RED BARN MOTORS, INC. et al v. NEXTGEAR CAPITAL, INC. et al
Filing
133
ORDER denying 119 Motion to Stay Discovery Pending a Ruling on Defendants' Motion to Dismiss. Signed by Magistrate Judge Denise K. LaRue on 5/2/2016. (CBU)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
RED BARN MOTORS, INC., et al.,
Plaintiffs,
vs.
COX ENTERPRISES, INC., et al.,
Defendants.
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No. 1:14-cv-01589-TWP-DKL
Entry on Defendants’ Motion to Stay Discovery Pending a Ruling on
Defendants’ Motion to Dismiss [doc. 119]
Defendants have moved to stay discovery pending a ruling on their motion to
dismiss. District Judge Tanya Walton Pratt referred the motion to stay discovery to the
undersigned. For the following reasons, the motion is denied.
Background
Red Barn Motors, Inc. commenced this action on December 3, 2013, in the Middle
District of Louisiana. Red Barn had entered into an agreement with Dealer Services
Corporation (“DSC”) for DSC to finance Red Barn’s purchase of vehicles at auction. Red
Barn alleged that DSC would not pay the auction house until DSC received the title but
would charge interest and fees to Red Barn when it made the purchase, sometimes weeks
before funds were transferred to the auction house. Red Barn alleged breach of contract,
unjust enrichment, and conversion.
Defendants filed several motions, including a motion to dismiss for failure to state
a claim and a motion to transfer the case to this district court. Following briefing and
hearing on the motions, the case was transferred to this district court on September 29,
2014. Thereafter, the parties filed petitions for writs of mandamus in the United States
Court of Appeals for the Fifth Circuit, asking the court to order the district court in
Louisiana to vacate its transfer order. The case was stayed pending ruling from the Fifth
Circuit.
On July 20, 2015, the Fifth Circuit denied the petitions for writs of mandamus, and
the stay was lifted. This Court held a status conference in early October 2015, and
approved the Case Management Plan as amended, setting deadlines for discovery and
dispositive motions, among other deadlines. In December 2015, the undersigned issued
a Report and Recommendation on the motions to dismiss for failure to state a claim filed
by Louisiana First Choice Auto Auction, L.L.C., and NextGear Capital, Inc.,
recommending that both motions be denied. The district judge adopted the report and
recommendation.
Red Barn sought an extension of time within which to file a motion for leave to
amend the pleadings or join additional parties, which was granted. On January 8, 2016,
Red Barn filed a motion for leave to file an amended complaint, seeking to add new
plaintiffs, new claims, and new defendants. RedBarn and NextGear eventually stipulated
that the leave to amend be granted and the undersigned granted Red Barn leave to
amend. The Amended Complaint was filed March 11, 2016. It asserts class action
allegations including a substantive RICO violation under 18 U.S.C. § 1962(c); conspiracy
to violate RICO, see 18 U.S.C. § 1962(d); breach of contract, constructive fraud; tortious
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interference with business relationships; and unjust enrichment.
Shortly thereafter,
Defendants filed their motion to stay discovery.
The parties jointly moved to reset the January 9, 2017, trial date, and the district
judge granted their motion. The final pretrial conference is set for April 19, 2017, and a
jury trial is to commence on May 8, 2017. The district judge’s order advised: “Because of
the age of this case, parties should anticipate no further continuances of the trial date.”
[Doc. 113.]
Under the Joint Revised Proposed Case Management Plan, non-expert discovery
shall be completed by December 20, 2016, and the deadline for filing dispositive motions
is January 16, 2017. (This Plan was filed on March 31, 2016, and has not yet been approved
by the Court.)
Defendants’ motion to dismiss for failure to state a claim was filed on April 15,
2016. They contend that the amended complaint fails to plausibly state claims for relief
under Rule 12(b)(6) and fails to meet the particularity standard of Rule 9(b), that the RICO
claim fails to allege essential elements, that the RICO conspiracy claim fails to sufficiently
allege an agreement to participate in an enterprise or conspiracy, and that the other claims
also fail. Having been granted an extension of time, Plaintiffs’ response is now due May
16, 2016. A reply would be due 7 days after service of the response.
Discussion
Defendants seek to stay discovery and Rule 26(a) disclosures pending a ruling by
the district judge on their motion to dismiss and motion to strike jury demand.
Defendants contend that discovery will not affect the outcome of the motion to dismiss,
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that a short stay will promote efficient use of the Court’s and parties’ resources, and that
a brief stay will not prejudice Plaintiffs. Defendants argue that the discovery requests
will impose a substantial burden on NextGear, requiring it to expend “dozens and dozens
of hours searching for responsive information and documentation while incurring tens
of thousands of dollars in legal costs.” [Defs.’ Mot. Stay Discovery, doc. 119 at 7.] They
argue that, at the least, the motion to dismiss will narrow the issues in the case, and it
may even eliminate the need for discovery altogether by resolving the case in its entirety.
