Alan Chaffee v. Keller Rohrback, L.l.p.

lN THE COURT OF 'APPEALS OF THE STATE OF WASH|NGTON
ALAN CHAFFEE, an individual; JEANNE
Del\/lUND, an individual; YUP|NG CHEN, an
individua|; lVlATTHEW WAHLMAN, an
individual; LAlRD DEV|CK, an individua|;
`` ASH HANLON, an individua|; NllKE
SCHEFFLER, an individual; Nl|CHA|L
W|LSON, an individual; NATHAN|EL
HEATHCOTE, an individual; PETER
HEATHCOTE, an individual; and TODD
HAGER, an individual,
Respondents,
V.
)
)
)
)
)
)
)
)
)
)
)
)
)
§
KELLER ROHRBACK LLP, a Washington )
limited liability partnership; ROBERT S. OVER,)
an individual; GLEN P. GARR|SON and DOES)
1-50; )
)
Appellants. )
’ ' )
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
PAC|F|C REALTY ADV|SORS, LLC, AS
GENERAL RECE|VER FOR FA|RPLAY
F|NANC|AL, |NC., AND FA|RPLAY
FUND|NG NW, LLC,
Respondents,
V.
KELLER ROHRBACK, LLP, ROBERT OVER,
and GLEN GARR|SON, ``
Appellants.
NO. 76491-8-|_
D|V|SlON ONE
0| HV l.* SHVUDZ
PUBL|SHED OP|N|ON
04
68
F|LED: August 7, 2017
M .~10;3.1 ll
dij l§§i'€!i
V
UIZ"U:}
``WEJ
§ lf)ll H-v
an‘S ' 8
144
No. 76491-8!|/2
DWYER, J. -- Pacific Realty Advisors, as general receiver for Fairplay
Financial, |nc. (co|lectively Fairplay), and 11 individual investors (|nvestors) sued
Keller Rohrback, LLP and its managing partners, G|en Garrison and Robert Over
(co|lectively Defendants), for legal malpractice related to the acquisition of a
bank. After the separate civil suits commenced, Defendants learned of an
ongoing federal criminal investigation into the acquisition Believing that they
were also subjects of the criminal investigation, Defendants moved for a
discovery stay in the civil proceeding pending the resolution of the criminal
investigation, The trial court denied the motion. After discovering new
information relating to the criminal investigation, Defendants moved for a six-
month discovery stay. The renewed motion was denied. We granted
discretionary review and now reverse the trial court’s order denying the motion to
stay.
l
This matter relates back to Fairplay’s desire to invest in Hometown
National Bank (the Bank)-a sma|l, one-branch bank in Longview, Washington.
ln 2012, Fairplay retained Keller Rohrback to address certain regulatory issues
relating to the investment. Keller Rohrback advised Fairplay that Fairplay itself
could not acquire the Bank. ln lieu of Fairplay acquiring the Bank directly, certain
investors decided to pursue the acquisition themselves-all of whom were
owners, officers, board members, or investors in Fairplay. Garrison advised
Fairplay that the investment could not come from Fairplay itself: “For example,
NO. 76491-8-|/3
Fairplay cannot loan the money to the investors. Or at |east, we would have to
disclose this and l think it would put an end to the application.”
Contrary to Garrison’s advice, Fairplay elected to loan money to the
investors and present the aggregated funds as individual investments. Bill
Widmer, who at that time served as president and chief executive officer of
Fairplay, instructed the investors to conceal this fact when filling out required
documentation Widmer later stated, f‘ln my mind, l believed the loan back to the
investors from Fairplay achieved the same result (i.e., that the money for all
practical purposes was that of the investors), but l never informed Mr. Garrison of
this, and | asked the investors not to disclose this arrangement on theregulatory
forms that they were filling out.” Six months after the |nvestor’s acquisition of the
Bank, Widmer instructed the investors to execute false promissory notes in favor
of Fairplay.
