United States District Court,

D. Nevada.

AMC FABRICATION, INC., Plaintiff,

v.

KRD TRUCKING WEST, INC., et al., Defendants.

 

No. 2:12–cv–00146–LDG–CWH.

Oct. 10, 2012.

 

Steven A. Gibson, Jodi Donetta Lowry, Jonathan M.A. Salls, Dickinson Wright PLLC, Las Vegas, NV, for Plaintiff.

 

Jayna M. Cacioppo, Richard A Kempf, Taft Stettinius & Hollister, Indianapolis, IN, Justin L. Carley, Patrick G. Byrne, Snell & Wilmer, Jennifer Ko Craft, Michael N. Feder, Puneet K. Garg, Gordon Silver LLP, Las Vegas, NV, for Defendants.

 

ORDER

C.W. HOFFMAN, JR., United States Magistrate Judge.

*1 This matter is before the Court on Defendant Kenneth S. Drenth’s Motion to Stay Discovery and Disclosure Obligations (# 37), filed May 4, 2012; Plaintiff’s Response (# 40), filed May 10, 2012; and Defendant’s Reply (# 41), filed May 21, 2012.

 

BACKGROUND

The parties filed a proposed discovery plan and scheduling order on April 25, 2012. In a footnote, the parties set forth a dispute that arose during the Rule 26(f) conference regarding the discovery obligations, if any, of Defendant Kenneth Drenth (“Drenth”). Drenth, through his counsel, took the position that, until the Court determined whether it had personal jurisdiction over Drenth, he should not be required to participate in party-related discovery or make initial disclosures. Plaintiff disagreed. See Docket (# 31) at n. 2. On May 2, 2012, the Court held a hearing on the proposed discovery plan. After hearing arguments from counsel, the Court indicated that it would enter a standard discovery order. The Court also requested that the parties brief the question of whether discovery should be stayed as against Drenth pending resolution of his motion to dismiss asserting that the Court does not have personal jurisdiction over him.

 

The parties agree on the general governing law as it relates to requests to stay discovery pending resolution of Rule 12 motion to dismiss, but disagree on its application. Drenth argues (1) that a stay should be granted “because requiring [him] to participate in discovery would frustrate [his] jurisdictional defense” and (2) that the stay would cause no prejudice as the remaining parties are in possession of any relevant documents regarding the asserted claims. See Def.’s Mot. (# 37) at 2:20–27. Plaintiff argues (1) that staying discovery based on a “jurisdictionally-based dismissal motion” is not automatic; (2) that, even if granted, the stay would not obviate Rule 26(a)’s initial disclosure requirements; (3) that a stay would simply make discovery tactically inconvenient by forcing Plaintiff to seek discovery through nonparty means; and (4) that, even if the stay is granted, Plaintiff should be able to conduct jurisdictional discovery.

 

DISCUSSION

The parties agree regarding the standards governing requests to stay discovery pending resolution of a dispositive motion. Courts have broad discretionary power to control discovery. See e.g., Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir.1988). In Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597 (D.Nev.2011), the court undertook a detailed and thorough review of the state of the law as pertains to staying discovery when a dispositive motion is pending. The court determined that, in light of the directive in Rule 1 to construe the Federal Rules of Civil Procedure in a manner to “secure the just, speedy, and inexpensive determination of every action,” the preferred approach remains as was previously set forth in Twin City Fire Insurance v. Employers of Wausau, 124 F.R.D. 652 (D.Nev.1989) and Turner Broadcasting System, Inc. v. Tracinda Corp., 175 F.R.D. 554 (D.Nev.1997). Generally, a pending dispositive motion is not “a situation that in and of itself would warrant a stay of discovery.” See Turner Broadcasting, 175 F.R .D. at 554, 555–6 (quoting Twin City, 124 F.R.D. at 653). However, preliminary issues such as jurisdiction, venue, or immunity are common situations that may justify a stay. See Twin City, 124 F.R.D. at 653.

 

*2 The party seeking a stay of discovery “carries the heavy burden of making a strong showing why discovery should be denied.” Tradebay, 278 F.R.D. at 601 (citing Turner Broadcasting, 175 F.R.D. at 556. An overly lenient standard for granting requests to stay would result in unnecessary delay in many cases. Courts generally insist on a particular and specific demonstration of fact as opposed to merely conclusory statements that a stay is warranted. Twin City, 124 F.R.D. at 653. Evaluation of a request for a stay often requires a magistrate to take a “preliminary peek” at a pending dispositive motion. This “preliminary peek” is not intended to prejudge the outcome, but to evaluate the propriety of a stay of discovery “with the goal of accomplishing the objectives of Rule 1.” Tradebay, 278 F.R.D. at 601 (citation omitted). That discovery may involve inconvenience and expense is not sufficient, standing alone, to support a stay of discovery. Turner Broadcasting, 175 F.R.D. at 556.

