VANDERWERFF v. QUINCY BIOSCIENCE HOLDING COMPANY, INC., et al

Filing 71

OPINION. Signed by Judge Esther Salas on 11/28/2018. (dmr)

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

JAMES VANDERWERFF,
Plaintiff,
v.
QUINCY BIOSCIENCE HOLDING
COMPANY, INC., et al.,
Defendants.

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Civil Action No. 17-0784 (ES) (MAH)
OPINION

SALAS, DISTRICT JUDGE
Before the Court is Defendants’ Quincy Bioscience Holding Company, Inc., Quincy
Bioscience, LLC, Prevagen, Inc., Quincy Bioscience Manufacturing, LLC, Mark Underwood, and
Michael Beaman’s (collectively “Defendants”) appeal, pursuant to Federal Rule of Civil Procedure
72(a) and Local Civil Rule 72.1(c), of Magistrate Judge Michael A. Hammer’s (the “Magistrate
Judge”) July 26, 2018 Order (D.E. No. 58, (the “July 26 Order”)) denying Defendants’ motion to
stay discovery in this matter. (D.E. No. 59). Having considered the parties’ submissions, the
Court decides the matter without oral argument. See L. Civ. R. 78.1(b). For the reasons below,
the Court AFFIRMS the Magistrate Judge’s July 26 Order.
I.

Background
On February 7, 2017, Plaintiff James Vanderwerff (“Plaintiff”) brought this class action on

behalf of himself and others similarly situated alleging that Defendants violated various federal
and New Jersey laws by making false and misleading claims regarding its dietary supplement,
Prevagen. (D.E. No. 1, Complaint (“Compl.”) ¶ 1). Particularly, Plaintiff seeks to represent a

nationwide class alleging that Defendants violated the Racketeer Influence and Corrupt
Organizations Act, as well as a New Jersey class alleging that Defendants violated three separate
New Jersey statutes. (See id. ¶¶ 42-90).
This action arises out of a similar set of facts as a lawsuit filed by the Federal Trade
Commission (“FTC”) against Defendants on January 9, 2017, in the Southern District of New
York (the “FTC Action”). The FTC alleged that Defendants’ products are false and misleading,
in violation of sections 5(a) and 12 of the FTC Act and various New York laws. See FTC v. Quincy
Bioscience Holding Co., Inc. 272 F. Supp. 3d 547, 551 (S.D.N.Y. 2017). The district court in that
action granted Defendants’ motion to dismiss for failure to state a claim. See id. at 549.
Defendants state that an appeal of the dismissal remains pending before the Second Circuit. (See
Defs. Mov. Br. at 1).
Defendants further contend that soon after Plaintiff filed the instant action, a new class
action was filed against Defendants in the Eastern District of New York, alleging similar facts as
to those in the FTC Action. See Defs. Mov. Br. at 4 (citing Karathanos v. Quincy Bioscience
Holding Co., et al., No. 17-1091, (Jan. 18, 2018)). Karathanos alleges deceptive acts or practices
and false advertising under New York law and the federal Racketeer Influenced and Corrupt
Organizations Act. No. 17-1091, D.E. No. 38. The Eastern District of New York stayed the matter
pending the appeal of the FTC Action. See id.
A third action is also currently pending before the Northern District of California. See
Racies v. Quincy Bioscience, LLC, No. 15-0292, 2015 WL 2398268, at *1 (N.D. Cal. May 19,
2015). In Racies, which asserts liabilities theories similar to the present action based on California
law, the California district court denied the Defendant’s motion to dismiss in part, finding that

