Romero et al v. CenturyLink, Inc. et al

Filing 41

MEMORANDUM OF LAW & ORDER. IT IS HEREBY ORDERED: 1. Defendant's Motion to Temporarily Stay Discovery Pending Resolution of Forthcoming Motion to Compel Arbitration and Enforce Class-Action Waivers (MDL 87 ) is GRANTED. 2. Plaintiffs may conduct reasonable discovery specifically directed to their assertion that their claims are not subject to mandatory arbitration and class-action waivers. Additionally, Plaintiffs may conduct reasonable discovery related to CenturyLink's Altern ative Motion to Dismiss under Rules 12(b)(2) and 12(b)(6), and, as the Court has previously ordered, Plaintiffs may conduct reasonable discovery specifically directed to the Motion to Intervene. All motions regarding discovery disputes related to th is paragraph, Paragraph 2, shall be submitted to Magistrate Judge Kate M. Menendez. 3. In all other respects, discovery in this case is stayed until the Court rules on CenturyLinks Motion to Compel Arbitration. (Written Opinion) Signed by Judge Michael J. Davis on 5/8/2018. Associated Cases: 0:17-md-02795-MJD-KMM et al.(GRR)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

IN RE: CENTURYLINK SALES
PRACTICES AND SECURITIES
LITIGATION

MDL No. 17-2795 (MJD/KMM)

This Document Relates to
Civil File Nos. 17-2832, 17-4613,
17-4614, 17-4615, 17-4616, 17-4617,
17-4618, 17-4619, 17-4622, 17-4943,
17-4944, 17-4945, 17-4947, 17-5001,
17-5046

MEMORANDUM OF LAW & ORDER

Carolyn G. Anderson, Brian C. Gudmundson, Bryce D. Riddle, and Hart L.
Robinovitch, Zimmerman Reed LLP, Plaintiffs’ Interim Co- Lead and Liaison
Counsel; Mark M. O’Mara, Alyssa J. Flood, Channa Lloyd, and Caitlin Frenkel,
O’Mara Law Group, and Mark J. Geragos, Benjamin J. Meiselas, and Lori G.
Feldman, Geragos & Geragos, APC, Plaintiffs’ Interim Co-Lead Counsel;
Daniel C. Hedlund and Michelle J. Looby, Gustafson Gluek PLLC, Richard M.
Hagstrom, Anne T. Regan, Nicholas S. Kuhlmann, and Jason Raether, Hellmuth
& Johnson, PLLC, Roxanne Barton Conlin, Roxanne Conlin & Associates, PC,
and Francois M. Blaudeau, W. Lewis Garrison, Jr., Christopher B. Hood, and
James F. McDonough, III, Heninger Garrison Davis, LLC, Plaintiffs’ Executive
Committee; and T. Ryan Langley, Hodge & Langley Law Firm, P.C., Michael
Fuller, Olsen Daines PC, Brandon C. Fernald, Fernald Law Group LLP, Bonner C.
Walsh, Walsh PLLC, Alfred M. Sanchez, and Orin Kurtz, Gardy & Notis, LLP,
Additional Counsel for Plaintiffs and the Proposed Class.
Douglas P. Lobel, David A. Vogel, Martin S. Schenker, and Jeffrey M. Gutkin,
Cooley LLP, and William A. McNab and David M. Aafedt, Winthrop &
Weinstine, P.A., Counsel for Defendant CenturyLink, Inc.

I.

INTRODUCTION
This matter is before the Court on Defendant’s Motion to Temporarily Stay

Discovery Pending Resolution of Forthcoming Motion to Compel Arbitration
and Enforce Class-Action Waivers. (MDL [Docket No. 87].) The Court heard
oral argument on May 2, 2018. For good cause shown, the Court grants the
motion.
II.

