(Photo by Chris Radburn/AP)

A federal court judge in Iowa has granted a stay in Aviva Life and Annuity Company’s civil lawsuit against three former Dewey & LeBoeuf executives for allegedly making false and misleading statements as part of a 2010 bond offering.

The judge also allowed the defendants—former chairman Steven Davis, former executive director Stephen DiCarmine and former chief financial officer Joel Sanders—to ask the U.S. Court of Appeals for the Eighth Circuit to hear an interlocutory appeal of his May 19 decision denying their motion to dismiss the case on grounds that the insurance company has no standing because it sold off the bonds and claims that are at the center of the case.

Aviva filed its civil suit against Davis, DiCarmine and Sanders in December 2012, seven months after the collapse of Dewey. The insurer claimed it lost 45 percent of its $35 million investment in the firm’s 2010 bond offering “as a result of false and misleading statements” by the three defendants, who are accused of violating Iowa state and federal securities laws in obtaining loans for Dewey.

Last year, the former Dewey executives filed a motion to dismiss the suit, arguing that Aviva lacked standing to file the claim because it sold the securities in question to Sea Port Group Securities for $19.2 million in the same month that Dewey filed for bankruptcy. U.S. District Judge James Gritzner for the Southern District of Iowa denied the motion on May 19 of this year.

Then, in June, the defendants asked Gritzner to stay the civil proceedings pending the outcome of a criminal case filed in March by Manhattan District Attorney Cyrus Vance against Davis, DiCarmine and Sanders as well as a fourth defendant—former Dewey client relations manager Zachary Warren—accusing them of masterminding a fraudulent scheme to cover up Dewey’s financial troubles.

Davis, DiCarmine and Sanders argued to Gritzner that by proceeding with the civil case in Iowa while the criminal case is underway, the men would have to choose between preserving their Fifth Amendment right to avoid self-incrimination and participating in their defense of the criminal trial that is scheduled to go to trial in January 2015 because both cases use some of the same evidence.

Vance’s office joined in requesting a stay in the Aviva case in June. (The office also had filed and received a stay in April from federal court in Manhattan in civil proceedings by the U.S. Securities and Exchange Commission against Davis, DiCarmine and Sanders as well as finance director Frank Canellas and controller Tom Mullikin, in which the SEC accuses the men of accounting fraud.)

Aviva, represented by Kilpatrick, Townsend & Stockton partner Helen Michael, asked Gritzner to deny the stay request, arguing that the insurer’s civil case had been delayed long enough and that 18 months had already passed without having entered discovery. The insurer was concerned that further delay could harm its case because of statutes of limitation, among other reasons.

On Tuesday, Gritzner agreed to put Aviva’s civil suit on hold until the criminal case is resolved, writing in his ruling that the court “agrees with the defendants and [the district attorney of New York County] that the criminal case should yield a great deal of evidence that can be utilized in this proceeding once a stay is lifted.”

He added: “This court is greatly concerned about the ability of witnesses to cooperate … due to cooperating agreements they may have with [the district attorney of New York County] as well as the logistical difficulties likely to arise during the six-month criminal trial next winter and spring. The task of managing discovery herein against the competing demands in New York offers the potential for substantial conflict.”

The criminal case is slated to move forward in August with the district attorney’s response to the defendants’ omnibus motions. The next court date is scheduled for Sept. 15.

In his order Tuesday, Gritzner refused to reconsider his motion to dismiss Aviva’s suit. Instead he allowed the defendants to file an interlocutory appeal with the Eighth Circuit, noting in his order that there is no assurance that the Eighth Circuit would accept the appeal.

“The case is one of the exceptional circumstances where a certification for interlocutory appeal is justified,” Gritzner wrote, adding, “An immediate appeal may materially advance the ultimate termination of the litigation.”

Kevin Van Wart, Davis’ attorney and a senior litigation partner at Kirkland & Ellis, told The Am Law Daily: “We are pleased with the ruling and believe it was a sensible resolution.”

Michael did not respond to requests for comment.