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EMC Property and Casualty Co. v. 205 Customz, LLC

United States District Court, N.D. Alabama, Southern Division

June 5, 2015

EMC PROPERTY AND CASUALTY COMPANY, Plaintiff,
v.
205 CUSTOMZ, LLC, et al., Defendants.

MEMORANDUM OPINION

R. DAVID PROCTOR, District Judge.

Before the court is Defendants' Motion to Stay (Doc. 9), filed April 20, 2015. The Motion has been fully briefed. (Docs. 11, 12). For the reasons outlined below, the Motion (Doc. 9) is due to be granted.

I. Background

This case involves whether Plaintiff EMC Property and Casualty Company's insurance policy covers a fire loss that occurred on August 23, 2014. (Doc. 11, at 1). On February 18, 2015, Plaintiff filed this civil action seeking a declaration disclaiming liabilities under its policy with Defendants 205 Customz, LLC and Ihab Barakat (the sole owner of 205 Customz). (Doc. 1, at ¶¶ 2-4). Plaintiff contends that Barakat intentionally set fire to an insured structure, and thereafter attempted to fraudulently collect on the underlying insurance policy. (Doc. 1, at ¶¶ 21-30). During Plaintiff's investigation, Barakat agreed to sit for an extensive examination under oath on November 13, 2014. ( See Doc. 11-1). Defendants have lodged counterclaims against Plaintiff for breach of contract and bad faith. (Doc. 5, at ¶¶ 3-14).

In March 2015, Barakat was arrested for his alleged involvement in the intentional setting of the fire at issue in this case. (Doc. 11, at ¶ 2). Barakat was charged with second degree arson and first degree insurance fraud in the criminal case currently pending before the District Court for Jefferson County, Alabama. ( See id. ). Defendants' current Motion (Doc. 9) seeks a stay in this civil case while the criminal arson and insurance charges are pending against Barakat.

II. Discussion

Barakat asserts his Fifth Amendment right against self-incrimination as a basis for staying this civil proceeding pending the outcome of his criminal proceedings. This court may exercise its discretion to stay this case in the interest of justice.

There is no question that this court has the power to stay a civil proceeding due to an active, parallel criminal investigation. See SEC v. Healthsouth Corp., 261 F.Supp.2d 1298, 1326 (N.D. Ala. 2003). As the Supreme Court has noted, "the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket...." Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). But, to prevail on a motion to stay, the movant must satisfy a high burden. Id. at 255; U.S. v. Lot 5, Fox Grove, Alachua County, Fla., 23 F.3d 359, 364 (11th Cir. 1994) (citations omitted). In determining whether to stay a civil case, the court may consider a variety of factors, including: the extent to which the issues in the criminal and civil cases overlap, the extent to which the defendant's Fifth Amendment rights are implicated, the interest of the plaintiff in proceeding expeditiously with the litigation and the potential prejudice to the plaintiffs from delay, the burden any particular aspect of the proceedings may impose on the defendant, the efficient use of judicial resources, the interests of persons not parties to the civil litigation, and the interest of the public in the pending civil and criminal litigation, and the relative statuses of the cases. See Healthsouth, 261 F.Supp.2d at 1326. "A balancing of these factors must be done on a case-by-case basis with the goal being to avoid prejudice." Id. (citing Volmar Distributors, Inc. v. N.Y. Post Co., 152 F.R.D. 36, 39 (S.D.N.Y. 1993)). In making its determination to stay this action, the court addresses each of the relevant factors, in turn.

A. Significant Overlap Is Unavoidable

Although no factor is necessarily dispositive, "[t]he degree to which the issues in the simultaneous civil and criminal proceedings overlap is the most important threshold issue in deciding whether the court should stay the civil proceeding." Id. (citing Walsh Securities, 7 F.Supp.2d at 527). In this case, the court concludes that there is plainly a significant overlap between the criminal case involving Barakat's alleged arson and insurance fraud, and the Plaintiff's similar allegations of arson ( i.e., exclusion for intentional acts) and insurance fraud in this civil case.[1] The substance of the civil and criminal claims revolve around a common nucleus of disputed fact: did Barakat intentionally set fire to the insured property and did he lie about it afterward. The unavoidable conclusion is that resolution of that dispute will go a long way in deciding the outcome of both cases, and pursuing this issue in force with two judicial bodies would be an inefficient use of both private and public resources.

B. Plaintiff's Fifth Amendment Rights Are Likely Waived

Plaintiff argues that Defendants are not entitled to the Fifth Amendment's privilege against self-incrimination in this case because Barakat has waived his privilege by sitting for an examination under oath. For the reasons outlined below, the court assumes without deciding that Barakat has waived the privilege against self-incrimination.[2]

The court recognizes that a testimonial waiver of Fifth Amendment rights is "not lightly to be inferred." Smith v. United States, 337 U.S. 137, 150 (1949); see also Emspak v. United States, 349 U.S. 190, 197 (1955). The Fifth Amendment privilege "can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory." Kastigar v. United States, 406 U.S. 441, 444-45 (1972). It protects the witness against compulsion to make any disclosure which he "reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used." Id. However, "[t]he amendment does not preclude a witness from testifying voluntarily in matters which may incriminate him.'" United States v. Mock, No. 2:12-cr-104-MHT, 2013 WL 1984370, at *1 (M.D. Ala. May 13, 2013) (emphasis added) (quoting United States v. Monia, 317 U.S. 424, 427 (1943)). In Mock, the district court held:

Once a person voluntarily testifies (whether in a civil trial, a deposition, or another proceeding ), any Fifth Amendment right he may have otherwise had with respect to the testimony he gave is waived. See United States v. White, 846 F.2d 678, 690 (11th Cir. 1998) ("A witness who testifies at any ...

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