Kor Media Group LLC v. Green et al

Filing 34

ORDER Denying 30 Defendants' Motion to Stay Discovery. Signed by Magistrate Judge Nancy J. Koppe on 10/29/2013. (Copies have been distributed pursuant to the NEF - AC)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 DISTRICT OF NEVADA 8 9 KOR MEDIA GROUP, LLC, 10 Plaintiff(s), 11 vs. 12 TIMOTHY GREEN, et al., 13 Defendant(s). 14 ) ) ) ) ) ) ) ) ) ) Case No. 2:13-cv-01217-JAD-NJK ORDER DENYING MOTION TO STAY DISCOVERY (Docket No. 30) 15 Pending before the Court is Defendants’ motion to stay discovery pending resolution of their 16 motion to dismiss or to transfer. See Docket 30; see also Docket No. 21 (“motion to dismiss or to 17 transfer”). Plaintiff filed a response in opposition and Defendants filed a reply. Docket Nos. 32, 33. 18 The Court finds the matter properly resolved without oral argument. See Local Rule 78-2. For the 19 reasons discussed below, the Court hereby DENIES the motion to stay discovery. 20 I. OVERVIEW 21 This is an action for breach of contract, breach of the implied covenant of good faith and fair 22 dealing, conversion, fraudulent inducement, unjust enrichment, and fraudulent misrepresentation. See 23 Compl. ¶ 1. Some of the same parties are involved in an action pending in the Southern District of 24 Florida, EyePartner, Inc. v. Kor Media Group LLC, 4:13-cv-10072 (S.D. Fla. Apr. 9, 2013). On August 25 15, 2013, Defendants filed a motion to dismiss the instant case pursuant to Rules 8 and 12(b)(6),1 as well 26 27 1 28 References to “Rules” refer to the Federal Rules of Civil Procedure. 1 as a motion to transfer the case to Florida pursuant to 28 U.S.C. § 1404(a). See Docket No. 21. A 2 response and reply have since been filed. See Docket Nos. 23, 27. On September 30, 2013, the parties 3 submitted a discovery plan, which the Court granted. See Docket Nos. 28, 29. Shortly thereafter, 4 Defendants filed the pending motion to stay discovery given the pending motion to dismiss or to 5 transfer. 6 II. ANALYSIS 7 Courts have broad discretionary power to control discovery. See, e.g., Little v. City of Seattle, 8 863 F.2d 681, 685 (9th Cir.1988). “The Federal Rules of Civil Procedure do not provide for automatic 9 or blanket stays of discovery when a potentially dispositive motion is pending.” Tradebay, LLC v. eBay, 10 Inc., 278 F.R.D. 597, 601 (D. Nev. 2011). Instead, a party seeking to stay discovery carries the heavy 11 burden of making a strong showing why discovery should be denied. See, e.g., Turner Broadcasting 12 Sys., Inc. v. Tracinda Corp., 175 F.R.D. 554, 556 (D. Nev. 1997). In deciding whether to grant a stay 13 of discovery, the Court is guided by the objectives of Rule 1 to ensure a “just, speedy, and inexpensive 14 determination of every action.” Tradebay, 278 F.R.D. at 602-03. Courts in this District have 15 formulated three requirements in determining whether to stay discovery pending resolution of a 16 potentially dispositive motion; motions to stay discovery may be granted when: (1) the pending motion 17 is potentially dispositive; (2) the potentially dispositive motion can be decided without additional 18 discovery; and (3) the Court has taken a “preliminary peek” at the merits of the potentially dispositive 19 motion and is convinced that the plaintiff will be unable to state a claim for relief. See id. The Court 20 analyzes each issue below in turn. POTENTIALLY DISPOSITIVE MOTION 21 A. 22 Defendants’ motion to dismiss or to transfer has three components. First, Defendants move to 23 dismiss for failure to state a claim pursuant to Rule 12(b)(6). Second, Defendants move to dismiss for 24 failure to provide a “short and plain statement of the claim” pursuant to Rule 8. Third, Defendants move 25 to transfer this case pursuant to 28 U.S.C. § 1404(a). Docket No. 21. The parties contest whether the 26 latter two aspects of the motion are “dispositive,” such that the Tradebay standards may be met. 27 Plaintiff does not dispute that the Rule 12(b)(6) motion