Vertellus Holdings LLC et al v. W.R. Grace & CO.-CONN.

RESPONSE in Opposition re MOTION to Lift Stay

S.D. Ind.January 8, 2018

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION VERTELLUS HOLDINGS LLC, et al. Plaintiffs, v. W. R. GRACE & CO. - CONN. Defendant. Case No. 1:17-cv-1192-TWP-MPB RESPONSE IN OPPOSITION TO MOTION TO LIFT STAY Only a few months ago, this Court, after assessing the relevant authorities and circumstances, stayed discovery until Grace’s motion to dismiss was resolved. Vertellus now attempts to undo that ruling by moving to lift the stay. Vertellus articulates no valid reason for its request-which is, in actuality, a motion for reconsideration. Nothing has changed since the Court entered its order, and the Court should reject Vertellus’s effort to lift the stay prematurely. I. Procedural History On October 6, 2017, having reviewed papers supporting and opposing Grace’s Motion for a Protective Order pursuant to Federal Rules of Civil Procedure 1, 26(b), and 26(c), the Court granted in part and denied in part Grace’s Motion. Specifically, the Court ruled that: • the case management plan was vacated; • good cause existed to stay discovery pending resolution of Grace’s Motion to Dismiss for Failure to State a Claim and Lack of Personal Jurisdiction because “a stay of discovery is generally appropriate to avoid unnecessary discovery battles where a motion to dismiss raises ‘threshold’ issues such as standing, jurisdiction, or qualified immunity,” and it was “particularly appropriate” in this case where Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 1 of 10 PageID #: 943 2 “[t]he record is replete with several early discovery disputes between the parties, indicating it is unlikely discovery will be conducted in a productive or efficient manner while the jurisdictional issue is pending before the Court.” (Order at 5, Dkt. 83, PageID #900); • it would consider Grace’s alternative request to bifurcate liability and damages discovery if the motion to dismiss were denied and the stay lifted; and • it would make particularized rulings on Grace’s objections to Vertellus’s discovery requests if the stay were lifted and after the parties had met and conferred regarding the disputed discovery. Vertellus now wants the Court to disregard its earlier ruling that good cause exists for imposing a stay and that it would determine, if and as necessary at a later date, whether some or all of Vertellus’s discovery requests were premature or otherwise objectionable. Thus, Vertellus demands that the Court lift the stay, “order Grace to fully respond to Vertellus’s discovery requests immediately, and direct the parties to revise the proposed case management plan allowing for streamlined, not bifurcated, discovery.” (Mot. Lift Stay at 11, Dkt 86, PageID #921.) Vertellus fails to articulate what it means by “streamlined” discovery, and the ambiguity is pregnant with numerous objectionable alternatives. Grace notes, in any event, that the Court denied Grace’s bifurcation request without prejudice, and noted a willingness to entertain a renewed request if the motion to dismiss is denied and the stay lifted. (See Dkt. 83, PageID #901.) Similarly, Vertellus offers no explanation for proposing to skip the customary meet-and- confer and judicial review steps with respect to Grace’s objections to Vertellus’s written discovery, suggesting instead that, for reasons nowhere articulated in their motion, the Federal and Local Rules no longer govern Vertellus’s discovery demands. Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 2 of 10 PageID #: 944 3 II. No reason exists to vacate the Court’s earlier order staying discovery. “The authority of a district judge to reconsider a previous ruling in the same litigation . . . is governed by the doctrine of the law of the case, which authorizes such reconsideration if there is a compelling reason, such as a change in, or clarification of, law that makes clear that the earlier ruling was erroneous.” Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571-72 (7th Cir. 2006). A motion for reconsideration may also address a court’s misunderstanding of a party or a “significant change” in the facts. Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (internal quotation marks and citation omitted). “Such problems rarely arise and the motion to reconsider should be equally rare.” Id. Although Vertellus characterizes the discovery stay imposed by this Court on October 6, 2017 as “indefinite,” the Court issued a finite stay and was clear about what needed to happen before it would lift the stay: “a discovery stay is appropriate in this case pending the Court’s ruling on the motion to dismiss.” (Order at 6, Dkt. 83, PageID #901.) That motion remains pending, and Vertellus presents nothing that would oblige this Court to reconsider its prior ruling imposing a stay. In concluding that a stay was appropriate, the Court weighed all of the factors that Vertellus now rehashes. The relevant circumstances and law remain the same. When it imposed the stay, the Court recognized its “inherent authority to manage litigation” (Order at 3) and held that good cause existed “in light of the motion to dismiss including a threshold issue, the amount of discovery disputes already arisen, and the relatively short time a stay would be in effect.” (Order at 5-6.) See also Madbak v. Anthem Ins. Co., No. 1:16-cv-03197-SEB-MPB, 2017 WL 5075262, at *2 (S.D. Ind. May 23, 2017) (Brookman, J.) (“A stay of discovery is often appropriate where a pending dispositive motion can resolve the case and where ‘requested discovery is unlikely to produce facts necessary to defeat the motion.’” (quoting Sprague v. Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 3 of 10 PageID #: 945 4 Brook, 149 F.R.D. 575, 577 (N.D. Ill. 1993))); Sprague, 149 F.R.D. at 578 (“The sole result of such discovery, pending resolution of the [defendant’s] motion, would be cost and inconvenience, which would impose an undue burden on the time and resources of the [defendant] and its agents.”). Vertellus cites Lippert Components Mfg., Inc. v. AL-KO Kober, LLC, No. 3:13-CV-697- JVB-CAN, 2014 WL 8807329, at *2 (N.D. Ind. Jan. 16, 2014), but that case is inapposite. In Lippert, a case involving a patent dispute in which the validity of the patent was in question and might have been reviewed by the United States Patent and Trademark Office (“USPTO”), one party asked for a stay of discovery. The court denied the motion because it was “uncertain whether the USPTO will even conduct the reexamination” and “any benefit from a stay at this point of the current litigation is highly speculative.” Id. at *3 (“[S]hould the USPTO grant AL- KO’s petitions for [inter partes review] and proceed with reexamination of the validity of the patents-in-suit, the Court will be willing to consider any request for a stay at that time when the benefits of the stay are no longer speculative.”). In this case, by contrast, a dispositive motion that could obviate the need for any discovery is fully briefed and pending before the Court so that the benefit of a stay is not at all speculative.1 A. Discovery may be unnecessary. Vertellus argues that the stay should be lifted because, no matter how the motion to dismiss is decided, discovery in this case is inevitable. This argument existed ten weeks ago when the Court imposed the stay; the argument was not persuasive then, and it is not persuasive 1 Vertellus characterizes Grace as the sole culprit with respect to discovery disputes and accuses it of dragging its feet for no reason. As Grace made clear when it asked for a stay, however, and among other valid concerns, Grace wants to protect its own and third-party trade secrets from what it regards as improper and unwarranted disclosure. Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 4 of 10 PageID #: 946 5 now. Moreover, discovery in this case is far from inevitable. Should the Court agree that it lacks jurisdiction over Grace, there is no guarantee that Vertellus will refile its case in another jurisdiction. See www.Turnstiles.us, Inc. v. Modular Sec. Sys., Inc., 15-CV-01806-RM-MEH, 2015 WL 8759737, at *2 (D. Colo. Dec. 15, 2015). Vertellus has long known it could dispose of Grace’s jurisdictional challenge by re-filing in Maryland, but it has chosen not to do so. Speculation that Vertellus will refile elsewhere at some point in time does not mean that the Court should compel extensive discovery from a defendant over which it may lack jurisdiction.2 Furthermore, while the jurisdictional issue may have prompted the stay, Grace has also challenged the sufficiency of the allegations in the Complaint. Discovery