Yangtze Memory Technologies, Inc. v. Strand Consult

• Court: District Court, N.D. California
• Decided: December 2, 2024
• Docket: 5:24-cv-03454
• Status: Unknown

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 YANGTZE MEMORY TECHNOLOGIES, Case No. 24-cv-03454-BLF INC., et al., 8 Plaintiffs, ORDER GRANTING DEFENDANTS’ 9 MOTION TO STAY DISCOVERY AND v. VACATING HEARING 10 STRAND CONSULT, et al., [Re: ECF No. 39] 11 Defendants. 12 13 Defendants Strand Consult and Roslyn Layton’s (collectively, “Defendants”) filed the 14 Motion to Stay Discovery until resolution of Defendants’ upcoming Motion to Strike and Motion to 15 Dismiss. ECF 39. Plaintiffs Yangtze Memory Technologies Company, Ltd., and Yangtze Memory 16 Technologies, Inc. (collectively, “Plaintiffs”) filed an opposition. ECF 46. The Court finds this 17 motion appropriate for disposition without oral argument. See Civil Local Rule 7-1(b). After 18 considering the moving and responding papers and the relevant record, the Court GRANTS 19 Defendants’ Motion to Stay Discovery and VACATES the hearing set for March 13, 2025. 20 I. BACKGROUND 21 Plaintiffs allege that Defendants have begun making false statements about Plaintiffs and 22 Plaintiffs’ products since September 2020. ECF 1 at ¶ 4. On June 7, 2024, Plaintiffs filed a complaint 23 (“Original Complaint”) alleging claims for trade libel and violation of Cal. Bus. Prof. Code § 17200 24 et seq. against Defendants. ECF 1. On October 30, 2024, Defendants filed the Motion to Stay 25 Discovery. ECF 39. On October 31, 2024, the Court held a Case Management Conference. ECF 42. 26 At the Case Management Conference, Plaintiffs stated that they intended to amend their complaint 27 to cure issues raised by Defendants in the Motion to Stay Discovery. See Case Management 1 (“Amended Complaint”) adding DCI Group AZ, LLC as a new defendant and adding Lanham Act 2 claims under 15 U.S.C. § 1125(a). ECF 50 at ¶¶ 61-85. Plaintiffs dropped the California state law 3 claims. See id. 4 II. LEGAL STANDARD 5 A district court “may, for good cause, issue an order to protect a party or person from … 6 undue burden or expense,” including by staying discovery. Fed. R. Civ. P. 26(c)(1); see, e.g., Reveal 7 Chat Holdco, LLC v. Facebook, Inc., 2020 WL 2843369, at *1 (N.D. Cal. Apr. 10, 2020); In re 8 Nexus 6P Prod. Liab. Litig., 2017 WL 3581188, at *1 (N.D. Cal. Aug. 18, 2017). A district court 9 has “wide discretion in controlling discovery.” Little v. City of Seattle, 863 F.2d 681, 685 (9th Cir. 10 1988); Chadwick v. BMO Harris Bank NA, 675 F. App’x 654, 655 (9th Cir. 2017). Courts in this 11 district apply a two-part test to determine whether to stay discovery pending resolution of a 12 dispositive motion. First, “a pending motion must be potentially dispositive of the entire case, or at 13 least dispositive on the issue at which discovery is directed.” Reveal Chat, 2020 WL 2843369, at *2 14 (citation omitted). The critical “question is only whether [movant’s] motion to dismiss is ‘potentially 15 dispositive[.]’” Id. at *3 (citation omitted). Second, “the court must determine whether the pending 16 motion can be decided absent additional discovery.” Id. at *2 (citation omitted). In applying this 17 test, “the court must take a ‘preliminary peek’ at the merits of the pending motion to assess whether 18 a stay is warranted.” Id. (citation omitted). 19 III. DISCUSSION 20 Defendants argue that their upcoming Motion to Strike and Motion to Dismiss will present 21 case-dispositive grounds to dismiss the case. ECF 39 at 5-10. Specifically, Defendants argue that 1) 22 Plaintiffs’ Original Complaint is a Strategic Lawsuit Against Public Participation (“SLAPP”) and 23 Defendants intend to bring a Motion to Strike under the anti-SLAPP statute, ECF 39 at 6; 2) the 24 Court lacks subject matter jurisdiction, ECF 39 at 7; 3) Plaintiffs lack Article III standing, ECF 39 25 at 7-9; 4) the Court lacks personal jurisdiction over Defendants, ECF 39 at 9-10; and 5) Plaintiffs 26 have failed to state a claim, ECF 39 at 10. With respect to the subject matter jurisdiction issue, 27 Defendants argue that there is no basis for diversity jurisdiction in Plaintiffs’ Original Complaint 1 thus 28 U.S.C. § 1332(a)(3) does not apply. ECF 39 at 7. Defendants further argue that the defect 2 in subject matter jurisdiction cannot be cured by Plaintiffs’ claims under the Lanham Act added in 3 the Amended Complaint because “[s]ubject matter jurisdiction must exist as of the time the action 4 is commenced.” ECF 55 at 1-2 (citing Morongo Band of Missions Indians v. Cal. State Bd. of 5 Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988)). 6 Plaintiffs contend that their Amended Complaint moots Defendants’ Motion to Stay 7 Discovery. Specifically, Plaintiffs argue that, considering their newly pleaded federal claims under 8 the Lanham Act and dismissal of all state law claims, Defendants cannot file an anti-SLAPP motion, 9 the Lanham Act claims create federal question subject matter jurisdiction, and the Lanham Act 10 claims do not require Plaintiffs to plead special damages. ECF 46 at 4-5. 11 Having considered the parties’ arguments, the Court GRANTS Defendants’ motion to stay 12 discovery. First, the Court has reviewed the parties’ arguments on the issue of subject matter 13 jurisdiction which are discussed by the parties in sufficient detail to provide the Court with a 14 “preliminary peak” at the merits of Defendants’ argument. While the Court does not provide an 15 opinion on the merits of the upcoming motion to dismiss, the Court finds that Defendants have 16 established in their papers that the subject matter jurisdiction issue is “potentially dispositive” of the 17 entire case, which favors staying discovery until the Court issues a ruling on that issue. See Wood 18 v. McEwen, 644 F.2d 797, 801 (9th Cir. 1981); Yiren Huang v. Futurewei Techs., Inc., No. 18-cv- 19 00534-BLF, 2018 WL 1993503, at *2 (N.D. Cal. Apr. 27, 2018). 20 Second, the subject matter jurisdiction issue can be decided without further discovery. The 21 issue appears to be solely a legal issue regarding whether an amended complaint can cure a defect 22 in subject matter jurisdiction. A decision on the upcoming motion to dismiss can be made “based 23 solely on the allegation in the Complaint.” Reveal Chat Holdco, LLC v. Facebook, Inc., No. 20-cv- 24 00363-BLF, 2020 WL 2843369, at *3 (N.D. Cal. Apr. 10, 2020). 25 // 26 // 27 // IV. ORDER For the foregoing reasons, IT IS HEREBY ORDERED that: 2 Defendants’ motion to stay discovery is GRANTED; and the March 13, 2025 hearing is 3 VACATED. All discovery in this matter is hereby STAYED pending ruling on Defendants’ 4 upcoming Motion to Dismiss. 5 6 7 Dated: December 2, 2024

9 ETH LABSON FREEMAN 10 United States District Judge 11 12

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