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plaintiff’s allegations that representations of Prevagen were false, misleading and deceptive, were
sufficient to state a claim. 2015 WL 2398268, at *1.
On June 14, 2017, Defendants in this matter filed a motion to dismiss and a motion to stay,
pending the resolution of the FTC Action in the Second Circuit. (D.E. No. 27 & 28). On
September 1, 2017, the Magistrate Judge issued an order denying Defendants’ motion to stay this
matter and ordered the Defendants to provide to Plaintiff “the documents they have provided to
the FTC” and for all the parties to prepare “to discuss deadlines for the completion of written
discovery, all fact discovery, experts, class certification and summary judgment.” (D.E. No. 37 at
1 & 2).
On March 6, 2018, the Court administratively terminated Defendants’ motion to dismiss
pending the resolution of the FTC Action. (See D.E. No. 51 (the “March 26 Order”)). The Court
specifically observed that “discovery is ongoing in this action” and that “nothing in this Order shall
be construed to supersede Magistrate Judge Hammer’s September 1, 2017 Order.” (Id. at 3-4).
On July 13, 2018, Defendants renewed their request that further discovery be stayed until
after the Second Circuit resolves the FTC Action appeal. (D.E. No. 57). On July 26, 2018, the
Magistrate Judge rejected Defendants’ arguments and ordered limited discovery directed only to
class certification. (D.E. No. 58). Particularly, the Magistrate Judge ordered Defendants to
produce additional discovery related to total New Jersey sales of Prevagen, because “the discovery
in the FTC and Racies actions do not cover this information.” (Id.).

On August 3, 2018, Defendants filed the instant appeal. (D.E. No. 59). The motion is now
ripe for adjudication.

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II.

Legal Standard
A.

Review of Magistrate Judge Decisions

A United States Magistrate Judge may hear and determine any non-dispositive pretrial
matter pending before the Court. 28 U.S.C. § 636(b)(1)(A). In considering an appeal of a nondispositive order by a Magistrate Judge, the Court will modify or vacate an order only if it is
“clearly erroneous or is contrary to law.” Fed. R. Civ. P. 72(a); L. Civ. R. 72.1(c)(1)(A). “A
Magistrate Judge’s finding is clearly erroneous when, although there may be some evidence to
support it, the reviewing court, after considering the entirety of the evidence, is left with the
definite and firm conviction that a mistake has been committed.” Coyle v. Hornell Brewing Co.,
No. 08-2797, 2009 WL 1652399, at *3 (D.N.J. June 9, 2009); Dome Petroleum Ltd. v. Employers
Mut. Liab. Ins. Co., 131 F.R.D. 63, 65 (D.N.J. 1990) (quoting United States v. U.S. Gypsum Co.,
333 U.S. 364, 395 (1948)). “A [ruling] is contrary to law if the magistrate judge has misinterpreted
or misapplied applicable law.” Gunter v. Ridgewood Energy Corp., 32 F. Supp.2d 162, 164
(D.N.J. 1998). “The party filing the notice of appeal bears the burden of demonstrating that the
magistrate judge’s decision was clearly erroneous or contrary to law.” Marks v. Struble, 347 F.
Supp. 2d 136, 149 (D.N.J. 2004) (quoting Cardona v. Gen. Motors Corp., 942 F. Supp. 969, 971
(D.N.J. 1996). However, “where a magistrate judge is authorized to exercise [his] discretion, the
decision will be reversed only for an abuse of discretion.” Rhett v. N.J. State, 2007 WL 1456199,
at *2 (D.N.J. May 14, 2007).
When a party “[s]eeks review of a matter within the purview of the Magistrate Judge,
such as a discovery dispute, an even more deferential standard, the abuse of discretion standard,
must be applied.” Koninklijke Philips Elec. N.V. v. Hunt Control Sys., Inc., No. 11-3684, 2014
WL 5798109, at *2 (D.N.J. Nov. 7, 2014) (quoting Salamone v. Carter’s Retail, Inc., No. 09-4-

5856, 2012 WL 821494, at *4 (D.N.J. Mar. 9, 2012)). “The deferential standard of review is
particularly appropriate in a case where the magistrate judge managed the case from the outset,
and thus has a thorough knowledge of the proceedings.” Robinson v. Horizon Blue Cross-Blue
Shield of New Jersey, No. 12-2981, 2014 WL 3573339, at *1 (D.N.J. July 21, 2014) (citing
Cooper Hosp./Univ. Med. Ctr. v. Sullivan, 183 F.R.D. 119, 127 (D.N.J. Oct. 15, 1998).
B.