Prior to the acquisition, Garrison circulated an escrow agreement that
listed Fairplay as signatory. After some of the lnvestors signed the escrow
agreement, Garrison purportedly deleted Fairplay as a signatory and informed
Widmer-but not the lnvestors--of the change. Garrison submitted the new
escrow agreement to the Office of the Comptroller of the Currency (OCC)``for
approval. Following an investigation led by the OCC, Fairplay brought suit
against Defendants for legal malpractice and other claims.
in December 2015, counsel for Fairplay informed counsel for Defendants
that Fairplay was cooperating with the Federal Bureau of investigation (FB|) and
the United States Attorneys’ Office (USAO) in connection with an investigation
-3_
No. 76491-8-|/4
into the Bank acquisition in early 2016, counsel for the receiver also informed
counsel for Defendants of the criminal inquiry into the Bank acquisition
in July 2016, the USAO e-maiied Fairplay to request a copy of the
August 21, 2013 Bank board minutes. The subject matter of that board meeting
included attorney Garrison’s views on the bank acquisition A copy of the e-mail
was sent to Defendants. in December 2016, counsel for Fairplay sent an e-mail
to counsel for Defendants stating that an FB| agent planned to attend Garrison’s
deposition Following receipt of this e-mail, Defendants informed Fairplay that
the Garrison deposition would be rescheduled. Counsel for Defendants
subsequently spoke with FB| Specia| Agent Ben Williamson, who confirmed that
he planned on attending the Garrison deposition in an “offlcial capacity,” but
declined to further elaborate.
Defendants moved to stay the deposition “due to an ongoing parallel
criminal investigation.” The trial court performed the required Olympic Pipeline1
balancing test on the record, denied the motion, and ordered Garrison to appear
for the deposition.
Garrison and Over subsequently retained independent criminal counsel,
who then met with two Assistant United States Attorneys (AUSAs) to discuss the
criminal investigation into the Bank acquisition The AUSAs informed
Defendants’ criminal counsel that the government had yet to determine who, if
anyone, would face charges. The AUSAs informed counsel that Garrison and
Over “were not being viewed as mere witnesses” and that the government’s
1 King v. O|ymgic Pige|ine Co., 104 Wash. App. 338, 16 P.3d 45 (2000).
_ 4 _
No. 76491-8-|/5
investigation should be completed within six months. A subsequent e-mail to
Defendants’ criminal counsel from AUSA Susan Roe stated that the USAO
“could not commit" to whether Defendants were viewed “solely as witnesses.”
Criminal counsel for Defendants then discovered documents establishing
that Fairplay itself had contacted the USAO to refer Garrison and Overfor
criminal investigation relating to the Bank acquisition Criminal counsel for
Garrison advised him that he should assert his Fifth Amendment privilege and
decline to answer any questions related to the Bank acquisition during the civil
proceedings 7
Based on counsel’s newly discovered evidencel Defendants filed an
emergency motion to stay the trial court’s order compelling Garrison to appear for
deposition and filed a renewed request to stay discovery.'2 Defendants’renewed
motion asked for a limited discovery stay of six months. The trial court denied
the Defendants’ renewed motion:
The Court, applying the factors in King v. Olvmpic Pipeiine to
the present motion, finds that the status and potential duration of
any criminal investigation into Defendants’ actions remains
unknown, the similarity of any possible criminal investigation to the
pending civil cases is unknown, Plaintiff and the Fairplay
Receivership creditors will be significantly prejudiced by an
indefinite stay of the pending actions, Defendants can point to no
significant or unique prejudice in proceeding with the depositions,
granting the requested stay will result in waste of judicial resources,
the interest of nonparties favors denying the requested stay, and
the equities of the case favor denying the requested stay,
Defendants filed a motion for discretionary review in this court. Our
commissioner granted an emergency motion to temporarily stay Garrison’s
2 Styled as a “motion for reconsideration"
-5-
No. 76491-8-|/6
deposition and expedited the motion for discretionary review. After hearing
argument on the motion, the commissioner granted discretionary review and set
the matter for consideration by a panel on the merits. Having had the benefit of
the parties’ briefs and oral argument, we now remand this matter for the entry of
a discovery stay,
ii
As a preliminary matter, it is necessary to clarify the nature of Defendants’
renewed motion
Following the trial court’s denial of Defendants’ first motion to stay
discovery, Defendants filed an emergency motion “(1) to stay order compelling
depositions and (2) for reconsideration of order denying defendants’ motion to
stay depositions.” Although Defendants characterized this motion as a motion
“for reconsideration,” the motion did not cite to or discuss the requirements of
Civil Ruie (CR) 59.