BACKGROUND
On April 28, 2018, Defendant CenturyLink, Inc. (“CenturyLink”) filed

Defendant and Proposed Intervenors’ Motion to Compel Arbitration and Enforce
Class-Action Waivers (MDL [Docket No. 122]), in which it claims that 37 of the
38 named Plaintiffs agreed to arbitration and class-action waiver clauses in their
service contracts such that their claims against CenturyLink in this case are
subject to mandatory individual arbitration. It further claims that the thirtyeighth Plaintiff, Michael Maguire, agreed solely to a class-action waiver.
Plaintiffs have taken the position that class-wide discovery on the merits
should begin immediately. According to Defendant, such discovery will
implicate more than 5.5 million customers. (Beard Decl. ¶ 4.) Defendant asks

that the Court stay discovery until it has ruled on the Motion to Compel
Arbitration.
III.

DISCUSSION
A.

Legal Standard

Federal Rule of Civil Procedure 26(c) provides that “a court may stay
discovery for good cause shown. However, it, of course, is black letter law that
the mere filing of a motion to dismiss the complaint does not constitute ‘good
cause’ for the issuance of a discovery stay.” TE Connectivity Networks, Inc. v.
All Sys. Broadband, Inc., No. CIV. 13-1356 (ADM/FLN), 2013 WL 4487505, at *2
(D. Minn. Aug. 20, 2013) (citations omitted). “Courts use a balancing test to
determine whether good cause exists, weighing the moving party’s potential
burden against the opposing party’s interest in the discovery at issue.” Wells
Fargo Ins. Servs. USA, Inc. v. Kyle King & Sherman Ins. Agency, Inc., No. 15-CV4378 (PJS/HB), 2016 WL 6892108, at *3 (D. Minn. July 29, 2016).
Regarding whether good cause exists to stay litigation pending
proceedings in another forum, courts in this district consider, among
other things, whether a stay would unduly prejudice or give a clear
tactical advantage to one party, whether a stay will simplify the
issues in question and the trial of the case, and whether discovery is
complete and a trial date has been set.

Id. “It may often make sense for discovery to continue while a federal court
considers whether a case that will probably be litigated no matter what will
proceed before it or in some other court, but courts have regularly stayed
discovery while the court considers whether a case must instead proceed in
arbitration.” Id. at *4 (gathering cases). When a pending motion to dismiss
would dispose of all or substantially all of the case, it “appears to have
substantial grounds,” and is “not unfounded in the law,” courts have stayed
discovery during the pendency of the motion. Anti-Monopoly, Inc. v. Hasbro,
Inc., No. 94CIV. 2120 (LMM)(AJP), 1996 WL 101277, at *4 (S.D.N.Y. Mar. 7, 1996).
B.

Substantial Grounds

The Court has thoroughly reviewed the parties’ submissions and oral
arguments connected to the current motion, as well as CenturyLink’s
submissions in connection with its Motion to Compel Arbitration. CenturyLink
has submitted admissible evidence and robust arguments to show that 37 of the
38 Plaintiffs are bound by mandatory arbitration agreements and class-action
waivers, that Plaintiff Maguire is bound by a class-action waiver, and that the
arbitration clauses and class-action waivers encompass the disputes at issue in
this proceeding against CenturyLink. Plaintiffs have vigorously responded with
strong arguments in favor of denial of the Motion to Compel Arbitration. The

Court makes no prediction regarding the eventual outcome of CenturyLink’s
motion. However, at this early stage, it appears that CenturyLink’s Motion to
Compel Arbitration is based on substantial grounds and is not unfounded in law.
Additionally, if CenturyLink’s Motion to Compel Arbitration is granted, only a
single Plaintiff’s individual claims will remain in this Court.
C.