Law Governing a Motion to Stay Discovery

Under Federal Rule of Civil Procedure 26(c), the party seeking a stay of discovery must
establish “good cause” for a stay. Fed. R. Civ. P. 26(c); see also Landis v. N. Am. Co., 299 U.S.
248, 254 (1936); Galarza v. Whittle-Kinard, No. 16-0764, 2017 WL 2198182, at *1 (D.N.J. May
18, 2017). “Courts generally do not favor granting motions to stay discovery because when
discovery is delayed or prolonged it can create case management problems which impede the
court’s responsibility to expedite discovery and cause unnecessary litigation problems.” Galarza,
2017 WL 2198182, at *1. “[I]t is well settled that the mere filing of a dispositive motion does not
constitute ‘good cause’ for the issuance of a discovery stay.” Gerald Chamales Corp. v. Oki Date
Americas, Inc., 247 F.R.D. 453, 454 (D.N.J. 2007) (citing Chesney v. Valley Stream Union Free
Sch. Dist. No. 24, 236 F.R.D. 113, 115 (E.D.N.Y. 2006)). The party seeking a stay “must make
out a clear case of hardship or inequity in being required to go forward, if there is even a fair
possibility that the stay . . . will work damage to someone else.” Landis, 299 U.S. at 254.
III.

Analysis
Defendants contend that this Court should vacate the Magistrate Judge’s July 26 Order and

stay this action, or in the alternative, decide Defendants’ motion to dismiss. (Defs. Mov. Br. at 34). Defendants rely on Federal Rules of Civil Procedure 23 and 12(b)(6) to support their argument.
(See id. at 3 & 9). Defendants argue that requiring parties to commence discovery related to class
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certification “before ruling on Defendants’ Rule 12(b)(6)” would be contrary to the Federal Rules
of Civil Procedure 23. (Id. at 3 & 9). Defendants also state that Rule 12(b)(6) is “designed to
screen out cases where a complaint states a claim based upon a wrong for which there is no remedy
. . . and for which no relief could possibly be granted,” and failure to vacate the Magistrate Judge’s
July 26 Order, would be contrary to Rule 12(b)(6). (Id. at 3). Defendants further argue that the
Magistrate Judge’s July 26 Order is unfair and inconsistent with the Court’s March 6 Order
administratively terminating the motion to dismiss. (Id. at 2).
In opposition, Plaintiff argues that the order in which the Court decides the parties’ motions
is within the Court’s discretion. (D.E. No. 60, Plaintiff’s Opposition to the Defendants’ Appeal
from and Objections to Magistrate Judge Hammer’s Order (“Pl. Opp. Br.”) at 4). Therefore,
Plaintiff contends that the Magistrate Judge’s July 26 Order is not clearly erroneous or contrary to
law. (Id.).
In reply, Defendants add that allowing additional discovery would “inevitably lead to the
parties briefing a motion for class certification before the Second Circuit rule[s]” on the FTC
Action, which it contends is unfair and inconsistent with the law. (D.E. No. 61, Defendants’ Reply
Brief in Support of Objection to Magistrate Judge Hammer’s Order (“Defs. Rep. Br.”) at 3). For
the reasons below, the Court disagrees with Defendants’ arguments and affirms the Magistrate
Judge’s July 26 Order.
The Court is not persuaded that the Magistrate Judge’s July 26 Order is contrary to law or
an abuse of discretion. As a starting point, Defendants’ argument that it is contrary to Federal Rule
of Civil Procedure 23 for the Magistrate Judge to order additional discovery prior to ruling on
Defendants’ motion to dismiss, is misplaced. There is no requirement that discovery must be
stayed pending a decision on a party’s dispositive motion. See e.g., Chamales, 247 F.R.D. at 454
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(noting that there is no requirement that discovery must be stayed pending a decision on a party’s
motion for summary judgment); Fed. R. Civ. P. 26(d)(3)(A) (“[M]ethods of discovery may be used
in any sequence”). Further, Rule 23 is silent on the issue of whether the Court must decide a
motion to dismiss before it permits discover related to class certification. See Fed. R. Civ. P. 23.
Rather, Rule 23 states that a decision on class certification is to be issued at “an early practicable
time after a person sues or is sued as a class representative . . . .” Fed. R. Civ. P. 23(c)(1)(A).
Similarly, Rule 12(b)(6) does not limit this Court’s, and by extension the Magistrate
Judge’s, discretion to manage its case docket, including making decisions of when and how to
conduct discovery. See Fed. R. Civ. P.12(b)(6). After all, the Court has “inherent power to manage
its caseload, control its docket, and regulate the conduct of attorneys before it,” which “provides
authority to fashion tools that aid the court in getting on with the business of deciding cases.” See
Eash v. Riggins Trucking Inc., 757 F.2d 557, 567 (3d Cir. 1985); see also Landis, 299 U.S. at 254
(recognizing the “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”); United States v.
Wecht, 484 F.3d 194, 217 (3d Cir. 2007) (“It is important to note that district courts have wide
discretion in the management of their cases.”). Consequently, it is neither unfair nor inconsistent
with the law for Defendants to be required to conduct limited discovery directed only at class
certification issues before the Second Circuit rules on the FTC Action.
Defendants rely on two Third Circuit cases in support of their position “[t]hat the motion
to dismiss should be decided before the class certification stage.” (Defs. Rep. Br. at 4 (citing
Estate of Gleiberman v. Hartford Life Ins. Co., 94 F. App’x 944 (3d Cir. 2004) and Zimmerman v.
HBO Affiliate Grp., 834 F.2d 1163, 1170 (3d Cir. 1987). Particularly, Defendants argue that “in
Gleiberman, the plaintiff on appeal contend[ed] that the District Court erred in ruling on the motion
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to dismiss before deciding the issue of class certification.” (Id.). And Defendants then cite to
Zimmerman, where the Third Circuit found no abuse of discretion in the district courts refusal to
consider certification of a class before determining whether the named plaintiff had a federal cause
of action.

