Valenzuela et al v. Crest-Mex Corporation et al

Filing 55

MEMORANDUM OPINION AND ORDER: The Court DENIES the Townsend Defendants' Motion for Temporary Stay of Discovery and Protective Order [Dkt. No. 45 ] and Defendant Kelly Goodwin's Motion for Protective Order [Dkt. No. 47 ]. (Ordered by Magistrate Judge David L. Horan on 6/26/2017) (mcrd)

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IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
FELIPE VALENZUELA, et al.,
Plaintiffs,
V.
CREST-MEX CORPORATION, et al.,
Defendants.

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No. 3:16-cv-1129-D

MEMORANDUM OPINION AND ORDER1
Defendants Thomas Townsend, Crest-Mex Corporation d/b/a La Sierra
Apartments, MTORMA Trust, Dallas Net Lease Trust, Sierra Management Trust,
Sierra Management Co., La Sierra Apartments Trust, Cedar Sierra Management Co.,
LLC., and 3328 Cedar Plaza Lane Apartments, Inc. (collectively, the “Townsend
Defendants”) have filed a Motion for Temporary Stay of Discovery and Protective Order
[Dkt. No. 45], and Defendant Kelly Goodwin has filed a Motion for Protective Order
[Dkt. No. 47].
United States District Judge Sidney A. Fitzwater has referred both motions to
the undersigned United States magistrate judge for determination under 28 U.S.C. §
636(b)(1)(A). See Dkt. No. 48.

