Fellows v. Universal Services of America

Background

This is a putative class action. Sabrina Fellows, Edmund Lynn III, Donna Patton, Wesley Hall, and Nina Bustamante-Vicario allege that Universal Services of America, LP, doing business as Allied Universal; the Allied Universal Employee Benefits Committee; Mercer Health and Benefits Administration, LLC; and Lockton Companies, LLC breached fiduciary duties under the Employee Retirement Income Security Act (ERISA). The alleged misconduct and self-dealing involved commission-fee structures for Allied Universal’s voluntary-benefits insurance, which plaintiffs say caused employee participants to pay too much in premiums.

Defendants filed three motions to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(1), which addresses subject-matter jurisdiction, and Rule 12(b)(6), which addresses whether a complaint states a legally sufficient claim. Defendants also jointly moved under Rule 26(c) to stay, or pause, discovery while the dismissal motions were pending.

Legal standard

The court explained that district courts have considerable discretion to stay discovery when there is good cause. Courts generally consider the breadth of the requested discovery, possible prejudice from delaying discovery, and the strength of the motion to dismiss.

Analysis

The court found that the first factor favored a stay. Plaintiffs had served requests seeking 110 categories of documents, including materials about the voluntary-benefits program, groups responsible for it, and organizational charts identifying people and entities involved in decision-making. The requests covered seven years and were likely to require extensive document production and review. If the motions to dismiss were granted, discovery might be unnecessary; even a ruling for one defendant could significantly reduce the scope of discovery.

The second factor also favored a stay. Plaintiffs did not identify specific deposition testimony or other non-documentary evidence that was crucial to their claims. The court concluded that the alleged harm, including the ongoing high premiums, could be remedied through damages, so plaintiffs’ request for injunctive relief did not by itself show prejudice from delaying discovery. The court stated that plaintiffs could obtain relevant and proportional discovery later if the motions to dismiss were denied.

The third factor favored a stay because the defendants’ motions raised substantial arguments for dismissal. The defendants questioned whether their conduct could be traced to the alleged higher premiums, which relates to whether plaintiffs suffered a concrete injury that could be remedied by a court. Defendants also argued that plaintiffs had not alleged that they were denied benefits they had bargained for. Mercer and Lockton argued that, as insurance brokers, they were not acting as ERISA fiduciaries, while Allied argued that no imprudent fiduciary process existed. The court acknowledged that plaintiffs had raised significant opposition but concluded that the balance favored staying discovery.

Disposition

Judge Barbara Moses granted the defendants’ motion to stay discovery pending a decision on their motions to dismiss. The Clerk of Court was directed to close the motion at Docket 87. This order resolved the discovery-stay motion; it did not decide the pending motions to dismiss or the merits of the ERISA claims.