LuxeYard, Inc. v. Bell et al

Filing 61

ORDER. ORDERED that Defendants' Motion to Stay Discovery Pursuant to Fed. R. Civ. P. 26(c)(1) Pending Determination of Defendants' Motion to Dismiss Plaintiffs' Amended Complaint 34 is DENIED and Plaintiff's Motion to Compel Deposition of Defendant Maury Bell 33 is GRANTED in part. Plaintiff may conduct the deposition of Defendant William Bell subject to the notice provisions of Fed. R. Civ. P. 30(b)(1) and D.C.COLO.LCivR. 30.1, by Magistrate Judge Kathleen M. Tafoya on 6/5/14.(sgrim)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 13–cv–02990–MSK–KMT

KHALED ALATTAR,
Plaintiff,
v.
AARON BELL,
CHRISTOPHER BELL,
RACHEL BELL and
WILLIAM BELL,
Defendants.

ORDER

This matter is before the court on “Defendants’ Motion to Stay Discovery Pursuant to
Fed. R. Civ. P. 26(c)(1) Pending Determination of Defendants’ Motion to Dismiss Plaintiffs’
Amended Complaint.” (Doc. No. 34, filed March 12, 2014.) The court also considers Plaintiff’s
“Motion to Compel Deposition of Defendant Maury Bell.” 1 (Doc. No. 33, filed Mar. 12, 2014.)
For the following reasons, Defendants’ Motion to Stay is DENIED and Plaintiff’s Motion to
Compel is GRANTED in part.
As a preliminary matter, the court addresses the parties’ failure to abide by the standard
briefing schedule for the instant motions. See D.C.COLO.LCivR 7.1(d). First, Plaintiff
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There is not a defendant named “Maury Bell” in this case. Defendants’ Response concludes
(without any discussion) that Plaintiff seeks to depose Defendant William Bell. The court
assumes that Maury must be William Bell’s nickname.

unilaterally and improperly concluded that Defendants’ Motion to Stay was a Response to his
Motion to Compel, even though the Motion to Stay was filed the same day as the Motion to
Compel. As such, Plaintiff filed a Reply in Support of his Motion to Compel on March 31, 2014
(Doc. No. 40), despite the fact there is no authority for filing a reply in the absence of a response.
Cf. United States v. Feinberg, 89 F. 3d 333, 341 (7th Cir. 1996) (reply brief must be limited to
addressing arguments raised in the response). Rightfully confused, Defendants filed a Response
to the Motion to Compel on March 21, 2014, asserting that their Motion to Stay did not
constitute a response to the Motion to Compel. (Doc. No. 48.) Plaintiff then filed a second
Reply in support of his Motion to Compel on March 31, 2014. (Doc. No. 50.)
With respect to the Motion to Stay, Plaintiff’s Response was included as part of his initial
Reply to the Motion to Compel. (See Doc. No. 40.) Defendants filed a Reply in Support of their
Motion to Stay on March 21, 2014 (Doc. No. 45). However, without any explanation,
Defendants included a second Reply as part of their Response to Plaintiff’s Motion to Compel.
(See Doc. No. 48.)
The court would be acting within its discretion to strike the improper filings—namely,
Plaintiff’s initial Reply in support of the Motion to Compel, and Defendants’ second Reply in
support of their Motion to Stay. However, the court finds this to be unnecessary as neither brief
alters the court’s resolution of the pending motions. Nevertheless, the parties are admonished to
abide by the briefing procedure and schedule outlined in Local Rule 7.1(d) for all future motions,
in the absence of any order to the contrary.
The court turns to the merits of the pending motions. In his Amended Complaint (Doc.
No. 13), Plaintiff asserts state law claims for conspiracy, aiding and abetting, and unjust

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enrichment against Defendants based on their alleged involvement in an illegal “pump and
dump” stock scheme involving their shares in LuxeYard, Inc. On February 18, 2014, Defendants
filed a “Motion to Dismiss Plaintiff’s Amended Complaint Pursuant to Rules 12(b)(1) and
12(b)(6) of the Federal Rules of Civil Procedure.” (Doc. No. 21.) Defendants argue that
Plaintiff lacks standing to proceed with this action because any alleged injury from Defendants’
alleged involvement in the pump and dump scheme was incurred by LuxeYard, not Plaintiff.
Defendants also argue that Plaintiff fails to state a claim for relief against Defendants.
Defendants’ Motion to Stay seeks to stay discovery until ruling on their Motion to
Dismiss. The Federal Rules of Civil Procedure do not expressly provide for a stay of
proceedings. See String Cheese Incident, LLC v. Stylus Shows, Inc., No. 02–CV–01934–LTB–
PA, 2006 WL 894955, at *2 (D. Colo. March 30, 2006) (unpublished). Federal Rule of Civil
Procedure 26 does, however, provide that
[a] party or any person from whom discovery is sought may move for a protective
order in the court where the action is pending . . . . The court may, for good
cause, issue an order to protect a party or person from annoyance, embarrassment,
oppression, or undue burden or expense . . . .
Fed.R.Civ.P. 26(c)(1). Moreover, “[t]he power to stay proceedings is incidental to the power
inherent in every court to control the disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for litigants. How this can best be done calls for the
exercise of judgment, which must weigh competing interests and maintain an even balance.”
Landis v. N. Am. Co., 299 U.S. 248, 254–255 (1936) (citing Kansas City S. Ry. Co. v. United
States, 282 U.S. 760, 763 (1931)). An order staying discovery is thus an appropriate exercise of
this court’s discretion. Id.