Under § 205(a)(5) of the E-Government Act of 2002 and the definition of “written
opinion” adopted by the Judicial Conference of the United States, this is a “written
opinion[] issued by the court” because it “sets forth a reasoned explanation for [the]
court’s decision.” It has been written, however, primarily for the parties, to decide
issues presented in this case, and not for publication in an official reporter, and should
be understood accordingly.
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Plaintiffs Felipe Valenzuela and Jose Guillermo Gandara have filed a response
to each motion, see Dkt. Nos. 50 & 51, and the Townsend Defendants and Goodwin
have filed replies, see Dkt. Nos. 52 & 54.
For the reasons explained below, the Court DENIES the Townsend Defendants’
Motion for Temporary Stay of Discovery and Protective Order [Dkt. No. 45] and
Defendant Kelly Goodwin’s Motion for Protective Order [Dkt. No. 47].
Background
In support of their Motion for Temporary Stay of Discovery and Protective
Order, the Townsend Defendants explain that
Plaintiffs sued ten defendants alleging that they all employed Plaintiffs,
for purposes of the [Fair Labor Standards Act (“FLSA”)], and claiming
that they were not paid $23,273.00 in wages for work as maintenance
workers on the La Sierra Apartments located in Dallas, Texas.
Defendants moved to dismiss because the FLSA does not cover Plaintiffs
and because Defendant Townsend is not an “employer” of Plaintiffs under
the FLSA. Defendants’ motion to dismiss presented threshold issues that
should be addressed before Defendants are subjected to the considerable
expense and burden of this type of litigation. The motion to dismiss is
pending. Defendants also recently filed a motion to compel arbitration
based on newly discovered arbitration agreements. Defendants requested
that the Court rule on the motion to compel arbitration prior to ruling on
the motion to dismiss.
Meanwhile, Plaintiffs have initiated a barrage of discovery directed
at all Defendants, including hundreds of discovery requests and seeking
to depose all nine defendants in this lawsuit. Much of the written
discovery is subject to objection given its overbreadth, request for
irrelevant material, and the undue burden that would be imposed on
Defendants. If discovery is not stayed, Defendants will be forced to spend
an amount complying with the discovery that exceeds Plaintiffs’ damages,
all before Defendants’ threshold motions are ruled upon. Defendants are
hereby moving for protection from such discovery by asking the Court to
exercise its discretion to protect Defendants from discovery until the
Court rules on Defendants’ motion to compel arbitration and/or motion to
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dismiss. For the reasons shown below, good cause exists for the Court to
exercise its discretion.
Dkt. No. 45 at 1-2 (footnote omitted).
More specifically, the Townsend Defendants contend that their request should
be granted after considering the relevant factors of “(1) the breadth of discovery sought;
(2) the burden of responding to such discovery; and (3) the strength of the dispositive
motion filed by the party seeking the stay.” Id. at 4. They assert, as to the first factor,
that
Plaintiffs served on the nine moving Defendants a total of 603 discovery
requests: 13 requests for admission, 12 interrogatories, and 42 requests
for production for each of the nine moving Defendants. These discovery
requests are wide-reaching and will require much work by Defendants to
comply with the requests. In addition, on April 26, 2017, Plaintiffs’
counsel requested dates for the depositions of corporate representatives
of the eight corporate Defendants and Defendant Townsend. .... The
topics listed in Plaintiffs’ counsel’s letter are equally wide-reaching.
Id. at 4-5 (citations omitted). As to the second factor, the Townsend Defendants argue
that
Plaintiffs’ counsel is seeking to conduct all of Plaintiffs’ discovery while
Defendants’ Motions are pending, thereby subjecting Defendants to the
burden of this discovery even if its motions are meritorious and are
ultimately granted. The burden is substantial. The discovery has been
propounded on all nine moving Defendants and in total comprise 603
discovery requests. The large number of discovery requests demonstrates
the obvious burden that will be imposed on Defendants.
Beyond the sheer magnitude of the discovery, as reflected in the
attached declaration of Defendant Townsend, it will take Defendants at
least thirty hours to comply with the discovery requests. Exhibit F,
Townsend Decl., ¶ 3 (App. 46). And, as reflected in the attached
declaration of Barrett Lesher, one of Defendants’ counsel, it will take
Defendants’ counsel at least ten hours to prepare the discovery responses.
Exhibit G, Lesher Decl., ¶ 3 (App. 48).
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The depositions of the eight corporate representatives and
Defendant Townsend, a total of nine depositions, is expected to take at
least eight hours of preparation and potentially as much as 63 hours of
depositions (7 hours times 9 depositions). Exhibit G, Lesher Decl., ¶ 4
(App. 48). Thus, Plaintiffs seek to impose on Defendants as much as 101
hours of discovery burden, seeking discovery on all issues in the case,
while Defendants’ potentially dispositive Motion is pending.
Id. at 5. And, as to the third factor, the Townsend Defendants assert that,
[a]t the threshold of this case, Defendants challenged Plaintiffs’ standing
to bring a claim under the Fair Labor Standards Act (“FLSA”) because
there is no individual or enterprise coverage. And, Defendant Townsend
challenged Plaintiff’s right to sue him as an “employer” under the FLSA.
