Case 2:20-cv-09581-FLA-RAO Document 48 Filed 05/06/21 Page 1 of 12 Page ID #:414
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`EMILY JOHNSON HENN (SBN 269482)
`ehenn@cov.com
`COVINGTON & BURLING LLP
`3000 El Camino Real
`5 Palo Alto Square, 10th Floor
`Palo Alto, CA 94306-2112
`Telephone: + 1 (650) 632-4700
`Facsimile: + 1 (650) 632-4800
`
`SIMON J. FRANKEL (SBN 171552)
`sfrankel@cov.com
`MATTHEW Q. VERDIN (SBN 306713)
`mverdin@cov.com
`JENNA L. ZHANG (SBN 336105)
`jzhang@cov.com
`COVINGTON & BURLING LLP
`Salesforce Tower
`415 Mission Street, Suite 5400
`San Francisco, CA 94105-2533
`Telephone: + 1 (415) 591-6000
`Facsimile: + 1 (415) 591-6091
`Attorneys for Defendants
`Nike, Inc. and FullStory, Inc.
`
`UNITED STATES DISTRICT COURT
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
`
` Civil Case No.: 2:20-cv-09581-FLA-RAO
`
`DEFENDANTS’ NOTICE OF MOTION
`AND MOTION TO STAY
`DISCOVERY; MEMORANDUM OF
`POINTS AND AUTHORITIES
`
`
`Hearing Date: June 11, 2021
`Hearing Time: 1:30 p.m.
`Honorable Fernando L. Aenlle-Rocha
`
`Defendants.
`
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY DISCOVERY
`Case No.: 2:20-cv-09581-FLA-RAO
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`
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`Plaintiff,
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`v.
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`BURHAAN SALEH, individually and
`on behalf of all others similarly situated,
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`
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`NIKE, INC., and FULLSTORY, INC.,
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`Case 2:20-cv-09581-FLA-RAO Document 48 Filed 05/06/21 Page 2 of 12 Page ID #:415
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`NOTICE OF MOTION AND MOTION
`PLEASE TAKE NOTICE that on June 11, 2021 at 1:30 p.m., or as soon thereafter
`as the matter may be heard before the Honorable Fernando Aenlle-Rocha in Courtroom 6B
`of the United States District Court for the Central District of California, located at 350 W.
`1st Street, 6th Floor, Los Angeles, CA 90012, Defendants FullStory, Inc. (“FullStory) and
`Nike, Inc. (“Nike”), will and hereby do move for an order staying discovery in this matter
`pending resolution of defendants’ motion to dismiss (Dkt. 30).
`The Motion is based on this Notice of Motion and Motion, the Memorandum of
`Points and Authorities, the Declaration of Matthew Q. Verdin and accompanying exhibits,
`and such further evidence and argument as may be presented to the Court at or before the
`hearing on this matter.
`The Motion is made following the conference of counsel pursuant to Local Rule 7-
`3, which took place on April 29, 2021.
`
`
`COVINGTON & BURLING LLP
`
`By: /s/ Matthew Q. Verdin
`Matthew Q. Verdin
`
`Attorney for Defendants
`Nike, Inc. and FullStory, Inc.
`
`DATED: May 6, 2021
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`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY DISCOVERY
`Case No.: 2:20-cv-09581-FLA-RAO
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`Case 2:20-cv-09581-FLA-RAO Document 48 Filed 05/06/21 Page 3 of 12 Page ID #:416
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`TABLE OF CONTENTS
`INTRODUCTION .......................................................................................... 1
`I.
`BACKGROUND ............................................................................................ 2
`II.
`III. ARGUMENT .................................................................................................. 3
`A. A Stay of Discovery is Warranted Because the Pending Motion to
`Dismiss Is Potentially Dispositive. ...................................................... 4
`FullStory’s Challenge to Personal Jurisdiction Strongly Favors a
`Stay of Discovery. ................................................................................ 5
`A Temporary Stay of Discovery Will Not Prejudice Plaintiff and
`Will Preserve the Parties’ Resources. .................................................. 6
`IV. CONCLUSION ............................................................................................... 8
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`C.
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`B.
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`Case 2:20-cv-09581-FLA-RAO Document 48 Filed 05/06/21 Page 4 of 12 Page ID #:417
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`MEMORANDUM OF POINTS AND AUTHORITIES
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`I.
