Antitrust Law Daily Wrap Up, RICO—SDFla: Motion to Stay Discovery Pending Spirit Airlines’ Motion to Dismiss “Passenger Usage Fee” RICO Class Action Denied, (Nov 12, 2012)

By Peter Reap, J.D., LLM

Spirit Airlines, Inc.’s motion to stay discovery in a putative RICO class action suit pending its motion to dismiss the complaint for failure to state a claim was denied because, after a preliminary examination of the filings, the federal district court in Miami could not say that the case was surely destined for dismissal (Ray v. Spirit Airlines, Inc., November 9, 2012, Scola, R.).

The action centered on Spirit’s allegedly fraudulent and deceptive practice of collecting a so-called “Passenger Usage Fee” in connection with online ticket sales. According to Spirit, the claims would likely be dismissed and discovery, if allowed to proceed, would prove especially difficult and expensive. Therefore, Spirit argued, no discovery should take place until the court ruled, or it would face unwarranted costs and burdens. Spirit requested a stay of the meet-and-confer requirement, mandated by the court’s initial case management order, and a wholesale stay of all discovery, until the court ruled upon its motion to dismiss.

District courts had broad discretion over pre-trial activities, including discovery and scheduling. If a court dismissed a nonmeritorious claim before discovery began, unnecessary costs to the litigants and the court system could be avoided. However, the District’s Local Rules made clear that a stay of discovery pending the determination of a motion to dismiss was the exception rather than the rule.

To evaluate whether there was a strong likelihood that dismissal would be granted and entirely eliminate the need for discovery, the district court must take a preliminary look at the merits of the motion. The court must also weigh the harm caused by a delay in discovery against the likely costs and burdens of proceeding with discovery.

Meet-and-Confer Requirement

There was no basis to stall the meet-and-confer requirement, the court ruled. While Spirit complained that coordinating a discovery plan “will raise innumerable and complicated issues, and preparation for that effort would require substantial resources,” it failed to offer any specifics. In fact, little in the way of judicial or litigant economy would be saved by a stay of that requirement.

The Court’s initial order did not impose burdens upon the parties that were particularly onerous or time consuming; it merely required them to get together and discuss discovery and other case issues and to file a joint report. The joint report was not meant to be a lengthy exposition, hyper-focused on every detail. Rather, it was merely designed to provide a general roadmap for the litigation and to identify potential problem areas of which the parties and the court could be mindful as the case progressed.

Discovery Stay

The court declined to grant Spirit’s request for a wholesale stay of discovery. Dismissal of the case with prejudice was not a foregone conclusion.

Spirit contended that the RICO claims were “untested” and “comprised of allegations that have never been sustained against an airline,” and that regulation of airline price advertising fell into the exclusive domain of the Department of Transportation. But these arguments did no more than rehash Spirit’s position, made in its motion to dismiss, that it should win, the court stated. Although the Court was required to take a “preliminary peek” at the motion and the complaint to see whether the plaintiffs’ claims were likely baseless or dubious, the Court was not required to move Spirit’s dismissal motion to the front of the line, ahead of other cases with pending motions, and fully adjudicate it on the spot. Such a requirement would be unfair to other parties, as well as to the court.

Spirit advanced several detailed arguments for dismissal, but the plaintiffs also offered several detailed arguments in response. Should the suit prove as utterly meritless as Spirit suggested, Rule 11 could afford a remedy.

Spirit failed to identify in any specific and tangible way the unreasonable discovery burdens it would face absent a stay. Instead, it resorted to bland generalizations such as: “[t]he scope and breadth of Plaintiffs’ RICO allegations would require a substantial amount of discovery, nearly all of which would be borne by Spirit and its outside vendors.” Such arguments were premature and speculative, according to the court.

A reasonably timely ruling on Spirit’s motion to dismiss should suffice to meet any looming threat of unwarranted discovery costs and burdens. In the interim, the court’s decision should not be construed as a blank check for the plaintiffs to burden or harass Spirit with ridiculous discovery requests. Should that come to pass, the multitude of tools provided by the discovery rules remained at Spirit’s disposal.

The case is No. 12-61528-Civ-SCOLA.

John Gravante , III (Podhurst Orseck, P.A.) for Bryan Ray. Daniel T. Graham (Clark Hill, PLC) for Spirit Airlines, Inc.

Cases: RICO FloridaNews