Morgan Art Foundation Limited v. Brannan

Background

This memorandum and order concerns two related actions, No. 18-CV-4438 and No. 18-CV-8231. The plaintiffs included Morgan Art Foundation Limited, Simon Salama-Caro, and affiliated entities. The defendant in the captioned action was James W. Brannan, acting as personal representative of the Estate of Robert Indiana. Fact discovery had originally been scheduled to close on September 30, 2020.

The plaintiffs asked under Federal Rule of Civil Procedure 26(c) for a stay, meaning a temporary pause, of all discovery while the court considered their motion to dismiss the Estate’s counterclaims. The plaintiffs argued that they had entered an agreement with Star of Hope Foundation, Inc., the sole beneficiary of Indiana’s will, that “fully resolves” the disputes between the plaintiffs and the Estate. They contended that the agreement made the counterclaims moot, meaning no longer capable of affecting a live dispute, and deprived the court of subject-matter jurisdiction.

The Estate initially joined a request for a short discovery pause so that Brannan could assess the agreement. The court granted that temporary pause through October 9, 2020, directed the parties to schedule remaining depositions, and extended discovery and pretrial deadlines by 20 days. After the temporary pause expired, the Estate opposed any further stay. It stated that discovery was nearly complete and that it would oppose the motion to dismiss. The plaintiffs renewed their request, arguing that continuing discovery would waste estate and party resources if the counterclaims were dismissed.

Court’s Analysis

The court explained that whether to stay discovery pending a motion to dismiss is discretionary. A stay is not automatic merely because a motion to dismiss has been filed. The party seeking the stay must show good cause under Rule 26(c). The court considered three factors: the scope of the remaining discovery, potential prejudice from a stay, and the strength of the motion to dismiss.

The first two factors weighed against a stay. The court found that substantial discovery had already occurred at considerable expense, much of it initiated by the plaintiffs in pursuing their own claims against the Estate. The plaintiffs had conducted extensive document discovery, sought spoliation sanctions, and deposed Brannan only three weeks before filing the stay motion. Six depositions remained. One remaining witness was a named plaintiff, and three others were affiliated with the plaintiffs. The court found that their testimony would be central to the plaintiffs’ claims and the Estate’s counterclaims and could also be relevant to disputes involving other defendants. Delaying the depositions so close to the end of discovery could be unfair to the Estate and potentially prejudicial to other parties.

The court found the strength of the motion to dismiss more difficult to assess. The motion raised a novel question: whether the sole beneficiary of an estate, despite lacking a direct right to settle or dismiss the estate’s litigation claims, could achieve the same result by contracting with the opposing party and thereby make the claims moot. The motion also had not been fully briefed. Even assuming the motion had substantial grounds, the court stated that a stay was properly denied when the other factors disfavored one.

Ruling

Judge Barbara Moses denied the plaintiffs’ motion for a stay of discovery. The court directed the parties to promptly arrange and conduct the depositions of Paul Salama-Caro, Simon Salama-Caro, Jamie Thomas, and Melissa Hamilton, along with the continued depositions of Philippe Grossglauser and Marc Salama-Caro. If those depositions had not been completed within the previously contemplated period, the parties were allowed through November 6, 2020, to complete the fact depositions. The order did not decide the underlying motion to dismiss the Estate’s counterclaims.