United States District Court, D. Colorado
CHURCH MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Plaintiff,
PHILLIP MARSHALL COUTU, an individual, POWER ADJUSTERS, INC., a Colorado corporation, JUDAH LEON BENSUSAN, an individual, and ATLANTIS CLAIMS SERVICES, LLC, a Florida limited liability company, Defendants.
MEMORANDUM OPINION AND ORDER
Y. Wang United States Magistrate Judge.
matter is before the court on Defendants Phillip Marshall
Coutu (“Mr. Coutu”), Power Adjusters, Inc.
(“Power Adjusters”), Judah Leon Bensusan
(“Mr. Bensusan”), and Atlantis Claims Services,
LLC's (“Atlantis”) (collectively,
“Defendants”) Forthwith Joint Motion To Stay
Disclosures And Discovery Until The Court Rules On
Defendants' Joint Motion To Dismiss (the
“Motion” or “Motion to Stay”). [#64,
filed June 5, 2017]. The undersigned considers the Motion
pursuant to 28 U.S.C. § 636(b), the Order Referring Case
dated March 30, 2017 [#33], and the memorandum dated June 5,
2017 [#66]. Upon careful review of the Motion and associated
briefing, the entire case file, applicable law, and the
comments offered at the July 14, 2017 Status Conference, the
Motion is DENIED for the reasons stated herein.
Church Mutual Insurance Company (“Plaintiff” or
“Church Mutual”) initiated this action by filing
its Complaint in the United States District Court for the
District of Colorado on January 23, 2017. [#1].
Plaintiff's Complaint alleged two claims against the
Defendants: (1) civil conspiracy and (2) fraudulent
concealment. [Id.]. The events giving rise to
Plaintiff's Complaint involved an appraisal award issued
to one of Church Mutual's policyholders for repairs
completed to the policyholder's roof following a
hailstorm. [Id.]. Plaintiff alleged that Defendants
conspired to unlawfully inflate the cost of repairs needed
for their own economic gains, as each had a stake in a higher
appraisal award. [Id.].
several extensions of time to answer or otherwise respond to
Plaintiff's Complaint, see, e.g., [#20; #25;
#29; #38], and prior to the Rule 16(b) Scheduling Conference,
the undersigned granted the Parties' request to set a
deadline of April 25, 2017 for Plaintiff to file its Amended
Complaint, and granted Defendants one final extension of May
16, 2017 to answer or otherwise respond to Plaintiff's
Amended Complaint. See [#46]. Plaintiff filed its
Amended Complaint on April 25, 2017, and levied several new
claims against Defendants. Thus, the operative claims in this
matter include: (1) Civil Conspiracy against all Defendants;
(2) Fraudulent Concealment against all Defendants; (3) Civil
RICO against all Defendants; (4) Civil RICO Conspiracy
against Messrs. Coutu and Bensusan; and (5) Colorado
Organized Crime Control Act (“COCCA”) against
Messrs. Coutu and Bensusan. [#49].
undersigned then held a Status Conference on May 10, 2017,
setting a Scheduling Conference for June 23, 2017. [#56]. On
June 5, 2017, Defendants filed the instant Motion in addition
to their Joint Motion to Dismiss the Amended Complaint
pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. [#64; #65]. At the June 23, 2017 Scheduling
Conference, the undersigned set the matter for a further
Status Conference on July 14, 2017. [#75]. At the July 14
Status Conference, the undersigned discussed several issues
regarding discovery in this matter, and also heard oral
arguments on the Motion to Stay. [#94]. Because the Motion to
Stay is ripe for resolution, this court considers the
Parties' arguments below.
Federal Rules of Civil Procedure do not provide for the stay
of proceedings while a motion to dismiss is pending. Instead,
Rule 1 instructs that the rules of procedure ‘shall be
construed and administered to secure the just, speedy, and
inexpensive determination of every action.'”
Sutton v. Everest Nat'l Ins. Co., No. 07 CV
00425 WYD BNB, 2007 WL 1395309, at *1 (D. Colo. May 9, 2007).
Nonetheless, when ruling on a motion to stay, courts weigh
the following factors: (1) the plaintiff's interests in
expeditiously litigating this action and the potential
prejudice to plaintiff of a delay; (2) the burden on the
defendants; (3) the convenience to the court; (4) the
interests of persons not parties to the civil litigation; and
(5) the public interest. String Cheese Incident, LLC v.
Stylus Shows, Inc., No. 1:02-CV-01934-LTB-PAC, 2006 WL
894955, at *2 (D. Colo. Mar. 30, 2006). However, “stays
of the normal proceedings of a court matter should be the
exception rather than the rule, ” Christou v.
Beatport, LLC, No. 10-CV-02912-CMA-KMT, 2011 WL 650377,
at *1 (D. Colo. Feb. 10, 2011), and stays in this District
are generally disfavored, see, e.g., Chavez v.
Young Am. Ins. Co., No. CIVA 06CV02419PSFBNB, 2007 WL
683973, at *2 (D. Colo. Mar. 2, 2007).
request a stay of all discovery in this matter until the
court disposes of their Joint Motion to Dismiss. Defendants
aver that Plaintiff's case is “one of first
impression and is intended to throw open the flood gates of
litigation[;] [h]owever, the Plaintiff has nothing more than
conclusory allegations that are subject to dismissal pursuant
to Rule 12(b)(6).” [#64 at 2]. In addressing the
String Cheese factors, Defendants argue that a stay
will not prejudice Church Mutual's interests,
“because it already had its day in court, ” as it
settled its case against the policyholder where in it sought
to vacate the appraisal award. See [id. at
2, 5]. Thus, Plaintiff does not get “a second bite at
the apple.” [Id. at 5]. Second, Defendants
argue that a stay is warranted, because a ruling in their
favor on the Joint Motion to Dismiss will dispose of
Plaintiff's whole case, and it would be burdensome on
Defendants to engage in grossly excessive and abusive
discovery” the Plaintiff proposes to undertake.
