United States District Court, S.D. New York
MARC S. KIRSCHNER, Plaintiff,
J.P. MORGAN CHASE BANK, N.A., et al., Defendants.
ORDER DENYING STAY OF DISCOVERY PENDING MOTION TO
DISMISS and SCHEDULING CASE MANAGEMENT CONFERENCE
L. CAVE, UNITED STATES MAGISTRATE JUDGE.
the Court is Defendants' request that, pending the
District Court's decisions on their pending motion to
dismiss,  “discovery in this action remain
limited to the discovery taking place” in Kirschner
v. JP Morgan Chase Bank, N.A., 17-51840-LSS (Bankr. D.
Del.) (the “Delaware Action”). (ECF No. 94 at 3).
In response, Plaintiff has proposed a protocol in which
document discovery in this action “catches up”
with the Delaware Action to permit party and non-party
witnesses to proceed and to occur once in both actions.
(Id. at 1). The Court construes Defendants'
request as a request to stay discovery during the pendency of
the motion to dismiss, and denies the motion for the reasons
set forth below.
is the trustee of a post-bankruptcy litigation trust, the
beneficiaries of which purchased from Defendants debt
instruments of a drug-testing company, Millennium
Laboratories LLC, that were issued as part of an April 2014
$1.775 billion syndicated leveraged loan transaction. (ECF
No. 94 at 1; see ECF No. 38 at 1-2). In November 2015, 19
months after the transaction closed, Millennium filed a
bankruptcy petition. (ECF No. 38 at 2). The bankruptcy plan
issued by the Bankruptcy Court created the trust on whose
behalf Plaintiff brings claims against Defendants.
Delaware Action, the trust is suing on behalf of Millennium
to recover as fraudulent conveyances $35 million in fees the
Defendants (or their affiliates) received for underwriting
the transaction. (ECF No. 94 at 1-2).
August 1, 2017, Plaintiff filed in New York State Supreme
Court a complaint alleging against violations of several
states' securities laws, as well as claims for negligent
misrepresentation, breach of fiduciary duty, breach of
contract, and breach of the implied covenant of good faith
and fair dealing. (ECF No. 38 at 1). On August 21, 2017,
Defendants removed the action to this Court, asserting as a
basis for federal jurisdiction the Edge Act, 12 U.S.C. §
632. (ECF No. 1). On September 24, 2018, the District Court
denied Plaintiff's motion to remand the action to New
York State Supreme Court. (ECF No. 38).
April 4, 2019, the District Court held a preliminary
conference to discuss a briefing schedule for Defendants'
anticipated motions to dismiss and coordination of discovery
with the Delaware Action. (ECF No. 57). During the
conference, the District Court expressed its
“preliminary view” that “it is unlikely
that the motion to dismiss will be granted in its entirety,
” and directed that discovery in this action
“proceed in tandem with the Delaware [Action].”
(Id. at 5:6-9). The District Court noted that the
overlap between the parties in the two actions and the fact
that discovery was occurring in the Delaware Action
“argues even more so to allow discovery proceed.”
(Id. at 6:11-16). The threshold question raised in
Defendants' motion to dismiss is whether a syndicated
term loan is a security; if it is not, Defendants contend
that Plaintiff's securities law claims must be dismissed.
(Id. at 6:20-24; ECF No. 94 at 2).
the conference, although a formal discovery schedule was not
entered, Defendants agreed that documents produced in the
Delaware Action should also be produced in this action, and
to date, have produced to Plaintiff over 87, 000 documents
from 35 custodians. (ECF No. 94 at 3). Pursuant to Bankruptcy
Rule 2004, Plaintiff also received pre-complaint discovery
that has been deemed to have been produced in this action.
parties in the Delaware Action now appear poised to begin
depositions. (See ECF No. 94). Plaintiff argues that, to
avoid deposing the same witnesses twice, it needs documents
relating to “(i) Millennium from custodians that were
not searched for by the Delaware Defendants, and search terms
that were not utilized by defendants . . .”, and (ii)
Defendants' leveraged loan and high-yield businesses
generally.” (ECF No. 94 at 2). In response, Defendants
argue that discovery in this action should “remain
limited to the discovery taking place in the Delaware
Action” unless and until the District Court denies
Defendants' motion to dismiss. (Id. at3).
January 10, 2020, this Court held a telephone conference with
the parties regarding their respective positions on the
continuation of discovery. (See ECF No. 95).
motion to dismiss does not automatically stay discovery,
except in cases covered by the Private Securities Litigation
Reform Act.” Hong Leong Fin. Ltd. (Singapore) v.
Pinnacle Performance Ltd.,297 F.R.D. 69, 72 (S.D.N.Y.
2013). Courts do not routinely stay discovery “simply
on the basis that a motion to dismiss has been filed.”
Moran v. Flaherty, No. 92 Civ. 3200 (PKL), 1992 WL
276913, at *1 (S.D.N.Y. Sept. 25, 1992); Mirra v.
Jordan, No. 15 Civ. 4100 (AT) (KNF), 2016 WL 889559, at
*2 (S.D.N.Y. Mar. 1, 2016) (“The pendency of a
dispositive motion is not, in itself, an automatic ground for
a stay.”) (internal citation omitted). On a showing of
good cause, a district court “has considerable
discretion to stay discovery” pursuant to Federal Rule
of Civil Procedure 26(c). Integrated Sys. & Power,
Inc. v. Honeywell Int'l Inc., No. 9 Civ. 5874 (RPP),
2009 WL 2777076, at *1 (S.D.N.Y. Sept. 1, 2009); accord
Shulman v. Becker & Poliakoff, LLP, No. 17 Civ.
9330 (VM) (JLC), 2018 WL 4938808, at *2 (S.D.N.Y. Oct. 11,
2018); Rep. of Turkey v. Christie's, Inc., 316
F.Supp.3d 675, 677 (S.D.N.Y. 2018); In re: Platinum &
Palladium Commodities Litig., No. 10 Civ. 3617 (WHP),
2010 WL 11578945, at *1 (S.D.N.Y. Nov. 30, 2010). Courts look
to three factors in determining whether good cause exists to
stay discovery pending a motion to ...