will not take place if the Court grants the motion to dismiss on Rule 12(b)(6) grounds and dismisses the case with prejudice. And if the Court grants the motion in part, any discovery conducted on the dismissed counts would be a waste of resources, given the complexity of the issues, the extent of discovery Vertellus has requested, and the likelihood that discovery disputes would continue. This is the exact problem a discovery stay seeks to avoid. See Towne Mortgage Co. v. Gen. Star Nat'l Ins. Co., 15-CV-01374-SEB-DML, 2015 WL 12885838, at *3 (S.D. Ind. Dec. 22, 2015) (staying discovery until a motion to dismiss was decided, although the motion raised no threshold issues, because “it is prudent to postpone discovery until it is determined whether the [plaintiff’s theory of recovery] is sufficiently pleaded and plausible”); Dillinger, L.L.C. v. Elec. Arts, Inc., 1:09- CV-01236-SEB-JM, 2010 WL 1945739, at *1 (S.D. Ind. May 11, 2010) (“[T]he Court agrees with [the defendant] that avoiding potentially unnecessary discovery costs-and if the motion to 2 Vertellus’s statement that “[i]ndeed, it is common for courts to order discovery so that the plaintiff may adequately respond to [a motion to dismiss for lack of personal jurisdiction]” is truly puzzling. Vertellus has not sought (and thus Grace has not opposed) targeted discovery specific to personal jurisdiction. Under these circumstances, therefore, a stay is appropriate. See Madbak, No. 1:16-cv-03197-SEB-MPB, 2017 WL 5075262, at *2. Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 5 of 10 PageID #: 947 6 dismiss succeeds, then all discovery costs would have been unnecessary-will not significantly prejudice [the plaintiff], and may indeed even operate to its benefit.”); see also Sanders v. City of Indianapolis, 2010 WL 1410587 at *1 (S.D. Ind. April 2, 2010) (noting that “courts often stay discovery while a motion to dismiss the complaint is pleading” and that Twombly’s heightened pleading standard was in part motivated by the “concern that plaintiffs were subjecting defendants to discovery costs despite having no legally cognizable claims”). B. Vertellus’s argument regarding “deteriorating evidence” does not justify lifting the stay. Vertellus has not identified a single piece of evidence that is at risk of being lost. If there is (or may be) such evidence, then Vertellus should identify it and ask to discover it or request that actions be taken specifically to preserve it. C. This Court should ignore Vertellus’s specious spoliation argument. Vertellus argues that because it has alleged that Grace is a dishonest actor, the Court should assume that Grace (and, presumably, its counsel) will deliberately destroy evidence relevant to this litigation. In lieu of responding with (justified) outrage, Grace simply notes that the system does not work that way. If it did, courts would have to assume spoliation in every case where fraud is alleged. Because there is no reason for the Court to consider ill motive a factor here, Vertellus’s argument to the contrary should be rejected out of hand. D. Vertellus’s argument that it is suffering continuing harm has no merit. Vertellus claims that Grace continues to cause it harm, “is currently preempting [Vertellus’s] space” (whatever that means), and is responsible for Vertellus’s dwindling “competitive edge.” (Mot. at 7, Dkt 86, PageID #917.) In keeping with its consistent failure (first evident in its Complaint) to assert actionable facts, Vertellus provides not a single demonstrable fact or piece of evidence in support of its conclusory and speculative assertions of Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 6 of 10 PageID #: 948 7 ongoing harm; apparently expecting instead that the Court will accept and act upon the unsubstantiated allegations merely on Vertellus’s say-so. But, the specter of ongoing harm was invoked from the outset, and the Court presumably factored that vacuous contention into its decision to impose the stay. No change in course is warranted now. Vertellus disregards that it had the opportunity, upon receiving Grace’s Motion to Dismiss, to expedite this litigation and alleviate the burden on this Court by refiling in Maryland. See Cenage Learning, Inc. v. Buckeye Books, 531 F. Supp. 2d 596, 602 (S.D.N.Y. 2008) (explaining that a plaintiff wishing to avoid