Smith v. FirstEnergy Corp.
| Decision Date | 11 February 2021 |
| Docket Number | Civil Action 2:20-cv-3755 |
| Parties | JACOB SMITH, Plaintiff, v. FIRSTENERGY CORP. et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION AND ORDER
This matter is before the Court on Defendants' Motion to Stay. (Doc. 27). The Motion is DENIED, and the parties shall meet and confer and file a revised Rule 26(f) Report within fourteen (14) days of the date of this Opinion and Order.
This is a civil conspiracy and corruption case stemming from the alleged criminal actions of the former Speaker of the Ohio House of Representatives, Larry Householder, and his alleged co-conspirators (the "Householder Enterprise"). According to the Complaint, the Householder Enterprise and Defendants FirstEnergy Corp. and FirstEnergy Service Company (collectively, "FirstEnergy") participated in an illegal bribery scheme, lasting from 2017-2020 (the "Criminal Action"). (See generally Doc. 19).
At base, the alleged scheme was a quid pro quo. The Householder Enterprise received $60 million from FirstEnergy to further their political and personal interests. (See generally Doc. 19). In exchange, the Householder Enterprise "coordinated" the passage of House Bill 6 ("HB6"), a billion-dollar energy bailout that purportedly saved two failing Ohio nuclear power plants, both affiliated with FirstEnergy. (See id.). As part of the bailout, Ohio residents and businesses will soon see "monthly surcharges" on their electric bills. (See id., ¶¶ 1-4).
Plaintiffs, Ohio residents and businesses allegedly injured by these surcharges, brought this putative class action, along with seven related cases, in July 2020. The Court consolidated the cases on September 29, 2020, and Plaintiffs filed their Consolidated Class Action Complaint the next month. (Docs. 16, 19). Broadly speaking, Plaintiffs allege that FirstEnergy, along with numerous individual Defendants, including, for example First Energy's CEO, CFO, and President, violated the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), as well as the Ohio Corrupt Activity Act ("OCRA"). (See generally Doc. 19). Defendants moved to dismiss on October 21, 2020 (Doc. 25), and moved to stay the next month (Doc. 27).
Defendants take three shots at staying discovery. First, they seek to defer discovery until after the Criminal Action is resolved. (Doc. 27 at 6-9). They assert that having this action and the Criminal Action proceed contemporaneously will impede their ability to defend themselves in the Criminal Action, which should take priority. (Id. at 6-7). Next, Defendants propose an alternative—even if discovery does not wait for the Criminal Action to be resolved, it at least should wait until the Court resolves Defendants' pending Motion to Dismiss. (Id. at 9-11). Finally, Defendants note that the pending securities actions against FirstEnergy likely will be statutorily stayed, so this case should be stayed, too. (Id. at 11-12).
Plaintiffs respond that none of Defendants' arguments justify a wholesale stay, and limited stays and the use of protective orders can provide adequate protections. (See generally Doc. 29). They also assert that the alleged scheme injured them, and an indefinite stay would injure them only further. (See id.). As explained below, the Court agrees with Plaintiffs.
"The power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes in its docket[.]" F.T.C. v. E.M.A. Nationwide, Inc., 767 F.3d 611, 626 (6th Cir. 2014) (quotation marks and citation omitted). As noted, Defendants make three attempts at staying this case, and different standards apply to their requests.
"[N]othing in the Constitution requires a civil action to be stayed . . . pending the outcome of criminal proceedings." Id. (quotation marks and citations omitted). In exercising their "broad discretion in determining whether to stay," courts balance six factors:
1) the extent to which the issues in the criminal case overlap with those presented in the civil case; 2) the status of the case, including whether the defendants have been indicted; 3) the private interests of the plaintiffs in proceeding expeditiously weighed against the prejudice to plaintiffs 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.
Id. (quotation marks and citation omitted).
Also relevant is "'the extent to which the defendant's fifth amendment rights are implicated.'" Id. (quoting Keating v. Office of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995)). Importantly, "[t]he case for a stay is strongest where the defendant has already been indicted, whereas pre-indictment requests for a stay . . . are usually denied." Chao v. Fleming, 498 F. Supp. 2d 1034, 1037 (W.D. Mich. 2007) (collecting cases). At base, the party seeking the stay bears "the burden . . . to show that there is a pressing need for the delay[.]" E.M.A. Nationwide, 767 F.3d at 627-28 (quotation marks and citation omitted).
