After the Guilty Plea

The onslaught of guilty pleas in post-Enron financial fraud cases has created new challenges for defense attorneys in the parallel civil litigation that inevitably accompanies criminal charges. Attorneys for the civil plaintiffs are quick to strike as soon as the guilty pleas are disclosed, demanding that the pleading defendant provide the documents and testimony previously denied to them by the invocation of the Fifth Amendment, and seeking to collect a prompt judgment.

While numerous articles have analyzed strategy in parallel civil proceedings where defendants have not yet been criminally convicted, or even indicted, the civil defense of the cooperating guilty pleader has been less examined. The operating assumptions are that the pleading individual either forfeits or waives Fifth Amendment rights and therefore faces immediate discovery, and that the defendant is collaterally estopped from contesting liability. This article explores these assumptions.

Survival of the Fifth Amendment Privilege

Contrary to common belief, the privilege continues to exist after a guilty plea. It survives at least until the conviction is final, which does not occur until the individual is sentenced. Mitchell v. U.S., 526 U.S. 314, 322-26 (1999). As the Supreme Court stated in Mitchell, “Where a sentence has yet to be imposed, however, this Court has already rejected the proposition that incrimination is complete once guilt has been adjudicated,” citing Estelle v. Smith, 451 U.S. 454, 462 (1981). The Court observed that so long as the sentence has not been imposed, “a defendant may have legitimate fear of adverse consequences from further testimony.” 526 U.S. at 326.

Thus, a plea does not extinguish the privilege at least until sentencing. In many cases, pleas are made in exchange for future cooperation, so the defendant's final conviction might well be years away. The pleader may continue to assert the Fifth Amendment until that time, and need not testify and/or produce documents in civil proceedings.

Additionally, in most federal plea arrangements, a plea is entered only to one or some counts of what are usually multi-count indictments. Typically, the plea is binding only on the prosecutor's office that has filed the charges, and not upon other federal and state jurisdictions. So long as it is possible – not even probable – that another federal or state prosecutor might file charges based on the remaining counts, the threat of incrimination continues to exist. U.S. v. Yurasovich, 580 F.2d 1212, 1218 (3d Cir. 1978); U.S. v. Seavers, 427 U.S. 607 (6th Cir. 1973). In U.S. v. Oliveras, 905 F.2d 623,628 (2d Cir. 1990), the Court of Appeals found, on Fifth Amendment privilege grounds, that a defendant could not, at sentencing, be forced to accept responsibility “for crimes other than those to which he pled guilty or of which he has been found guilty … ” This means that the privilege may continue to be available to a pleader even after a sentence is imposed as to charges to which he or she has not pled guilty.

Not only does the plea fail to invalidate the privilege, but it does not constitute a waiver of any Fifth Amendment rights in the civil case. This is so because the law long has been unlike, say, the attorney-client privilege – that the waiver of the privilege in one proceeding does not waive it in other proceedings. Empsak v. U.S., 349 U.S. 190, 201 N.2 (1955); U.S. v. Licavoli, 604 F.2d 613 (9th Cir. 1980); In Re Neff, 206 F.2d 149 (3d Cir. 1953). The fact that the pleading defendant has testified or agreed to testify, or was required expressly to waive his or her privilege in the criminal case, is not grounds for compelling testimony in another case on a waiver theory. This does not, of course, prevent the use in evidence against the pleader of any prior statements made in other proceedings, U.S. v. Salerno, 506 U.S. 317 (1992). Rather, it prohibits requiring the individual to give new testimony or other discovery.

Civil Issue Preclusion

Many plaintiffs' attorneys believe that they can conclusively preclude the pleading defendant from contesting the civil claims by virtue of res judicata or collateral estoppel. These doctrines are intended to avoid multiple litigation based on the same facts and, where all the proper elements are met, they can in fact preclude a litigant from contesting claims or issues previously decided. Once again, however, this may be easier said than done, and timing continues to play a key role.

A conviction based on a guilty plea does not result in any judicial adjudication of facts, which usually is a pre-requisite for application of collateral estoppel-like preclusion. The Supreme Court has stated that “the taking of a guilty plea is not the same as an adjudication on the merits after a full trial … ” Johnson v. Ohio, 467 U.S. 493, 500 n.9 (1984). Just as consent judgments and stipulations do not involve an adjudication that prevents the parties from litigating the issues in the future, In re Kane, 254 F.3d 325, 329 (1st Cir. 2001), neither should a guilty plea.

Significantly, the requirement for accepting guilty pleas in the Federal Rules of Criminal Procedure, Rule 11(b)(3), simply asks the court to find that there “is a factual basis for the plea.” This by no means satisfies a criminal burden of proof beyond a reasonable doubt, or even a civil preponderance of the evidence standard. It simply means that there was “sufficient evidence … that the defendant likely committed the crime.” U.S. v. Marks, 38 F.3d 1009, 1012 (8th Cir. 1994). Such a determination does not seem to rise to the level of an “adjudication.” Moreover, the differences in the proof requirements for a guilty plea and a civil judgment may provide an independent basis for rejecting the application of collateral estoppel. See U.S. v. One Assortment of 89 Firearms, 465 U.S. 354, 361-2 (1984).

