Lateral Recovery LLC v. Cap Call LLC
- Lorna Schofield
- 1:22-cv-02314
- U.S. District Court · Southern District of New York
- 3
In Lateral Recovery v. Cap Call, Judge Schofield denied Defendants’ request to pause discovery while awaiting their motion to dismiss.
The ruling affects Lateral Recovery LLC and the defendants Cap Call LLC, Yes Funding Services, LLC, and Evan Marmott by leaving discovery unstayed while the defendants’ anticipated motion to dismiss is prepared.
What happened
In Lateral Recovery LLC v. Cap Call LLC, the defendants asked the court to pause discovery until the court decided their planned motion to dismiss. They argued that discovery would be expensive and burdensome and that the motion was likely to end the case.
The defendants asserted that the plaintiffs’ fraud and Racketeer Influenced and Corrupt Organizations Act claims were legally insufficient, and that other grounds also supported dismissal. The plaintiffs did not agree to pause discovery and believed their claims could survive the motion to dismiss.
Judge Lorna G. Schofield denied the request to pause discovery. The court stated that it generally does not stay discovery while a motion to dismiss is pending and directed that a case-management plan and scheduling order would issue separately.
The detailed version
- Lateral Recovery LLC v. Cap Call LLC · No. 1:22-cv-02314
- Lorna Schofield
- May 10, 2022
Background
The defendants—Cap Call LLC, Yes Funding Services, LLC, and Evan Marmott—asked the court to stay, or pause, discovery while they prepared a pre-answer motion to dismiss. The court had authorized that motion, which the defendants stated was scheduled to be filed on or before May 20, 2022. The plaintiffs did not consent to the requested stay.
The defendants argued that discovery would involve broad and intrusive requests concerning the transactions, individual nonparties, and the parties’ private finances. They also argued that discovery would generate substantial legal fees and costs and that the plaintiffs would not be prejudiced by a delay because the case was at an early stage and no evidence would be lost.
Parties’ arguments about dismissal
The defendants asserted that their anticipated motion to dismiss was likely to succeed. They stated that the plaintiffs had withdrawn a usury claim, that the fraud claim did not identify material misrepresentations, and that the Racketeer Influenced and Corrupt Organizations Act claims lacked sufficient allegations of unlawful debt, racketeering activity, a distinct enterprise, or continuity. They also asserted that Lateral Recovery’s claims could be dismissed under New York Judiciary Law § 489(1).
The defendants further relied on rulings in two other related cases, where stays of discovery had been granted while similar motions to dismiss were pending. The opinion records that the plaintiffs opposed the stay and that plaintiffs’ counsel believed the claims could survive dismissal.
Ruling
Judge Lorna G. Schofield denied the defendants’ application to stay discovery. The court stated that it generally does not stay discovery while a motion to dismiss is pending. The court did not decide the anticipated motion to dismiss in this order. It stated that a case-management plan and scheduling order would issue separately and directed the clerk to close the motion at Docket No. 1.
Disposition
The defendants’ application to stay discovery was denied.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.