[Id. at 6-7]. Third, Defendants again point to the
likely success of their Joint Motion to Dismiss in dismissing
Plaintiff's case which will relieve the court of needless
discovery disputes. [Id. at 7]. As to the final two
factors, Defendants contend that Plaintiff's suit is
“groundless, ” and that persons outside this
matter have no interest in such a suit. [Id. at 7].
Finally, during oral argument, counsel for Bensusan and
Atlantis, indicated that, to the extent that this court's
Recommendation was to deny the pending Motion to Dismiss,
Defendants agreed that discovery should properly commence at
that time even if the presiding judge, the Honorable Raymond
P. Moore, had not yet ruled on any objections to the
Church Mutual argues that a stay is unwarranted merely
because Defendants believe their Joint Motion to Dismiss will
be granted; rather, the Joint Motion to Dismiss encompasses a
litany of issues, and is not likely to result in the
dismissal of the Amended Complaint in its entirety.
See [#71 at 1, 6-7]. As to the first String
Cheese factor, Plaintiff argues that this weighs heavily
in its favor, as it filed this case in January 2017 and in
nearly six (6) months no discovery has commenced.
[Id. at 7-8]. Next, Plaintiff avers that there would
be no burden on Defendants should the court adopt a phased
discovery schedule in this matter. See [id.
at 8]; see also [#87 at 3-4]. Relatedly, phased
discovery will allow the case to proceed (without becoming
stagnant) as the court resolves the Joint Motion to Dismiss,
which serves the court's interests. [#71 at 8-9]. At oral
argument, Plaintiff argued that its phased discovery plan
limited discovery for a period that was roughly equivalent to
the time that it would require the court to issue a
Recommendation on the Motion to Dismiss. As to the fourth and
fifth factors, Church Mutual contends that this case impacts
the interests of non-parties, as evidenced by the two (2)
motions to quash a subpoena duces tecum served on interested
party Keith Frankl, see also [#91; #92], and that
the allegations contained in the Amended Complaint
potentially implicate a matter of public interest.
See [#71 at 9].
the court focuses on the first three String Cheese
factors, i.e., the prejudice to Church Mutual in staying
discovery; the burden on Defendants; and the convenience to
the court. Defendants' arguments supporting stay are all
rooted in the premise that they will prevail on the pending
Motion to Dismiss, and that, to the extent dismissal is
proper, there is no available cure to Church Mutual. But as
reflected by both the briefing related to the Motion to Stay
and to the Motion to Dismiss, this court is keenly aware of
the divergent views that each side in this action holds about
its merits. And no element of the String Cheese
factors requires that this court make a preliminary
determination as to the likelihood of success of either the
dispositive motion or the ultimate merits of this case. Given
that the briefing and argument are not complete, and this
court has not had an opportunity to consider the merits of
the Motion to Dismiss, it declines to presume at this
juncture that Plaintiff will be unable to proceed with this
action in any form, on any of the five causes of action
asserted in the Amended Complaint.
court noted during the Status Conference held on July 14,
2017, it is concerned that this case has been pending over
six months without any substantive progress. Even with
discovery progressing now, the Parties agree that expert
discovery will occur after the close of fact discovery in
April 2018, and the Final Pretrial Conference is set for
December 2018 - almost two years after the commencement of
this action. The court further notes that the number of
causes of action and contentious nature of this action
suggests that discovery may be arduous for both the Parties
and the court. And despite Defendants' suggestion that it
is more efficient for the court to defer addressing discovery
issues until after the Recommendation on the Motion to
Dismiss, this court notes three things to the contrary.
First, it is the clear preference of this District to proceed
with discovery while a motion to dismiss is pending. Second,
discussion between the Parties and counsel to date suggests
that discovery related to where information is stored and by
whom it is held may be a necessary predicate to substantive
discovery. Third, this particular court prefers a proactive
approach to case management to one of procrastination.
Therefore, the operative inquiry is whether this court and
the Parties can craft a discovery plan that balances the
divergent interests of the Parties for the time that the
Motion to Dismiss is pending. This court concludes they can.
argue that there are “unrelated personal and business
relationships between Bensusan and Coutu or McConnell and
Church Mutual” so that discovery should not be
permitted. But at the heart of the allegations asserted by
Plaintiff is a relationship between the four Defendants and
their financial integration. It strikes this court that, to
the extent that Church Mutual is incorrect about the
relationship between the four Defendants, none of the claims
asserted by the Amended Complaint can survive. The court is
also cognizant that Defendants are particularly sensitive
about how Church Mutual might use the details of the
relationship, but that is the very purpose of the Protective
Order entered by the court, i.e., to limit the access and use
of any sensitive information to certain individuals and to
this action. If the relationship is what Defendants
represented at oral argument - a professional relationship in
which Messrs. Bensusan and Coutu worked together on a limited
number of occasions over several years - then discovery into
that relationship should not be particularly onerous and that
evidence could lead to an early disposition of this matter.
But to the extent that the relationships between the four
Defendants are more complex and may take more analysis to
unravel, or Defendants raise specific bases for
non-disclosure (such as privilege), ...