Plaintiffs claim they worked as maintenance employees at the La
Sierra Apartments in Dallas until March 1, 2006. (Complaint, ¶ 20, 21)
Plaintiffs claim, in conclusory fashion, that Defendants’ business and
Plaintiffs’ work for Defendants “affected interstate commerce” because
“materials and goods that Plaintiffs used” in their job “moved through
interstate commerce prior to and subsequent to Plaintiffs’ use.”
(Complaint, ¶ 22) Plaintiffs claim that Defendant Townsend ran the
apartment business primarily from California, while making trips to
Texas to supervise on-site operations. (Complaint, ¶ 22) Based on these
allegations, Plaintiffs assert coverage under the FLSA.
Defendants’ Motion challenges Plaintiffs’ pleading of FLSA
coverage, both from Plaintiffs’ side and from Defendants’ side.
Defendants’ Motion cites numerous authorities, including this Court’s
own decision in Lopez-Santiago v. Coconut Thai Grill, 2014 WL 840052
(N.D. Tex. 2014), rejecting FLSA coverage allegations similar to those in
Plaintiffs’ complaint. The Court should rule on this threshold issue (and
Townsend’s “employer” issue) before Defendants are subjected to the
burden of all-out discovery in this case. If the FLSA does not apply, then
Plaintiffs’ lawsuit based solely on the FLSA should not be allowed to
proceed and Defendants should not be subjected to the burden of
Plaintiffs’ discovery. It would be manifestly unjust to give Plaintiffs’ full
discovery before they have even made it past the threshold FLSA
coverage issue.
Additionally, Defendants’ motion to compel arbitration is as
equally strong. Defendants presented the court with two arbitration
agreements that were provided to Plaintiffs, and Plaintiffs continued to
work and accept pay after receiving the agreements. Additionally,
Plaintiffs’ claims fall within the scope of the agreements. Therefore,
Defendants have provided strong arguments in support of arbitration..
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Id. at 5-7.
Finally, the Townsend Defendants contend that a stay is appropriate where they
have presented substantial arguments for dismissal, where Plaintiffs have served
objectionable and harassing discovery, and where a temporary stay of discovery will
not unduly delay litigation. See id. at 7-9.
Goodwin similarly explains that she has filed a motion to dismiss Plaintiffs’ case
under Federal Rule of Civil Procedure 12(b)(6), asserting “that Plaintiffs lack standing,
and because Goodwin does not meet the statutory definition of ‘employer,’” and that
“Plaintiffs served three (3) sets of written discovery on Goodwin: (1) requests for
production, (2) requests for admissions, and (3) interrogatories (collectively, the
‘Discovery Requests’).” Dkt. No. 47 at 1. Goodwin asserts that, “[i]f the Court does not
protect Goodwin from the Discovery Requests, she will be forced to spend time and
money responding to the Discovery Requests that would otherwise be unnecessary
should the threshold issues made the subject of her motion to dismiss be decided in her
favor and/or should the issues made the subject of her co-defendants’ motions
concerning arbitration (which seeks to stay this entire proceeding) be decided in their
favor.” Id. at 2. Goodwin explains that her
dispositive motion challenges Plaintiffs’ pleadings, and the cases cited
therein (including this Court’s own prior decision) reject FLSA coverage
in cases with similar allegations. The Court should rule on this threshold
issue (and Goodwin’s “employer” issue) before Goodwin is subjected to the
burden and expense of discovery in this case.
If the FLSA does not apply, then Plaintiffs’ FLSA lawsuit should
not be allowed to proceed and, correspondingly, Goodwin should not be
subjected to the burden or expense of responding to the Discovery
Requests (or, additional discovery such as depositions). It would be
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manifestly unfair, costly to Goodwin, and burdensome to require Goodwin
to participate in full discovery before Plaintiffs have even made it past
the threshold issues described herein.
Id. at 3 (footnote omitted). “Notwithstanding these arguments, Goodwin concurs with
her co-defendants’ assertion the arguments made the subject of their motion to compel
arbitration are strong and would suffice as an independent basis on which to wholly
protect Goodwin from the Discovery Requests.” Id. at 3 n.1. “Goodwin, therefore, moves
this Court for complete protection from the Discovery Requests, or at least until such
time as the Court has ruled on Goodwin’s motion to dismiss and/or her co-defendants’
motions concerning arbitration.” Id. at 2.
Plaintiffs respond that the “Townsend Defendants’ Motion to Dismiss does not
assert an outright legal defense against the allegations in the Complaint other than
the statute of limitations as to some of Plaintiffs’ claims, but instead attacks the
sufficiency of the pleadings under Rule 12(b)(6) and alleges that Plaintiffs have failed
to plead any facts to support their individual and enterprise coverage allegations or
that Defendant Townsend was their employer”; that, “even if the Court finds that
Plaintiffs need to provide further factual development,” the Court is likely to allow
Plaintiffs to replead; that, “[a]s to the breadth of discovery sought, Plaintiffs’ discovery
requests in this case inquire into basic elements of Plaintiffs’ FLSA claims, i.e., hours
worked, identification of goods and materials used, identity of co-workers (who are
witnesses with knowledge of relevant facts such as the Plaintiffs’ hours worked and the
Defendants’ wage and hour policies and practices), amounts paid to Plaintiffs,
Defendants’ wage and hour policies, and issues related to FLSA coverage and employer