 

Whether the Court has personal jurisdiction over Defendant Drenth is a critical preliminary question. However, it is not a question that mandates a stay of discovery. The Court retains its discretion to determine whether discovery should go forward. See Holiday Systems, Intern. of Nevada v. Vivarelli, Schwarz, and Associates, 2012 WL 3860824 (D.Nev) (finding that a magistrate judge does not abuse his discretion when he denies a stay based solely on a motion challenging personal jurisdiction). Nevertheless, it is the undersigned’s view that a pending motion challenging jurisdiction strongly favors a stay, or at minimum, limitations on discovery until the question of jurisdiction is resolved. See Liberty Media Holdings, LLC v. Letyagin, 2012 WL 3135671 *5 (D.Nev .) (“A defendant should not be required to engage in expensive and burdensome discovery in a court that has no jurisdiction over him.”) (citation omitted).

 

“When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant.” Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir.2006). To meet this burden, a plaintiff must demonstrate that personal jurisdiction over a defendant is (1) permitted under the applicable state’s long-arm statute and (2) that the exercise of jurisdiction does not violate federal due process. Id. The Court must analyze whether personal jurisdiction exists over each defendant separately. Harris Rutsky & Co. Servs. v. Bell & Clements Ltd., 328 F.3d 1122, 1130 (9th Cir.2003). Generally, when determining personal jurisdiction the court accepts as true any uncontroverted allegations in the complaint and resolves conflicts between the facts contained in the parties’ evidence in the plaintiff’s favor. Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1119 (9th Cir.2002). However, for personal jurisdiction purposes, a court “may not assume the truth of allegations in a pleading which are contradicted by affidavit.”   Alexander v. Circus Circus Enters., Inc., 972 F.2d 261, 262 (9th Cir.1992) (quotation omitted).

 

*3 Subject matter jurisdiction in this matter is predicated on a federal question and, as such, “the exercise of personal jurisdiction over a non-resident defendant must be authorized by a rule or statute and consonant with the constitutional principles of due process.” Glencore Grain, 284 F.3d at 1123. Because there is no applicable federal statute governing personal jurisdiction, the starting point is Nevada’ long-arm statute, which provides that a court may exercise personal jurisdiction over a defendant to the full extend permitted by due process. Id.; see also NRS 14.065 (“A court of this state may exercise jurisdiction over a party to a civil action on any basis not inconsistent with the … Constitution of the United States.”). Federal law is controlling on the issue of due process under the United States Constitution. E.g., Data Disc, Inc. v. Sys. Tech. Assoc. Inc., 557 F.2d 1280, 1286 n. 3 (9th Cir.1977). Thus, analysis of personal jurisdiction under Nevada’s long-arm statute and the Constitution collapses and the Court considers only whether the exercise of jurisdiction over Drenth comports with due process.

 

To satisfy federal due process standards, a nonresident defendant must have “minimum contacts” with the forum state such that the assertion of jurisdiction does not offend traditional notions of fair play and substantial justice.   Pebble Beach Co., 453 F.3d at 1155 (citation omitted). A federal court may exercise either specific or general jurisdiction over a defendant. Helicopteros Nacionales de Columbia S.A. v. Hall, 466 U.S. 407, 414–15 (1984). To establish general jurisdiction a plaintiff must demonstrate that the defendant has sufficient contacts to “constitute the kind of continuous and systematic general business contacts that approximate physical presence.”   Glencore Grain, 284 F.3d at 1124 (citations and quotations omitted). A nonresident defendant’s contacts with the forum state may permit the exercise of specific jurisdiction if: (1) the defendant has performed some act or transaction within the forum or purposefully availed himself of the privileges of conducting activities within the forum, (2) the plaintiff’s claim arises out of or results from the defendant’s forum-related activities, and (3) the exercise of jurisdiction is reasonable. Pebble Beach Co., 453 F.3d at 1155–56.

 

The parties appear to agree that only specific jurisdiction is available here. The primary argument advanced by Defendant Drenth appears to be that exercising personal jurisdiction over him would be inappropriate because his contacts with Nevada have been solely “in his representative capacity for the Defendant Corporations.” See Def.’s Motion (# 29) at 6:18–26. This defense, often referred to as the “fiduciary shield doctrine,” says that “a person’s mere association with a corporation that causes injury in the forum state is not sufficient in itself to permit that forum to assert jurisdiction over the person.” Davis v. Metro Prods., Inc ., 885 F.2d 515, 520 (9th Cir.1989). Application of the doctrine is limited. Klein v. Freedom Strategic Partners, LLC, 595 F.Supp .2d 1152, 1158 (D.Nev.2009). As noted in Klein, “although the Court cannot acquire personal jurisdiction over employees based on their employers’ forum activities, their status as employees does not somehow insulate them from jurisdiction.” Id. at 1159 (citations and quotations omitted).

