A Parallel Universe: Navigating Discovery in Concurrent Civil and Criminal Proceedings

As criminal law has expanded into almost every sector of the American economy, one byproduct is the rise of "parallel proceedings"—lawsuits that proceed concurrently in criminal and civil court based on largely the same facts.  Often times, the government is a party to both proceedings.  This is most common in False Claims Act cases or in securities enforcement proceedings.  But that is not always the case.  Civil litigation, especially cases involving claims of fraud and deceit, may also attract the government's attention (sometimes in response to a request by one of the parties).  In those cases, at least one of the parties will be confronted with the difficult task of navigating the two proceedings without doing violence to the client's interest in either. 

The discovery process typically presents the most treacherous waters for the lawyers tasked with handling parallel proceedings.  Criminal and civil practitioners who rarely venture over to the "other side" may forget or be unaware of the dramatic differences in a defendant's ability to request and obtain evidence when the defendant is the subject of an indictment instead of a civil complaint.  This article explores some of those differences in the discovery context—though litigants who find themselves involved in parallel proceedings will quickly find that differences in discovery are only one of the many factors that must be carefully considered as part of an overall litigation strategy. 

United States v. Rand and Federal Discovery

A helpful case study of the different tools available to litigants in the civil and criminal context is the Fourth Circuit's recent decision in United States v. Rand.  The government began investigating Michael T. Rand in 2007 in relation to alleged mortgage fraud that occurred while he was acting as chief accounting officer at Beazer Homes USA, Inc. ("Beazer").  In 2009, the SEC brought charges against Rand in a civil, regulatory proceeding on allegations that he had conducted a multi-year fraudulent accounting scheme.  Then, in 2010, the government charged Rand criminally with accounting fraud and with obstructing the investigation into Beazer's mortgage practices.  Before his trials, Rand sought leave of court to issue subpoenas pursuant to Federal Rule of Criminal Procedure 17(c) to obtain information regarding, among other things, Beazer's accounting systems.  Rand's subpoena for documents to Beazer asked for "accounting entries, budgets, budget entries, and financial reports for seven categories of reserve accounts over an eight-year period (the timeframe of the alleged conspiracy)."  Rand sought this information to bolster his defense of his accounting practices.  The district court denied Rand's requests.

On appeal, the Fourth Circuit examined Rule 17(c) and held that the rule is "not intended to provide a means of pretrial discovery."  Instead, the purpose of the rule is to expedite the trial by providing time and place before trial for the inspection of subpoenaed materials.  Although requests like those contained in Rand's proposed subpoena would be considered commonplace in civil litigation, the Fourth Circuit found this request to be too broad under the Federal Rules of Criminal Procedure, comparing it to a "fishing expedition." 

Criminal vs. Civil Discovery

The court's assessment highlights the differences in discovery in criminal and civil proceedings.  Rand's options for discovery were more limited than they would have been in a civil case, as illustrated by the following chart listing the discovery tools available to criminal and civil litigants:

The Civil Side – Methods for Obtaining Discovery under the Federal Rules of Civil Procedure

The Criminal Side – Methods for Obtaining Discovery under the Federal Rules of Criminal Procedure

Rule 26(b)(1) permits discovery of "any non-privileged matter relevant to any party's claim or defense."

Rule 16 permits discovery, upon the defendant's request, of the defendant's statements, criminal record, and certain documents and tangible evidence the government intends to use in its case-in-chief at trial.  Once the government has complied, Rule 16 triggers reciprocal obligations on the defendant's part.

Rule 27 – Depositions to perpetuate testimony before an action is filed

Rule 15 – Depositions are not allowed by right.  Upon a party's motion, the court may allow oral depositions "to preserve testimony for trial" if there are "exceptional circumstances" and it is "in the interest of justice."

Rule 30 – Depositions by oral examination

Rule 31 – Depositions by written questions

The Criminal Rules do not provide a mechanism to require the opposing party to prepare written responses to questions.  Accordingly, this method is not available to force the opposing party to take positions or forecast strategy.

Rule 33 – Interrogatories to parties

Rule 36 – Requests for admission

Rule 34 – Requests for production of documents

Rule 16 – The defendant has to make a request to trigger this Rule, which then creates reciprocal obligations to produce pre-existing documents that fit into broad categories articulated in the rule.

Brady v. Maryland, 373 U.S. 83 (1963), established that the government must turn over evidence that is exculpatory, or might exonerate the defendant.  This includes evidence that might prove the defendant's innocence or reduce his or her sentence, as well as evidence that impeaches or discredits the government's case.

Giglio v. United States, 405 U.S. 150 (1972), provides that the government must disclose information relating to any deals that witnesses have received in exchange for their cooperation.

The Jencks Act, 18 U.S.C. § 3500, requires the government to produce written statements and reports of its witnesses.  This law only requires the production of Jencks material after the witness has testified, although the government frequently delivers the materials pre-trial in the interest of efficiency.

Rule 45 – Subpoenas to third parties, which may command attendance at a deposition or command a party to produce or permit inspection of documents, electronically stored information, or tangible things.

Rule 17 – Does not provide the defendant with a broad-reaching subpoena power.  The court authorizes the issuance of a subpoena only if the terms meet the high standard articulated in United States v. Nixon: (1) that the documents are evidentiary and relevant; (2) that [the documents] are not otherwise procurable reasonably in advance of trial by exercise of due diligence; (3) that [the subpoenaing] party cannot properly prepare for trial without such production and inspection in advance of trial and that the failure to obtain such inspection may tend unreasonably to delay the trial; and (4) that the application is made in good faith and is not intended as a general “fishing expedition.”

