Plaintiff Opposing Answer Stay on Appeal

8/7/2019 Plaintiff Opposing Answer Stay on Appeal

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BY HANDHon . Naomi Reice BuchwaldUnited States District JudgeDaniel Patrick Moynihan United States Courthouse500 Pearl Street, Suite 2270New York, New York 10007

U.S. Department of JusticeUnited States AttorneySouthern District ofNew York

86 Chambers Street. 3'" FloorNew York, New York 10007

March 11, 2009~ : l ' 3

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Re: United States v. Karron, No. 08 Civ. 10223 (NRB) (DFE)Dear Judge Buchwald:

This Office represents the United States in the above-referenced action, which seeks torecover damages and civil penalties in connection with false claims made by defendant DanielKarron to fraudulently obtain in excess of $1.3 million in scientific grants from the DepartmentofCommerce. I write pursuant to the Court's March 4th Order, construing Karron's letter datedJanuary 22,2009, to be a request to stay this action pending the resolution of her criminal appeal,and requiring the Government to respond by today. This Court should not stay this action duringthe pendency ofKarron's criminal appeal.

"I t is well settled that a federal court has the discretion to stay a civil case pendingresolution of a related ... criminal action, if the interests of justice so require . 'A stay of thecivil case, however, is an extraordinary remedy. '" Jackson v. Johnson, 985 F. Supp. 422 , 424(S.D.N.Y. 1997) (citations omitted; quoting Trustees ofPlumbers & Pipefitters Nat '1 PensionFundv. Transworld Mechanical, Inc" 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995)). In consideringany application to stay a civil action pending the resolution of a criminal action, "courts must ,in proceeding with the litigation, the public interest, and the interests of the courts and of third ll\l , fiJweigh competing interests, including the interests of the defendants, the interests of the plaintiffs .partie.s.". SEC. v. Doody, 186 F. Supp. 2d 379, 381 (S.D.N.Y. 2001) (internal quotation marks L~ O \ and CItatIOn omItted). t,Q60

In support of her application, Karron cites only one reason why she believes a stay isappropriate: because she cannot testify freely about the subject matter of this action until hercriminal appeal resolves "in protection of [her] j1h amendment rights under 'the United StatesConstitution." Once the appeal is decided, Karron has indicated that she "categorically den[ies]the truth of[the Government's] allegations," and presumably intends to testify as such.This is entirely a red herring, as Karron has no ability to deny her culpability in this action


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and, in fact, no discovery is required at all. Indeed, "a criminal conviction, whether by juryverdict or guilty plea, constitutes estoppel in favor of the United States in a subsequent civilproceeding as to those matters determined by the 'ud ment in the criminal case." New York v.Julius Nasso ConC;:;;e Corp., 202 F.3d 82, 86 (2d Cir: 2000) (quoti";ig United 'States v. Podell,572 F.2d 31, 35 (2d Cir. 1978)). This rule of estoppel-by-conviction was explicitly written intothe False Claims Act:

Notwithstanding any other provision of law, the Federal Rules of CriminalProcedure, or the Federal Rules of E v i d e n c e f i n a l judgment rendered infavor of the United States in any criminal proceeding charging fraud or falsestatements, whether upon a verdict after trial or upon a plea of guilty or nolocontendere, shall estop the defendant from denying the essential elements ofthe offense in any action which involves the same transaction as in thecriminal proceeding and which is brought under subsection (a) or (b) ofsection 3730.

31 U.S.c. 373J(d). Because Karron acknowledges that this case is "essentially the same as thecriminal case against [her]," the only remaining question is whether her conviction is a "final


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Supp. 2d 483, 486 n.3 (D. Vi. 2004) (noting, without further explanation, that the court hadpreviously stayed case pending resolution of criminal appeal).!

Even in the context of common law estoppel, where fairness is a relevant consideration,courts frequently hold that a conviction is entitled to preclusive effect, notwithstanding a pendingappeal. See, e.g., Robi v. Five Platters, Inc., 838 F.2d 318, 327 (9th Cir. 1988) ("The presentappeals in no way affect the ' firmness' of the Robi decisions in the district court for purposes ofissue preclusion" (citations omitted. And the Second Circuit has expressly recognized that"[t]he pendency of a criminal appeal generally 'does not deprive a judgment of its preclusive .e-effect. '" United States v. International Brotherhood o/Teamsters, Chauffeurs, Warehousemen &Helpers 0/Am., AFL-CIO, 905 F.2d 610, 621 (2d Cir. 1990). Thus, for example, Judge Marbleyrecently explained the importance of allowing a SEC civil action enforcement action to proceedeven as the related criminal conviction was on appeal:

A criminal conviction and sentence is a final judgment on the merits .Defendants argue that because they have an expedited appeal pending beforethe Sixth Circuit, this Court should either exercise its discretion not to applyestoppel or stay its decision on the SEC's Motion [for summary judgment]until after the appeals process is complete. . . . The majority of courts haveconcluded that a pending criminal appeal does not bar the court fromapplying principles of claim preclusion to the plaintiffs case. AllowingDefendants to avoid the preclusive effect of the Criminal Action until theirappeal is finalized would halt the process of justice. Defendants have theability to delay their criminal appeals for years by requesting en banchearings, petitioning the U.S. Supreme Court for certiorari, and filing habeascorpus petitions .

s.E. C. v. Blackwell, 477 F. Supp. 2d 891, 901 (S .D. Ohio 2007) (citations omitted).Simply put, Karron already h ~ d a criminal trial with all of its procedural SafegUarf ,andthe jury in that case found that the Government proved its case beyond a reasonable doubt.

Karron 's implicit suggestion that she may revisit that determination in this case - in order todetermine whether the government has proved its case by a preponderance of the evidence - istz. wrong as a matter of law. And since Karron's mistaken belief that she will be able to relitigateher guilt is the only reason she has advanced in favor of a stay, she has no valid interest in havingthis case stayed. On the other hand, the Government's interests in prosecuting this case, the

In denying Karron bail pending appeal, Judge Patterson has held that her putativeappellate arguments "do not raise a substantial question of law or fact likely to result in reversal."But in the event that Karron's conviction is overturned on appeal , her remedy will be to movethis court under Federal Rule of Civil Procedure 60, which permit a court to relieve a party of afinal civil judgment if "it is based on an earlier judgment that has been reversed or vacated ."Fed. R. Civ. P. 60(b)(5).3


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public.s interest in recovering fraudulently obtained grant funds, and the Court's interest inefficient judicial administration are all real, valid, and serious concerns. Weighing those interestsis entirely one-sided. As a result, no stay should issue.

Instead, the Government respectfully requests that the Court set a briefing schedule forsummary judgment. We propose the following schedule, which is somewhat elongated to takeinto account Karron's current incarceration.

Government to move on or before April 17, 2009Karron to oppose on or before June 5, 2009Government to reply on or before June 19, 2009

Thank you for your consideration of this request.Respectfully,

LEV L. DASSINActiq.g\,i,.j Il; /By: __ ~ ' i ~ ~ ~ ~ ______________________. SCHWARTZ

Assistari United States Attorney86 Chambers Street, 3rd FloorNew York, New York 10007Telephone: (212) 637-1945Facsimile: (212) 637-2750E-mail: [email protected]

cc: BY OVERNIGHT DELIVERY & ELECTRONIC MAILDaniel B. Karron, Reg. No. 60101-054FPC AldersonFederal Prison CampGlen Ray Road, Box AAlderson, West Virginia 24910E-mail: [email protected]

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Plaintiff Opposing Answer Stay on Appeal