A. Schulman, Inc. HGGC Citadel Plastic Holdings, Inc. v. Citadel Plastic Holdings, LLC
CA 12459-VCL
| Del. Ch. | Nov 2, 2017Background
- Plaintiffs (A. Schulman, HGGC Citadel Plastic Holdings, Lucent Polymers) sued multiple defendants for fraud and breach of contract; court previously denied a 12(b)(6) dismissal and set trial for March 2018.
- Extensive civil discovery had occurred: ~500,000 documents produced and 40+ depositions taken.
- Five individual defendants were served with FBI subpoenas in a parallel federal criminal investigation; no indictments had been returned.
- After the subpoenas, defense counsel cancelled depositions and the five individuals retained new counsel.
- Defendants moved to stay the entire civil case (initially seeking 90 days, but proposing an effectively open-ended postponement) to avoid prejudice from the criminal investigation.
- The Court applied the federal multi-factor stay test (status of criminal case; overlap between proceedings; plus five balancing factors) and denied the stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to stay the civil case pending a criminal investigation | Plaintiffs argued litigation should proceed given extensive discovery, looming trial date, and no indictments; delay would prejudice plaintiffs and public interest in timely remedies | Defendants sought a stay to protect Fifth Amendment rights and allow new counsel to assess criminal exposure; argued overlap between civil claims and criminal investigation justified stay | Denied — court found investigation pre-indictment, overlap unproven, and plaintiffs’ and public interests favored proceeding |
| Scope of stay (all defendants vs. only subpoenaed individuals) | Plaintiffs argued stay would improperly benefit defendants not subject to subpoenas and unduly derail the case | Defendants sought a stay of all deadlines, benefiting all defendants though only five had subpoenas | Denied — stay affecting all parties was unjustified because only five had subpoenas and others faced different issues |
| Weight of pre‑indictment subpoenas as a basis for stay | Plaintiffs maintained subpoenas alone do not warrant a stay and that routine pre‑indictment stays would unfairly delay civil litigation | Defendants contended subpoenas implicated significant criminal risk and justified at least a temporary stay to avoid self-incrimination and other prejudice | Denied — court emphasized stays are disfavored pre‑indictment and subpoenas alone, without more, do not typically justify open‑ended stays |
| Public interest and judicial efficiency considerations | Plaintiffs emphasized public interest in timely resolution, rooting out alleged fraud, and efficient use of court resources (trial scheduled) | Defendants argued protecting criminal investigation integrity and defendants’ rights served public interest | Held for plaintiffs — public interest and efficient administration weighed against an open‑ended stay; judicial resources favored proceeding toward trial |
Key Cases Cited
- Texaco, Inc. v. Borda, 383 F.2d 607 (3d Cir. 1967) (stay decisions require weighing competing interests)
- Landis v. North American Co., 299 U.S. 248 (1936) (court may stay proceedings to control its docket but must balance interests)
- Maryland v. Universal Elections, Inc., 729 F.3d 370 (4th Cir. 2013) (pre‑indictment stays generally disfavored)
- Christian v. Counseling Res. Assocs., Inc., 60 A.3d 1083 (Del. 2013) (Delaware courts have an interest in moving cases toward scheduled trial dates)