CR 59 provides, in pertinent part,
(a) Grounds for New Trial or Reconsideration. On the
motion of the party aggrieved, a verdict may be vacated and a new
trial granted to all or any of the parties, and on all issues, or on
some of the issues when such issues are clearly and fairly
separable and distinct, or any other decision or order may be
vacated and reconsideration granted. Such motion may be granted
for any one of the following causes materially affecting the
substantial rights of such parties: l
(4) Newly discovered evidence, material for the party making the
application which the party could not with reasonable diligence have
discovered and produced at the trial; ``
(b) Time for Motion; Contents of Motion. A motion for a new trial
or for reconsideration shall be filed not later than 10 days after the entry of
the judgment, order, or other decision The motion shall be noted at the
_6-
No. 76491-8-|/7
time it is filed, to be heard or othenlvise considered within 30 days after the
entry of the judgment, order, or other decision, unless the court directs
otherwise;
On appeal, Fairplay and the investors assert that Defendants’ renewed
motion failed to comply with the requirements of CR 59. Specifically, Fairplay
and the investors assert that (1) Defendants’ renewed motion was untimely
because it was filed more than 10 days following the trial court’s order denying
the original motion, and (2) Defendants failed to properly establish that the
motion was supported by newly discovered evidence that could not have been
previously discovered with due diligence.
Fairplay’s and the lnvestors’ assertions are without merit, as their
contentions are at odds with our Supreme Court’s decision in l_n_[e_De_tM)_n_o_f
Williams, 147 Wash. 2d 476, 491-92, 55 P.3d 597 (2002). in that case, the State
sought an order to compel a CR 35 mental examination of the respondent The
trial court denied the motion The State later renewed the motion and the trial
court again denied the request. The State moved for discretionary reviewl which
was granted. Williams, 147 Wash. 2d at 481-82.
Williams argued that the State failed to timely appeal the denial of its
renewed motion pursuant to the time limitation in CR 59(b). The Supreme Court
rejected that argument
CR 59(b) explicitly applies to a motion for reconsideration filed after
the entry ofjudgment. in the matter before us, the State filed a
renewed motion for CR 35 examination and then sought
interlocutory review of the decision denying that motion The
State’s notice for discretionary review was filed within the time
allowed under RAP 5.2(b), the applicable rule. The Court of
Appeals did not err in granting review of the trial court’s order
denying the State’s renewed motion for CR 35 examination
_7-
No. 76491-8-|/8
y_ViiliaB, 147 Wash. 2d at 491-92.3
The Supreme Court’s conclusion is evidenced by both the juxtaposition of
``CR 59 within the Superior Court Civil Rules and by the context of the rule itself.
CR 59 is included in chapter 7 of the Superior Court Civil Rules-Judgment
(Rules 54-63). The other rules within chapter 7 include CR 54, dealing with
judgments and costs; CR 55, dealing with default judgments; CR 56, dealing with
summary judgments; CR 57, dealing with declaratory judgments; CR 58, dealing
with the entry of judgments; CR 60, dealing with relief from a judgment or order;
and CR 62, dealing with a stay of proceedings to enforce a judgment, The
surrounding civil rules thus address judgments and final orders. All of these rules
deal either with the entry of final judgments or posttrial matters.
The language of CR 59 itself is consistent with this theme. Although CR
59 permits reconsideration of “any . . . decision or order," this language is
informed by the context of the rule and the surrounding ianguage. Rather than
contemplating any order occurring prior to or during trial, CR 59 deals exclusively
with judgments and orders entered following a verdict. Causes for granting
reconsideration include:
(1) irregularity in the proceedings of the court, jury or
adverse party, or any order of the court, or abuse of discretion, by
which such party was prevented from having a fair trial;
(2) l\/lisconduct of prevailing party orjury; and whenever any
one or more of the jurors shall have been induced to assent to any
general or special verdict or to a finding on any question or
questions submitted to the jury by the court, other and different
3 Although the Supreme Court described CR 59 as applying only afterjudgment, we
recognize that CR 59 may also apply following a verdict but preceding the entry of the judgment,
as contemplated by the rule itself. §Y, egg CR 59(2). The salient point is that CR 59 applies
only to posttrial proceedings
_3_
NO. 76491-8-|/9
from the juror's own conclusions, and arrived at by a resort to the
determination of chance or |ot, such misconduct may be proved by
the affidavits of one or more of the jurors;
(4) Newly discovered evidence, material for the party making
the application which the party could not with reasonable diligence
have discovered and produced at the trial;
(5) Damages so excessive or inadequate as unmistakably to
indicate that the verdict must have been the result of»passion or
prejudice; »
(6) Error in the assessment of the amount of recovery
whether too large or too smali, when the action is upon a contract,
or for the injury or detention of property;
(7) That there is no evidence or reasonable inference from
the evidence to justify the verdict or the decision, or that it is
contrary to law.
