, and ostensibly unrelated to it, will also likely refuse to give testimony. As indicated in Walden Marine ( supra), the exercise of discretion in granting a stay appears to be more liberal when the witnesses invoking the 5th Amendment privilege are unrelated non-party witnesses. Thus, the fact that discovery from these unrelated persons will be unavailable in this action provides an independent basis for, and augers in favor of, a limited stay. Moreover, as noted by my colleagues at the trial level, a disposition of the criminal proceeding may in fact conserve judicial resources by determining some of the issues to be resolved in this civil action.
Reasons Which Justify a Limited Stay
In short, the prejudice to the LLC defendant arising from the unavailability of testimony from unrelated witnesses, and the fact that the disposition of the criminal action may narrow the issues for trial, warrants the granting of a stay, albeit, not of the entire action, but only of the deposition of these individuals.
The court notes that present standards and goals policies require that a standard case be disposed of within twenty seven terms of court following the filing of the request for judicial intervention (i.e., twelve terms pre note and fifteen terms post note.) In the City Part in Bronx County, cases are routinely not reached for the trial until approximately three years from the filing of the Note of Issue. Given this substantial delay before trial, it is most probable that the criminal case will be concluded before the civil action is reached for trial. As this court is permitting the case to be placed on the trial calender and permitting all other discovery to continue, there is manifestly no prejudice to plaintiffs.
Lastly, the court notes that there exists a strong public policy that cases be disposed on the merits (see, Theater Row Phase II Associates v. H I, Inc, 2006, NY App. Div. Lexis 2375 [1st Dept. 2006]). Forcing the moving defendant (LLC) to litigate this action without full and fair disclosure, unhampered by the pendency of criminal charges, would be contrary to this policy under the circumstances.
CONCLUSION
Pending a further order of this court, the motion is granted to the extent of staying the deposition of those non-parties who have been indicted, as well as those officers and employees of the defendant LLC who intend to assert a 5th Amendment privilege. The deposition of other parties, and other discovery, as is not impacted by the pendency of the criminal proceeding, including discovery with respect to those causes of action asserted against defendant City of New York, shall continue. A note of issue may be filed upon completion of all discovery (other than that stayed herein) so as not to unfairly delay the ultimate trial of this action. The remainder of the depositions shall be conducted expeditiously after the conclusion of the criminal proceedings but in no event less than ninety days before the trial of the civil proceedings.
This constitutes the decision and order of the Court.