Unicredit Bank AG, New York Branch v. Gardner Walton & Associates, Inc. et al

Filing 27

MEMORANDUM AND ORDER granting 19 Defendants' Motion to Stay Discovery and All Other Federal Rule of Civil Procedure 26 Activities Except Mediation. All Fed. R. Civ. P. 26 proceedings (with the exception of early mediation), including the Rul e 26(f) meeting, report of planning meeting, initial disclosures pursuant to Rule 26(a)(1), scheduling conference, discovery, and all other Rule 26 activities, are hereby stayed until the Court rules on Defendants' Motion to Dismiss (ECF No. 17) . In the event any part of the motion is denied, counsel for Plaintiff should email chambers to set up a scheduling conference. It is further ordered that the parties are permitted and encouraged, but not required at this time, to participate in early mediation. Signed by Magistrate Judge David J. Waxse on 8/10/2012. (byk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
UNICREDIT BANK AG, NEW YORK
BRANCH, f/k/a BAYERISCHE HYPOUND VEREINSBANK, AG, as agent for
THE BANK OF NEW YORK,
Plaintiff,
Case No. 12-CV-2254 EFM/DJW
v.
GARDNER WALTON & ASSOCIATES,
INC., ROBERT J. WALTON, GRETCHEN
A. WALTON, TEDDY ALLAN GARDNER,
VICKI GARDNER, POWER GROUP
COMPANY, LLC, AND POWER GROUP
RISK SERVICES, LLC,
Defendants.

MEMORANDUM AND ORDER
Pending before the Court is Defendants’ Motion to Stay Discovery and All Other Federal
Rule of Civil Procedure 26 Activities Except Mediation (ECF No. 19). Defendants request that the
Court issue an Order staying all Fed. R. Civ. P. 26 proceedings (with the exception of early
mediation), including the Rule 26(f) meeting, report of planning meeting, initial disclosures pursuant
to Rule 26(a)(1), scheduling conference, discovery, and all other Rule 26 activities, until such time
as this Court has had an opportunity to rule on Defendants’ Motion to Dismiss (ECF No. 17). In that
motion, Defendants move to dismiss Plaintiff’s complaint as to all parties on the grounds that (1)
Plaintiff does not have standing to bring these claims against any of these Defendants as Plaintiff
was not a party to the underlying agreements it attempts to enforce, and hence lacks subject matter
jurisdiction, and, alternatively (2) that Plaintiff’s Complaint fails to state a cognizable claim for
relief for any of the eight causes of action that Plaintiff asserts. Plaintiff opposes the motion, arguing

that the case that Defendants rely upon in their motion to dismiss, Tri-State Truck Insurance, Ltd.
v. First National Bank of Wamego,1 is factually different than this case and does not establish that
this case is likely to be concluded as a result of a ruling on the motion to dismiss. As set forth
below, the Court grants Defendants’ motion to stay.
I.

Applicable Standard for Ruling on a Motion to Stay Case Pending Ruling on a
Dispositive Motion
The decision to stay discovery is firmly vested in the sound discretion of the trial court.2 The

Tenth Circuit, however, has recognized the principle that “the right to proceeding in court should
not be denied except under the most extreme circumstances.”3 In light of this principle, the general
policy in the District of Kansas is not to stay pretrial proceedings and discovery based upon the
pendency of dispositive or other motions, even though they may have a significant bearing on the
case.4 The court has recognized exceptions to this general rule and has held that a stay of discovery
until a pending motion is decided may be appropriate “where the case is likely to be finally
concluded as a result of the ruling thereon; where the facts sought through uncompleted discovery
would not affect the resolution of the motion; or where discovery on all issues of the broad
complaint would be wasteful and burdensome.”5

1

No. 09-4158-SAC, 2011 WL 3349153 (D. Kan. Aug. 3, 2011).

2

Kutilek v. Gannon, 132 F.R.D. 296, 297 (D. Kan. 1990).

3

Commodity Futures Trade Comm’n v. Chilcott Portfolio Mgmt, Inc., 713 F.2d 1477, 1484
(10th Cir. 1983).
4

Wolf v. United States, 157 F.R.D. 494, 495 (D. Kan. 1994).

5

Id. (citing Kutilek,132 F.R.D. at 297-98).
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II.