delay based on jurisdictional issues could refile in a jurisdiction where the defendants are “clearly amenable to suit”). At the time, the Court already was “operating under a judicial emergency” due to heavy caseloads and “the recent deaths of Senior District Judge Larry J. McKinney and Magistrate Judge Denise K. LaRue.” Order, Maxey v. Access Therapy, No. 16-cv-01286-TWP-TAB (S.D. Ind. Nov. 3, 2017). If Vertellus wanted a more expedited disposition of this case, refiling in Maryland would have been the logical choice. Vertellus chose the more burdensome, more difficult path, which Vertellus has exacerbated by rehashing arguments the Court already has considered. The only new fact that Vertellus puts before the Court in support of its claim of continuing harm is that Dr. Dorai Ramprasad, a Grace employee, presented at a recent meeting on pyridine catalysts, an area in which he “claimed expertise.” (Mot. at 7, Dkt 86, PageID #917.) Vertellus then states, summarily and without identifying either what Dr. Ramprasad disclosed or the information Vertellus claims is confidential and proprietary to it, that Dr. Ramprasad took credit for Vertellus’s work. Dr. Ramprasad is a distinguished scientist with decades of catalyst experience. He is the inventor on the’366 patent (and Vertellus’s allegations to the contrary do not make it otherwise), Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 7 of 10 PageID #: 949 8 so he spoke about it. If Vertellus truly believes that Grace is acting illegally and is causing it harm, Vertellus’s most appropriate course of action is not to move to lift the discovery stay in the court in which jurisdiction is refuted, but to file a motion for preliminary injunction in a court that has jurisdiction over Grace. The fact that Vertellus has not chosen that path (which would require a preliminary examination of the merits, for which Grace has been campaigning from the outset) betrays the weakness of its accusations and belies the vehemence of its complaints. III. Conclusion Vertellus presents no relevant new facts or law, and does not argue that the Court misunderstood the issues. Rather, Vertellus repeats the same arguments the Court already considered, but decorates them with baseless allegations about disappearing or destroyed evidence. When it issued the stay, this Court set a status conference for April 9, 2018- obviously contemplating that the stay could be in effect until then. Vertellus offers no reason why the Court should reconsider its decision. The motion to lift the stay should be denied. Dated: January 8, 2018 Respectfully submitted, /s/ Michael B. MacWilliams Michael B. MacWilliams (admitted pro hac vice) VENABLE LLP 750 E. Pratt Street, Suite 900 Baltimore, Maryland 21202 Tel: (410) 244-7400 Fax: (410) 244-7742 MBMacWilliams@Venable.com Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 8 of 10 PageID #: 950 9 Daniel David Trachtman Michael Rabinowitch WOODEN MCLAUGHLIN LLP One Indiana Square, Suite 1800 Indianapolis, Indiana 46204-2019 Tel: (317) 639-6151 Fax: (317) 639-6444 dan.trachtman@woodenmclaughlin.com mrabinowitch@woodenmclaughlin.com Attorneys for Defendant W. R. Grace & Co. - Conn. Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 9 of 10 PageID #: 951 10 CERTIFICATE OF SERVICE I hereby certify that on January 8, 2018, a copy of the foregoing Response in Opposition to Motion to Lift Stay of W.R. Grace & Co. - Conn. was filed electronically. Notice of this filing will be sent to the following parties by operation of the Court’s electronic filing system. Parties may access this filing through the Court’s system. Deborah Pollack-Milgate Jessica M. Lindemann Leah Lewis Seigel BARNES & THORNBURG LLP 11 South Meridian Street Indianapolis, IN 46204 dmilgate@btlaw.com jessica.lindemann@btlaw.com leah.seigel@btlaw.com Keith H. Forst (admitted pro hac vice) Scott Watson (admitted pro hac vice) QUINN EMANUEL URQUHART & SULLIVAN, LLP 777 6th Street NW, 11th Floor Washington, DC 20001 keithforst@quinnemanuel.com scottwatson@quinnemanuel.com Prashanth Chennakesavan QUINN EMANUEL URQUHART & SULLIVAN, LLP 51 Madison Avenue, 2nd Floor New York, NY 10010 prashanthchennakesavan@quinnemanuel.com /s/ Daniel D. Trachtman Daniel D. Trachtman 2000049-1 (13450-0001) Case 1:17-cv-01192-TWP-MPB Document 91 Filed 01/08/18 Page 10 of 10 PageID #: 952