is a dispositive motion. The parties do 28 disagree as to whether a Rule 8 motion is considered dispositive. Docket No. 32 at 14; Docket No. 33 2 1 at 6-7. Rule 8(a) requires allegations sufficient to give defendants notice of plaintiffs’ claims, which 2 is “not an onerous burden.” Johnson v. Riverside Healthcare System, LP, 534 F.3d 1116, 1122 (9th Cir. 3 2008). This notice requirement is often discussed in tandem with the sufficiency of the complaint to 4 state a claim under Rule 12(b)(6). See, e.g., id. 1121-22 (discussing Rule 8 and Rule 12(b)(6) standards 5 together). Therefore, the Court will likewise analyze the sufficiency of the allegations under Rule 8 and 6 Rule 12(b)(6) together.2 7 Plaintiff also disputes whether a Section 1404(a) motion is dispositive and could properly lead 8 to a stay of discovery under the Tradebay standards. Docket No. 32 at 13.3 The Court is not persuaded 9 that a Section 1404(a) motion is a proper basis for a stay of discovery under Tradebay, through which 10 the Court balances the expense of conducting unnecessary discovery in the event a case is eventually 11 dismissed on the pleadings against the delay caused by staying discovery in the event the case is not 12 dismissed. See Tradebay, 278 F.R.D. at 603. The granting of a Section 1404(a) motion to transfer does 13 not result in the dismissal of claims, but rather merely transfers a case to another court for further 14 proceedings. Hence, the outcome of a Section 1404(a) motion does not impact the ultimate need to 15 conduct discovery. Accordingly, the Court finds that Defendants’ Section 1404(a) motion to transfer 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Defendants raise Rule 8 arguments untethered to any particular Rule 12(b)(6) argument, see, e.g., Docket No. 21 at 10 (arguing that the complaint is too long and uses numerous self-defined terms), but such deficiencies are generally not case-dispositive. See Hearns v. San Bernardino Police Dept., 530 F.3d 1124, 1130-31 (9th Cir. 2008) (generally “verbosity or length is not by itself a basis for dismissing a complaint based on Rule 8(a)”); see also Fed. R. Civ. P. 15(a)(2) (indicating that leave to amend shall be “freely given”). Moreover, the Court has reviewed the complaint and does not believe these Rule 8 arguments will lead to dismissal of Plaintiff’s claims. 3 Defendants’ briefing implicitly raises the possibility of staying all proceedings under the Court’s inherent authority pending resolution of the motion to transfer. See Reply at 10 (citing Amadeck v. Capital One Fin. Corp., 2012 U.S. Dist. Lexis 161603 (W.D. Wash. Nov. 9, 2012) (staying all proceedings pending resolution of an MDL transfer based on considerations enumerated in Landis v. N. Am. Co., 299 U.S. 248, 254 (1936))). Defendants failed to develop this argument, however, so the Court will not consider whether a stay is appropriate under Landis. See, e.g., Vaccine Ctr. LLC v. GlaxoSmithKline LLC, 2013 U.S. Dist. Lexis 68298, *8 n.4 (D. Nev. May 14, 2013) (the Court considers the well-developed arguments presented and will not search for arguments that may be camouflaged in the briefing (citing Williams v. Eastside Lumberyard & Supply Co., 190 F. Supp. 2d 1104, 1114 (S.D. Ill. 2001)). 3 1 is not dispositive, and Defendants have failed to carry their heavy burden of showing that a stay is 2 appropriate pursuant to Tradebay with respect to that pending motion. 3 B. 4 The parties do not argue that additional discovery is required to enable a decision on the pending 5 motion to dismiss, and the Court agrees. “In considering a motion to dismiss under Federal Rule of 6 Civil Procedure 12(b)(6), the court asks only whether the pleadings are sufficient to establish a claim, 7 not whether the Plaintiff could find evidence to support the pleadings.” Tracy v. United States, 243 8 F.R.D. 662, 664 (D. Nev. 2007) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)). 