Case Names: Keene, et al. v. Lund
Case Numbers: 2014-1-CV-273082, 266573 (Lines 4-5, 7)
2015-1-CV-281299, 281301, 284149, 281297, 281318 (Lines 12-16)

Defendants John R. Lund, DDS and John R. Lund, DDS, Inc., sued in these eight separate cases, move this Court for an Order staying the proceedings until the disposition of a related criminal case recently filed against Dr. Lund; or alternatively, request a Protective Order that Plaintiffs be precluded from taking Defendants’ depositions or propounding discovery until the criminal case is resolved.

Regarding the Motions to Stay filed in the 2015 cases: Cordi v. Lund, DDS, et al, Mitchell v. Lund, DDS, et al, Nasser v. Lund, DDS, Rushforth v. Lund, DDS, et al, and Brallier v. Lund, DDS, et al, Plaintiffs in each of these actions have filed a Notice of Non Opposition to the Stay. These Notices further state that a protective order preventing deposition testimony during the pendency of the criminal proceeding may be sufficient to protect all interests.

Having considered the Notices of Non Opposition in the 2015 cases, and the Opposition filed in the 2014 cases (Keene, et al. and Varteressian) the Court will GRANT Defendants’ Motion to Stay proceedings in all eight of these civil cases, for the following reasons.

FACTS AND PROCEDURAL HISTORY

Plaintiffs have sued Defendants for fraud and deceit, battery, fraudulent billing of money had and received, theft, and dental malpractice.

Defendant Dr. Lund was arrested and charged with 28 counts of insurance fraud and was scheduled to be arraigned on June 6, 2016. Defendants’ indictment and criminal complaint has not yet been made available, but Defendant represents he understands the charges against him involve the identical subject matter and issues as those raised by Plaintiffs in each of these cases. The gravamen of each civil complaint is that Defendant(s) provided unnecessary and fraudulent treatment to them. As a direct result of the pendency of the criminal action, Defendant cannot effectively defend his interests in both this civil litigation and the criminal prosecution, without waiving his Fifth Amendment privilege against self-incrimination.

Defendant(s) could reasonably and legitimately refuse to answer questions posed at either deposition or trial by Plaintiffs, based upon the threat of self-incrimination. Defendants request the civil case be stayed pending resolution of the criminal case.

DISCUSSION

I. Same Transaction or Related Transactions

Those asserting the Fifth Amendment privilege can claim it where an individual “reasonably believes the answers might incriminate him or her in a criminal case.” (Spielbauer v. County of Santa Clara (2009) 45 Cal.4th 704, 714) Furthermore, “it has been consistently held that when both civil and criminal proceedings arise out of the same or related transactions, an objecting party is generally entitled to a stay of discovery in the civil action until disposition of the criminal matter.” (Pacers, Inc., supra, 162 Cal.App.3d at p. 690)

Plaintiffs argue charges of defrauding insurance companies are not the same as defrauding individual patients and the criminal charges do not involve the same subject matter or issues raised by Plaintiffs in these cases. Plaintiffs state the criminal case is based exclusively upon insurance fraud; while nowhere in the civil complaint do plaintiffs allege insurance fraud. Plaintiffs contend the elements are different, so evidence in the civil case poses no risk of being useful to prosecutors in the criminal case. Plaintiffs also claim Defendants are not entitled to the 5th Amendment protection because Defendants were already deposed, responded to interrogatories, Defendant Dr. Lund was already aware he was being accused of fraud well before the instant actions were filed, and the 5th Amendment was never raised.

“Same or related transactions” include criminal cases arising out of the same or similar facts at issue in a civil case. Both cases arise out of the same or similar facts: the treatment and billing of patients. Defendants have established that the claims involve, or potentially implicate, the same or related transactions. Defendants’ application of the Avant! Corp (79 Cal.App.4th 876, 885) factors for imposition of a stay of these civil proceedings until the disposition of the criminal case against Defendant is persuasive. The Court has weighed and considered these factors in reaching its conclusion.

II. Corporate Entity

Plaintiffs correctly assert that corporate employees and custodians cannot assert the privilege against self-incrimination on a company’s behalf, citing People v. Appellate Division (2011) 197 Cal.4th 985, 994, “Organizations of any sort, corporate or otherwise, as well as individuals acting as representatives of an organization, lack the privilege against self-incrimination” Lastly, Plaintiffs argue the criminal statute of limitations has run: insurance fraud and grand theft have a 4-year statute. It begins to run when “the offense has been discovered, or could have reasonably been discovered,” Penal Code §803(e). Lund sold his practice to Zeidler in January 2012. Plaintiffs believe it would be unfair to delay proceeding of this case when the criminal statute of limitations has already expired.

Although corporate employees and custodians may not assert the privilege against self-incrimination on a company’s behalf, an employee may assert the privilege on their own behalf. As Defendants contend, Defendant Dr. Lund is the only person alleged to be responsible for the corporation’s operations and practices. The corporation is a professional corporation in his name, alone. He is accused of committing a criminal act, which involves and is directly related to the operations of his professional corporation. Any testimony by Dr. Lund regarding the operations of the professional corporation in the civil case may incriminate him in the criminal matter because the actions of the corporation and the individual cannot be separated.

Therefore, Defendants have established that Dr. Lund seek to avoid self-incrimination, both for himself and for his actions in conducting the business of his eponymously named professional corporation. The Court finds no waiver by Dr. Lund’s participation in pretrial discovery before the inception of the criminal proceedings, nor does it find such participation to bar Defendant’s further assertion of his constitutional right.

The statute of limitations issue is for the criminal court to decide, and is beyond the scope of the issues currently before this court. It is a fact-specific determination that is not properly before this court, in determining whether Dr. Lund may reasonably assert his Fifth Amendment privilege against self-incrimination in these civil proceedings, while the criminal action remains pending.

CONCLUSION

The Court will GRANT Defendants’ Motion to Stay proceedings in each of these eight pending civil cases, pending disposition of the related criminal case.
The dates currently set for Mandatory Settlement Conference and Trial in the Varteressian case are VACATED. Mediation Status Review Conference is set for 8/18/16 at 10:30 a.m.
Plaintiffs’ motion for leave to conduct discovery of Defendants’ financial condition under Civil Code §3295 in the Keene case is DENIED, without prejudice, as discovery is stayed by this Court’s Order.
All cases remain set for Mediation Status Review on 8/18/16 at 10:30 a.m.