Idle Media, Inc. v. Create Music Group, Inc.

Background

Idle Media, Inc. and The Dispensary, LLC sued Create Music Group, Inc. and others. Kyle Reilly, identified in the opinion as a defendant, moved by letter to stay, or pause, discovery while the court considered his motion to dismiss. The plaintiffs opposed the requested stay.

The plaintiffs argued that filing a motion to dismiss does not automatically pause discovery. They also argued that Reilly had not shown good cause—a sufficient reason under the discovery rules—for stopping discovery. Their opposition discussed the alleged agreements, forum-selection clauses, Reilly’s role in the project, the expected financial-record discovery, and their concern that relevant assets might be dissipated. These arguments were presented in opposition to the stay request; the court did not decide the underlying claims in this order.

Legal Standard

The court explained that it may stay discovery for good cause under Federal Rule of Civil Procedure 26(c). It considered three factors: the breadth and burden of the discovery, the strength of the underlying motion to dismiss, and the risk of prejudice to the party opposing the stay.

Court’s Analysis

First, the court found that Reilly had only asserted that discovery would involve highly confidential and burdensome financial records covering at least two years. Reilly did not explain why electronically available records would be burdensome. The court also noted that the plaintiffs would likely be able to seek the records from Reilly through a third-party subpoena even if the motion to dismiss were granted. This factor weighed against a stay.

Second, the court found that Reilly had not shown that his motion to dismiss was supported by substantial arguments for dismissal or that he was likely to succeed. The court did not prejudge the motion to dismiss, which had not been fully briefed. It noted the plaintiffs’ argument that Reilly was subject to forum-selection clauses in the alleged agreement and in Create Music Group’s website terms of service. The court concluded that this factor also weighed against a stay.

Third, the court found that Reilly had not shown that delaying discovery would not prejudice the plaintiffs. The requested accounting could help determine whether Reilly was intentionally dissipating the assets at issue, according to the plaintiffs’ position. The court rejected the argument that a short delay would eliminate prejudice, reasoning that accepting that argument would prevent a finding of prejudice in virtually every request for a stay. This factor weighed against a stay as well.

Disposition

Judge Jennifer L. Rochon denied Reilly’s letter-motion for a stay of discovery pending the court’s decision on his motion to dismiss. The order did not rule on whether Reilly’s motion to dismiss should be granted or denied, and it did not resolve the merits of the underlying dispute.