COURT OF CHANCERY OF THE STATE OF DELAWARE L ORI W. W ILL V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

- 3734 Date Submitted: September 8 , 2021 Date Decided: September 8, 2021

Jody C. Bar i llare Morgan, Lewis & Bockius LLP 1201 North Market Street, Suite 2201 Wilmington, D elaware 19801 Davi d H. Holloway Shlansky Law Group, LLP 1504 N. Broom Street Wilmington, D elaware 19806
RE: Edward D eane , et al. v. Robert Maginn , Jr. C.A. No. 2017

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- LWW Dear Couns el :
I have reviewed the briefing on Defendant ’s Rule 26 (c) Motion for a Protective Order Staying Discovery Pending Resolution of the Motion to Dismiss

. For the reasons explained below, the motion is denied

. 1
Court o f Chancery Rule 26 (c ) empowers this c ourt to imp ose a stay of discovery. 2 A stay of discovery pending a dispositive motion is not automatic but

1 In o pposing the defe ndant ’s motion, th e plaintiffs assert ed a “Cross

- Motion to Compel Discovery. ” D kt. 120. That motion was p rocedurally unnecessary when opposing the defendant ’s motion alone would ha ve sufficed. The plaint iffs ’ motion did not include a fo r m of proposed or der and does not s eem to seek relief beyond the denial of the defendant ’s motion. Te chni cally speaking, by declining to stay discovery , I am granting the relief soug ht by the motion to compel.
2 Ct. Ch. R. 26(c) ( “Upon motion by a party

. . . and for good ca use shown, the Court .

. . may ma ke any order which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, inclu ding 1 or more of the follow ing: (1) That the discovery not be h ad

. . . .” ).C.A. No. 2017

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rests within the discretion of this court

. 3 As the moving party, the defendant bears
the bur den of demonstrating that a stay is war ranted

. 4
The defendant asse rts tha t a stay of discovery pending my decision on his
M otion t o Dismiss Plaintiffs ’ First Ame nded Complain t will promote efficiency
and prevent the unnecessary burden and expe nse of discovery in the event that I
dismiss this ac tion. 5 Ordinarily , that mi ght be an adequate basis to justify a stay of discovery. This court often stays discovery during the pend ency of a d ispositive
motion to prevent what ma y ultimately be unnecessary discovery

. 6 A stay may not be appropriate despit e a pending dispositive mot ion , however, in a number of cir cumstances

. In In re McCrory Parent Cor p
. , Chancellor Allen gave several examples of the types of “ special cir cums tances ”
that could justify the d enial of a stay of disc overy
. 7 They include : (1) where the

3 Orloff v . Shulma n , 2005 WL 333240, at *1 (Del. Ch. Feb. 2, 2005) ( “There is n o right to [a] stay of discovery, even where a case dispositive motion ha s been filed. ” ) ; I n re Yahoo! Inc. S ’holders Litig. , 2008 WL 2721800, at *1 (Del. Ch. Ju ly 1 1, 2008).
4 O rloff , 2005 W L 33 3240, at * 1 ( citing Pensionskasse d er ASCOOP v. Random Intern. Hl dg , Ltd. , 1993 WL 35977, at * 1 (Del. Ch. Jan. 26, 1993 ) )

. 5 Dkt. 118.
6 See, e.g. , In re KKR Fin. Hldgs. LLC S ’holder Litig. , 2014 WL 2090527, at * 1 (Del. Ch

. May 19, 20 14 ) ( “[A]voidin g unnec essary discovery is u sually sufficient justification for a stay pending resolution of a potent ially dispositive motion. ” (citing TravelCenters of Am

. LLC v. Brog , 2008 WL 5101619, at *1 (Del. Ch. Nov. 21, 2008) ) )

. 7 1991 WL 137145 , at *1 (Del. Ch. July 3 , 1991).C.A. No. 2017

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dispositive motio n does not offer a “ reason able expectation ” of avoiding fur ther litigation ; (2) where the plaintiff h as sought interim relief; and (3) wh ere the plaintiff wil l b e prejudiced because “ information may be unavailable later. ” 8
None o f those situations is prese nt here. Wit h respect to the first
circumstance , I need only consider whether the motion to dismiss has the potenti al to dispose of the entire case if the defen dant prevails. 9 That potential is obvious given t hat the motion see ks dismissal of all claims on multip l e g rounds. I wi ll not , however, a ssess the merits of the defend ant ’ s motion to dismiss in deciding the present motion

—

though the defendant makes sever al merits

- ba s ed arg uments in
adv ocating for a stay. As to the other circumstances outlined in McCrory , t he plaintiff s have not requ ested interim relief and there is no reason to suspect tha t the
relev ant discovery will become unavai lable during th e time t ha t the motion to dismiss will be adjudicated.