By contrast, the government's ability to subpoena third parties through the power of the grand jury is almost unlimited.

 

As the chart makes clear, a civil litigant has far more ability to obtain information from the opposing side and third parties through a wide variety of tools.  While the 2015 amendments to the Federal Rules of Civil Procedure impose a "proportionality" requirement, the civil rules remain designed to help the parties fully flesh out their theories and collect the evidence necessary to support them.  It is also critical to remember that civil litigation can, and routinely is, resolved short of trial by jury based on the evidence collected through the discovery process and presented to the court in support of summary judgment.  There is no analogous vehicle for challenging a criminal indictment.

The exchange of information in criminal cases, by contrast, is designed to expedite the decision to seek a trial of the case, or negotiate a plea.  The government's obligation to produce information obtained during the course of the investigation is fairly broad, though the timing of the disclosures can often be a source of dispute since there are few firm deadlines established by the criminal rules.  However, nothing obligates the government to investigate potential defenses to a charge.  As such, the decision to accept a plea offer is made based not on a thorough review of all the available evidence, but on an evaluation of the evidence the government intends to present at trial.  To the extent an affirmative defense rests on facts not collected during the government's investigation, the burden falls to the defendant to use the limited criminal discovery tools in his arsenal to collect potentially exonerating evidence.

This is precisely where Mr. Rand found himself.  Rand's subpoena requests to Beazer would have been routine in a civil case.  But because Rand was a defendant in a criminal matter, his ability to obtain such information from Beazer was significantly, if not entirely, diminished.  Rand may have utilized civil discovery tools in the SEC's case against him, but that civil suit settled prior to the resolution of the criminal matter.  While Rand would have had the opportunity to serve discovery and subpoena third parties in the civil matter, whether or not he would have elected to do so raises a number of critical strategic and legal questions that all litigants in parallel proceedings must consider.

Discovery Issues in Parallel Proceedings

Access to Discovery

For a defendant in a criminal case, the expansive discovery power in a civil action might seem to be an attractive way to get additional information.  However, there are downsides to attempting to use a parallel civil case to obtain discovery that would also be useful for a criminal defense.  First, courts are wary of criminal defendants skirting the criminal rules by using civil discovery tools.  Despite the broad latitude civil litigants generally enjoy in conducting discovery, the court may be more willing to quash or limit requests geared towards the criminal defense, particularly if the government objects.

Additionally, the litigant must also consider that the same discovery tools used to obtain information may be used against him or her.  While the discovery rules (especially the civil rules) often allow for broad investigation of the opposing side's case, they simultaneously create broad exposure to respond to civil discovery requests, which can multiply costs and create self-incrimination issues.  These considerations become particularly complicated when the opposing civil litigant is a government entity.  Federal agencies involved in civil enforcement actions work closely with the Department of Justice, and information obtained in these civil actions can be used in a later criminal proceeding. 

Along the same lines, civil litigants also must exercise caution regarding the discoverability of materials provided to the government if the parties are in a cooperative posture.  Regulatory agencies provide strong incentives for companies and individuals to cooperate in civil and administrative regulations.  However, statements and documents provided in these civil proceedings are likely to be shared among agencies and may form the basis for a subsequent criminal prosecution.

Fifth Amendment Implications

The Fifth Amendment’s protection against self-incrimination applies to individuals in both civil and criminal proceedings.  However, the application of this right differs in each arena.  A criminal defendant’s decision to invoke his or her Fifth Amendment rights may not be used against him or her.  Because the government cannot force a defendant to make pre-trial statements or testify at trial, a fact-finder is unlikely to even hear a defendant invoke his or her right against self-incrimination.

By contrast, in a civil setting, a party has no ability to assert a blanket invocation of his or her Fifth Amendment rights.  Instead, these rights must be asserted on a question-by-question basis in response to written discovery requests, deposition questions, or even examination at trial.  Further, unlike in the criminal setting, the invocation can be used against the individual who makes it.  If an individual invokes his or her Fifth Amendment privilege against self-incrimination in a civil proceeding, the opposing party is entitled to an instruction to the fact-finder that it may draw an adverse inference from the invocation of Fifth Amendment rights—in other words, the fact-finder may infer that the invoking party is guilty of some wrongdoing. 

Moreover, business entities have no testimonial protection under the Fifth Amendment, and cannot assert the privilege on behalf of individual employees.  The Fifth Amendment does protect a witness from having to produce documents if doing so would be testimonial in nature by revealing the witness's mental processes.  However, the privilege does not apply to corporate records or documents kept pursuant to law.

Stays of Litigation

Due to these complications, parties frequently seek stays of civil litigation pending the resolution of the related criminal matter.  Criminal defendants might seek a stay to avoid making damaging admissions in the civil proceeding, or to avoid the application of the adverse inference.  The government might wish to stay the civil litigation to prevent the defendant from using civil discovery to prepare his or her defenses, particularly since the defendant’s Fifth Amendment rights prevent the government from using civil discovery similarly.  While requests for stays technically are not granted as a matter of course, courts generally will stay the civil litigation if one or more parties can demonstrate true risk of injury arising from the concurrent proceedings.

Conclusion

Successfully litigating through parallel proceedings is an endeavor fraught with peril.  Litigants involved in concurring civil and criminal matters, like the defendant in Rand, should seek the advice of counsel skilled in navigating parallel proceedings to avoid potential discovery pitfalls.

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© 2017 Ward and Smith, P.A. For further information regarding the issues described above, please contact Wes J. Camden, Caroline B. McLean or Caitlin M. Poe.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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