 

*4 This motion to stay (# 37) creates a difficult situation. In the undersigned’s view the record is not clear and, based on the standards set forth above, the undersigned is not convinced that exercising personal jurisdiction over Defendant Drenth in his individual capacity is appropriate. Normally, “discovery should … be granted where pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.” Laub v. U.S. Dept. of Interior, 342 F.3d 1080, 1093 (9th Cir.2003) (citation omitted) (emphasis added); see also Klein, 595 F.Supp.2d at 1160 (because jurisdictional discovery would parallel ongoing discovery on the merits of the case, “granting jurisdictional discovery separate from general discovery would be inefficient”). Nevertheless, how the undersigned sees the jurisdictional picture may be very different from how the assigned district judge will see the jurisdictional picture. And, ultimately, it is the assigned district judge who will make the ultimate determination on whether there is personal jurisdiction. Given this, the undersigned finds it more prudent to grant the requested stay and defer the question of whether jurisdictional discovery is necessary to the assigned district judge in his determination of the merits of Drenth’s motion to dismiss (# 29). As a result, traditional party discovery should not go forward as against Drenth in his individual capacity (i.e., Rule 26(a) disclosures, Rule 33 interrogatories, Rule 34 requests, or Rule 36 requests for admission). The Court agrees with Drenth that Plaintiff may seek discovery, including jurisdictional discovery, through the use of nonparty discovery methods. See Def.’s Mot. (# 37) at n. 4.

 

Based on the foregoing and good cause appearing therefore,

 

IT IS HEREBY ORDERED that Defendant Kenneth S. Drenth’s Motion to Stay Discovery and Disclosure Obligations (# 37) is granted.

United States District Court,

N.D. Illinois,

Eastern Division.

CONTINENTAL CASUALTY COMPANY, Plaintiff,

v.

Khaled Abdelrahman Mohd MOHATARE, Ahmad Abdoul, and KMC International, Inc., Defendants.

 

No. 11 C 2751.

Oct. 10, 2012.

 

Emily Morgan Kepner, Leena Soni, Zacarias R. Chacon, Lewis, Brisbois, Bisgaard, and Smith, LLP, Chicago, IL, for Plaintiff.

 

MEMORANDUM OPINION

JOHN F. GRADY, District Judge.

*1 The court has reviewed the plaintiff’s motion for default judgment against all defendants, the plaintiff’s memorandum of law in support of its motion, and the amended complaint. We have entered orders of default against the defendants, but default goes only to the well-pled facts of the amended complaint; we must still consider whether those facts state a claim. See Black v. Lane, 22 F.3d 1395, 1399 (7th Cir.1994); 10A Charles Alan Wright et al., Federal Practice and Procedure § 2688 (3d ed. 1998) (“Even after default, however, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.”).

 

In 2010, plaintiff, Continental Casualty Company (“Continental”), issued a cargo insurance policy to defendant Khaled Abdelrahman Mohd Mohatare in connection with a shipment of decorative glass vases. Continental alleges that Mohatare, along with defendants Ahmad Abdoul and KMC International, Inc., engaged in a scheme to submit a fraudulent insurance claim in connection with the vases, which Mohatare claimed had been damaged in shipment. After it conducted an investigation, Continental denied the claim.

 

It is further alleged that Continental paid a claim that Mohatare submitted in 2007 when employing the same fraudulent scheme and that he employed the same scheme in 2008 to defraud another insurance company, Munich Re. The amended complaint asserts that the defendants used interstate mail and wire communication to transmit false documents to Continental. It contains claims against all three defendants for engaging in a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c), the RICO statute (Count I); conspiring to violate RICO under 18 U.S.C. § 1962(d) (Count II); common-law fraud (Count III); violation of the Illinois insurance-fraud statute FN1 (Count IV); and unjust enrichment (Count V). In Counts VI and VII of the amended complaint, which are asserted against Mohatare only, plaintiff seeks declaratory judgments that plaintiff has no duty to pay Mohatare’s claim under the insurance policy because the claimed losses are attributable to his willful misconduct and were caused by improper packing of the vases.

 

FN1. The statute was previously at 720 ILCS 5/46–5. Since July 2011, it has been at 720 ILCS 5/17–10.5. The relevant provision is the same.