Another requirement for the application of the preclusion doctrines is that the prior judgment must be final: “Only a final judgment is res judicata.” G&C Merriam Co. v. Smithfield, 241 U.S. 22, 28-29 (1916). If the guilty plea is not a final judgment for Fifth Amendment purposes, it likely also is not “final” for application of the preclusion doctrines – at least until after sentencing. It is also important to analyze the facts and legal elements of the issue for which preclusion is sought, because the preclusion doctrines apply only when the issues in both cases are the same. Thus, in U.S. v. Farmer, 923 F.2d 1557, 1563-65 (11th Cir. 1991), an acquittal in a conspiracy case did not preclude aiding and abetting charges because the two charges involved different elements of proof. Likewise, a guilty plea to a conspiracy charge does not necessarily establish binding proof of a substantive charge. See Alsco-Harvard Fraud Litigation, 523 F. Supp. 790, 800-804, 811 (D.D.C. 1981).

This is not to say that the plea is of no value to the civil plaintiffs. Indeed, the judgment may be put into evidence once it becomes final, and although it is not conclusive, it certainly may be considered by the trier of fact. FDIC v. Oldenburg, 34 F.3d 1529, 1539-40 (10th Cir. 1994). Similarly, a final judgment may be used to support a motion for summary judgment. Scholes v. Lehmann, 56 F.3d 750, 762 (7th Cir. 1995). Courts have also imposed a form of “judicial estoppel” to preclude litigants from taking inconsistent positions before the criminal and civil judges. Lowery v. Stovall, 92 F.3d 219, 224-225 (4th Cir. 1996).

Conclusion

As a practical matter, defense counsel might seek to enlist the aid of the prosecutors who elicited the guilty plea. They too have an interest in preventing discovery from an important cooperating witness. Rather than standing by while other actual or putative criminal defendants force the invocation of the privilege or conduct a lengthy deposition of a co-conspirator, prosecutors may choose to file a motion to stay all or part of the discovery process. Such a stay might also result from an informal prosecutorial request to Plaintiffs' counsel to delay discovery from certain defendants until a later date.

There is no doubt that civil defendants who have pled guilty start with at least two strikes against them. While they pose unique challenges for defense counsel, there may be room to maneuver and delay. As is true in so much of life, timing is everything.

The onslaught of guilty pleas in post-Enron financial fraud cases has created new challenges for defense attorneys in the parallel civil litigation that inevitably accompanies criminal charges. Attorneys for the civil plaintiffs are quick to strike as soon as the guilty pleas are disclosed, demanding that the pleading defendant provide the documents and testimony previously denied to them by the invocation of the Fifth Amendment, and seeking to collect a prompt judgment.

While numerous articles have analyzed strategy in parallel civil proceedings where defendants have not yet been criminally convicted, or even indicted, the civil defense of the cooperating guilty pleader has been less examined. The operating assumptions are that the pleading individual either forfeits or waives Fifth Amendment rights and therefore faces immediate discovery, and that the defendant is collaterally estopped from contesting liability. This article explores these assumptions.

Survival of the Fifth Amendment Privilege

Contrary to common belief, the privilege continues to exist after a guilty plea. It survives at least until the conviction is final, which does not occur until the individual is sentenced. Mitchell v. U.S. , 526 U.S. 314, 322-26 (1999). As the Supreme Court stated in Mitchell, “Where a sentence has yet to be imposed, however, this Court has already rejected the proposition that incrimination is complete once guilt has been adjudicated,” citing Estelle v. Smith , 451 U.S. 454, 462 (1981). The Court observed that so long as the sentence has not been imposed, “a defendant may have legitimate fear of adverse consequences from further testimony.” 526 U.S. at 326.

Thus, a plea does not extinguish the privilege at least until sentencing. In many cases, pleas are made in exchange for future cooperation, so the defendant's final conviction might well be years away. The pleader may continue to assert the Fifth Amendment until that time, and need not testify and/or produce documents in civil proceedings.

Additionally, in most federal plea arrangements, a plea is entered only to one or some counts of what are usually multi-count indictments. Typically, the plea is binding only on the prosecutor's office that has filed the charges, and not upon other federal and state jurisdictions. So long as it is possible – not even probable – that another federal or state prosecutor might file charges based on the remaining counts, the threat of incrimination continues to exist. U.S. v. Yurasovich , 580 F.2d 1212, 1218 (3d Cir. 1978); U.S. v. Seavers , 427 U.S. 607 (6th Cir. 1973). In U.S. v. Oliveras , 905 F.2d 623,628 (2d Cir. 1990), the Court of Appeals found, on Fifth Amendment privilege grounds, that a defendant could not, at sentencing, be forced to accept responsibility “for crimes other than those to which he pled guilty or of which he has been found guilty … ” This means that the privilege may continue to be available to a pleader even after a sentence is imposed as to charges to which he or she has not pled guilty.