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status of the various Defendants”; that, “[w]hile the Townsend Defendants refer to a
total of 603 discovery requests, this is a result of the fact that there are nine separate
entities involved in the business structure created by Defendant Townsend himself,”
where “Plaintiffs served thirteen requests for admissions, twelve interrogatories, and
forty-two requests for production on each of the Townsend Defendants”; and that,
“[g]iven the relationship between the Townsend Defendants, it is likely that the
majority of the Townsend Defendants will have similar, if not identical, responses to
most of Plaintiffs’ discovery requests.” Dkt. No. 50 at 2, 3, 4-5.
Plaintiffs further respond that,
[a]s to the burden of responding to Plaintiffs’ discovery requests, the
Townsend Defendants argue in conclusory fashion that the burden of
responding to Plaintiffs’ discovery requests would be “substantial.” The
Townsend Defendants’ counsel provided an affidavit estimating that it
would take at least ten hours to respond to the Plaintiffs’ discovery
requests. This amounts to barely over an hour per party. That the
Townsend Defendants’ counsel is representing nine separate entities in
this litigation is a fact that is completely out of Plaintiffs’ control. The
Townsend Defendants’ calculation of the discovery burden also
incorporates a “worst case” scenario as to the requested depositions of the
parties, presuming that all of the depositions will last the full seven hours
provided for in the Federal Rules of Civil Procedure. Furthermore, the
burden of deposing the Townsend Defendants will fall more heavily on
Plaintiffs as they will be required to engage the services of a court
reporter and bear the full cost associated therewith, at least until such
time as they may prevail in this matter. Finally, the Townsend
Defendants have already responded to Plaintiffs’ discovery requests with
naught but objections; albeit the responses are generally improper under
Heller v. City of Dallas, 303 F.R.D. 466 (N.D. Tex. Nov. 12, 2014), and a
motion to compel may ultimately be necessary.
Id. at 4 (citations omitted).
Plaintiffs also note,
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[a]s one final matter, [that] Defendants previously requested that the
Court stay all discovery until after deciding the Defendants’ motions to
dismiss when the parties filed their Joint Status Report Regarding
Scheduling Proposal. The Court did not stay discovery when it entered its
Scheduling Order on March 20, 2017. As this issue was previously raised
with the Court and the Court declined to enter a similar stay of discovery
less than three months ago, the current request to stay discovery should
be declined as well.
Id. at 8-9 (citations omitted).
As to Goodwin’s Motion for Protective Order, Plaintiffs oppose for many of the
same reasons as they raise in opposition to the Townsend Defendants’ motion, but
Plaintiff also note that, in her motion, Goodwin did not address any of the relevant
factors in detail and that she “argues only in conclusory fashion that she should not be
subjected to the burden or expense of responding to the discovery requests.” Dkt. No.
51 at 3.
Legal Standards and Analysis
The Court has discretion to stay discovery “for good cause shown.” FED. R. CIV.
P. 26(c)(1); accord Landry v. Air Line Pilots Ass’n Int’l AFL-CIO, 901 F.2d 404, 436 (5th
Cir. 1990); see generally Landis v. N. Am. Co., 299 U.S. 248, 254 (1936) (“[T]the power
to stay proceedings is incidental to 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.”). Under Federal Rule of Civil Procedure 26(c), the Court
may, for good cause, issue an order to protect a party or person from annoyance,
embarrassment, oppression, or undue burden or expense. See FED. R. CIV. P. 26(c)(1).
“[T]he burden is upon [the party seeking the protective order] to show the necessity of
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its issuance, which contemplates a particular and specific demonstration of fact as
distinguished from stereotyped and conclusory statements.” In re Terra Int’l, 134 F.3d
302, 306 (5th Cir. 1998) (citations omitted); see also E.E.O.C. v. BDO USA, L.L.P., 856
F.3d 356, 367 (5th Cir. 2017), as revised (May 8, 2017). A protective order is warranted
in those instances in which the party seeking it demonstrates good cause and a specific
need for protection. See Landry, 901 F.2d at, 435. The Court has broad discretion in
determining whether to grant a motion for a protective order. See Harris v. Amoco
Prod. Co., 768 F.2d 669, 684 (5th Cir. 1985). “The trial court is in the best position to
weigh fairly the competing needs and interests of parties affected by discovery.” Seattle
Times Co. v. Rhinehart, 467 U.S. 20, 36 (1984).
In particular, “[t]he Court has broad discretion and inherent power to stay
discovery’ while a motion to dismiss is pending,” but “[s]uch a stay is not []
automatically granted whenever a motion to dismiss is pending.” Stanissis v. Dyncorp
Int’l LLC, No. 3:14-cv-2736-D, 2014 WL 7183942, at *1 (N.D. Tex. Dec. 17, 2014)
(internal quotation marks omitted). “[N]o federal rule, statute, or binding case law
applies here to automatically stay discovery pending a ruling on” defendants’ motions
to dismiss. Escareno ex rel. A.E. v. Lundbeck, LLC, No. 3:14-cv-257-B, 2014 WL
1976867, at *2 (N.D. Tex. May 15, 2014). “In fact, such a stay is the exception rather
than the rule.” Glazer’s Wholesale Drug Co., Inc. v. Klein Foods, Inc., No. 3:08-cv-774-L,
2008 WL 2930482, at *1 (N.D. Tex. July 23, 2008). “[H]ad the Federal Rules
contemplated that a motion to dismiss under Fed. R. Civ. P. 12(b)(6) would stay