CR 59 (emphasis added).
Here, Defendants’ renewed motion was not subject to the requirements of
a CR‘59 motion for reconsideration The trial court’s order denying Defendants’
first motion was not a final order terminating the dispute, so as to,fail within CR
59, but, rather, was merely an interlocutory order subject to review and revision
k by the court as appropriate
An interlocutory order is “‘one which does not finally determine a cause of
action but only decides some intervening matter pertaining to the cause, and
which requires further steps to be taken in order to enable the court to adjudicate
the cause on the merits.'" Alwood v. Aukeen Dist. Court Comm’r Harper, 94 Wn.
App. 396, 400, 973 P.2d 12 (1999) (quoting BLAcK’s LAw chTloNARY 815 (6th ed.
1990)). interlocutory orders are not appealable, as “permitting a trial court to
correct any mistakes prior to entry of final judgment serves the interests of
judicial economy.” Alwood, 94 Wash. App. at 400-01. lndeed, the authority of trial
courts to revisit interlocutory orders “allows them to correct not only simple
_9_
NO. 76491-8-|/10
,mistakes, but also decisions based on shifting precedent, rather than waiting for
the time-consuming, costly process of appeal.” United States v. Martin, 226 F.3d
1042, 1049 (9th Cir. 2000).
CR 59 is not applicable to such interlocutory orders. _Vy_imm, 147 Wash. 2d
at 491. Rather, such orders--not being final orders_are subject to discretionary
review. Kinq v. Olvmpic Pipeiine Co., 104 Wash. App. 338, 347-48, 16 P.3d 45
(2000).
Defendants’ renewed motion was not a CR 59 motion for reconsideration
but, rather, a renewed motion for a stay.“'
Defendants contend that the trial court erred by denying their renewed
motion to stay discovery. This is so, they assert, because the trial court failed to
correctly apply the Olympic Pipeiine factors in light of the new evidence
submitted in support of the renewed motion
We review a trial court’s determination on a motion to stay for an abuse of
discretion O|ympic Pipeiine, 104 Wash. App. at 348. An abuse of discretion
occurs when the trial court’s ruling is manifestly unreasonable or is based on
untenable grounds or reasons. Oiympic Pipeiine, 104 Wash. App. at 348.
4 The investors contend that Defendants’ renewed motion was a motion for
reconsideration pursuant to King County Local Civil Rules 59 and 7(b)(6). But neither local rule
relied upon by the investors supports the understanding that the Defendants’ motion was a
motion for reconsideration in anything other than name. in any event, local rules cannot
supersede or conflict with our Supreme Court’s rules. CR 83; lturribarria Perez v. Bazaldua
Garcia, 148 Wash. App. 131, 140, 198 P.3d 539 (2009). Neither can local rules foreclose an
established avenue of appellate relief. S_ee_ Olympic Pigeline, 104 Wash. App. at 347-48 (reviewing
petitioners renewed motion to stay discovery). Ratherl local rules must harmonize with the
Supreme Court’s rules to provide consistency throughout the state. Defendants’ renewed motion
is no more a CR 59 motion for reconsideration in King County than it is in any other county in the
state.
_10_
No. 76491-8-|/11
“Whether a court abuses its discretion in controlling discovery depends on the
interests affected and the reasons for and against the decision.” Olympic
Pigeline, 104 Wash. App. at 348.
We have recognized that parallel civil and criminal proceedings present a
potential dilemma for trial courts.
“On the one hand, a parallel civil proceeding can vitiate the
protections afforded the accused in the criminal proceeding if the
prosecutor can use information obtained from him through civil
discovery or testimony elicited in the civil litigation . . . . On the
other hand, the pendency of a parallel criminal proceeding can
impede the search for truth in the civil proceeding if the accused
resists disclosure and asserts his privilege against self-incrimination
and thereby conceals important evidence.”
Olympic Pipeiine, 104 Wash. App. at 352 (quoting Paral/el Civil & Criminal
Proceedings, 129 F.R.D. 201, 202 (1990) (Pollack, J.)).
