United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
LAURA TAYLOR SWAIN, District Judge.
Defendants ESDNetwork ("ESDN") and Steve Yeko ("Yeko") in KGK Jewelry LLC v. ESDNetwork, 11CV9236-LTS-RLE ("Action I"), and Plaintiffs Accurate Grading Quality Assurance ("AGQA") and the Diamond Center, Inc. ("Diamond Center") (collectively, the "Yeko Parties"), in Accurate Grading Quality Assurance Inc., et al. v. Kothari et al., 12CV9130-LTS-RLE ("Action II") move pursuant to Federal Rule of Civil Procedure 42 to consolidate Actions I and II. KGK Jewelry LLC ("KGK"), Plaintiff in Action 1, and Allen Bloom, Martin Flyer Jewelry LLC, Josh Kaufman and Susan Hecht, Defendants in Action II (collectively, the "Opposing Parties"),  oppose this motion and move to dismiss or stay the causes of action asserted in Action II as untimely raised compulsory counterclaims. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1332. The Court has carefully considered the parties' arguments and, for the following reasons, the Yeko Parties' motion to consolidate is denied, and the Opposing Parties' motion to dismiss or stay the Yeko Parties' Action II claims is denied.
In light of the extensive prior motion practice in both Actions I and II, the Court presumes the parties' familiarity with the underlying facts, and provides only a brief summary of the relevant background.
These actions arise generally out of the breakdown of business relations between the Yeko Parties and the Opposing Parties under agreements to collaborate on the creation and implementation of jewelry marketing services including, most notably, an "E-Commerce Platform." On December 16, 2011, KGK filed its initial complaint against Steve Yeko and ESDN in Action I (Action I, Docket Entry No. 1). ESDN moved to dismiss KGK's second amended complaint on June 18, 2013 (Action I, Docket Entry No. 24), and on January 9, 2013, this Court issued a Memorandum Opinion and Order granting in part and denying in part ESDN's motion. (Action I, Docket Entry No. 34.) The case has continued to progress and discovery closed in May 2013. (Action I, Seventh Amended Pretrial Order, Docket Entry No. 91.) Though the dispositive motion practice deadline in Action I is currently stayed pending Magistrate Judge Ellis' determination of KGK's motion for terminating sanctions (Action I, Docket Entry No. 102), the case stands ready to proceed either to summary judgment motion practice or trial.
On December 14, 2012, approximately a year after KGK filed Action I, the Yeko Parties filed their initial complaint against the Opposing Parties in Action II. (Action II, Docket Entry No. 1.) The Opposing Parties filed a motion to dismiss the Yeko Parties' complaint on October 11, 2013 (Action II, Docket Entry No. 37), and on September 30, 2014, this Court issued a Memorandum Opinion and Order granting in part and denying in part the Opposing Parties' motion. (Action II, Docket Entry No. 80.) Discovery in Action II is scheduled to close at the end of March 2015. (Action II, First Amended Pretrial Scheduling Order, Docket Entry No. 94.)
On May 16, 2014, while the motion to dismiss in Action II was pending, the Yeko Parties filed the instant motion to consolidate Actions I and II. (Action I, Docket Entry No. 75; Action II, Docket Entry No. 61.)
Legal Standard for Consolidation Under Rule 42
Federal Rule of Civil Procedure 42 empowers a court to consolidate actions involving common questions of law or fact. See Fed.R.Civ.P. 42(a); see also Blackmoss Investments, Inc. v. ACA Capital Holdings, Inc., 252 F.R.D. 188, 190 (S.D.N.Y. 2008) ("[c]onsolidation is appropriate where actions before the Court involve common questions of law or fact."). The Second Circuit has noted that trial courts have "broad discretion to determine whether consolidation is appropriate." Johnson v. Celotex Corp., 899 F.2d. 1281, 1284 (2d Cir. 1990). "Even if the explicit standards of Rule 42 are met, the decision whether to order consolidation is discretionary with the court." Quintel Corp., N.V. v. Citibank, N.A., 100 F.R.D. 695, 697 (S.D.N.Y. 1983). In deciding whether consolidation is appropriate, "the court must balance the interest of judicial convenience against any delay, confusion, or prejudice that might result from such consolidation." Sheet Metal Contractors Ass'n of Northern New Jersey v. Sheet Metal Workers' Int'l, 978 F.Supp. 529, 531 (S.D.N.Y. 1997). Consolidation is warranted where it promotes "judicial economy, " Celotex Corp., 899 F.2d at 1284, and serves to eliminate "the waste associated with duplicative discovery and multiple trials, and the danger of inconsistent verdicts." Internet Law Library, Inc. v. Southridge Capital Mgmt. LLC, 208 F.R.D. 59 (S.D.N.Y. 2002) (internal citations omitted). Before deciding to consolidate actions, the court must determine that "the parties will not be prejudiced." See Kaplan v. Gelfond, 240 F.R.D. 88, 91 (S.D.N.Y. 2007). To that end, the Second Circuit has instructed courts that "the benefits of efficiency can never be purchased at the cost of fairness." Malcolm v. Nat'l Gypsum Co., 995 F.2d 346, 350 (2d Cir. 1993). "[A]t all times, the burden remains with the moving party to demonstrate that consolidation is appropriate." In re Currency Conversion Fee Antitrust Litigation, 01 MDL No. 1409, 2009 WL 1834351, at *2 (S.D.N.Y. June 18, 2009).
The Yeko Parties have not carried their burden of demonstrating that consolidation of Actions I and II is appropriate. The Court reaches this conclusion for several reasons.
As an initial matter, the procedural posture of the two actions is markedly different. Action I is far more advanced than Action II; it has progressed to the point where discovery is closed and it is ripe for either dispositive motion practice or trial. Courts have routinely denied consolidation motions where there is a stark difference in the procedural posture of the actions, finding that judicial economy would not be served by consolidating two actions at disparate stages of litigation. See, e.g., Ruane v. County of Suffolk, 923 F.Supp.2d 454, 461 (E.D.N.Y. 2013) ("judicial economy would not be served through consolidation as these two actions are at different stages of the litigation. While no discovery has been conducted in this action, discovery has been completed and there is a motion for summary judgment currently pending in the [other] matter."); see also Transeastern Shipping Corp. v. India Supply Mission, 53 F.R.D. 204, 206 (S.D.N.Y. 1971) ("[a]lthough there are common questions of law and fact in the ten cases involved here, their respective calendar positions vary greatly... If the court were to order consolidation now, the cases which were ready for or close to trial would have to be held up pending completion of pretrial in the other cases. Such a result would delay rather than expedite the disposition of those cases which are now prepared for trial. In such a situation courts have consistently denied consolidation"); In re Currency Conversion Fee Antitrust Litigation, 2009 WL 1834351 (denying consolidation where one case was just beginning discovery and another was nearing the end of the pretrial process). Consolidating Actions I and II will not serve the purposes of judicial economy, and would prejudice the Opposing Parties by forcing them to delay moving forward with a case that they stand ready to litigate to conclusion.
The Court also credits the Opposing Parties' assertion that this motion appears to be a tactical maneuver on the part of the Yeko Parties to re-open discovery in Action I following their ...