Chancery Denies Motion to Stay Discovery Pending Dispositive Motion

Barton v. Club Ventures Investments LLC, C.A. No. 8864-VCN (Del. Ch. Dec. 23, 2013).

Issue Presented:  Under what circumstances may a motion to stay discovery be granted when a dispositive motion to dismiss is pending.

Brief Overview:

Court of Chancery Rule 26(c) confers upon the Court the discretion to enter a protective order to stay discovery.  This letter ruling discusses the standard that the Court will apply to balance the costs and hardships to defendants if discovery were to proceed, as compared to the need of the plaintiffs for discovery and the risk of injury to the plaintiffs if a stay were granted.

The Court typically grants these motions where “some practical reason” is established by the moving party which is “often easily met because avoiding unnecessary discovery is usually sufficient justification for stay of discovery pending resolution of a potentially dispositive motion.”  For a more detailed discussion of the facts involved in this matter, see Barton v. Club Ventures Inv. LLC, 2013 WL 6072249 (Del. Ch. Nov. 19, 2013).

The factual background of this case involved pending litigation in another jurisdiction that was related, as well as the fact that there was an expedited scheduling order involved in this case due to the need for a prompt resolution of issues related to the non-competition provision that may bind the plaintiff.

In sum, the Court reasoned that discovery regarding the bulk of the claims will eventually take place even if in another jurisdiction where a related case is pending and that the discovery that the plaintiff needs should not impose a substantial burden on the defendants.

The Court was also persuaded by the reality that any delay in the litigation would be a partial victory for the defendants to the extent that plaintiff sought a ruling on the ability of the plaintiff to compete based on the applicable agreement.

This ruling highlights the factually determinative nature of motions to stay discovery pending dispositive motions.