United States District Court, D. Nevada
CAM FERENBACH, Magistrate Judge.
This matter involves David Brown's fraud action against Trans Union, LLC. Before the court is Defendant Bank of America's motion to stay (#31). Brown opposed (#35); and Bank of America replied (#37). For the reasons stated below, Bank of America's motion to stay is denied.
On June 16, 2007, David Brown borrowed $203, 984.00 from Countrywide. (Compl. (#1) at ¶ 19). The loan contract's original terms contained a prepayment penalty provision. ( Id. at ¶ 21). Brown alleges that he refused to sign the contract because it contained a prepayment penalty provision and, therefore, amended the loan contract-with Countrywide's assent-to remove the prepayment penalty provision. ( Id. at ¶¶ 21-22).
In the fall of 2007, Bank of America merged with Countrywide. ( See id. at ¶ 23). Once Bank of America assumed Countrywide's rights and responsibilities under Brown's loan contract, Brown began receiving letters from Bank of America regarding the status of his loan. ( Id. at ¶ 24). On April 28, 2011, Brown visited a local Bank of America, inquired how much he owned on the loan and was told that the outstanding balance, including accrued interested through April 28, 2011, amounted to $10, 435.53. ( Id. at ¶ 25). Brown, then, pulled out his check book and executed a draft for $10, 435.53. ( Id. )
Despite the fact that Brown thought that he had paid off his loan, he continued to receive statements and bills from Bank of America. ( Id. at ¶ 26). A series of communications were sent back and forth between Brown, Bank of America, and the loan servicer, Green Tree. ( Id. ) During this time, which was sometime during the fall of 2011, Brown learned that his loan contract had been treated as if the prepayment penalty provision was never removed from the contract. ( Id. ) Consequently, on November 15, 2013, Brown filed suit.
When evaluating a motion to stay discovery while a dispositive motion is pending, the court initially considers the goal of Federal Rule of Civil Procedure 1. The guiding premise of the Rules is that the Rules "should be construed and administered to secure the just, speedy, and inexpensive determination of every action." FED. R. CIV. P. 1. It needs no citation of authority to recognize that discovery is expensive. The Supreme Court has long mandated that trial courts should resolve civil matters fairly but without undue cost. Brown Shoe Co. v. United States , 370 U.S. 294, 306 (1962). This directive is echoed by Rule 26, which instructs the court to balance the expense of discovery against its likely benefit. See FED. R. CIV. P. 26(B)(2)(iii).
Consistent with the Supreme Court's mandate that trial courts should balance fairness and cost, the Rules do not provide for automatic or blanket stays of discovery when a potentially dispositive motion is pending. Skellerup Indus. Ltd. v. City of Los Angeles , 163 F.R.D. 598, 600-01 (C.D. Cal. 1995). Pursuant to Federal Rule of Civil Procedure 26(c)(1), "[t]he court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Whether to grant a stay is within the discretion of the court. Munoz-Santana v. U.S. I.N.S. , 742 F.2d 561, 562 (9th Cir. 1984). The party seeking the protective order, however, has the burden "to show good cause' by demonstrating harm or prejudice that will result from the discovery." FED. R. CIV. P. 26(c)(1).
Satisfying the "good cause" obligation is a challenging task. A party seeking "a stay of discovery carries the heavy burden of making a strong showing' why discovery should be denied." Gray v. First Winthrop Corp. , 133 F.R.D. 39, 40 (N.D.Cal.1990) (citing Blankenship v. Hearst Corp. 519 F.2d 418, 429 (9th Cir. 1975)). The Ninth Circuit has held that under certain circumstances, a district court abuses its discretion if it prevents a party from conducting discovery relevant to a potentially dispositive motion. See Alaska Cargo Transp., Inc. v. Alaska R.R. Corp. , 5 F.3d 378, 383 (9th Cir. 1993) (stating the district court would have abused its discretion in staying discovery if the discovery was relevant to whether or not the court had subject matter jurisdiction).
Two published decisions in this district have held that a stay of discovery is not warranted simply because a dispositive motion is pending. Twin City Fire Ins. v. Emp'r of Wausau , 124 F.R.D. 652, 653 (D. Nev. 1989); Turner Broad. Sys., Inc. v. Tracinda Corp. , 175 F.R.D. 554, 556 (D. Nev. 1997). Both opinions concluded that to establish good cause for a stay, the moving party must show more than that an apparently meritorious Rule 12(b)(6) motion to dismiss is pending in the litigation. Id. Instead, citing Wood v. McEwen , 644 F.2d 797, 801 (9th Cir. 1981) cert. denied, 455 U.S. 942 (1982), Twin City and Turner both ruled a district court "may... stay discovery when it is convinced that the Plaintiff will be unable to state a claim for relief." Twin City , 124 F.R.D. at 653; Turner , 175 F.R.D. at 555. Typical situations in which staying discovery pending a ruling on a dispositive motion are appropriate would be where the dispositive motion raises issues of jurisdiction, venue, or immunity. TradeBay, LLC v. Ebay, Inc. , 278 F.R.D. 597, 600 (D. Nev. 2011).
The Northern and Eastern District courts of California have applied an analogous but somewhat different two-part test for evaluating whether and under what conditions discovery should be stayed. In Mlejnecky v. Olympus Imaging America, Inc. , No. 10-cv-2630 2011 WL 489743 at *6 (E.D. Cal. Feb. 7, 2011), the court held that an underlying motion to dismiss must be potentially dispositive of the entire case, or at least dispositive on the issue on which discovery stay is sought. Id. Second, the court must determine whether the pending motion can be decided without additional discovery. Id. In applying this two-part test, the court evaluating the motion to stay must take a so-called "preliminary peek" at the merits of the underlying pending dispositive motion to assess whether a stay of discovery is warranted. If the party moving to stay satisfies both prongs of the Mlejnecky test, discovery may be stayed.
Similarly, a decision from the Central District of California has held that discovery should be stayed while a dispositive motion is pending "only when there are no factual issues in need of further immediate exploration, and the issues before the Court are purely questions of law that are potentially dispositive." Skellerup Indus. Ltd. 163 F.R.D. at 601 (citing Hachette Distribution, Inc. v. Hudson County News Co. , 136 F.R.D. 356, 358 (E.D.N.Y.1991)).
The issue of whether a motion to stay should be granted pending the resolution of a motion to dismiss was recently decided by the Honorable Peggy A. Leen, Magistrate Judge, in the case of TradeBay , 278 F.R.D. at 603, and the Honorable William G. Cobb, U.S. Magistrate Judge, in the case of Money v. Banner Health , No. 11-cv-800, 2012 WL 1190858, at *5 (D. Nev. April 9, 2012). Both Judge Leen and Judge Cobb were confronted with a similar request by the Defendant's motion to stay discovery pending the resolution of a motion to dismiss. Id. Both Judge Leen and Judge Cobb adopted the standard enunciated in Twin City, Turner , and Olympus Imaging , and concluded that a stay of discovery should be ordered ...