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Jacksonville Savings Bank v. Kovack
State: Illinois
Court: 4th District Appellate
Docket No: 4-01-0730 Rel
Case Date: 01/14/2002

NO. 4-01-0730
January 14, 2002

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

JACKSONVILLE SAVINGS BANK, an
 Illinois Banking Corporation,
                Plaintiff-Appellee,
                v.
MARK KOVACK,
                Defendant-Appellant.
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Appeal from
Circuit Court of
Morgan
County
No. 01L31

Honorable
Ronald F. Robinson
,
Judge Presiding.

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JUSTICE STEIGMANN delivered the opinion of the court:

In July 2001, plaintiff, Jacksonville Savings Bank(Bank), filed a complaint against defendant, Mark Kovack, alleging that he had illegally received funds belonging to the Bankwhile employed there. Later that month, Kovack filed a motion tostay the civil proceedings until a pending federal criminalinvestigation involving the same wrongful conduct was resolved. Following an August 2001 hearing, the trial court denied Kovack'smotion to stay the proceedings.

Kovack appeals, arguing only that the trial courtabused its discretion by denying his motion to stay the civilproceedings. We affirm.

I. BACKGROUND

In July 2001, the Bank filed a four-count complaintagainst Kovack, the Bank's former assistant vice president,alleging that from 1995 through April 2001, Kovack engaged in several wrongful activities to his personal benefit, includingthe following: (1) repeated diversions of checks and cash fromthe Bank's customers; (2) misapplication of loan proceeds; and(3) creation of "dummy" loans without the knowledge or consent ofthe affected customers.

Later during July 2001, Kovack filed a motion to staythe civil proceedings, asserting that he was a suspect in aFederal Bureau of Investigation (FBI) criminal investigationinvolving the same wrongful conduct. Kovack also filed anaffidavit of his attorney, in which his attorney averred that (1)he had spoken with an assistant United States Attorney on severaloccasions, and based on those conversations, he believed thatcriminal charges were going to be filed against Kovack; and (2)Kovack intended to invoke his fifth amendment privilege againstself-incrimination in the civil proceedings.

In August 2001, the Bank filed a response to Kovack'smotion to stay the proceedings, asserting, in pertinent part,that (1) federal prosecutors had not yet filed criminal chargesagainst Kovack; (2) Kovack had not claimed that criminal chargeswere pending; (3) the Bank had suffered a financial loss between$2 and $3 million due to Kovack's wrongful conduct; and (4) ifthe trial court stayed the civil proceedings, Kovack mightdissipate his assets, making the Bank's recovery of its lostfunds impossible.

Later during August 2001, the trial court conducted ahearing on Kovack's motion to stay the proceedings. Afterconsidering counsel's arguments, the court denied the motion andstated, in pertinent part, as follows:

"[T]his [c]ourt does have authority tostay the proceedings in this case upon propershowing, and as I understand[,] that rulingis discretionary with the [c]ourt. *** Itis a fact, as I understand it, that no criminal action is pending in this case. None hasbeen filed in any jurisdiction to my knowledge. The affidavit indicates none has beenfiled. [Kovack's counsel] did file [an]affidavit that it was his belief that chargeswould be filed. That really doesn't help the[c]ourt. *** The fact is there are nonefiled and this [c]ourt must take that factinto consideration. The [c]ourt is alsoconcerned with the fact that [Kovack] has notasserted his fifth amendment right againstself[-]incrimination to any specific requestin this case. All the affidavit, and that'sall I have in the file, *** is an affidavit,again, [Kovack's counsel] indicating that hisclient intends at sometime to invoke hisfifth amendment right to a privilege againstself[-]incrimination. That may well be. Butit is not asserted yet. *** There is a[c]omplaint on file and I understand that[Kovack] must at sometime choose how hewishes to respond to that [c]omplaint. Thatcan be in a variety of ways. It can be a[m]otion to [d]ismiss. It can be a denial. There are any number of ways to answer a[c]omplaint. But I think we need to proceedto that stage. *** [Kovack's counsel hasindicated] that his client intends at sometime to invoke that privilege. *** I am notsure when, if ever, he is going to invoke it. So, I think we need to find out. *** Ithink until we see some facts a little closerto the case at hand, then I see no reason toprevent the plaintiff from pursuing [its]civil remedies and in trying to locate andrecover [its] funds. *** [Kovack's] rightagainst self[-]incrimination is paramount. And I can assure you *** that upon properassertion of that right, it will be supportedand guaranteed. But I think we need to lookat, I think, it's a right and privilege he isgoing to have to affirmatively assert when hefeels it's necessary. *** But I am notgoing to second[-]guess him as to when he isever going to assert that, when he has notasserted that in the past and he had a perfect opportunity to. He may not. Let's findout down the road when there are specificrequests and so forth as to when he wishes toassert that privilege. I will review it andif it's properly asserted and he shows areasonable nexus between a potential criminalconviction and the information requested, Iwill certainly back him up in his assertionof his fifth amendment rights ***. But it'sthe [c]ourt's order and discretionary at thistime to deny the [m]otion to [s]tay of theseproceedings."

