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The Stanley Works Israel Ltd. v. 500 Group, Inc.

United States District Court, D. Connecticut

April 26, 2018

THE STANLEY WORKS ISRAEL LTD. f/k/a ZAG INDUSTRIES, LTD., Plaintiff,
v.
500 GROUP, INC. and PAOLO TIRAMANI, Defendants.

          RULING ON PENDING DISCOVERY MOTIONS

          CHARLES S. HAIGHT, JR. SENIOR UNITED STATES DISTRICT JUDGE.

         The Stanley Works Israel Ltd., f/k/a ZAG Industries, Ltd. ("Plaintiff"), an Israeli limited liability company, brings this diversity action against Defendants 500 Group, Inc, a New York corporation, and Paolo Tiramani, a citizen of the state of Nevada (collectively, "Defendants"). Plaintiff and Defendant 500 Group were parties to certain product license agreements that related generally to patent rights owned by 500 Group. Plaintiff's claims against Defendants arise from a dispute over monies paid pursuant to a settlement agreement between the parties. Pending before the Court is Defendants' Motion for a Protective Order, which seeks a stay of all discovery until the resolution of Defendants' Motion to Dismiss the Amended Complaint. Also pending is Plaintiff's Motion to Compel responses to its interrogatories and requests for production. Both motions are opposed, and are ripe for consideration. This Ruling resolves them.

         I. BACKGROUND

         Plaintiff commenced this action on October 20, 2017. Complaint, Doc. 1. Attorneys on behalf of Defendants filed Notices of Appearances on December 4, 2017, and on December 5, 2017, the matter was transferred to the undersigned. The parties filed their Form 26(f) Report of Parties' Planning Meeting on January 2, 2018, Doc. 30, and the Court entered a Scheduling Order that same day. Doc. 21. On February 13, 2018, Plaintiff filed an Amended Complaint. Doc. 24.

         According to the facts alleged in Plaintiff's Amended Complaint, Plaintiff and Defendant 500 Group had previously been engaged in various disputes related to license agreements; the disputes resulted in a demand for arbitration. Doc. 24 ¶¶7-11. The disputes were then negotiated and the parties ultimately reached a settlement. Id. ¶11. Plaintiff and Defendant 500 Group entered into a Settlement Agreement on March 31, 2017, which provided, among other things, that Plaintiff would pay a sum of ten million dollars to Defendant 500 Group. Id. ¶¶11-12. Plaintiff contends that the parties agreed that Plaintiff was to retain $600, 000 from the total payment to fulfill Defendant 500 Group's tax obligations and other arrangements with the Israeli tax authority. Id. ¶21. However, Plaintiff alleges that it mistakenly failed to deduct the $600, 000 from the total when it wired the settlement funds, and when it requested that 500 Group return the $600, 000, Defendants ultimately refused. Id. ¶¶ 25-32. Plaintiff's Amended Complaint raises counts sounding in breach of contract, unjust enrichment, unfair trade practices, conversion, and civil theft.

         On February 27, 2018, Defendants filed a motion to dismiss the Amended Complaint, Doc. 26. In the motion, Defendants argue, inter alia, that the parties' settlement agreement contains no reference to the withholding of any portion of the payment, and there is no writing signed by both parties, as contemplated by the settlement agreement's merger clause, that would show that the agreement was modified. Doc. 27 at 12-22. Defendants also argue that Plaintiff's quasi-contract and tort claims fail given the existence of a written, express contract governing the subject matter of the Amended Complaint. Id. at 27-36.

         On March 2, 2018, Defendants filed a Motion for a Protective Order, seeking to stay discovery pending resolution of the motion to dismiss. Doc. 28. On March 9, 2018, Plaintiff filed a motion to compel responses to its discovery requests. The Court will address the pending discovery-related motions in turn.

         II. STANDARD OF REVIEW

         Rule 26(c) of the Federal Rules of Civil Procedure provides, in relevant part: "The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including . . . forbidding the disclosure or discovery[.]" Fed.R.Civ.P. 26(c)(1)(A). A request for a stay of discovery is treated as a request for a protective order under Rule 26(c). See, e.g., Morien v. Munich Reins. Am., Inc., 270 F.R.D. 65, 66 (D. Conn. 2010); Transunion Corp. v. PepsiCo, Inc., 811 F.2d 127, 130 (2d Cir. 1987). "[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes 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). Thus, a "request for a stay of discovery, pursuant to Rule 26(c) is committed to the sound discretion of the court based on a showing of good cause." ITT Corp. v. Travelers Cas. & Sur. Co., No. 3:12-CV-0038(RNC), 2012 WL 2944357, at *2 (D. Conn. July 19, 2012) (quotation marks and citation omitted). The party seeking the stay bears the burden of showing that good cause exists for its request. Morien, 270 F.R.D. at 66-67.

         Where a party seeks a stay of discovery pending resolution of a dispositive motion, the Court considers "(1) the strength of the dispositive motion; (2) the breadth of the discovery sought; and (3) the prejudice a stay would have on the non-moving party." Lithgow v. Edelmann, 247 F.R.D. 61, 62 (D. Conn. 2007) (citation omitted). "[W]hile discovery may in a proper case be stayed pending the outcome of a motion to dismiss, the issuance of a stay is by no means automatic." Spencer Trask Software & Info. Servs., LLC v. RPost Int'l Ltd., 206 F.R.D. 367, 368 (S.D.N.Y. 2002) (quotation marks and citation omitted) (collecting cases).

         III. DISCUSSION

         A. Motion to Stay

         Defendants contend that good cause exists to stay discovery pending the resolution of the motion to dismiss. Defendants assert that the dispositive motion has substantial merit and may dispose of the case in its entirety. Further, Defendants anticipate that any discovery will create an undue burden and expense, and claim that no prejudice will result to Plaintiff if a stay of discovery is imposed.

         In opposing Defendants' motion, Plaintiff responds that a stay of discovery is unnecessary and would be prejudicial. Plaintiff argues that Defendants could have requested a stay at the parties' Rule 26(f) planning conference, but they instead waited, thereby prejudicing Plaintiff and the Court as a scheduling order is now in place. Plaintiff contends that the motion to dismiss is "devoid of legal merit, " Doc. 30 at 2, and therefore does not justify a stay. Finally, Plaintiff argues that as the dispute resolves around a single ...


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