The Court begins with the status of the Criminal Action. Under this factor, "'[a] stay of a civil case is most appropriate where a party to the civil case has already been indicted for the same conduct[.]'" Id. at 628 (quoting Trustees of Plumbers & Pipefitters Nat. Pension Fund v. Transworld Mech., Inc., 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995)). This makes sense. "'[T]he likelihood that a defendant may make incriminating statements is greatest after an indictment has issued,'" and any prejudice to the civil plaintiffs "'is reduced since the criminal case will likely be quickly resolved due to Speedy Trial Act considerations.'" E.M.A. Nationwide, 767 F.3d at 628 (quoting Transworld Mech., 886 F. Supp. at 1139).
None of the Defendants in this case has been indicted. (See Doc. 27 at 5; Doc. 29 at 3). Nor do Defendants contend that they are currently being criminally investigated. But even if they were, "'a stay of civil proceedings due to a pending criminal investigation is an extraordinary remedy' that is not generally granted in the absence of an indictment." Kirby Dev., LLC v. XPO Glob. Forwarding, Inc., No. 2:18-CV-500, 2018 WL 6075071, at *4 (S.D. Ohio Nov. 20, 2018) (quoting E.M.A. Nationwide, 767 F.3d at 627-28).
Without indictments against any of the Defendants—or, at the very least, strong evidence of a criminal investigation—"the case for staying civil proceedings is weak." Rothstein v. Steinberg, No. 5:08CV0673, 2008 WL 5716526, at *3 (N.D. Ohio Dec. 23, 2008) (alterations, quotation marks, and citations omitted); see also Doe v. Matthew 25, Inc., 322 F. Supp. 3d 843, 850 (M.D. Tenn. 2018) (). So this factor weighs heavily against a stay.
The second factor tilts the other way. Defendants assert that "the thrust of the civil and criminal cases is identical: an alleged bribery scheme involving the Householder Enterprise." (Doc. 27 at 7). Just look at the Complaint, they say. (Id. at 4-5). Plaintiffs do not dispute this point. And the Court agrees there is "a nexus between the parallel proceedings sufficient to show that such proceedings are related and involve substantially similar issues[.]" McCullaugh v. Krendick, No. 5:07CV2341, 2009 WL 2929306, at *2 (N.D. Ohio Sept. 9, 2009). This factor weighs in favor of Defendants' request for a stay.
The third consideration favors Plaintiffs. The Court must balance Plaintiffs' '"interest in proceeding expeditiously against the prejudice that a delay would cause.'" Johnson, next friend of C.P.S. v. Hamilton Cty. Gov't, No. 1:19-CV-329, 2020 WL 6479558, at *3 (E.D. Tenn. Feb. 26, 2020) (quoting In re Flint Water Cases, No. 5:16-cv-10444, 2019 WL 5802706, at *3 (E.D. Mich.Nov. 7, 2019)). While Defendants emphasize the early stage of this case (see Doc. 27 at 7), they are "effectively asking [] to stay the [] case indefinitely[.]" Newell v. Cty. of Wayne, No. 12-CV-14928, 2013 WL 4613613, at *5 (E.D. Mich. Aug. 29, 2013) (). Understandably so, indefinite stays are disfavored. See id.
As Plaintiffs note, it may be many months—if not years—until the Criminal Action is resolved. Defendants do not challenge this. If the parties wait that long to start discovery, there is a "particularly harmful" "risk of spoliation of evidence, failed memories, or witness availability[.]" Johnson, 2020 WL 6479558, at *3 (); cf. Coats v. Grant Blanc Cmty. Schs., No. 18-cv-12162, 2018 WL 63212916, at *2 (E.D. Mich. Dec. 3, 2018) (). While the Criminal Action will, one day, come to an end, an "indefinite[]" stay is "tantamount to [] den[ying] [Plaintiffs] [their] day in court." Newell, 2013 WL 4613613, at *5. Another strike against a stay.
The Court must also consider Defendants' interests and any prejudice they might suffer without a stay. At first glance, Defendants' prejudice argument appears to be one of constitutional significance. Indeed, they rely heavily on the Fifth Amendment, and courts often stay a civil case where the defendant "may be compelled to answer questions in the civil case that he would have the right to refuse to answer in the criminal case." Coats, 2018 WL 6321916, at *2.
But upon closer examination, Defendants' concern is less about self-incrimination and more about what discovery they will be able to receive from others. Many key witnesses in this case, including Larry Householder, have been...
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