Prejudice

If CenturyLink is successful on its Motion to Compel Arbitration, the
arbitrator, not this Court, will determine the scope of discovery. See, e.g.,
CIGNA HealthCare of St. Louis, Inc. v. Kaiser, 294 F.3d 849, 855 (7th Cir. 2002);
Wells Fargo Ins. Servs. USA, Inc., 2016 WL 6892108, at *5. Proceeding with
discovery before determining which claims are arbitrable or subject to classaction waivers would allow Plaintiffs to obtain extensive discovery on class-wide
issues. Yet much of this information will be irrelevant to individual arbitrations.
Such voluminous discovery will likely be costly in terms of money and time.
Without a temporary stay, CenturyLink’s potential right to have an arbitrator
manage discovery would be negated. See Nat’l Broad. Co. v. Bear Stearns & Co.,
165 F.3d 184, 190–91 (2d Cir. 1999) (“The popularity of arbitration rests in
considerable part on its asserted efficiency and cost-effectiveness—characteristics
said to be at odds with full-scale litigation in the courts, and especially at odds

with the broad-ranging discovery made possible by the Federal Rules of Civil
Procedure.”). This prejudice cannot be undone if the disputes are later found to
be arbitrable.
On the other hand, a temporary stay of discovery will not prejudice
Plaintiffs. If the claims are subject to arbitration, Plaintiffs will not be prejudiced
by being barred from taking discovery to which they are not contractually
entitled. If the claims are not subject to arbitration and class-action waivers, a
brief delay in class-wide discovery to determine what discovery is appropriate is
not prejudicial. See Roadbuilders Machinery Supply Co. v. Sennebogen, Inc.,
No. CIV.A. 11-2681-KHV, 2012 WL 1253265, at *2 (D. Kan. Apr. 13, 2012) (“[T]his
Court does not find that Plaintiffs will be unduly prejudiced by this delay in
beginning the discovery process. In fact, if the case is transferred to arbitration,
Plaintiffs may benefit from not having to change course in their discovery plan.
Allowing discovery at this point would, however, require Defendant to expend
resources on litigation activities that it sought to avoid when it included an
arbitration clause in the [] agreement.”).
“Courts routinely grant stays” pending the determination of a motion to
compel arbitration, because

unless discovery is stayed, [the movant] will forever lose the
advantages of arbitration—speed and economy . . . [and] [i]f the
Court ultimately determines that the dispute should be arbitrated,
responsibility for the conduct of discovery lies with the arbitrators—
and if not, [the non-movant] will suffer no prejudice from a
temporary stay.
Mahamedi IP Law, LLP v. Paradice & Li, LLP, No. 5:16-CV-02805-EJD, 2017 WL
2727874, at *1 (N.D. Cal. Feb. 14, 2017) (citations omitted).
Thus, because CenturyLink has shown that its Motion to Compel
Arbitration appears to be based on substantial grounds, it faces irreparable
prejudice if full-scale discovery proceeds at this time, and Plaintiffs will not be
prejudiced by a brief delay in discovery, CenturyLink’s motion is granted.
Accordingly, based upon the files, records, and proceedings herein, IT IS
HEREBY ORDERED:
1.

Defendant’s Motion to Temporarily Stay Discovery Pending
Resolution of Forthcoming Motion to Compel Arbitration and
Enforce Class-Action Waivers (MDL [Docket No. 87]) is
GRANTED.

2.

Plaintiffs may conduct reasonable discovery specifically
directed to their assertion that their claims are not subject to
mandatory arbitration and class-action waivers.
Additionally, Plaintiffs may conduct reasonable discovery
related to CenturyLink’s Alternative Motion to Dismiss under
Rules 12(b)(2) and 12(b)(6), and, as the Court has previously
ordered, Plaintiffs may conduct reasonable discovery
specifically directed to the Motion to Intervene. All motions

regarding discovery disputes related to this paragraph,
Paragraph 2, shall be submitted to Magistrate Judge Kate M.
Menendez.
3.

In all other respects, discovery in this case is stayed until the
Court rules on CenturyLink’s Motion to Compel Arbitration.

Dated: May 8, 2018

s/ Michael J. Davis
Michael J. Davis
United States District Court