Morgan Art Foundation Limited v. McKenzie d/b/a American Image Art
- Barbara Moses
- 1:18-cv-04438
- U.S. District Court · Southern District of New York
- 7
In Morgan Art Foundation v. McKenzie, Judge Moses denied plaintiffs’ motion to stay discovery while their dismissal motion was pending.
The plaintiffs and the Estate in the two related actions, as well as the other parties whose claims or defenses depended on the remaining depositions, were affected by the denial of the discovery stay and the resulting direction to complete depositions.
What happened
Morgan Art Foundation Limited and other plaintiffs asked the court to pause discovery in two related cases while the court considered their motion to dismiss the Estate’s counterclaims. They argued that an agreement with the sole beneficiary of Robert Indiana’s will resolved the disputes and made the counterclaims no longer live. The Estate opposed another stay, noting that discovery was nearly finished and that the plaintiffs had not dismissed their own claims.
The court considered the amount of discovery remaining, possible prejudice, and the strength of the dismissal motion. It found that substantial discovery had already occurred, only six depositions remained, and the remaining witnesses’ testimony could matter to both the plaintiffs’ claims and the Estate’s counterclaims. The court also said the dismissal motion raised a novel issue and was not fully briefed, so the plaintiffs had not shown sufficient reason to pause discovery.
Judge Barbara Moses denied the motion to stay discovery. She directed the parties to promptly arrange the remaining depositions and allowed, if necessary, one additional week—through November 6, 2020—to complete fact depositions. The order did not decide the pending motion to dismiss or the underlying claims and counterclaims.
The detailed version
- Morgan Art Foundation Limited v. McKenzie d/b/a American Image Art · No. 1:18-cv-04438
- Barbara Moses
- Oct. 18, 2020
Background
These were two related actions involving Morgan Art Foundation Limited (MAF), Simon Salama-Caro, and affiliated entities, along with defendants including Michael McKenzie and James W. Brannan, the personal representative of the Estate of Robert Indiana. The disputes concerned two contracts between MAF and Indiana, executed in 1999, and related addenda and modifications. The plaintiffs asserted claims against the Estate and others; the Estate asserted counterclaims against the plaintiffs.
Fact discovery was scheduled to close on September 30, 2020. On September 21, the plaintiffs sought a stay of all discovery under Federal Rule of Civil Procedure 26(c), pending their motion to dismiss the Estate’s counterclaims. The plaintiffs argued that they had reached an agreement with the 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 mooted the counterclaims and deprived the court of subject-matter jurisdiction.
The parties had previously obtained a temporary discovery stay through October 9 and a 20-day extension of the remaining discovery and pretrial deadlines. After that stay expired, the Estate opposed any further stay. It argued that discovery was nearly complete, that a further stay would be inefficient and prejudicial, and that it would oppose the motion to dismiss. The plaintiffs responded that restarting discovery before resolution of the dismissal motion would waste resources because the remaining depositions concerned issues raised by the Estate’s counterclaims.
Legal standard and analysis
A discovery stay is an order temporarily pausing information exchange in a case. The court explained that discovery should not automatically be stayed merely because a motion to dismiss has been filed. Under Rule 26(c), however, the court may issue a protective order, including a stay, when the moving party shows good cause. The court considered three factors: the breadth of the discovery sought, the prejudice that could result, and the strength of the motion to dismiss.
The court found that the first two factors weighed against a stay. Substantial discovery had already taken place at considerable expense, much of it initiated by the plaintiffs. The plaintiffs had conducted extensive document discovery, sought sanctions for lost emails, and recently taken Brannan’s deposition. Only six depositions remained. Several of the remaining witnesses were plaintiffs or affiliated with the plaintiffs, and their testimony would be central to the plaintiffs’ claims against the Estate as well as the Estate’s counterclaims. The testimony could also be relevant to disputes involving Thomas and McKenzie. Delaying the depositions could therefore prejudice the Estate and other parties.
The court found the strength of the motion to dismiss more difficult to assess. The motion presented a novel question: whether the sole beneficiary of an estate could, through a contract with the opposing party, effectively achieve a result that would moot the estate’s litigation claims even though the beneficiary had no direct right to settle or dismiss those claims. The motion was also not fully briefed. The court nevertheless explained that no single factor controlled and that the other factors justified denying a stay.
Disposition
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, as well as the continuation of the depositions of Philippe Grossglauser and Marc Salama-Caro. If those depositions had not been scheduled as previously ordered, the parties were allowed through November 6, 2020, to complete the fact depositions. The Clerk of Court was directed to close the two letter-motions seeking the stay.
The order addressed only the requested discovery stay. It did not decide the plaintiffs’ pending motion to dismiss the Estate’s counterclaims or the merits of the parties’ claims, counterclaims, or crossclaims.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.