Not only does the plea fail to invalidate the privilege, but it does not constitute a waiver of any Fifth Amendment rights in the civil case. This is so because the law long has been unlike, say, the attorney-client privilege – that the waiver of the privilege in one proceeding does not waive it in other proceedings. Empsak v. U.S. , 349 U.S. 190, 201 N.2 (1955); U.S. v. Licavoli , 604 F.2d 613 (9th Cir. 1980); In Re Neff, 206 F.2d 149 (3d Cir. 1953). The fact that the pleading defendant has testified or agreed to testify, or was required expressly to waive his or her privilege in the criminal case, is not grounds for compelling testimony in another case on a waiver theory. This does not, of course, prevent the use in evidence against the pleader of any prior statements made in other proceedings, U.S. v. Salerno , 506 U.S. 317 (1992). Rather, it prohibits requiring the individual to give new testimony or other discovery.

Civil Issue Preclusion

Many plaintiffs' attorneys believe that they can conclusively preclude the pleading defendant from contesting the civil claims by virtue of res judicata or collateral estoppel. These doctrines are intended to avoid multiple litigation based on the same facts and, where all the proper elements are met, they can in fact preclude a litigant from contesting claims or issues previously decided. Once again, however, this may be easier said than done, and timing continues to play a key role.

A conviction based on a guilty plea does not result in any judicial adjudication of facts, which usually is a pre-requisite for application of collateral estoppel-like preclusion. The Supreme Court has stated that “the taking of a guilty plea is not the same as an adjudication on the merits after a full trial … ” Johnson v. Ohio , 467 U.S. 493, 500 n.9 (1984). Just as consent judgments and stipulations do not involve an adjudication that prevents the parties from litigating the issues in the future, In re Kane, 254 F.3d 325, 329 (1st Cir. 2001), neither should a guilty plea.

Significantly, the requirement for accepting guilty pleas in the Federal Rules of Criminal Procedure, Rule 11(b)(3), simply asks the court to find that there “is a factual basis for the plea.” This by no means satisfies a criminal burden of proof beyond a reasonable doubt, or even a civil preponderance of the evidence standard. It simply means that there was “sufficient evidence … that the defendant likely committed the crime.” U.S. v. Marks , 38 F.3d 1009, 1012 (8th Cir. 1994). Such a determination does not seem to rise to the level of an “adjudication.” Moreover, the differences in the proof requirements for a guilty plea and a civil judgment may provide an independent basis for rejecting the application of collateral estoppel. See U.S. v. One Assortment of 89 Firearms, 465 U.S. 354, 361-2 (1984).

Another requirement for the application of the preclusion doctrines is that the prior judgment must be final: “Only a final judgment is res judicata.” G&C Merriam Co. v. Smithfield , 241 U.S. 22, 28-29 (1916). If the guilty plea is not a final judgment for Fifth Amendment purposes, it likely also is not “final” for application of the preclusion doctrines – at least until after sentencing. It is also important to analyze the facts and legal elements of the issue for which preclusion is sought, because the preclusion doctrines apply only when the issues in both cases are the same. Thus, in U.S. v. Farmer , 923 F.2d 1557, 1563-65 (11th Cir. 1991), an acquittal in a conspiracy case did not preclude aiding and abetting charges because the two charges involved different elements of proof. Likewise, a guilty plea to a conspiracy charge does not necessarily establish binding proof of a substantive charge. See Alsco-Harvard Fraud Litigation, 523 F. Supp. 790, 800-804, 811 (D.D.C. 1981).

This is not to say that the plea is of no value to the civil plaintiffs. Indeed, the judgment may be put into evidence once it becomes final, and although it is not conclusive, it certainly may be considered by the trier of fact. FDIC v. Oldenburg , 34 F.3d 1529, 1539-40 (10th Cir. 1994). Similarly, a final judgment may be used to support a motion for summary judgment. Scholes v. Lehmann , 56 F.3d 750, 762 (7th Cir. 1995). Courts have also imposed a form of “judicial estoppel” to preclude litigants from taking inconsistent positions before the criminal and civil judges. Lowery v. Sto vall, 92 F.3d 219, 224-225 (4th Cir. 1996).

Conclusion

As a practical matter, defense counsel might seek to enlist the aid of the prosecutors who elicited the guilty plea. They too have an interest in preventing discovery from an important cooperating witness. Rather than standing by while other actual or putative criminal defendants force the invocation of the privilege or conduct a lengthy deposition of a co-conspirator, prosecutors may choose to file a motion to stay all or part of the discovery process. Such a stay might also result from an informal prosecutorial request to Plaintiffs' counsel to delay discovery from certain defendants until a later date.

There is no doubt that civil defendants who have pled guilty start with at least two strikes against them. While they pose unique challenges for defense counsel, there may be room to maneuver and delay. As is true in so much of life, timing is everything.