The Parties’ Arguments
Defendants argue that the Court should stay this case because it is likely to be finally

concluded as a result of a ruling on their pending motion to dismiss. They have moved to dismiss
all of Plaintiff’s claims based on Judge Crow’s August 3, 2011 Memorandum and Order in Tri-State
Truck Insurance, Ltd. v. First National Bank of Wamego.6 In the Tri-State Truck decision, the court
generally recognized that only parties to a contract can sue upon that contract, and specifically
recognized that a bank that is not a party to loan agreement cannot sue to enforce that loan
agreement. Defendants argue that Tri-State Truck is “virtually identical” to the present case, both
legally and factually, and that holding is controlling in this case. Defendants further argue that the
issues raised in their motion to dismiss are purely questions of law so that no discovery is needed
that could affect the outcome of the ruling on the motion to dismiss.
Plaintiff opposes Defendants’ motion to stay the case. It argues that the Tri-State Truck case
is in fact very different from the present case, especially in terms of standing. According to Plaintiff,
in the Tri-State Truck case, the original lender did not “sell” the loans to a third party, whereas
herein the loans were sold to a third party. Unlike Tri-State Truck, the loans at issue here were
securitized. Also, the plaintiff-creditor in Tri-State Truck was a bank that held only participation
certificates in the respective loans and did not have a right to proceed directly against the debtor for
default. In this case, Plaintiff is an agent authorized to pursue the claims of an indenture trustee that
is empowered by the indenture to collect the funds generated by these loans, to liquidate the
collateral following an event of default under the indenture, to take measures to protect the loans
under the indenture. It is moreover entitled to pursue a turnover and liquidation of collateral

6

2011 WL 3349153.
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securing the loans upon default of the loan borrowers. Therefore, as opposed to the allegations of
Defendants’ motion to dismiss, there is near complete dissimilarity between the Tri-State Truck case
and this case regarding the relation of the plaintiff to the debt. Plaintiff contends that this makes it
unlikely that Defendants will prevail on their pending motion to dismiss.
Defendants dispute Plaintiff’s assertion that Tri-State Truck is factually very different from
the facts of this case. In response to Plaintiff’s claim that Tri-State Truck original lender did not
“sell” the loans to a third party, Defendants argue that the original lender, unbeknownst to the
participating lenders, “sold” the last remaining 5.025% stake of the loan, making 100% of the loans
participated and “sold” to third parties, just like Plaintiff is claiming in this matter. Defendants also
argue that this case is similar to Tri-State Truck in that Plaintiff only holds a note and indenture,
which have nothing to do with the Defendants. Like Tri-State Truck, this note does not provide
Plaintiff with a right to enforce agreements to which Plaintiff is not a party. Finally, Defendants
claim that this case is even more compelling than Tri-State Truck itself as the degrees of separation
between Defendants and Plaintiff are even more pronounced because there were intermediate
acquisitions of the note, making any privity-type argument even further strained.
III.

Whether a Stay of This Action is Appropriate
Although the Court agrees with Plaintiff that factual differences exist between Tri-State

Truck and this case, Defendants have convinced the Court that this case is sufficiently similar to TriState Truck to warrant staying this action until the Court rules on Defendants’ motion to dismiss.
The subject matter of both cases pertains to commercial loans and guaranties made by the now
defunct Brooke Credit Corporation (which later changed its name to Aleritas) that were later
acquired by banks who are now seeking to collect the debt due under the loans and pursue the

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collateral securing the loans. The issues raised in Defendants’ motion to dismiss appear to be
questions of law, and Plaintiff has not argued that it needs additional discovery in order to respond
to Defendants’ motion. Finally, Plaintiff will not be unduly prejudiced by this relatively short delay
in beginning the Rule 26 and discovery process. In fact, all the parties may benefit from not having
to expend resources litigating and conducting discovery on claims that may be dismissed.
IT IS THEREFORE ORDERED that Defendants’ Motion to Stay Discovery and All Other
Federal Rule of Civil Procedure 26 Activities Except Mediation (ECF No. 19) is granted. All Fed.
R. Civ. P. 26 proceedings (with the exception of early mediation), including the Rule 26(f) meeting,
report of planning meeting, initial disclosures pursuant to Rule 26(a)(1), scheduling conference,
discovery, and all other Rule 26 activities, are hereby stayed until the Court rules on Defendants’
Motion to Dismiss (ECF No. 17). In the event any part of the motion is denied, counsel for Plaintiff
should email [e-mail] to set up a scheduling conference.
IT IS FURTHER ORDERED THAT the parties are permitted and encouraged, but not
required at this time, to participate in early mediation.
Dated in Kansas City, Kansas, this 10th day of August, 2012.

s/ David J. Waxse
David J. Waxse
United States Magistrate Judge

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