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The underlying principle governing whether to grant or deny a stay is that “[t]he right to
proceed in court should not be denied except under the most extreme circumstances.”
Commodity Futures Trading Comm’n v. Chilcott Portfolio Mgmt., Inc., 713 F.2d 1477, 1484
(10th Cir. 1983) (quoting Klein v. Adams & Peck, 436 F.2d 337, 339 (2d Cir. 1971)). In other
words, stays of the normal proceedings of a court matter should be the exception rather than the
rule. As a result, a stay of all discovery is generally disfavored in this District. Bustos v. United
States, 257 F.R.D. 617, 623 (D. Colo. 2009).
Nevertheless, “a court may decide that in a particular case it would be wise to stay
proceedings until [certain challenges] have been resolved.” See 8A Charles Alan Wright, Arthur
R. Miller & Richard L. Marcus, FEDERAL PRACTICE AND PROCEDURE § 2040, at 198 (3d ed.
2010). Courts have also recognized that a stay of discovery may be appropriate if “resolution of
a preliminary motion may dispose of the entire action.” Nankivil v. Lockheed Martin Corp., 216
F.R.D. 689, 692 (M.D. Fla. 2003). See also Vivid Techs, Inc. v. Am. Sci. & Eng'r, Inc., 200 F.3d
795, 804 (Fed. Cir. 1992) (“When a particular issue may be dispositive, the court may stay
discovery concerning other issues until the critical issue is resolved.”). When considering a stay
of discovery, this court has considered the following factors: (1) the plaintiff’s interests in
proceeding expeditiously with the civil action and the potential prejudice to plaintiff of a delay;
(2) the burden on the defendants; (3) the convenience to the court; (4) the interests of persons not
parties to the civil litigation; and (5) the public interest. See String Cheese Incident, 2006 WL
894955, at *2.
The court finds that Plaintiff has a presumptive right to proceed expeditiously with this
matter. Contrasted against that right, the court is not persuaded that Defendants would face a

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significant burden if required to proceed with discovery prior to a ruling on their Motion to
Dismiss. Defendants’ Motion to Dismiss does argue that Plaintiff lacks standing to bring his
claims because only LuxeYard was harmed by the alleged pump and dump scheme at issue in
this case. And decisions from this district have generally favored a stay when a jurisdictional
defense, such as a lack of standing, has been asserted. See Wyers Products Group v. Cequent
Performance Products, Inc., No. 12-cv-02640-REB-KMT, 2013 WL 2466917, at *2 (D. Colo.
June 7, 2013) (citing Weatherspoon v. Miller, No. 11-cv-00312-REB-MEH, 2011 WL 1485935,
at *2 (D. Colo. Apr. 19, 2011)). However, LuxeYard has now been permitted to intervene in this
action as a Plaintiff. (See Doc. No. 57-58.) Thus, regardless of whether Defendants is correct
that Plaintiff lacks standing, LuxeYard, a party that Defendants concede has standing, is now a
party to this action. Under these circumstances, the court finds that Defendants will face little, if
any, burden or prejudice from proceeding with discovery prior to a ruling on the standing issue.
The court also rejects that Defendants would be burdened by proceeding with discovery
prior to a determination as to whether Plaintiff’s Amended Complaint states a claim for relief.
Although a stay is generally favored when a jurisdictional defense has been asserted, the same
cannot be said with respect to a Rule 12(b)(6) defense. Indeed, granting a stay simply because a
defendant moved to dismiss for failure to state a claim “would suggest that a stay of discovery is
appropriate nearly any time a defendant files a motion to dismiss.” Gomez v. Kroll Factual
Data, Inc., No. 13-cv-00445-WJM-KMT, 2013 WL 1751376, at *2 (D. Colo. Apr. 23, 2013).
This would not only be contrary to the disfavored status of stays in this District, see Bustos, 257
F.R.D. 617, 623 (D. Colo. 2009), but would also make the court’s docket thoroughly

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unpredictable and, hence, unmanageable, Sanaah v. Howell, No. 08-cv-02117-REB-KLM, 2009
WL 980383, at *1 (D. Colo. Apr. 9, 2009).
The interests of nonparties and the public interest in general do not prompt the court to
reach a different result. Indeed, the public interest favors the prompt and efficient handling of all
litigation. Sanaah, 2009 WL 980383, at *1. Accordingly, on balance, the court finds that a stay
of discovery is not warranted in this case.
As a final matter, Defendants’ primary objections to Plaintiff’s Motion to Compel are that
(1) discovery should be stayed until ruling on Defendants’ Motion to Dismiss, and (2) a
protective order should be entered before Mr. Bell’s deposition is conducted. (See generally
Resp. Mot. Compel.) As discussed above, the court declines to stay discovery pending ruling on
Defendants’ Motion to Dismiss. Further, the court has now entered a Protective Order governing
the disclosure of confidential information in discovery. Accordingly, the court does not see any
impediment to conducting Mr. Bell’s deposition.
Therefore, for the foregoing reasons it is,
ORDERED that “Defendants’ Motion to Stay Discovery Pursuant to Fed. R. Civ. P.
26(c)(1) Pending Determination of Defendants’ Motion to Dismiss Plaintiffs’ Amended
Complaint” (Doc. No. 34) is DENIED and Plaintiff’s “Motion to Compel Deposition of
Defendant Maury Bell” (Doc. No. 33) is GRANTED in part. Plaintiff may conduct the

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deposition of Defendant William Bell subject to the notice provisions of Fed. R. Civ. P. 30(b)(1)
and D.C.COLO.LCivR. 30.1.
Dated this June 5, 2014.

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