When a defendant files a case-dispositive motion early in a Delaware proceeding, the parties often informally agree to stay discovery pending resolution of the motion. Where the plaintiff seeks to proceed with discovery notwithstanding the pendency of the potentially case-dispositive motion, a common tactic used by defendants is to file a motion to stay discovery while the motion to dismiss is pending. The argument is that if the case is dismissed, the expense of undertaking discovery may be avoided while the motion to dismiss is pending.
Delaware courts have the power to stay discovery in appropriate cases, but a stay of discovery pending a dispositive motion is not automatic. Absent special circumstances, discovery will normally be stayed pending the determination of a motion to dismiss the complaint.
In Deane v. Maginn, C.A. No. 2017-0346-LWW (Del. Ch. Sept. 8, 2021), the court found that such special or unique circumstances warranted denying a stay. In its decision, the court outlined three specific, non-exhaustive factors in favor of denying a stay including: (1) where the dispositive motion does not offer a “reasonable expectation” of avoiding further litigation; (2) where the plaintiff seeks interim relief; and (3) where the plaintiff may be prejudiced by delay because information will not be available in the future. The party seeking to stay discovery bears the burden of establishing some practical reason why discovery should be stayed.
Although the three well-established factors favor the defendant, the court in Deane reasoned that those factors were not exhaustive, and the “twin goals of efficiency and fairness” required further inquiry beyond those three factors. In particular, the court focused on the parties’ responsibility to adhere to the discovery schedule to which they previously had agreed.
First, the specific circumstances of the case meant that if the stay of discovery were granted, the parties would have less than a month to conduct discovery once the motion was decided. The court determined that such a compressed time frame would be highly prejudicial to the plaintiffs and contrary to the parties’ agreed schedule. Additionally, the court found that this risk outweighed the potential waste of resources that might occur if discovery took place and the case was subsequently dismissed.
Second, the court found that the risk of prejudice to the plaintiff was compounded by the defendant waiting nearly a month between receiving the discovery requests and filing the motion to dismiss. The court essentially found that the defendant granted himself a stay of discovery in the interim.
Third, the court acknowledged that the parties had previously raised and resolved scheduling issues over the course of the matter, and the court had already urged the parties to adhere to the schedule.
Finally, and most important in the court’s view, the defendant retained the right to seek a protective order if, contrary to the plaintiffs’ representations to the court, the discovery at issue posed an undue burden to the defendant.
Based on the four “unique circumstances,” the court in Deane exercised its discretion to deny the stay of discovery despite the pending motion to dismiss.
Key takeaways
- Delaware courts often stay discovery pending the resolution of a potentially case-dispositive motion to dismiss, but a stay of discovery is not automatic.
- Delaware courts may exercise their discretion to deny a stay based on efficiency and fairness concerns, even where several factors otherwise favor a stay (for example, the potential waste of resources that may occur if discovery takes place and the case is subsequently dismissed).
- The ruling in in Deane highlights the factually determinative nature of motions to stay discovery pending dispositive motions.
Client Alert 2022-003