This interlocutory appeal followed.

II. THE TRIAL COURT'S DENIAL OF KOVACK'S

MOTION TO STAY THE PROCEEDINGS



Kovack argues that the trial court abused its discretion by denying his motion to stay the civil proceedings againsthim. Specifically, he contends that the court should havegranted the stay because "he is unable to adequately defendhimself in the pending civil proceeding while the criminalinvestigation is hanging over his head." We disagree.

The fifth amendment to the United States Constitutionprovides that no person "shall be compelled in any criminal caseto be a witness against himself." U.S. Const., amend. V. Thefifth amendment does not, however, mandate a stay of civilproceedings pending the outcome of similar or parallel criminalproceedings. See People ex rel. Hartigan v. Kafka & Sons Building & Supply Co., 252 Ill. App. 3d 115, 119, 625 N.E.2d 16, 19(1993) ("Where a criminal action is simultaneously pending with acivil action, courts may stay the civil proceeding based on thefifth amendment until the resolution of the criminal matter"(emphasis added)); Keating v. Office of Thrift Supervision, 45F.3d 322, 324 (9th Cir. 1995) (the Constitution does not requirea stay of civil proceedings pending the outcome of criminalproceedings); Nowaczyk v. Matingas, 146 F.R.D. 169, 174 (N.D.Ill. 1993) ("A stay of civil discovery is sometimes appropriateto protect competing interests arising from parallel civil andcriminal proceedings involving the same subject matter" (emphasisadded)).

Kovack claims that "he is completely hamstrung tryingto defend himself" in the civil proceedings because he mightincriminate himself in the pending criminal investigation. However, Kovack's unenviable position does not deny him his fifthamendment right to remain silent. As the Ninth Circuit Court ofAppeals stated in Keating:

"A defendant has no absolute right not to beforced to choose between testifying in acivil matter and asserting his [f]ifth[a]mendment privilege. Not only is it permissible to conduct a civil proceeding at thesame time as a related criminal proceeding,even if that necessitates invocation of the[f]ifth [a]mendment privilege, but it is evenpermissible for the trier of fact to drawadverse inferences from the invocation of the[f]ifth [a]mendment in a civil proceeding." Keating, 45 F.3d at 326, citing Baxter v.Palmigiano, 425 U.S. 308, 318, 47 L. Ed. 2d810, 821, 96 S. Ct. 1551, 1558 (1976) (notingthe "prevailing rule that the [f]ifth[a]mendment does not forbid adverse inferences against parties to civil actions whenthey refuse to testify in response to probative evidence offered against them").

See also Securities & Exchange Comm'n v. Incendy, 936 F. Supp.952, 956 (S.D. Fla. 1996) (referring to Baxter and noting thatthe Constitution is not violated by forcing an individual to risk"non-criminal disadvantage" by remaining silent in civil proceedings out of fear that he will incriminate himself in a subsequentcriminal action). Similarly, in International Business MachinesCorp. v. Brown, 857 F. Supp. 1384, 1389 (C.D. Cal. 1994), thecourt discussed the difficult decision that must be made by aparty facing simultaneous or successive civil and criminaltrials:

"[T]he contention that being forced to choosebetween the compulsion to testify in a civilsuit in order to avoid an adverse result onthe merits undermines the right to remainsilent in a criminal matter, while havingsurface appeal, will not stand analysis. While the 'choice between testifying or invoking the [f]ifth [a]mendment may be difficult, *** it does not create the basis for astay.' [Citations.]"

