Donoghue v. SilverSun Technologies, Inc.

Background

Defendants Ault Global Holdings, Inc., Digital Power Lending, LLC, and Milton C. Ault, III asked the court to stay, or pause, discovery while their fully briefed motion to dismiss was pending. Their motion seeks dismissal of the entire case for lack of Article III standing, the constitutional requirement that a plaintiff show a qualifying injury that allows a federal court to hear the case. The defendants argued that the plaintiffs had not alleged a concrete injury under the Supreme Court's decision in TransUnion LLC v. Ramirez.

The dispute involves a claim under Section 16(b), a securities law provision. The opinion states that the plaintiffs had previously voluntarily dismissed the case and recently refiled it while awaiting further development of the law on Article III standing in Section 16(b) cases. The plaintiffs supported the request to pause discovery.

Court's reasoning

The court concluded that the pending motion to dismiss presented a potentially case-ending threshold issue. It noted that a district court had dismissed a similar Section 16(b) claim on standing grounds in Packer and that the Second Circuit was considering an appeal in that matter. The court also stated that the appeal could clarify what must be alleged to establish standing in Section 16(b) suits in the Second Circuit.

The court found that pausing discovery would not prejudice the plaintiffs, particularly because the plaintiffs had supported the stay and the parties were awaiting the Second Circuit's decision. The opinion does not decide whether the plaintiffs have standing or whether the motion to dismiss should be granted.

Disposition

Judge Vernon S. Broderick granted the discovery stay until the Second Circuit issues its decision in Packer. The parties must file supplemental briefing no later than two weeks after that decision explaining how it affects the pending motion to dismiss. The order does not state a disposition of the motion to dismiss itself.