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discovery, the Rules would contain a provision to that effect.” Id. (internal quotation
marks omitted).
The law is the same as to a pending motion to compel arbitration, although “[a]
trial court has broad discretion and inherent power to stay discovery until preliminary
questions that may dispose of the case are determined.” Petrus v. Bowen, 833 F.2d 581,
583 (5th Cir. 1987).
As the Townsend Defendants note, courts in this jurisdiction have explained
that relevant “factors that inform the court’s discretion are: (1) the breadth of discovery
sought; (2) the burden of responding to such discovery; and (3) the strength of the
dispositive motion filed by the party seeking a stay.” Von Drake v. Nat’l Broad. Co., No.
3:04-cv-652-R, 2004 WL 1144142, at *1 (N.D. Tex. May 20, 2004).
Here, the Court is persuaded that the discovery requests that Plaintiffs have
served and the depositions that they seek are not so voluminous and do not present
such an undue burden as the defendants make them out, considering that multiple,
apparently related defendants have been sued here and are jointly represented. The
Court finds that the defendants’ assertions – which “only detail[] the usual
inconveniences and costs that are associated with discovery practice” – “do not suffice
to show hardship or inequity” or other good cause that would justify a stay of discovery
and protective order under Rule 26(c)(1). Ashford Inc. v. Unite Here, No.
3:15-cv-0262-M, 2015 WL 11121019, at *2 (N.D. Tex. May 12, 2015).
And, as to the pending dispositive motions, the Townsend Defendants and
Goodwin raise threshold challenges to Plaintiffs’ FLSA claims that are not uncommon
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and have not generally resulted in staying discovery – even in cases to which the
defendants’ briefing points – and that the Court notes, without suggesting a view on
the merits of defendants' pending motions to dismiss, often have resulted in leave to
replead. See, e.g., Lopez-Santiago v. Coconut Thai Grill, No. 3:13-cv-4268-D, 2014 WL
840052, at *4-*5 (N.D. Tex. Mar. 4, 2014). That all weighs heavily in favor of the
Court’s “declin[ing] in the exercise of its broad discretion to ... preclude all discovery
in this case during the time it will take to decide the instant motions to dismiss and
(if applicable) any motions addressed to amended pleadings.” Stanissis, 2014 WL
7183942, at *1. And, although the motion to compel arbitration might, if granted,
result in the complete dismissal of this case as pending in this Court, that possibility
alone does not, considering all the other factors discussed above, justify taking the
extraordinary step of staying discovery.
Accordingly, the Court determines, in an exercise of its broad discretion, that a
stay of discovery and protective order, as requested, are not appropriate here. And,
after considering all of the circumstances presented, the Court further determines that
the parties will bear their own expenses, including attorneys’ fees, in connection with
the Townsend Defendants’ Motion for Temporary Stay of Discovery and Protective
Order [Dkt. No. 45] and Defendant Kelly Goodwin’s Motion for Protective Order [Dkt.
No. 47].

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Conclusion
For the reasons explained above, the Court DENIES the Townsend Defendants’
Motion for Temporary Stay of Discovery and Protective Order [Dkt. No. 45] and
Defendant Kelly Goodwin’s Motion for Protective Order [Dkt. No. 47].
SO ORDERED.
DATED: June 26, 2017
_________________________________________
DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE

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