Hawg Tools, LLC v. Newsco International Energy Service, Inc. et al

Filing 30

ORDER denying 20 Motion for Stay, by Magistrate Judge Michael J. Watanabe on 12/09/2014.(slibi, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-03011-REB-MJW
HAWG TOOLS, LLC, a Colorado limited liability company,
Plaintiff,
v.
NEWSO INTERNATIONAL ENERGY SERVICES, INC., aka NEWSCO INTERATIONAL
ENERGY SERVICES USA, INC., aka NEWSCO DIRECTIONAL & HORIZONTAL
SERVICES, INC., aka NEWSCO USA, INC., and
JOE FICKEN, an individual,
Defendants.

ORDER
on
DEFENDANTS’ MOTION FOR STAY
(Docket No. 20)
MICHAEL J. WATANABE
United States Magistrate Judge
Defendants moved to stay all proceedings in this case pending the outcome of
an appeal in related state-court litigation. Plaintiffs oppose the motion, and it is now
fully briefed. (Docket Nos. 20, 23, & 28.) District Judge Robert E. Blackburn referred
the motion to the undersigned. (Docket No. 21.) The Court has reviewed the parties’
filings, taken judicial notice of the court’s file, and considered the applicable Federal
Rules of Civil Procedure, statutes, and case law. Now being fully informed, the Court
makes the following findings of fact, conclusions of law, and order.

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Background
This is the second lawsuit between these parties, both concerning Defendants’
alleged misappropriation of Plaintiff’s trade secrets. In the first lawsuit, a state court jury
found Defendants liable and awarded a seven-figure verdict to Plaintiff. The state court
judge denied post-trial motions for injunctive relief on the ground that the jury’s general
verdict form did not contain sufficiently detailed findings to allow injunctive relief to be
appropriately tailored; in doing so, the judge noted that Plaintiff also had an adequate
remedy at law—suing again for continuing damages. The first lawsuit is currently being
briefed before the Colorado Court of Appeals, where Defendants have argued (among
other things) that Plaintiff’s evidence did not show a protectable trade secret as a matter
of law. Defendants had lost this argument at least twice before the trial court, but
believe they can prevail on appeal.
As suggested by the trial court, Plaintiff filed a second lawsuit for continuing
damages accruing after those encompassed in the first lawsuit. Defendants removed
this second lawsuit to this Court and have now moved for a stay of proceedings.
Legal Standards
The Federal Rules of Civil Procedure do not expressly provide for a stay of
proceedings. See String Cheese Incident, LLC v. Stylus Shows, Inc., 02–cv–01934–
LTB–PA, 2006 WL 894955, at *2 (D. Colo. Mar. 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

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from annoyance, embarrassment, oppression, or undue burden or expense . . . .” Fed.
R. Civ. P. 26(a). Further, “[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.
A stay of all discovery is generally disfavored. Bustos v. United States, 257
F.R.D. 617, 623 (D. Colo. 2009). However, “a court may decide that in a particular case
it would be wise to stay discovery on the merits until [certain challenges] have been
resolved.” 8A CHARLES ALAN W RIGHT, ARTHUR R. MILLER & RICHARD L. MARCUS, FEDERAL
PRACTICE AND PROCEDURE § 2040, at 198 (3d ed. 2010). 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.
Discussion
Defendants argues that, if they win their appeal in state court, this case will be
moot because Defendants will not be liable as a matter of res judicata. Thus,

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Defendants argue, proceeding with this case is potentially a waste of time and is best
left for after the Colorado Court of Appeals issues its mandate.
Plaintiff argues that discovery in this case is relatively limited, as the issue of
liability will be established as soon as the trial court’s judgment is (as Plaintiff hopes)
affirmed by the Colorado Court of Appeals. The only discovery necessary in that event
would be discovery into (1) whether Defendants continue to use the same product
design as before, and (2) if so, the extent of damages accrued since the date of the trial
court’s judgment. Thus, Plaintiff argues, the discovery burden on Defendants is light.
By contrast, Plaintiff argues, the competitive disadvantage to Plaintiff’s business and
thus Plaintiff’s interest in proceeding expeditiously is substantial.
The Court agrees with Plaintiff, and finds that the case relied upon by Defendants
is distinguishable. In Davis v. Bifani, Case No. 07-cv-00122-MEH-BNB, 2007 WL
2484304 (D. Colo. Aug. 29, 2007), Magistrate Judge Hegarty stayed a shareholder’s
derivative case pending a related state court appeal because the state trial court had
had held that the plaintiff was not a shareholder. There, unlike here, the state trial
court’s ruling mooted the federal case; it was the party opposing the stay, not the party
seeking a stay, who hoped for reversal on appeal. Here, by contrast, the state trial
court ruled in a way that does not moot this case. The Colorado Court of Appeals
affirms more cases than it reverses; thus, the likelihood of this suit becoming moot is not
nearly as great as had been the case in Davis v. Bifani.

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As to the remaining factors, the court finds that the convenience to the court, the
interest of nonparties, and the public interest in general do not weigh heavily in either
direction.
Accordingly, on balance, the court finds that a stay of discovery is inappropriate
in this case.

WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that Defendants’ Motion for Stay (Docket No. 20) is DENIED.

Dated: December 9, 2014
Denver, Colorado

/s/ Michael J. Watanabe
Michael J. Watanabe
United States Magistrate Judge