Accordingly, trial courts confronted with such a situation must conduct an
on-the-record balancing of eight nonexclusive factors before granting or denying
a motion to stay the civil proceeding. Olympic Pipeiine, 104 Wash. App. at 352-53,
375. These factors include: the extent to which a party’s right against seif-
incrimination is implicated in the civil proceedings; the similarities between the
civil and criminal cases; the status of the criminal case; the plaintiffs' interests in
expeditious litigation and potential prejudice; the burdens on the party asserting
the privilege; the convenience and efficiency of the court; the interests of
nonparties to the civil iitigation; and the public interest in the civil and criminal
litigation Olymp_ic Pipeiine, 104 Wash. App. at 352-53.
The trial court herein made on-the-record findings as to each Ol m ic
Pipeiine factor in its order denying Defendants’ first motion for a stay, However,
-11_
NO. 76491-8-|/12
the trial court’s order denying Defendants’ renewed motion failed to analyze the
relevant factors in light of the new information that Defendants gleaned following
the denial of the first motion As we discuss below, the balance of the relevant
factors had changed by the time that Defendants filed the renewed motion Each
factor is addressed in turn
A
While the extent to which a party’s right against self-incrimination is
implicated in civil proceedings is not determinative, this factor “must be given
‘serious consideration’ in the balancing of interests.” Olymp_ic Pipeiine, 104 Wn.
App. at 353 (quoting White v. Mapco Gas Prods., |nc., 116 F.R.D. 498, 502 (E.D.
Ark. 1987); Brock v. Tolkow, 109 F.R.D. 116, 120 (E.D.N.Y. 1985)).
The parties’ dispute as to this factor focuses on whether Defendants are
“witnesses," “subjects," or “targets" of the criminaiinvestigation. in the renewed
motion, Defendants provided a declaration from criminal counsel stating that two
AUSAs confirmed that Defendants “were not being viewed as mere witnesses.”
Defendants also provided an e-mail from AUSA Susan Roe stating that criminal
counsel “asked if their clients were viewed solely as witnesses. We said we
could not commit to that status.” Defendants assert that these statements
establish that they are at least “subjects” of the investigation, if not “targets.”
Fairplay contends that no such inference can be drawn from the government’s
refusal to comment on the ongoing investigation
But despite the reluctance of federal officials to openly confirm whether
Defendants are actual subjects or targets of the ongoing criminal investigation,
_12_
No. 76491-8-|/13
“[t]here seems``to be no serious dispute that [Defendants] are in genuine jeopardy
of criminal |iability.” Olympic Pipeiine, 104 Wash. App. at 354. |ndeed, the
investors themselves alerted the USAO that Defendants may have doctored l
escrow agreements in violation of federal law. lt is also undisputed that an FBl
agent plans to attend the Garrison deposition Based on this information,
Garrison’s criminal counsel advised him to assert his Fifth Amendment rights
during the civil proceeding.
Although no individual defendant has been indicted in this matter-a fact
that “makes more difficult the analysis of the potential criminal jeopardy”-an
indictment is not necessary before a party’s Fifth Amendment rights are
implicated. Olympic Pipeiine, 104 Wash. App. at 354. lndeed, “the protections of
the Fifth Amendment turn not on whether a litigant has been indicted, but on
whether the litigant is in real danger of self-incrimination in a subsequent criminal
proceeding.” Oiympic Pipeiine, 104 Wash. App. at 359. Here, Defendants’ fears of
self-incrimination are supported by the record. Accordingly, this factor weighs
heavily in favor of a stay,
B
“One of the most important factors in the balancing process is ‘the degree
to which the civil issues overlap with the criminal issues,’ because ‘[i]f there is no
overlap, there would be no danger of self-incrimination and accordingly no need
for a stay.”’ Olympic Pipeiine, 104 Wash. App. at 357 (alteration in original)
(footnote omitted) (quoting ParaI/el Proceedings, 129 F.R.D. at 203; B_o_f
Piumbers & Pipefitters Nat’l Pension Fund v. Transworld Mech., lnc.. 886 F.
