Kirschner v. JP Morgan Chase Bank, N.A.

Background

Marc S. Kirschner, as trustee of the Millennium Lender Claim Trust, sued J.P. Morgan Chase Bank, N.A., J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Citibank, N.A., BMO Capital Markets Corp., Bank of Montreal, SunTrust Robinson Humphrey, Inc., and SunTrust Bank. The trust’s beneficiaries had purchased debt instruments issued as part of an April 2014 $1.775 billion syndicated leveraged loan transaction involving Millennium Laboratories LLC. After Millennium filed for bankruptcy, the bankruptcy plan created the trust on whose behalf Kirschner brought claims.

The complaint asserted violations of several states’ securities laws and claims for negligent misrepresentation, breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair dealing. The defendants removed the case from New York State Supreme Court to federal court based on the Edge Act. The District Court later denied Kirschner’s request to return the case to state court.

The case had related litigation in Delaware and California. Defendants had produced more than 87,000 documents from 35 custodians for use in this action, and Kirschner had also received discovery under Bankruptcy Rule 2004 that was treated as produced in this action. On May 22, 2020, Judge Paul Gardephe dismissed the complaint in its entirety and denied Kirschner’s first request to amend because the proposed amended complaint included claims that had been dismissed. Kirschner was allowed to file a later motion for permission to amend, which was fully briefed when this order was issued.

Question Before the Court

The issue was whether fact discovery should continue while the court considered Kirschner’s motion for permission to file the proposed amended complaint. Kirschner proposed continuing document discovery in coordination with the Delaware and California actions while generally delaying depositions. The defendants argued that no discovery should proceed because there was no operative complaint—the complaint currently defining the claims and issues in the case.

Legal Standard

Under Federal Rule of Civil Procedure 26(c), a district court may stay discovery for good cause. A court may pause discovery when resolving a preliminary issue could dispose of the entire case.

Ruling and Reasoning

Judge Sarah L. Cave granted the defendants’ motion to stay discovery. She found good cause because there was no operative complaint and denial of the motion for permission to amend would dispose of the entire case. The court stated that discovery must be based on the operative complaint, not on a separate action in another court or on a proposed amended complaint.

Disposition

The motion to stay was granted, and discovery was stayed pending the ruling on the motion for permission to amend.