(Id.).

Putting aside that Defendant’s characterizations of these cases may be

questionable, Defendants’ reliance on them is misplaced for the simple fact that the present issue
before the Court is not whether the Court can decide a motion to certify a class before a motion to
dismiss, but rather, whether the Magistrate Judge can permit discovery related to class certification
to continue before the Court decides a motion to dismiss. Neither Gleiberman nor Zimmerman
say anything about that issue.
Finally, the Court is not persuaded that the Magistrate Judge’s July 26 Order is inconsistent
with the Court’s March 26 Order administratively terminating the motion to dismiss. The Court
did not state that discovery was stayed; it only stated that the motion to dismiss would be
administratively terminated pending a decision on the FTC Action. (D.E. No. 51). Indeed, the
Court specifically observed that “discovery is ongoing in this action” and that “nothing in this
Order shall be construed to supersede Magistrate Judge Hammer’s September 1, 2017 Order.” (Id.
at 3-4). Therefore, the Court use of a procedural device to temporarily terminate the pending
motion did not, in any way, limit the Magistrate Judge’s discretion to continue discovery in this
matter, particularly when that discovery is unrelated to the FTC Action.
The Court therefore determines that the Magistrate Judge’s July 26 Order is neither “clearly
erroneous” nor “contrary to law” because the Magistrate Judge did not misinterpret or misapply
the law, nor did he overlook any law or fact. See L. Civ. R. 72.1(c)(1)(A). Additionally, the Court
declines Defendants’ request that the Court decide their motion to dismiss.

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IV.

CONCLUSION
For the foregoing reasons, Defendants’ appeal is DENIED, and the Magistrate Judge’s July

26 Order is AFFIRMED. An appropriate Order accompanies this Opinion.
s/Esther Salas
Esther Salas, U.S.D.J.

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