Diamond v. Shiftpixy, Inc.
- Lewis Liman
- 1:20-cv-07305
- U.S. District Court · Southern District of New York
- 3
In Jason Diamond v. ShiftPixy, Inc., Judge Liman granted defendants’ motion to stay discovery while considering their motion to dismiss.
Jason Diamond, ShiftPixy, Inc., and Scott Absher were affected: discovery was stayed while the defendants’ motion to dismiss remained pending.
What happened
Jason Diamond sued ShiftPixy, Inc. and Scott Absher over an investment banking agreement and warrants for ShiftPixy stock. Defendants asked the court to pause discovery while their motions to dismiss were considered.
Defendants argued that the agreement did not promise the type of anti-dilution protection Diamond claimed, and that his claims against Absher and the court’s authority over Absher were legally insufficient. They also said discovery would be extensive and costly.
Judge Lewis Liman granted the motion to stay discovery pending the outcome of the motion to dismiss. The order did not decide whether Diamond’s claims were legally valid.
The detailed version
- Diamond v. Shiftpixy, Inc. · No. 1:20-cv-07305
- Lewis Liman
- Nov. 16, 2020
Background
Jason Diamond brought claims involving an Investment Banking Agreement between ShiftPixy, Inc. and Diamond’s former firm, Drexel Hamilton, LLC. The defendants’ letter described the case as primarily a contract dispute concerning warrants to purchase ShiftPixy common stock. According to the defendants, Diamond claimed that a full-ratchet anti-dilution provision entitled him to warrants for approximately 1.2 billion shares, based on an original entitlement of 67,285 warrants.
The defendants stated that they had moved to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, and moved under Rule 12(b)(2) to challenge personal jurisdiction over Scott Absher. They argued that the Investment Banking Agreement did not contain the full-ratchet provision Diamond relied on. They further argued that Diamond’s fiduciary-duty claim against Absher failed because Diamond did not allege that he was a ShiftPixy shareholder, that the interference-with-contract claim could not be brought against Absher under the circumstances alleged, and that the complaint did not establish personal jurisdiction under the cited New York law.
Motion to Stay Discovery
The defendants asked the court to stay, or pause, discovery until the motion to dismiss was decided. They argued that Diamond sought six months of broad discovery, including document production, electronic discovery, depositions, and possible expert discovery. They also argued that the case’s subject matter would make discovery costly and that a successful motion to dismiss could end the case. The opinion text does not include Diamond’s substantive opposition arguments; it states that he opposed the requested stay.
Ruling
At the November 13, 2020 status conference, Judge Lewis Liman granted the motion to stay discovery pending the outcome of the motion to dismiss. The order addressed the timing of discovery only. It did not rule on the defendants’ motions to dismiss, the contract claims, the claims against Absher, or personal jurisdiction.
Disposition
The motion to stay discovery pending the outcome of the motion to dismiss was GRANTED.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.