Plaintiffs oppose the motion, arguing that a stay would disrupt the case deadlines
and jeopardize the trial setting. They also argue that Defendants failed to provide any
affidavit or other evidence to support their motion and that the amended complaint’s
allegations are sufficient to survive the motion to dismiss.
District courts have “extremely broad discretion in controlling discovery.” Jones
v. City of Elkhart, Ind., 737 F.3d 1107, 1115 (7th Cir. 2013). The court may, “for good cause,”
limit the scope of discovery to “protect a party from … undue burden or expense.” Fed.
R. Civ. P. 26(c)(1); see also Friends of the Parks v. Chi. Park Dist., No. 14-cv-9096, 2015 WL
4111312, at *1 (N.D. Ill. Jul. 6, 2015).
Filing a motion to dismiss does not automatically stay discovery, however, and
the court is not required to grant a motion to stay discovery pending a ruling on a motion
to dismiss. See, e.g., New England Carpenters Health & Welfare Fund v. Abbott Labs., No. 12
C 1662, 2013 WL 690613, at *1 (N.D. Ill. Feb. 20, 2013). Although such stays are frequently
granted, id., a party has no right to a stay, and the party seeking a stay bears the burden
of proving that the Court should exercise its discretion in staying the case. Ind. State Police
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Pension Trust v. Chrysler LLC, 556 U.S. 960, 961 (2009). Defendants have not carried this
burden.
Defendants seek dismissal of the constructive fraud claim in part on the grounds
that the allegations are conclusory and lack particularity. Dismissal for failing to plead
fraud with particularity is generally without prejudice and with leave to re-plead. U.S.
ex rel. Robinson v. Ind. Univ. Health, Inc., No. 1:13-cv-02009-TWP-MJD, 2015 WL 3961221,
at *4 (S.D. Ind. June 30, 2015). Thus, even assuming that Defendants are correct about the
insufficiency of the constructive fraud allegations, it seems that Plaintiffs may have the
opportunity to amend and the case will continue. As a result, discovery would not
necessarily be wasteful and staying discovery would only build in unnecessary delay in
resolving this case. See id.
In addition, as a general matter, a stay of discovery is warranted only when a party
raises a potentially dispositive threshold issue such standing, jurisdiction, or qualified
immunity. Id., at *7. Defendants’ motion to dismiss has not raised such an issue. Thus,
even though the motion may raise dispositive legal issues, any likelihood of success on
the motion does not justify granting a stay. Id.; see also New England Carpenters Health &
Welfare Fund, 2013 WL 690613, at *2 (noting that until the district court rules on the motion
to dismiss, defendant’s assertion that its motion has a “high likelihood of success” is
“mere speculation”).
Furthermore, Defendants have failed to make a showing, with affidavits or other
supporting evidence, that the discovery requests would impose a substantial burden on
NextGear, requiring it to expend “dozens and dozens of hours searching for responsive
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information and documentation while incurring tens of thousands of dollars in legal
costs.” [Defs.’ Mot. Stay Discovery, doc. 119 at 7.] All that Defendants have offered to
support their motion are the unsupported statements of counsel in briefs. This is
insufficient. See U.S. ex rel. Robinson, 2015 WL 3961221, at *5 (indicating that a showing
of undue burden “typically requires affidavits or other evidence supporting a party’s
assertions of burden”); New England Carpenters Health & Welfare Fund, 2013 WL 690613, at
*3 (“[Defendant] provides no clear showing of its burden or cost with any anticipated
discovery. Therefore, Defendants’ motion to stay discovery is denied.”) (citation
omitted).
Moreover, the undersigned has to consider the prejudice to the judicial system as
a whole and the prejudice to Plaintiffs from a stay of discovery. U.S. ex rel. Robinson, 2015
WL 3961221, at *4 & *6 (“District courts have an important and inherent authority and
obligation
to
control
their
calendars
and
ensure
that
litigation
proceeds
expeditiously[.]”); New England Carpenters Health & Welfare Fund, 2013 WL 690613, at *2
(noting that courts disfavor stays of discovery “because they bring resolution of the
dispute to a standstill” (quotation and citation omitted)). This case was filed in late 2013
and transferred here in 2014. Despite the length of time the case has been pending, little
progress has been made; an amended complaint was filed not long ago, adding new
parties and new claims. And under the Joint Revised Proposed Case Management Plan,
non-expert discovery would close on December 20, 2016, and dispositive motions would
be due January 16, 2017. This case is set for trial on May 8, 2017, with a final pretrial
conference on April 19, 2017. The district judge has stated that “[b]ecause of the age of
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this case, parties should anticipate no further continuances of the trial date.” Even a short
stay of discovery would seem to jeopardize the case management deadlines and trial
setting.
For all these reasons, the undersigned finds that Defendants have not shown that
this is a case in which the Court should exercise its discretion and stay discovery.
Conclusion
For the foregoing reasons, Defendants’ Motion to Stay Discovery Pending a Ruling on
Defendants’ Motion to Dismiss [doc. 119] is DENIED.
So Ordered: 05/02/2016
Electronic Distribution to All Counsel of Record
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