9 C. NEED FOR ADDITIONAL DISCOVERY PRELIMINARY PEEK 10 The Court next conducts a preliminary peek of the merits of the motion to dismiss to determine 11 the likelihood that the claims will be dismissed. See Turner Broadcasting, 175 F.R.D. at 556 (the court 12 must make a “preliminary finding of the likelihood of success on the motion”).4 The parties dispute the 13 proper standard in conducting this analysis; in particular, they dispute just how likely the success of the 14 dispositive motion must be to warrant staying discovery. Plaintiff argues that the Court should only stay 15 discovery where it is convinced that the Plaintiff will be unable to state a claim, see Response at 5-6, 16 while Defendants argue for a much lesser showing that there is some degree of foundation in law for 17 the dispositive motion and “a possibility” that Defendants may prevail, see Reply at 6. The Court agrees 18 with Plaintiff. 19 As with the rest of its analysis, the Court must adopt a standard in reviewing the merits of the 20 dispositive motion that best effectuates the goals of Rule 1 for the “just, speedy, and inexpensive” 21 determination of actions. See Tradebay, 278 F.R.D. at 602-03. The fact that discovery may involve 22 inconvenience and expense is not sufficient, standing alone, to support a stay of discovery. Turner 23 Broadcasting, 175 F.R.D. at 556. Morever, motions to dismiss are a frequent part of federal practice 24 and “[a]n overly lenient standard for granting motions to stay all discovery is likely to result in 25 26 27 28 4 Conducting this preliminary peek puts a magistrate judge in an awkward position because the district judge may evaluate the underlying motion differently. Tradebay, 278 F.R.D. at 603. The preliminary peek is not intended to prejudice the outcome of the motion to dismiss. Id. 4 1 unnecessary delay in many cases.” Trzaska v. Int’l Game Tech., 2011 U.S. Dist. Lexis 39275, *10 (D. 2 Nev. Mar. 29, 2011). As such, courts in this District have consistently held that “[a] stay of all 3 discovery should only be ordered if the court is ‘convinced’ that a plaintiff will be unable to state a 4 claim for relief.” Tradebay, 278 F.R.D. at 603 (discussing holdings of Twin City Fire Ins. v. Employers 5 of Wausau, 124 F.R.D. 652 (D. Nev. 1989) and Turner Broadcasting, 175 F.R.D. 554); see also Wood 6 v. McEwen, 644 F.2d 797, 801 (9th Cir. 1981). 7 That standard is not easily met. “Generally, there must be no question in the court’s mind that 8 the dispositive motion will prevail, and therefore, discovery is a waste of effort. Absent extraordinary 9 circumstances, litigation should not be delayed simply because a non-frivolous motion has been filed.” 10 Trzaska, 2011 U.S. Dist. Lexis 39275, at *8 (emphasis in original)); see also Tradebay, 278 F.R.D. at 11 603 (“The fact that a non-frivolous motion is pending is simply not enough to warrant a blanket stay of 12 all discovery.”). Thus, for example, “a stay might be appropriate where the complaint was utterly 13 frivolous, or filed merely for settlement value.” Turner Broadcasting, 175 F.R.D. at 556. 14 In arguing that a lesser standard should apply, Defendants rely heavily on case law from other 15 districts. The Court is cognizant that some courts in other districts apply a more lenient standard in 16 determining whether to stay discovery pending resolution of a dispositive motion. See, e.g., Ameritel 17 Inns v. Moffat Bros. Plastering, LC, 2007 U.S. Dist. Lexis. 