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Remy v. Lubbock National Bank

United States District Court, E.D. North Carolina, Western Division

March 20, 2019

BILL REMY, MICHELE BENNETT, DAN SULLIVAN, and KEN KOENEMANN, Plaintiffs,
v.
LUBBOCK NATIONAL BANK, Defendant. LUBBOCK NATIONAL BANK, Counter Claimant,
v.
BILL REMY, MICHELE BENNETT, and DAN SULLIVAN, Counter Defendants. LUBBOCK NATIONAL BANK, Third-Party Plaintiff,
v.
TBM CONSULTING GROUP, INC. EMPLOYEE STOCK OWNERSHIP PLAN COMMITTEE; ANAND SHARMA 2009 GRAT TRUST; ANAND SHARMA; ROBERT DEAN; STEPHEN SMITH; RON WINCE; MELVIN R. HAUGHT; JOHN DOES 1-15; WILLIAM SCHWARTZ; TBM CONSULTING GROUP, INC.; LOTUS ONE LLC; MARK GOTTFREDSON; and STOUT RISIUS ROSS, LLC f/k/a/ Stout Risius Ross, Inc., Third-Party Defendants.

          ORDER

          LOUISE W. FLANAGAN United States District Judge.

         This matter is before the court on joint motion to stay discovery (DE 79) filed by third-party defendant Stout Risius Ross, LLC f/k/a Stout Risius Ross, Inc. (“Stout”), third-party defendants Anand Sharma, Anand Sharma 2009 GRAT Trust, and Lotus One LLC (“Sharma parties”), and defendant, counter claimant, and third-party plaintiff Lubbock National Bank (“Lubbock”) (collectively, “moving parties”). The matters have been fully briefed, and in this posture the issue raised are ripe for ruling. For the reasons that follow, the court grants the moving parties' motion to stay.

         BACKGROUND

         TBM Consulting Group, Inc. (“TBM”) and four of its officers filed this action against Lubbock, a former trustee of the TBM Consulting Group, Inc. Employee Stock Ownership Plan (the “ESOP”), on September 11, 2017, seeking relief for Lubbock's alleged breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., arising out of a 2011 transaction (the “2011 transaction”) in which, among other things, the ESOP purchased stock from the Sharma parties. In connection with the 2011 transaction, Lubbock engaged Stout, an independent advisory firm, to perform a valuation of TBM and provide a fairness opinion concerning the consideration to be paid by the ESOP for the Sharma parties' shares.

         On November 17, 2017, Lubbock filed a motion to dismiss. Thereafter, the court stayed discovery pending resolution of the motion to dismiss. On May 31, 2018, the court granted in part and denied in part Lubbock's motion, and lifted the stay of discovery, in part dismissing TBM as a plaintiff.

         On July 5, 2018, Lubbock filed answer, affirmative defenses, counterclaim, and third-party complaint. Lubbock subsequently amended its answer and third-party complaint on September 13, 2018, and in its first amended third-party complaint seeks indemnity, contribution and/or apportionment from counterclaim defendants and third-party defendants, including the Sharma parties and Stout, should it be deemed liable to the ESOP for the losses alleged in the complaint.

         Stout and the Sharma parties filed motions to dismiss Lubbock's claims on September 18 and 27, 2018, respectively. Stout's motion to dismiss argues that ERISA does not provide fiduciary Lubbock a right to contribution against non-fiduciary Stout. The Sharma parties' motion to dismiss argues that 1) ERISA does not provide fiduciary Lubbock a right to contribution or indemnity against co-fiduciary the Sharma parties, 2) even if ERISA did provide such a cause of action, the Sharma parties were not ERISA fiduciaries and 3) Lubbock's claims are barred by the statute of limitations. Lubbock argues that ERISA provides for a right of indemnity and contribution against fiduciaries and non-fiduciaries, that Lubbock has sufficiently alleged that the Sharma parties were fiduciaries, and that its claims are not barred by the statute of limitations.

         On January 14, 2019, the court issued initial order regarding planning and scheduling directing the parties to file joint report and plan concerning discovery following the parties' Federal Rule of Civil Procedure 26(f) conference, and further providing that “[i]f the parties have made a good faith attempt to confer and submit a joint discovery plan, but have been unable to do so, the parties shall file separate plans within the allotted time period, each of which must include the parties' respective positions and information as would be included in a joint report.” (DE 77 at 8).

         On February 8, 2019, the moving parties filed the instant motion to stay discovery. Also on February 8, 2019, plaintiffs Bill Remy, Michele Bennett, Dan Sullivan and Ken Koenemann (“plaintiffs”), counterclaim-defendants Bill Remy, Michele Bennett, and Dan Sullivan (“counterclaim-defendants”), and third-party defendants TBM, TBM Consulting Group, Inc., Employee Stock Ownership Plan Committee, Robert Dean, Ron Wince, Stephen Smith, William A. Schwartz, Mark Gottfredson, and Melvin R. Haught (“TBM third-party defendants”) (collectively, “TBM parties”) filed individual Rule 26(f) report and plan. On February 12, 2019, the moving parties filed individual Rule 26(f) report and plan. On February 22, 2019, the TBM parties filed opposition to the moving parties' motion to stay.

         DISCUSSION

         A. Standard of Review

         A district court has the authority pursuant to Federal Rule of Civil Procedure 26(c) to establish limitations on discovery. Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 929 (4th Cir. 1995). The court may properly exercise its discretion pursuant to Rule 26(c) to issue a stay of discovery pending resolution of dispositive motions. Tilley v. United States, 270 F.Supp.2d 731, 734 (M.D. N.C. 2003), aff'd, 85 Fed.Appx. 333 (4th Cir. 2004), cert. denied, 543 U.S. 819 (2004); see also Thigpen v. United States, 800 F.2d 393, 396-97 (4th Cir. 1986) (endorsing the trial court's decision to stay discovery pending resolution of a Rule 12(b)(1) motion), overruled on other grounds by, Sheridan v. United States, 487 U.S. 392 (1988).

         Factors weighing in favor of a stay include 1) the potential for the dispositive motion to terminate all claims in the case or all claims against a defendant; 2) strong support on the merits for the dispositive motion; and 3) the irrelevancy of discovery to determining the dispositive motion. Yongo v. Nationwide Affinity Ins. Co. of Am., No. 5:07-CV-94-D, 2008 WL 516744, at *2 (E.D. N.C. Feb. 25, 2008). However, courts should not stay discovery where discovery is still necessary to gather facts to defend against a dispositive motion. Tilley, 270 F.Supp.2d at 734; see also Simpson v. Specialty Retail Concepts, Inc., 121 F.R.D. 261, 263 (M.D. N.C. 1988) (“[Motions to stay discovery] are not favored because when ...


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