DKS, Inc. v. Corporate Business Solutions, Inc. et al

Filing 47

MEMORANDUM AND ORDER signed by Chief Judge Morrison C. England, Jr. on 11/09/15 ORDERING that the 38 Motion to Stay pending appeal following denial of Motion to Compel Arbitration is DENIED without prejudice to refiling if the trial date approaches. (Benson, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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DKS Inc.,

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Plaintiff,

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No. 2:15-cv-00132-MCE-DAD

v.

MEMORANDUM AND ORDER

CORPORATE BUSINESS
SOLUTIONS, INC., et al.,
Defendants.

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Through this action, Plaintiff DKS Inc. (“Plaintiff”) seeks to recover money that

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Defendants purportedly stole while ostensibly providing business consulting services that

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were supposed to increase Plaintiff’s cash flow. The Court previously denied Defendant

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Corporate Business Solutions, Inc.’s (“CBS”) Motion to Compel Arbitration (ECF No. 32),

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and CBS timely appealed that denial. Presently before the Court is CBS’s Motion for a

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Stay Pending Appeal (“Motion”). ECF No. 38. For the following reasons, that Motion is

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DENIED.1

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Because oral argument would not be of material assistance, the Court ordered this matter
submitted on the briefs. E.D. Cal. Local R. 230(g).

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ANALYSIS

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District courts have discretion to stay a case pending an appeal of a denial to

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compel arbitration. Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir.

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1990). The moving party has the burden of persuading the court that the circumstances

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of the case justify a stay. Ward v. Estate of Goossen, No. 14-cv-03510, 2014 WL

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7273911 at *1 (N.D. Cal. Dec. 22, 2014). In analyzing whether the moving party has met

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its burden, the Ninth Circuit uses a four-factor test: “(1) whether the party has made a

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strong showing it is likely to succeed on the merits; (2) whether the party will be

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irreparably injured absent a stay; (3) whether issuance of a stay will substantially injure

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the parties in the proceeding; and (4) where the public’s interest lies.” Id.; see also

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Leiva-Perez v. Holder, 640 F.3d 962, 964 (9th Cir. 2011). Courts apply a sliding scale in

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weighing these factors. Morse v. Servicemaster Global Holdings, Inc., No. C 10-00628,

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2013 WL 123610 at *2 (N.D. Cal. Jan. 8, 2013). Under this sliding scale approach, a

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moving party who cannot show a strong likelihood of success on the merits may

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nonetheless be entitled to a stay provided it can show that the second and third factors

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tilt sharply in its favor and that the appeal raises serious legal questions. Kum Tat Ltd. v.

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Linden Ox Pasture, LLC, No. 14-cv-02857, 2015 WL 674962 at *2 (N.D. Cal. Feb. 17,

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2015); see also Leiva-Perez v. Holder, 640 F.3d at 966.

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CBS has failed to meet its burden of showing that the circumstances of this case

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warrant a stay pending its appeal of the Court’s order denying its Motion to Compel. As

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an initial matter, CBS has completely failed to address one of the four factors that this

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Court must consider in deciding to grant a stay. Rather than explaining why its appeal is

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likely to succeed on the merits, CBS argues instead that its appeal is “nonfrivolous”

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because the Court’s order on the motion to compel was ten pages long. While the Ninth

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Circuit can be grateful that CBS’s appeal is “nonfrivolous,” CBS has the burden of

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showing, at a minimum, that its appeal raises serious legal questions. Kum Tat Ltd.,

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2015 WL 674962 at *2. Neither the length of the Court’s underlying order nor the bare
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allegation that “reasonable minds can disagree” with that order’s reasoning is enough to

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show that the appeal raises serious legal questions. ECF No. 38 at 5. CBS’s Motion

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fails for this reason alone.

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Furthermore, two of the other three factors weigh in Plaintiff’s favor. Failing to

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stay this case will not harm the public interest. Indeed, issuing a stay will harm the

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public interest if Plaintiff’s fraud allegations have any merit. Bradberry v. T-Mobile USA,

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Inc., No. C 06-6567, 2007 WL 2221076 at *5 (N.D. Cal. Aug. 2, 2007). Conversely, the

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risk of lost evidence as a result of delaying this action, along with the amount of money

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at issue, favors denial of the instant Motion. See id. at *4 (explaining that the risk of lost

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evidence is an important consideration in determining whether other parties in

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proceeding will be injured as a result of a stay).

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Finally, CBS also contends that failing to stay proceedings in this Court will result

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in irreparable harm because CBS will be required to engage in the discovery process

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while the Ninth Circuit considers the appeal. Although continuing litigation costs in the

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face of a denied motion to compel arbitration generally constitute irreparable harm, this

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factor does not justify a stay here. Steiner v. Apple Computer, Inc., No. C 07-04486,

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2008 WL 1925197 at *5 (N.D. Cal. April 29, 2008). Because CBS has not made a strong

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showing that it will likely succeed on appeal, it must show that the irreparable harm

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factor “strongly” favors a stay. Id. CBS’s conclusory contention that Plaintiff has made

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“crippling demands for voluminous discovery” is not enough to make a strong showing of

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irreparable harm. ECF No. 38 at 7. Moreover, the discovery that has apparently been

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served in this case is far from crippling. See, e.g., Plaintiff’s Request for Admission to

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Defendant Corporate Business Solutions, ECF No. 39-5 (propounding nine Requests for

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Admission).2 Even if CBS had adequately briefed the issue of whether its appeal

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presents a serious legal question, the discovery occurring in this action is not enough for

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the potential for irreparable harm to weigh sharply in favor of a stay.

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If discovery in this matter becomes unduly burdensome, CBS’s remedy is a protective order
under Federal Rule of Civil Procedure 26(c) rather than a stay of all proceedings.

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This case is in its earliest stages, and the risk of harm to CBS if discovery

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proceeds is low. If the trial date approaches without a decision on the pending appeal,

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CBS is free to file another motion to stay. At this early juncture, however, CBS has failed

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to meet its burden of persuading this Court that the circumstances of this case justify a

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stay. The instant Motion is therefore DENIED.

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CONCLUSION

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For the reasons set forth above, the Motion for Stay Pending Appeal Following

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Denial of Motion to Compel Arbitration (ECF No. 38) is DENIED without prejudice to

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refiling if the trial date approaches.

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IT IS SO ORDERED.

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Dated: November 9, 2015

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