_13_
NO. 76491-8-|/14
Supp. 1134, 1139 (S.D.N.Y. 1995); Volmar Distribs.. |nc. v. N.Y. Post Co., |nc.,
152 F.R.D. 36, 39 (S.D.N.Y. 1993)).
Here, although the scope of the criminal investigation is unknown, the
conduct alleged in the civil complaint is the same conduct that is under
investigation by federal authorities. As discussed herein, the investors
themselves alerted the USAO that Garrison and Over allegedly doctored escrow
agreements related to the Bank acquisition in violation of federal law. Moreover,
the FBl’s decision to send an agent to attend the Garrison deposition further
indicates that evidence of criminal conduct may be discerned through civil
discovery. W Olympic Pipeiine, 104 Wash. App. at 358 (“The U.S. Attorney thus
believes that evidence of criminal conduct may be found in the civil discovery.
There appears thus to be complete correspondence between the civil and
criminal cases."). This factor likewise weighs heavily in favor of a stay.
C
The third factor in considering a stay request is the status of the criminal
case. Although the argument for granting a stay is stronger when a party is
under indictment, “the protections of the Fifth Amendment turn not on whether a
litigant has been indicted, but on whether the litigant is in real danger of self-
incrimination in a subsequent criminal proceeding.” Olympic Pip_eiine, 104 Wn.
App. at 359. But the absence of an indictment is not without consequence.
The status of the criminal case includes the likely speed of its
resolution Where there is not yet a formal charge, resolution of the
criminal matter may be so remote it should not be awaited. On the
other hand, if the resolution of criminal proceedings is close at
hand, the detriments of a stay are counterbalanced by the prospect
-14-
No. 76491-8-|/15
of a speedy criminal trial, and by the potential res judicata or
collateral estoppel effects of resolution of common issues.
Olympic Pipeiine, 104 Wash. App. at 359.
Here, as in Olympic Pipeiine, Defendants have not been indicted.
However, the record supports Defendants’ contention that the criminal
investigation may be resolved within the next six months. Counsel for Garrison
was told by an AUSA that the USAO expects the criminal investigation to be
completed within six months. An e-mail from AUSA Susan Roe similarly states
that “many federal crimes have a five year statute of limitations and [] we
certainly expect[] the investigation would be complete with the statute of
iimitations.”5 The relatively short time frame in which the criminal investigation is
likely to be concluded weighs in favor of a stay,
y D
“Civii plaintiffs have a substantial interest in expeditious conduct of their
litigation That interest, and any potential prejudice from delay, must be carefully
considered. Delayed resolution of the civil claims is, by itself, usually a
detriment. in addition, delay carries with it the possibility of lost memories and
missing witnesses.” Oiympic Pipeiinel 104 Wash. App. at 359-60 (footnote
omitted). ‘FThe consequences of delay usually depend upon its duration if a
brief, limited stay produces no clarification in criminal status,' and other issues
have not emerged to alter the balance, the court remains free to lift the stay and
proceed.” Olymgic Pipeiine, 104 Wash. App. at 361.
5 The underlying conduct at issue occurred mostly in the summer of 2012.
-15_
NO. 76491-8-|/16'
Here, Defendants’ first motion to stay discovery set no proposed duration
However, Defendants’ renewed motion requested a limited stay of six months. A
limited stay is unlikely to substantially prejudice Fairplay or the investors in this
matter and may clarify the nature and extent of the criminal investigation6
Should new information come to light regarding the extent and scope of the
criminal investigation, the trial court may alter the length of the stay as
appropriate. Accordingly, this factor weighs in favor of a stay,
E
“ln addition to considering the implications of the Fifth Amendment
privilege, courts consider ‘the burden which any particular aspect of the
proceedings may impose on defendants.’" Olympic Pipeiine, 104 Wash. App. at
362-63 (quoting Fed. Sav. & Loan lns. Corp. v. Molinaro, 889 F.2d 899, 903 (9th
Cir. 1989)). This factor includes consideration of the burden associated with the
simultaneous defense of civil and criminal proceedings and the likelihood that
“materials unearthed during civil discovery may eventually inure to the benefit of
the government prosecution.” Olympic Pipeiine, 104 Wash. App. at 363.
Once a witness in a civil suit has invoked his or her Fifth Amendment
privilege against self-incrimination the trier of fact is entitled to draw an adverse
inference from the witness’s refusal to testify. Olympic Pigeline, 104 Wash. App. at
355-56 (citing lkeda v. Curtis, 43 Wash. 2d 449, 458j 261 P.2d 684 (1953)).
l\/loreover, invocation of the Fifth Amendment privilege may supply an avenue for '
6 Fairplay contends that even a six-month stay could become an indefinite stay as
Defendants may request another stay following the six-month period. But this contention
completely ignores that the trial court “has the power to control ali aspects of this issue.” Olymgic
Pipeiine, 104 Wash. App. at 361.
