Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_16-cv-03614/USCOURTS-cand-4_16-cv-03614-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court 

Northern District of Californi

a

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

WELLS FARGO BANK, N.A., 

Plaintiff, 

v. 

HOWARD MISLE, et al., 

Defendants. 

Case No. 16-cv-03614-JSW 

ORDER DENYING MOTION TO STAY; 

OVERRULING OBJECTIONS TO AND 

ADOPTING REPORT AND 

RECOMMENDATION REGARDING 

JOINT LETTER BRIEF; AND 

CONTINUING CASE MANAGEMENT 

CONFERENCE 

Re: Dkt. Nos. 52, 58, 63, 65 

Now before the Court for consideration are: (1) the Report and Recommendation issued by 

Magistrate Judge Kim regarding a dispute about whether discovery should be stayed (the 

“Report”); (2) the objections to the Report filed by Schnitzer Steel Industries, Inc. (“SSI”) 

objections to the Report; and (3) SSI’s motion to stay all aspects of this case pending resolution of 

Misle v. Schnitzer Steel Industries, Inc., No. 15-cv-6031-JSW (the “Related Case”). 

The Court has considered the parties’ papers, relevant legal authority, and the record in this 

case, and the parties appeared for a hearing on February 17, 2017. For the reasons set forth below, 

the Court HEREBY DENIES SSI’s motion to stay this case in its entirety. The Court HEREBY 

ADOPTS Judge Kim’s recommendation that discovery be limited to the parties’ priorities of 

entitlement to the escrow funds. 

BACKRGOUND 

This is an interprleader action which arises out of a dispute over funds (“Escrow Funds”) 

that had been held in escrow by Plaintiff Wells Fargo Bank, N.A. (“Wells Fargo”) pursuant to an 

Escrow Agreement executed by Defendant Howard Misle (“Misle”), Defendant Schnitzer Steel 

Case 4:16-cv-03614-JSW Document 84 Filed 02/17/17 Page 1 of 5
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Industries, Inc. (“SSI”), and Wells Fargo. The Court set forth the background that gave rise to this 

litigation in its Order denying a motion to dismiss filed by Defendants, Nico Alloy, Inc., Larry 

Levine and Denyse MacMillan (collectively “Judgment Creditors”), and it shall not repeat those 

facts here. (See Dkt. No. 25.) 

On February 15, 2017, the Court granted, in part, the motion for discharge and attorney’s 

fees and costs filed by Wells Fargo. (Dkt. No. 82.) Thus, this case will proceed to the second 

phase of an interpleader dispute, namely “a determination of the respective rights of the 

claimants.” Mack v. Kuckenmeister, 610 F.3d 1010, 1024 (9th Cir. 2010) (internal quotation and 

citation omitted). The Related Case, which also involves a dispute over the Escrow Funds, 

currently is set to go to trial on May 8, 2017. 

On December 9, 2016, the parties submitted a joint letter brief, in which they raised a 

dispute about whether discovery in this case should be stayed pending resolution of the Related 

Case. SSI argued discovery in this case should not proceed until the Related Case is resolved, 

because it is seeking all or substantially all of the Escrow Funds. Therefore, according to SSI, if it 

prevails in the Related Case, this case will be moot. 

Misle, and Defendant American Metals Group, Inc. and Defendant Cornerstone Nevada, 

LLC (collectively the “Misle Defendants”)1 also argued that discovery should be stayed until the 

Related Case is resolved. However, they proposed, in the alternative, that if discovery is not 

stayed, it should be limited to all parties’ priority of entitlement to the Escrow Funds. (Dkt. No. 

52, Joint Letter Brief at 2-3.) The Judgment Creditors argued discovery should proceed without 

limitations. (Id. at 3-5.) 

On December 20, 2016, Judge Kim issued the Report, in which she recommended that the 

request to stay be denied but recommended that discovery proceed on the priorities in entitlements 

to the Escrow Funds. Judge Kim also recommended the Judgment Creditors be provided copies of 

the Escrow Agreement as well as the Asset Purchase Agreement that is at issue in the Related 

Case. (Dkt. No. 58, Report at 2:2-16.) The Report also recommends that the Misle Defendant’s 

 

1

 The Court refers to the Misle Defendants collectively for the sake of convenience. 

Case 4:16-cv-03614-JSW Document 84 Filed 02/17/17 Page 2 of 5
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United States District Court 

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request for 75 interrogatories be denied. (Id.) 

