Schapira v. Netbase Solutions, Inc. d/b/a Quid

Background

Daniel Schapira’s amended complaint asserted two claims against NetBase Solutions, Inc. d/b/a Quid: retaliation under New York Labor Law § 740 and breach of the implied covenant of good faith and fair dealing. The second claim was based on the allegation that NetBase terminated Schapira’s employment to avoid paying a discretionary bonus.

NetBase filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which concerns whether a complaint adequately states a legal claim. While that motion was pending, NetBase requested an order staying, or pausing, discovery under Rule 26(c). The request was presented through the parties’ letters, and the parties had unsuccessfully discussed the issue before seeking court action.

Arguments for a Discovery Stay

NetBase argued that its motion to dismiss presented substantial grounds for dismissal. It contended that New York Labor Law § 740 did not apply outside New York and that Schapira had not alleged that retaliatory acts occurred in New York. NetBase also argued that Schapira could not pursue the implied-covenant claim based on a discretionary bonus because no fixed amount was due when his employment ended and his employment was at will.

NetBase further argued that discovery would require document requests, interrogatories, and depositions about Schapira’s employment, compensation, alleged protected activity, the reasons for his termination, and efforts to reduce his losses. It maintained that this discovery could be unnecessary if the motion to dismiss were granted. NetBase also argued that Schapira would not suffer unfair prejudice because the case was at an early stage, discovery had not begun, and any stay would be limited while the dismissal motion was decided.

Ruling

Judge Margaret M. Garnett found that NetBase had shown good cause for a discovery stay. The court granted the application and ordered that all discovery be stayed pending resolution of NetBase’s motion to dismiss. The court also postponed all discovery dates and deadlines, including the initial pretrial conference and the parties’ joint letter and proposed case-management plan. The text does not decide NetBase’s motion to dismiss or the merits of Schapira’s claims.