44900, *12-13 (D. Id. June 20, 2007). The 18 Court agrees with and follows the case law in this District requiring a more robust showing regarding 19 the likely success of the dispositive motion. See, e.g., Trzaska, 2011 U.S. Dist. Lexis 39275, *8-9 20 (noting that “some courts apply a more lenient standard in deciding whether discovery should be stayed 21 pending a decision on a potentially dispositive motion,” and declining to follow those cases).5 22 Defendants also rely on case law applying more lenient standards to particular types of dispositive 23 5 24 25 26 27 28 Defendants’ briefing on these issues is at times troubling to the Court. Among several examples, Defendants quoted the above passage from Trzaska but omitted the word “some” and indicated that a stay was granted under the “more lenient standard.” See Mot. at 7. Contrary to Defendants’ representation, the court expressly rejected the “more lenient standard.” Trzaska, 2011 U.S. Dist. Lexis 39275, *9 (“While a more lenient standard may avoid the burden and expense of discovery in cases that are ultimately dismissed on the pleadings, this Court concludes that it should continue to abide by the stricter standards set forth in [this District’s case law].” (internal citations omitted)). 5 1 motions not at issue here. See, e.g., Kabo Tool Co. v. Porauto Indus. Co., 2013 U.S. Dist. Lexis 53570, 2 *2 (D. Nev. Apr. 15, 2013) (challenges to personal jurisdiction). Such case law is inapplicable to the 3 preliminary peek at Defendants’ motion to dismiss for failure to state a claim under Rule 12(b)(6). See 4 id. (distinguishing applicable standards). 5 1. Analysis of Motion to Dismiss 6 With the above-standards in mind, the Court turns to its preliminary peek at the motion to 7 dismiss. Plaintiff’s first three claims allege breach of contract. Defendants attack these claims 8 predominately by asserting that Plaintiff failed to sufficiently allege that Defendants can be held liable 9 as alter egos of EyePartner Inc. (“EP”). See Docket No. 21 at 13-14. As part of their briefing, 10 “Defendants freely admit that EP, McCarty, and Green are essentially one and the same.” Id. at 14. 11 Nonetheless, Defendants argue that Plaintiff has failed to sufficiently plead that the corporate form was 12 used fraudulently or for an improper purpose. See id.6 Defendants’ argument relies significantly on the 13 magistrate judge’s report and recommendation in NetJets Aviation, Inc. v. Peter Sleiman Dev. Group, 14 LLC, 2011 U.S. Dist. Lexis 114081 (M.D. Fla. June 13, 2011). See, e.g., Docket No. 21 at 14-15. The 15 magistrate judge in NetJets recommended that a motion to dismiss should be granted because the 16 complaint failed to sufficiently plead that the corporate form was used fraudulently or for an improper 17 purpose. See 2011 U.S. Dist. Lexis 114081, at *22-23, 27. 18 Defendants fail to acknowledge, however, that the report and recommendation on which they 19 rely was expressly rejected on this issue by the district judge assigned to that case. See NetJets Aviation, 20 Inc. v. Peter Sleiman Dev. Group, LLC, 2011 U.S. Dist. Lexis 109973 (M.D. Fla. Sept. 27, 2011).7 The 21 22 23 24 25 26 27 28 6 The motion to dismiss also asserts that Plaintiff failed to sufficiently plead materiality of the breaches, see Docket No. 21 at 13, and that Plaintiff failed to sufficiently plead that the improper use of the corporate form harmed Plaintiff, see id. at 15. Defendants do not meaningfully develop these arguments in the motion, and the Court is not convinced that Plaintiff will be unable to state breach of contract claims based on these arguments. 7 Plaintiff’s opposition to the motion to dismiss also failed to recognize that the NetJets magistrate judge’s recommendation on this issue was rejected by the district judge. See Docket No. 23 at 7-8. As such, the parties should seriously consider whether they are ethically required to advise Judge Dorsey that case 6 1 district judge reviewed, inter alia, the magistrate judge’s determination that “while NetJets sufficiently 2 alleged that PSDG and Sleiman dominated and controlled J. Ward to such an extent that J. Ward did not 3 have an independent existence, NetJets failed to sufficiently allege that PSDG’s and Sleiman’s use of 4 J. Ward was fraudulent or for an improper purpose, as is necessary to state a claim for alter ego 5 liability.” Id. at *2. The district judge disagreed, however, concluding that “because we are at the 6 pleadings stage, it seems premature to foreclose the possibility that NetJets could establish that J. Ward 7 was used fraudulently or for an improper purpose, a fact intensive inquiry.” Id. at *3. The district judge 8 further explained that the allegations were sufficient for Rule 8 purposes “and only further discovery 9 will provide the proper record upon which to determine whether NetJets can ultimately make the 10 required showing to sustain these claims.” Id. As such, the district judge denied the motion to dismiss. 