In State Farm Mutual Automobile Insurance Company v Mittal, No. 16-CV-4948 (FB) (SMG) (E.D.N.Y. June 25, 2018), State Farm alleged that defendants (various health care providers) engaged in a conspiracy to defraud insurance companies by issuing fraudulent bills and medical records.
After suit was filed, a dispute arose as to the order of depositions and it was ultimately decided that the insurer’s deposition would go first and defendants would follow thereafter. The insurer’s deposition went forward as scheduled but the defendants refused to move forward with their scheduled depositions.
Defendants’ attorneys notified State Farm’s counsel that their clients were under investigation by the New York State Attorney General’s office and sought a stay in the matter until the investigation ran its course, and filed a motion to enforce the stay. The Court initially granted the defendants permission to stay the depositions and then issued a decision on their motion.
U.S Magistrate Judge Steven M. Gold, denied defendant’s motion, finding that the circumstances weighed strongly against the issuance of a stay. The U.S. Court of Appeals for the Second Circuit laid out six factors it uses for district courts to exercise their discretion when deciding whether a related criminal action warrants issuance of a stay: 1) The extent to which the issues in the criminal case overlap with those in the civil case; 2) The status of the case, including whether the defendants have been indicted; 3) The private interests of the plaintiff’s in proceeding expeditiously weighed against the prejudice to the plaintiff’s caused by the delay; 4) The private interests of and burden on the defendants; 5) The interests of the courts; and 6) the public interest.
The court decided that the first factor slightly weighed in favor of the defendants due to the overlapping of issues in the potential criminal case and the civil case. The second factor weighed “heavily against issuing a stay.” In the instant case the investigation cited by the defendants was a search warrant not an indictment and no charges had been brought against the defendants. The court also found that the third factor supported denying the stay as there was no gauging how long the criminal investigation would last and “the potential delay could be years, even before an indictment is returned.” The judge also noted that assets that might be available to satisfy a judgment would be moved or depleted while the case was stayed.
The fourth factor slightly favored the stay as the Court acknowledged that the defendants’ concerns about self-incrimination during the deposition was valid however in this situation there was no activity regarding the criminal investigation for around a year and there was no reason to think that criminal prosecution was inevitable.
The fifth factor supported denying the stay as the court has an interest in advancing the docket and avoiding delay. Lastly, the sixth factor of public interest strongly favored denying the stay. The court stated that this case could affect “hundreds of thousands of dollars of potentially fraudulent claims.” Moreover, the Court stated that defendants had imposed substantial costs on the insurer that undoubtedly had been passed on to consumers in the form of higher premiums.
Overall, the Court found that the defendant health care providers had not met their collective burden is showing that a stay was necessary and appropriate. Thus, State Farm is now permitted to depose the defendants. One expected there may be some invocation of 5th Amendment privilege, is the criminal investigation is ongoing. Stay tuned. Thanks to Jon Avolia for his contribution to this post. Please contact Brian Gibbons (on Twitter @bgibbons35) with any questions.