AVANT! CORP. v. Superior Court
2000 Cal. Daily Op. Serv. 2721, 79 Cal. App. 4th 876, 94 Cal. Rptr. 2d 505 (2000)
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Rule of Law:
Corporations do not possess a Fifth Amendment privilege against self-incrimination, and thus a trial court does not abuse its discretion by denying a corporate defendant's motion to stay civil discovery due to a parallel criminal proceeding, even if individual employees might assert such a privilege. Courts will instead apply a multi-factor balancing test to determine if a stay is warranted, while fashioning protective orders for individual employee rights.
Facts:
- Avant! Corporation (Avant) published statements on its website falsely asserting that Eric Nequist, an officer of Cooper & Chyan Technologies and former Cadence employee, admitted to insider trading of Avant! stock and perjury.
- Nequist denied making these statements, trading Avant! stock, or committing criminal insider trading of any kind.
- Nequist formally requested Avant to remove the false statements and issue a retraction, but Avant initially refused, then offered to remove them in exchange for concessions in the discovery process, which Nequist declined.
- Six months after Avant filed its motion to stay proceedings, Avant removed the statements about Nequist from its website.
- Avant was a defendant in a civil case, Cadence Design Systems, Inc. v. Avant! Corp., for copyright infringement and theft of trade secrets.
- Avant was also an indicted defendant in People v. Avant!, a criminal case in Santa Clara County for trade secret theft, which resulted from a search of Avant’s offices.
- Seven current or former Avant employees were also individually indicted in People v. Avant!.
Procedural Posture:
- On July 15, 1998, Eric Nequist filed a civil complaint against Avant! Corporation in an unspecified trial court for defamation, intentional infliction of emotional distress, negligent and intentional interference with economic advantage, abuse of process, and unfair competition and business practices.
- As part of discovery, Nequist propounded requests for admission (RFAs) and a form interrogatory to Avant! regarding alleged trade secret theft.
- Avant! objected to Nequist's discovery requests, citing the involvement of the same issues in a related criminal action.
- Nequist filed a motion to compel Avant!'s responses.
- A discovery master (retired Justice Harry F. Brauer) sustained Avant!'s general objection to the definition of 'you' in the RFAs (limiting it to 'Avant! Corporation') but overruled Avant!'s relevance and criminal-case-pendency objections, recommending that Avant! provide responsive, non-privileged information.
- Avant! objected to the discovery referee's recommendations and filed its own motion asking the trial court to stay civil proceedings or discovery.
- The trial court overruled Avant!'s objections, approved the discovery referee's recommendations, and denied Avant!'s motion to stay.
- Avant! Corporation (petitioner) then sought a writ of mandate from the California Court of Appeal, Sixth Appellate District, to vacate the trial court's order.
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Issue:
Does a trial court abuse its discretion by denying a corporate defendant's motion to stay civil discovery, pending the disposition of a related criminal case, when the corporation itself does not possess a Fifth Amendment privilege against self-incrimination?
Opinions:
Majority - Premo, J.
No, a trial court does not abuse its discretion by denying a corporate defendant's motion to stay civil discovery when the corporation itself does not possess a Fifth Amendment privilege against self-incrimination. The court affirmed the trial court's denial of Avant's motion to stay civil discovery or proceedings. The court emphasized that, unlike private individuals, corporations have no Fifth Amendment privilege against self-incrimination, citing long-standing Supreme Court precedent in Hale v. Henkel, Wilson v. United States, and United States v. Kordel. A corporation is a creature of the state, receiving special privileges, and owes a duty to divulge its business information to the state. While individual employees may have personal Fifth Amendment rights, the corporation cannot assert these rights on its own behalf to obtain a stay. The court noted that the trial court appropriately addressed potential Fifth Amendment concerns for individual employees by defining “you” in the discovery requests to refer solely to Avant! Corporation and requiring Avant! to provide “non-privileged information in the custody and control of its officers, employees and agents.” The court further explained that the decision to stay civil proceedings in the face of parallel criminal proceedings rests on the trial court's discretion, guided by a balancing of various factors established in Keating v. Office of Thrift Supervision. Applying these factors, the court found Nequist had a strong interest in proceeding expeditiously, the burden on Avant was diminished by the trial court's protective order, court convenience favored denying the stay, non-parties' interests were protected by the tailored order, and the public had a significant interest in Nequist's ability to vindicate his rights. Therefore, the trial court acted within the bounds of reason.
Analysis:
This case establishes clear precedent in California that corporations cannot invoke the Fifth Amendment privilege against self-incrimination to stay civil discovery proceedings, even when facing parallel criminal charges. It reinforces the distinct legal standing of corporations versus individuals regarding constitutional rights. The decision provides a practical framework for trial courts to manage such situations by applying a multi-factor balancing test and implementing protective orders to safeguard the personal Fifth Amendment rights of individual employees, without unduly delaying civil litigation. This limits a corporation's ability to strategically delay civil cases by citing related criminal investigations, ensuring that plaintiffs can pursue justice in a timely manner.