On December 22, 2016, SSI filed its motion to stay, in which it repeats its argument that 

because, in its view, it is likely that the Related Case will moot this action, the Court should stay 

this matter in its entirety. On January 3, 2017, SSI objected to the Report, and argued the Court 

should not resolve the Report until it resolved the motion to stay. (Dkt. No. 65.) 

The parties in both cases are scheduled to appear for a settlement conference with 

Magistrate Judge Westmore on February 22, 2017. 

ANALYSIS 

A. The Court Denies the Motion to Stay the Case. 

SSI moves to stay this case in its entirety pending resolution of the Related Case. The 

Misle Defendants do not oppose that motion. The Judgment Creditors do oppose the motion to 

stay. “[T]he power to stay proceedings is incidental to the power inherent in every court to control 

disposition of the cases on its docket with economy of time and effort for itself, for counsel, and 

for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “The exertion of this power calls 

for the exercise of sound discretion.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962); see 

also Landis, 299 U.S. at 254-55 (“How this can best be done calls for the exercise of judgment, 

which must weigh competing interests and maintain an even balance.”) The Court considers a 

number of factors in deciding whether to grant a stay. CMAX, 300 F.2d at 268 (citing Landis, 299 

U.S. at 254-55). As the moving party, SSI has the burden to show a stay is warranted. See, e.g., 

Clinton v. Jones, 520 U.S. 681, 708 (1997). 

First, the Court considers the “possible damage which may result from granting a stay.” 

CMAX, 300 F.2d at 268. SSI has taken the position that, in addition to the indemnification claims 

it submitted, which are the subject of the Related Case, it is entitled to recover attorneys’ fees it 

incurs in that case and in this case. SSI also contends those fees will come from the Escrow 

Funds. Thus, in SSI’s view, imposing a stay will prevent further depletion of the Escrow Funds 

based on litigation in this case. SSI also argues that the Judgment Creditor’s interests are 

protected by the Related Case, because they have filed a Notice of Judgment Lien in that case. 

Case 4:16-cv-03614-JSW Document 84 Filed 02/17/17 Page 3 of 5
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United States District Court 

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(See SSI Request for Judicial Notice, Ex. 1.)2 SSI also argues that the Judgment Creditors would 

not be harmed if this case is stayed based on Misle’s position in the Related Case, which is that 

SSI is not entitled to any of those funds. 

However, the Court also must consider the disputes between the Misle Defendants and the 

Judgment Creditors. It is not clear that the Related Case will fully deplete the Escrow Funds. 

Further, even if SSI’s stake in this litigation is minimal, the Court finds the Judgment Creditors 

would be suffer hardship by a delay in obtaining discovery on the issue of the priorities in 

entitlement. Accordingly, the Court finds that this factor weighs against granting a stay of the 

litigation in its entirety. 

The second factor the Court considers is the hardship or inequity which a party may suffer 

in being required to go forward. CMAX, 300 F.2d at 268. The fact that SSI and the other parties 

might be “required to defend a suit, without more, does not constitute a clear case of hardship or 

iniquity within the meaning of Landis.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1112 (9th Cir. 

2005) (internal quotations and citation omitted). Apart from being required to defend against this 

litigation and incurring additional fees, SSI does not articulate any prejudice it would suffer the 

Court denies the stay. This factor weighs against staying the case in its entirety. 

The third factor the Court considers is “the orderly course of justice measured in terms of 

the simplifying or complicating of issues, proof, and questions of law which could be expected to 

result from a stay.” CMAX, 300 F.2d at 268. SSI argues that the Related Case will fully resolve 

this matter and will be resolved in a matter of months. In her Report, Judge Kim noted that “there 

is no evidence showing that the Related Case will deplete the Escrow Account.” (Report at 4:4-5.) 

SSI argues that its claim for attorneys’ fees in this case and in the Related Case will, in fact, 

deplete those funds. (See, e.g., Declaration of Thomas A. Woods, ¶ 6.) However, that argument 

presumes SSI will be entitled to recover any and all attorneys’ fees it seeks in both this case and 

the Related Case. At this point, that issue is not before the Court. 

 

2

 The Court grants SSI’s request to take judicial notice of that document, which is a court 

record and, thus, the proper subject of judicial notice. See, e.g., Lee v. City of Los Angeles, 250 

F.3d 668, 689-90 (9th Cir. 2001); Fed. R. Evid. 201. 

Case 4:16-cv-03614-JSW Document 84 Filed 02/17/17 Page 4 of 5
United States District Court 

Northern District of Californi

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Case 4:16-cv-03614-JSW Document 84 Filed 02/17/17 Page 5 of 5