Notwithstanding the fact that no direct fifth amendmentviolation results from a trial court's refusal to stay civilproceedings, courts have enunciated several factors to be considered when determining whether to stay civil proceedings, including the following: (1) the plaintiff's interest in an expeditious resolution of the civil case and any prejudice to theplaintiff in not proceeding; (2) the interests of and burdens onthe defendant, including the extent to which the defendant'sfifth amendment rights are implicated; (3) the convenience to thecourt in managing its docket and efficiently using judicialresources; (4) the interests of persons who are not parties tothe civil proceeding; and (5) the interests of the public in thepending civil and criminal actions. See Keating, 45 F.3d at 324-25; Nowaczyk, 146 F.R.D. at 174. The decision whether to staycivil proceedings lies within the trial court's discretion. Cf.United States v. Kordel, 397 U.S. 1, 12 n.27, 25 L. Ed. 2d 1, 10n.27, 90 S. Ct. 763, 770 n.27 (1970) (where the "interests ofjustice" so require); see also Vasa North Atlantic Insurance Co.v. Selcke, 261 Ill. App. 3d 626, 628, 633 N.E.2d 865, 868 (1994).

A. The Bank's Interests

The Bank has suffered a substantial financial loss,totaling between $2 and $3 million. As the Bank points out, ithas a right to proceed with its civil case against Kovack andseek recovery of its lost funds. As earlier noted, parties whoface contemporaneous civil litigation and criminal investigationface difficult choices. At the same time, parties who claim tohave been victimized by fraud or other crimes are entitled topursue their civil remedies. It would be perverse if plaintiffswho claim to be the victims of criminal activity were relegatedto receive slower justice than other plaintiffs simply becausethe behavior they allege is egregious enough to attract theattention of criminal authorities.

B. Kovack's Interests

Whether a party's fifth amendment rights are implicatedis a significant factor for the trial court to consider indeciding whether to stay civil proceedings, "but it is only oneconsideration to be weighed against others." Federal Savings &Loan Insurance Corp. v. Molinaro, 889 F.2d 899, 902-03 (9th Cir.1989). When issues in a criminal matter significantly overlapwith those in the civil proceedings, self-incrimination is morelikely. Trustees of the Plumbers & Pipefitters National PensionFund v. Transworld Mechanical, Inc., 886 F. Supp. 1134, 1139(S.D.N.Y. 1995). In this case, the parties agree that thewrongful conduct alleged in the civil complaint and the wrongfulconduct that is the subject of the criminal investigation is thesame. Kovack's counsel has indicated that Kovack intends toinvoke his fifth amendment privilege in the civil proceedings. If and when Kovack does so, that limitation, though significant,will not bar him from taking the stand and asserting his fifthamendment rights as needed, while presenting a vigorous defensethrough cross-examination and other means available to him.

C. Convenience to the Trial Court

Regarding the convenience to the trial court, we notethat Kovack merely asserted that he was the subject of a federalcriminal investigation. He had not yet been charged with acrime, and the record does not show that a criminal charge waspending. Courts have indicated that an announced charge againsta defendant weighs heavily in the defendant's favor in decidingwhether to stay civil proceedings. See Sterling National Bank v.A-1 Hotels International, Inc., No. 00Civ.7352, slip op. at 2(S.D.N.Y. May 4, 2001) (citing cases). However, a stay is notnormally appropriate when a defendant has not been formallycharged. See Transworld Mechanical, 886 F. Supp. at 1139 ("stayswill generally not be granted before an indictment is issued"). Because Kovack had not yet been charged in the criminal matter,it was not clear how long the civil proceedings would have to bestayed. In effect, Kovack was seeking to delay the civil caseindefinitely, with no predictability as to when the case couldhave returned to the trial court's active docket. This wouldhave burdened the court's ability to manage its cases.

D. Private and Public Interests

Finally, the interests of nonparties and the publicfavored prompt resolution of the civil proceedings. See SterlingNational Bank, No. 00Civ.7352, slip op. at 2, quoting Citibank,N.A. v. Hakim, No. 92Civ.6233, slip op. at 3 (S.D.N.Y. 1993)("'[T]he public interest in financial institutions['] promptlyrecovering misappropriated funds is significant, particularlywhen weighed against the interest in a merely conjectural criminal prosecution'").

Having reviewed the trial court's decision in light ofthe particular circumstances of this case and under the appropriate standard of review, we conclude that the court did not abuseits discretion by denying Kovack's motion to stay the civilproceedings.

III. CONCLUSION

For the reasons stated, we affirm the trial court'sjudgment.

Affirmed.

MYERSCOUGH and KNECHT, JJ., concur.

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