11 Id. 12 Accordingly, the opinion that Defendants rely upon heavily in their motion to dismiss on this 13 issue was expressly rejected for the proposition cited. The reviewing district judge’s opinion directly 14 contradicts Defendants’ position that these issues should be decided on the pleadings. Having reviewed 15 the complaint, the undersigned believes that the allegations are sufficient under Rule 8 to provide 16 Defendants notice of these claims, see, e.g., Compl. ¶¶ 36-39, and, at the very least, the issues raise 17 questions of fact properly developed through discovery. See NetJets Aviation, 2011 U.S. Dist. Lexis 18 109973, *3. As such, the Court is not convinced that Plaintiff will be unable to state a claim for the 19 breach of contract claims such that discovery would be a waste of effort.8 20 21 22 23 24 25 26 27 28 law relied upon in the motion to dismiss is not good law. See, e.g., Nev. R. Prof. Conduct 3.3(c). 8 In its opposition to the motion to dismiss, Plaintiff argues that Nevada law applies and that Nevada law tracks Delaware law. See Docket No. 23 at 5. Defendants argue in reply that dismissal is appropriate even if Nevada/Delaware law is applied. See, e.g., Docket No. 27 at 4. The case law presented by Defendants fails to persuade the undersigned that these claims are susceptible to dismissal at the pleading stage. See, e.g., LaSalle Nat. Bank v. Perelman, 82 F. Supp. 2d 279, 282, 295 (D. Del. 2000) (addressing issues on motion for summary judgment rather than on a motion to dismiss). 7 1 Because the Court believes Defendants will not succeed on their motion to dismiss with respect 2 to Claims 1, 2 and 3, the Court finds that the motion to stay discovery pending resolution of the motion 3 to dismiss should be DENIED.9 4 III. CONCLUSION 5 For the reasons discussed more fully above, the Court hereby DENIES the motion to stay 6 discovery. The Court will rule on the pending motion to dismiss or to transfer in due course; in the 7 meantime, the parties shall engage in discovery and may not object to providing discovery based on the 8 pendency of Defendants’ motion to dismiss or to transfer. 9 On a final note, the Court expects any future briefing to be significantly better-prepared than 10 what has been presented thus far. As noted above, Defendants’ briefing reviewed to date: (1) seriously 11 mischaracterized the case law cited and (2) relied on case law that had been reversed on the issue for 12 which it was cited. The Court requires counsel to be candid in their briefing, see Nev. R. Prof. Conduct 13 3.3(a)(1) (attorneys may not make a false statement of law), and to make a reasonable inquiry into the 14 legal contentions presented, see Rule 11(b). Especially given that the Court highlights these deficiencies 15 now, counsel should be mindful that future shortcomings could result in sanctions. 16 IT IS SO ORDERED. 17 DATED: October 29, 2013 18 ______________________________________ NANCY J. KOPPE United States Magistrate Judge 19 20 21 22 23 24 25 26 27 28 9 The Court need not conduct a preliminary peek with respect to the other claims challenged in the motion to dismiss because a general stay of discovery is only appropriate where the Court is convinced that all claims will be dismissed. See FTC v. AMG Servs., Inc., 2012 U.S. Dist. Lexis 121935, *7 (D. Nev. Aug. 28, 2012); see also Tradebay, 278 F.R.D. at 602 (pending motion must be “potentially dispositive of the entire care or at least dispositive of the issue on which discovery is sought”). 8

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