_16_
No. 76491-8-|/17
investigation by prosecutors.7 Olymgic Pipeiine, 104 Wn. App.at 364. Because
Garrison plans on asserting his Fifth Amendment privilege should this matter
proceed to trial prior to the completion of the criminal investigation, the potential
burden on Defendants is high. Accordingly, this factor weighs heavily in favor of
a stay. ``
F
The final three factors are (1) the convenience of the court in the
management of its cases and the efficient use of judicial resources, (2) the
interests of nonparties to the civil litigation and (3) the public interest in the civil
and criminal litigation Olympic Pipeiine, 104 Wash. App. at 365-67 (citing
Molinaro, 889 F.2d at 903).
Here, these factors weigh both in favor of and against a stay, The trial
court certainly has an interest in resolving this matter quick|y, as do the nonparty
Fairplay creditors who may benefit from a favorable outcome. But the``public also z
has an interest in seeing that the integrity of the judicial system is maintained and
that defendants in a civil suit are not unjustifiably exposed to criminal liability.
G
The Oiympic Pipline factors are nonexhaustive-individual cases may
present additional factors that weigh on a court’s analysis. 104 Wash. App. at 349.
Here, Defendants have proposed that the piaintiffs’ own underlying criminal
7 Because the right to remain silent in such circumstances must be invoked on a
question-by-question basis, the fact that the witness either invokes the privilege or declines to do
so as to any particular question may provide “a roadmap” for government investigators to foilow.
_17_
NO. 76491-8-|/18
conduct and their efforts to create and leverage Fifth Amendment issues in this
litigation also weighs in favor of a stay.
The record supports Defendants’ contention lt appears that Fairplay and
the investors actively concealed information from Defendants concerning the
lnvestors’ role in alerting the USAO regarding Defendants’ asserted culpability in‘
the Bank acquisition Fairplay and the investors contend that the scope and
parameters of the criminal investigation are unknown but it was the investors
themselves who helped shape the scope of that investigation through their
involvement with the USAO. The investors have exposed Defendants to criminal
liability and now seek to leverage that liability against Defendants in the civil
proceeding-forcing Defendants to assert their Fifth Amendment rights to their
own detriment in the civil proceeding. These facts weigh in favor of a stay,
lV '
Following Defendants’ first motion to stay discovery, the trial court
conducted an on-the-record balancing of all relevant Olympic Pipeiine factors
and found that the balance of equities weighed against a stay, Notably, the trial
court found that no defendant planned on asserting his Fifth Amendment rights,
that any similarities between the civil and criminal cases were unknown that
there was no evidence that the criminal investigation would be concluded
anytime soon and that Defendants would not be prejudiced by proceeding with
the depositions,
But there is no serious dispute that the circumstances changed following
the trial court’s denial of the first motion to stay. As we recognized in Olympic
_13-
NO. 76491-8-|/19
M, “[w]ith issues as complex as these, discovery management decisions
are likely to be revisited as new events or the passage of time changes the
picture.” 104 Wash. App. at 376. |ndeed, by the time that Defendants filed the
renewed motion for a stay, (1) Defendants had discovered that the investors had
personally alerted the USAO of alleged criminal activity regarding the Bank
acquisition (2) Garrison planned on asserting his Fifth Amendment rights during
the civil litigation and (3) Defendants had reason to believe that the criminal
investigation would be concluded within six months. .
But the trial court failed to acknowledge or address these changed
circumstances when it denied Defendants’ renewed motion Rather, the trial
court simply restated some of its previous findings-finding that no defendant
planned on asserting his Fifth Amendment rights, that the potential duration of
the criminal investigation was unknown and that the stay was potentially
indefinite. Although the trial court was not obligated to conduct an entirely new,
on-the-record balancing of each Olymgic Pipeiine factor, the trial court’s order
failed to account for the significantly changed circumstances discussed herein
These changed circumstances weigh heavily in favor of a stay, Thus, the trial
court abused its discretion by not accounting for them and by not granting the
motion
We recognize that our discretionary review is of an interlocutory order,
Should the parties present the trial court with new information that alters the
balance of equities, the trial court retains complete control over the length and
parameters of the stay.
_19_
No. 76491-8-|/20
Reversed.
We concur:
tr M
..20_