8 Id

. 9 Soo Hyu n Kim v. Coupang, LLC , 2021 WL 222162 , at *1 (Del. Ch. Jan. 22, 20 21 ) ( “ Bu t whether vel non the Motion to Dismiss will be granted or denied is not the question on th is Motion. The question, instea d, is whether the Motion to D ismis s, if successful , will avoid the need fo r further litigation

. ”).C.A. No. 2017

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But that is no t the e nd of the inquiry. Th e thr e e “ special circumstances ”
Chancellor A llen discussed are not an exhaustive list. 10 Rather, the court must
consider the “ twin goals ” of e fficiency and fairness

. 11 It would be more efficient to stay discovery given the possibility that the defenda nt ’ s motio n to dismiss wil l be case dispositive

. Fairness to the plaintiff s , however , weigh s against a s tay

. 12 The unique circumstances of this case give rise to a thre at of injury to the plaintiff s if discovery is stayed entirel y and the mo tion to di smiss is denie d

. That risk of harm

o utw eigh s the potential waste of resources tha t may occur if discovery ta kes place and the case is subseq uently dism issed. 13 In my view, the interests of justice will
be promoted by dec lining to defer disco v ery until the motion to dis miss is
resolved.

10 See Electra Inv. Tr

. P LC v. Crews , 1999 WL 1204844, at *2 (Del. Ch. Nov. 30, 1999) (noting that the “ loose three

- part test ” described in McCrory was “ by no means exclusive or exhaustive ” ).
11 McCrory , 1 991 WL 137145, at *1.
12 See Pensionskasse , 1993 WL 35977, at *1 ( explaining that a stay “ should not

. . . be granted automat ically but carefully only when plaintiff will not be prejudiced thereby and defendan t may, if it prevails on its [case

- dispositive] motion, be spared the expense inv olved in responding to the disco very ” (quoting Schick, Inc. v. Amalgamated Clothing & Textile Workers Union , C.A. No. 9066 , slip op. at 2 (Del. Ch. June 18, 1 987) ) ).
13 See Mc Crory , 1991 WL 137 145, at *1 (expl aining that “ in eac h instance, the court mu st m ake a particularized judgment evaluating the we ight that efficienc y should be afforded . . . and the significance of any risk of injury to the plaintiff that might eventuate f rom a sta y ” ).C.A. No. 2017

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There are several reasons for that conclusion. First, if the court were to t ake
the full amount of time affor d ed it to dec ide the defendant ’ s motion to dismiss and
stay discovery d uring that time , the plaintiff s would have less than a mo nth ( at

most ) to conduct fact discovery

. That compressed time fra me could be highly prejudicial to the plaintiff s and contrary to the schedule t he parties negotiated

. Second, t h e risk of prejudice to the plaintiffs is compound ed by the
defendant wai t ing nearly a month after filing his motion to dismiss brief (and afte r the plain tiff

s served their discovery reque sts and the defendant served pages of objections ) to seek a stay of discovery. In the int erim, t he defendant has
effe ctively granted himself a d iscovery stay and refused to produce any
documents

. 14 The defendan t claims th at it was “ onl y after Defendant saw the
absence of any serious opposition to dismissa l ” in the plaintiffs ’ opposition brief
that it “ objected to dis cove ry going forward at all. ” 15 But the defendant ’ s vie ws on
the merits of th e plaintiff s ’ legal arguments a re hardly a proper basis to refuse to engage in discovery.
Third , t o stay discovery pending my decision on the motion to dismi ss
would r isk further dela y in a case whe re the parti es h ave repeatedly been

14 See Dkt. 120, Hol loway Aff. ¶ 6.
15 D kt. 122 ¶ 7

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admonished t o maintain a schedule

. 16 I n en suring that the defendant had a fair opportunity to move to dismiss the plaintiff s ’ eleventh

- hour amendment to their complaint , I expressed a view th at the parties w ould need to “ press ahead with

some discovery at the same time as the motion to dismiss ” an d that I di d not

“ envision [] holding off on discovery entirely until after I decide the motion to
dismiss. ” 17 I see no basis to deviate from that view now. Th e de fendant w as given

amp le tim e to brief his motion in this non
- expedited ca se but , to maintain the
schedul e the parties agreed to , discovery m ust proceed in tandem

. Fourth , and perhaps most importantly, the defendant is not without recourse
if th e plaintiff s ’ discovery re quests impos e an undue burden

. The plaintif fs ’
counsel previously told th is court that

— should their motion to amend be granted

— they would not “ seek extensive additional discovery

. ” 18 The plaintiffs ’ counsel

a lso said that several categories of their additional discov e r y requests s ought
documents that would also b e responsive to their prior document requests

. 19 The court expects that the plaintiffs will abide b y those statements and b e reasonably

16 E.g. , D kt. 76 at 17

. 17 Dkt. 111 at 7, 9.
18 Dkt. 91 at 2 ; see also Dkt . 100 at 9 ( stating that “ [ d iscovery] would be very expedited ” )

. 19 Dkt. 91 at 2

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targ ete d in negotiating the scope of discover y necessary to the ir recent ly

- pleaded
claims. If the plaintiffs overreach ( by requ esting documents spanning a 21

- year date range, for e xample ) and the parties are at an impasse af te r appropriately meeting and confe rring , t he defendan t h as the right to see k a protective order. A
wh olesale stay of discovery , however, is inappropriate

. For these reasons, I conclude that the court should exercise its discretion to deny the motion to stay. Discovery will procee d purs uant to the June 24, 2021 scheduling orde r . Giv en this ruling, argu ment on the motion to sta y is

unnecessary . The hearing scheduled for September 9, 2021 wil l proceed only on
the motion to dismiss. Sincerely yours , /s/ Lori W. W

ill
Lo ri W. Will Vice Chancellor LWW/dmh