 

We will begin our discussion with the RICO claims. Under § 1962(c) of RICO, it is unlawful “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.” 18 U.S.C. § 1962(c). Thus, to state a § 1962(c) claim, a plaintiff must allege that the defendant (1) conducted or participated in conducting the affairs (2) of an enterprise (3) through a pattern (4) of racketeering. Sedima, S.P .R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). To satisfy the “enterprise” element of § 1962(c), a plaintiff must adequately allege an enterprise, which is “more than a group of people who get together to commit a pattern of racketeering activity.” Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 645 (7th Cir.1995) (internal quotation marks omitted). RICO is not just a conspiracy statute; the enterprise must have “a structure and goals separate from the predicate acts themselves.” Id.; see also Jennings v. Emry, 910 F.2d 1434, 1441 (7th Cir.1990) (“[W]hile the hallmark of conspiracy is agreement, the central element of an enterprise is structure.”). An enterprise is shown “by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” Richmond, 52 F.3d at 644.

 

*2 Counts I and II must be dismissed for failure to state claims for violation of RICO. The amended complaint contains a legal conclusion that Mohatare, Abdoul and KMC (a Michigan corporation whose principals are alleged on information and belief to be “Mohatare and/or Abdoul,” Am. Compl. ¶ 4) constitute an “association-in-fact enterprise” “with the common purpose of routinely and regularly carrying out the scheme to defraud … namely, submitting fraudulent insurance claims to induce payment of money not due.” (Am.Compl.¶¶ 45–46.) But the complaint is devoid of any factual allegations from which we can make a reasonable inference that there was an ongoing RICO organization with structure, continuity, or goals separate from the alleged scheme to defraud.

 

Furthermore, all of the claims asserted against Abdoul and KMC (Counts I through V) must be dismissed for failure to state a claim. They are based on alleged fraudulent conduct, but fail to meet the pleading standards of Rule 8, let alone Rule 9(b). There are no allegations, other than legal conclusions, that Abdoul himself or the entity KMC made any misrepresentations to Continental. All that is alleged regarding Abdoul is that he may be a principal of KMC; that Mohatare claimed that Abdoul was a representative of KMC; that Mohatare provided Continental with a fraudulent receipt bearing Abdoul’s name; that Abdoul declined to provide documents regarding the shipment when requested by Continental’s claims investigator; and that Abdoul is a relative of Mohatare. Abdoul is not alleged to have been involved in schemes that took place prior to 2010. Similarly, KMC is not alleged to have engaged in any conduct separate from Mohatare’s alleged conduct. Plaintiff has alleged nothing more than garden-variety, albeit repeated, fraud by Mohatare, and that is what is deemed to be admitted as a result of Mohatare’s default.

 

As against Mohatare, plaintiff’s claims in Counts III–VII are adequately pled, and we will enter a default judgment against him on those counts of the amended complaint. Because we are dismissing the RICO claims, the treble-damages and “cost of the suit” components of the damages claimed by plaintiff will not be included in the default judgment.

 

It appears from our review of plaintiff’s memorandum of law in support of its motion for default judgment that the amount of damages awardable on Counts III and V (the common-law fraud and unjust enrichment counts) is $32,488.13, which represents the $24,492.94 Continental paid to Mohatare on the fraudulent 2007 claim plus & 7,995.19 in investigation expenses for the 2007 and 2010 claims. On Count IV, the claim for violation of the Illinois insurance-fraud statute, plaintiff seeks damages in connection with the 2010 claim, which was denied. Under the statute, a claimant is entitled to damages in the amount of twice the value of the property attempted to be obtained, plus reasonable attorneys’ fees. Mohatare made a claim for $162,922.50, so the total amount of damages awardable on Count IV is $325, 845. 00 ($162, 922.50 times 2).

 

*3 Continental is also entitled to reasonable attorneys’ fees in relation to the 2010 claim. It claims a total amount of $81,044.58 for “[a]ttorneys’ fees and out-of-pocket expenses incurred as a result of Defendants’ RICO violations and insurance fraud.” (Pl.’s Mem. of Law in Supp. of Mot. for Default J. at 4.) Continental fails, however, to attach time records to support the fees claimed, to break down the fees by claim, or to indicate how much of this total is for out-of-pocket expenses, which are not recoverable because we are dismissing the RICO claims. In order to recover attorneys’ fees, Continental must file a supplemental memorandum in support of its motion that adequately supports its request. It must be tailored to the attorneys’ fees incurred on the 2010 claim and supported by time records. Continental is given leave to do so by November 2, 2012. It is also directed to file by the same date a revised proposed default judgment order that incorporates our rulings herein.