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    The United States Attorney's Office wrote to Judge Buchwald requesting that she not stay a civil false claims action against Daniel Karron pending the resolution of his criminal appeal. The letter argues that Karron's conviction estops him from denying liability in the civil case under the False Claims Act. It also asserts that a conviction constitutes a final judgment for preclusion purposes even if appealed. Finally, it contends the government's interest in recovery and judicial efficiency outweigh Karron's interest in delaying the civil case during his criminal appeal.

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    09.03.11 Letter to NRB

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    The United States Attorney's Office wrote to Judge Buchwald requesting that she not stay a civil false claims action against Daniel Karron pending the resolution of his criminal appeal. The letter argues that Karron's conviction estops him from denying liability in the civil case under the False Claims Act. It also asserts that a conviction constitutes a final judgment for preclusion purposes even if appealed. Finally, it contends the government's interest in recovery and judicial efficiency outweigh Karron's interest in delaying the civil case during his criminal appeal.

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    55 views4 pages

    United States Attorney Southern District O/new York: U.S. Department of Justice

    Uploaded by

    D B Karron, PhD
    The United States Attorney's Office wrote to Judge Buchwald requesting that she not stay a civil false claims action against Daniel Karron pending the resolution of his criminal appeal. The letter argues that Karron's conviction estops him from denying liability in the civil case under the False Claims Act. It also asserts that a conviction constitutes a final judgment for preclusion purposes even if appealed. Finally, it contends the government's interest in recovery and judicial efficiency outweigh Karron's interest in delaying the civil case during his criminal appeal.

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    of 4

    U.S.

    Department of Justice

    United States Attorney


    Southern District o/New York

    86 Chambers Street, 3'" Floor


    New York, New York 10007

    March 11, 2009

    BY HAND

    Hon. Naomi Reice Buchwald


    United States District Judge
    Daniel Patrick Moynihan United States Courthouse
    500 Pearl Street, Suite 2270
    New York, New York 10007

    Re: United States v. Karron, No. 08 Civ. 10223 (NRB) (DFE)

    Dear Judge Buchwald:

    This Office represents the United States in the above-referenced action, which seeks to
    recover damages and civil penalties in connection with false claims made by defendant Daniel
    Karron to fraudulently obtain in excess of $1.3 million in scientific grants from the Department
    of Commerce. I write pursuant to the Court's March 4th Order, construing Karron's letter dated
    January 22,2009, to be a request to stay this action pending the resolution of her criminal appeal,
    and requiring the Government to respond by today. This Court should not stay this action during
    the pendency of Karron' s criminal appeal.

    "It is well settled that a federal court has the discretion to stay a civil case pending
    resolution of a related ... criminal action, if the interests ofjustice so require. 'A stay of the
    civil case, however, is an extraordinary remedy.'" Jackson v. Johnson, 985 F. Supp. 422, 424
    (S.D.N.Y. 1997) (citations omitted; quoting Trustees ofPlumbers & Pipefitters Nat'! Pension
    Fund v. Transworld Mechanical, Inc., 886 F. Supp. 1134, 1139 (S.D.N.Y. 1995)). In considering
    any application to stay a civil action pending the resolution of a criminal action, "courts must
    weigh competing interests, including the interests of the defendants, the interests of the plaintiffs
    in proceeding with the litigation, the public interest, and the interests of the courts and of third
    parties." SE.C v. Doody, 186 F. Supp. 2d 379,381 (S.D.N.Y. 2001) (internal quotation marks
    and citation omitted).

    In support of her application, Karron cites only one reason why she believes a stay is
    appropriate: because she cannot testify freely about the subject matter of this action until her
    criminal appeal resolves "in protection of [her] 5th amendment rights under the United States
    Constitution." Once the appeal is decided, Karron has indicated that she "categorically den[ies]
    the truth of [the Government's] allegations," and presumably intends to testify as such.

    This is entirely a red herring, as Karron has no ability to deny her culpability in this action
    and, in fact, no discovery is required at all. Indeed, "a criminal conviction, whether by jury
    verdict or guilty plea, constitutes estoppel in favor of the United States in a subsequent civil
    proceeding as to those matters determined by the judgment in the criminal case." New York v.
    Julius Nasso Concrete Corp., 202 F.3d 82, 86 (2d Cir. 2000) (quoting United States v. Podell,
    572 F.2d 31, 35 (2d Cir. 1978». This rule of estoppel-by-conviction was explicitly written into
    the False Claims Act:

    Notwithstanding any other provision of law, the Federal Rules of Criminal


    Procedure, or the Federal Rules of Evidence, a final judgment rendered in
    favor of the United States in any criminal proceeding charging fraud or false
    statements, whether upon a verdict after trial or upon a plea of guilty or nolo
    contendere, shall estop the defendant from denying the essential elements of
    the offense in any action which involves the same transaction as in the
    criminal proceeding and which is brought under subsection (a) or (b) of
    section 3730.

    31 U.S.c. § 3731(d). Because Karron acknowledges that this case is "essentially the same as the
    criminal case against [her]," the only remaining question is whether her conviction is a "final
    judgment," notwithstanding the pending appeal.

