A common tactic employed by experienced Chancery litigators defending a lawsuit is to file a motion to stay discovery while a motion to dismiss is pending. The argument is that if the case is dismissed, the expense of undertaking discovery while a motion to dismiss is pending should be avoided.
A recent short letter opinion issued by Vice Chancellor Slights, in the case of Soo Hyun Kim v. Coupang, LLC f/k/a Forward Ventures, LLC, C.A. No. 2020-0772-JRS (Del. Ch. Jan. 22, 2021), adjudicated such a motion to stay discovery while a motion to dismiss was pending.
The Court of Chancery recited the well-known standard for granting a motion to stay discovery pending a motion to dismiss:
Absent special circumstances, discovery will normally be stayed pending the determination of a motion to dismiss the complaint. ‘Special circumstances’ have been found to include situations where (i) the motion does not offer a ‘reasonable expectation’ of avoiding further litigation, (ii) plaintiff has requested interim relief, and (iii) the plaintiff will be prejudiced because the information may be unavailable at a later time.
Slip op. at 1-2 (internal citations omitted).
Counsel for plaintiff opposed the motion to stay discovery on the grounds that the motion to dismiss did not offer a reasonable expectation of avoiding further litigation because the Court will likely deny it.
The Court rejected that argument. In so ruling, Vice Chancellor Slights wrote that: “But whether vel non the Motion to Dismiss will be granted or denied is not the question on this Motion. The question, instead, is whether the Motion to Dismiss, if successful, will avoid the need for further litigation.” Id. at 2.
The Court also rejected plaintiff’s argument that the requested discovery would not impose an undue burden, stating that such consideration “is not the standard by which this court reviews applications to stay discovery in the midst of pending dispositive
motion practice.” Id.
This pithy opinion reinforces the Court’s proclivity to grant a stay of discovery pending a motion to dismiss, provided none of the special circumstances referenced above are met. This decision should be considered by parties seeking to oppose discovery pending a motion to dismiss.