    But courts routinely hold that a conviction, regardless of whether it is the subject of a
    pending appeal, is a "final judgment rendered in favor of the United States" within the meaning
    of the False Claims Act. For example, in United States v. St. Luke's Subacute Hospital and
    Nursing Centre, No. 00-1976,2004 WL 2905237 (N.D. Cal. Dec. 16,2004), Judge Patel rejected
    the argument that it was unfair to apply estoppel while the underlying conviction was appealed,
    explaining:

    While it may be true that an issue of fairness is an important consideration in


    determining whether to apply the common law doctrine ofcollateral estoppel
    offensively against a defendant . . . such concerns are for the most part
    inapposite to the application of the statutory estoppel provision of the FCA.
    Because section 3731 (d) expressly states that its preclusive effect applies
    "notwithstanding any other provision of law," the prudential limitations on
    the common law doctrine do not apply. Thus, absent a degree of unfairness
    that rises to the level of a due process violation which defendants cannot
    credibly assert here - the court must interpret section 3731 (d) to mean what
    it says: namely, that a final judgment in any criminal proceeding "shall estop
    ... defendant[s] from denying the essential elements" of any offense in a
    subsequent civil proceeding brought under the FCA and arising out of the
    same transaction or occurrence.

    Id. at *4. See also United States v. Szilvagyi, 398 F. Supp. 2d 842,845-47 (E.D. Mich. 2005);
    Leone Industries v. Associated Packaging, Inc., 795 F. Supp. 117, 118 n.2 (D.N.J. 1992). But
    see United States ex rei. Virgin Islands Housing Auth. v. Coastal Gen. Constr. Serv., 299 F.

    2
    Supp. 2d 483, 486 n.3 (D. Vi. 2004) (noting, without further explanation, that the court had
    previously stayed case pending resolution of criminal appeal). I

    Even in the context of common law estoppel, where fairness is a relevant consideration,
    courts frequently hold that a conviction is entitled to preclusive effect, notwithstanding a pending
    appeal. See, e.g., Robi v. Five Platters, Inc., 838 F.2d 318, 327 (9th Cir. 1988) ("The present
    appeals in no way affect the 'firmness' of the Robi decisions in the district court for purposes of
    issue preclusion" (citations omitted)). And the Second Circuit has expressly recognized that
    "[t]he pendency ofa criminal appeal generally 'does not deprive a judgment of its preclusive
    effect.'" United States v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen &
    Helpers ofAm., AFL-CIO, 905 F.2d 610,621 (2d Cir. 1990). Thus, for example, Judge Marbley
    recently explained the importance of allowing a SEC civil action enforcement action to proceed
    even as the related criminal conviction was on appeal:

    A criminal conviction and sentence is a final judgment on the merits.


    Defendants argue that because they have an expedited appeal pending before
    the Sixth Circuit, this Court should either exercise its discretion not to apply
    estoppel or stay its decision on the SEC's Motion [for summary judgment]
    until after the appeals process is complete. . . . The majority of courts have
    concluded that a pending criminal appeal does not bar the court from
    applying principles of claim preclusion to the plaintiffs case. Allowing
    Defendants to avoid the preclusive effect of the Criminal Action until their
    appeal is finalized would halt the process of justice. Defendants have the
    ability to delay their criminal appeals for years by requesting en banc
    hearings, petitioning the U.S. Supreme Court for certiorari, and filing habeas
    corpus petitions.

    s.E.c. v. Blackwell, 477 F. Supp. 2d 891,901 (S.D. Ohio 2007) (citations omitted).

    Simply put, Karron already had a criminal trial with all of its procedural safeguards, and
    the jury in that case found that the Government proved its case beyond a reasonable doubt.
    Karron's implicit suggestion that she may revisit that determination in this case - in order to
    determine whether the government has proved its case by a preponderance of the evidence - is
    wrong as a matter of law. And since Karron's mistaken belief that she will be able to relitigate
    her guilt is the only reason she has advanced in favor of a stay, she has no valid interest in having
    this case stayed. On the other hand, the Government's interests in prosecuting this case, the

    In denying Karron bail pending appeal, Judge Patterson has held that her putative
    appellate arguments "do not raise a substantial question of law or fact likely to result in reversal."
    But in the event that Karron's conviction is overturned on appeal, her remedy will be to move
    this court under Federal Rule of Civil Procedure 60, which permit a court to relieve a party of a
    final civil judgment if "it is based on an earlier judgment that has been reversed or vacated."
    Fed. R. Civ. P. 60(b)(5).

    3
    public.s interest in recovering fraudulently obtained grant funds, and the Court's interest in
    efficient judicial administration are all real, valid, and serious concerns. Weighing those interests
    is entirely one-sided. As a result, no stay should issue.

    Instead, the Government respectfully requests that the Court set a briefing schedule for
    summary judgment. We propose the following schedule, which is somewhat elongated to take
    into account Karron' s current incarceration.

    Government to move on or before April 17, 2009


    Karron to oppose on or before June 5, 2009
    Government to reply on or before June 19, 2009

    Thank you for your consideration of this request.

    Respectfully,

    LEV L. DASSIN
    Acti~g y
    '~d States Attorney
    i j ,---'~.....•
    l
    I·
    /{
    I,
    By:
    MATTHE . SCHWARTZ
    Assistanrunited States Attorney
    86 Chambers Street, 3rd Floor
    New York, New York 10007
    Telephone: (212) 637-1945
    Facsimile: (212) 637-2750
    E-mail: [email protected]

    cc: BY OVERNIGHT DELIVERY & ELECTRONIC MAIL

    Daniel B. Karron, Reg. No. 60101-054


    FPC Alderson
    Federal Prison Camp
    Glen Ray Road, Box A
    Alderson, West Virginia 24910
    E-mail: [email protected]

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