`
`INTRODUCTION
`Defendants FullStory and Nike respectfully request a stay of all discovery pending
`resolution of their motion to dismiss. If granted, that motion will entirely dispose of the
`suit against defendants, obviating the need for the wide-ranging and burdensome discovery
`campaign that plaintiff has commenced. The court in two very similar cases (filed by the
`same counsel as here) has postponed the commencement of discovery while dismissing,
`with leave to amend, virtually identical complaints that are predicated, as here, on the use
`by website operators like Nike of FullStory’s software and services to improve their
`websites. Graham v. Noom, Inc., 2021 WL 1312765, at *10 (N.D. Cal. Apr. 8, 2021);
`Johnson v. Blue Nile, Inc., 2021 WL 1312771, at *3 (N.D. Cal. Apr. 8, 2021).
`The grounds articulated by the Northern District of California for dismissal of the
`Noom and Blue Nile complaints apply equally here, and provide sufficient good cause for
`a temporary stay of discovery. First, FullStory, as Nike’s vendor, was a party to plaintiff’s
`communications with Nike and not a third-party eavesdropper and, thus, plaintiff fails to
`state a claim under Federal Rule of Civil Procedure 12(b)(6). Second, because plaintiff’s
`only asserted basis for personal jurisdiction over FullStory in California is its alleged
`eavesdropping, plaintiff fails to establish personal jurisdiction over FullStory under Federal
`Rule of Civil Procedure 12(b)(2) for the same reasons that plaintiff fails to state a claim.
`Imposing costly and burdensome discovery on defendants at this juncture would thus
`undercut the purpose of a motion to dismiss, which is “to enable defendants to challenge
`the legal sufficiency of complaints without subjecting themselves to discovery.” Rutman
`Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987). Nor will plaintiff
`suffer any prejudice from a temporary stay of discovery while the Court resolves
`defendants’ potentially dispositive motion. To the extent plaintiff suggests he should be
`able to embark on a fishing expedition in an attempt to find some facts that could support
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`his claims prior to the filing of any amended complaint, that position, as the Ninth Circuit
`observed, “is unsupported and defies common sense.” Id.
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`II.
`
`BACKGROUND
`This Lawsuit. In October 2020, plaintiff filed this putative class-action lawsuit
`against FullStory, which provides software-based services to the other named defendant,
`Nike, designed to improve Nike’s website and the user experience on the website. See Dkt.
`1 (“Compl.”) ¶ 15; Dkt. 24 (“Am. Compl.) ¶¶ 35–36.1 Nike embedded FullStory’s
`software code on its website (nike.com) to collect data regarding a user’s interactions with
`the website (e.g., keystrokes, mouse clicks, and page scrolling). Am. Compl. ¶¶ 17, 37–
`38. Plaintiff’s core allegation is that FullStory eavesdropped on—and Nike aided and
`abetted the eavesdropping of—plaintiff’s communications with Nike when he visited
`Nike’s website, and that this conduct violated his right to privacy under California’s
`Invasion of Privacy Act and the California Constitution. See Am. Compl. ¶¶ 59–89.
`Plaintiff filed the operative amended complaint after, and instead of opposing, defendants’
`motion to dismiss the original complaint. See Dkts. 19, 22.
`Defendants’ Pending Motion to Dismiss. FullStory and Nike moved to dismiss
`plaintiff’s amended complaint in its entirety, arguing that plaintiff failed to state a claim,
`in part, because FullStory, as Nike’s vendor, was a party to plaintiff’s communications
`with Nike and not an eavesdropper. See Dkt. 30 at 2, 11–15; Dkt. 32 at 6–9, 12–13, 15.
`FullStory also moved to dismiss plaintiff’s claims against FullStory for lack of personal
`jurisdiction arguing, in part, that plaintiff failed to allege sufficient facts under a theory of
`
`
`1 Plaintiff previously filed a virtually identical complaint, save for swapping defendant
`Nike, Inc. for previous defendant Hudson’s Bay Company. Saleh v. Hudson’s Bay
`Company, Case No. 2:20-cv-9095-PA-KS (C.D. Cal. Oct. 2, 2020) (Dkt. 1). The
`Honorable Percy Anderson dismissed the previous complaint with leave to amend based
`on plaintiff’s failure to adequately plead diversity jurisdiction. Id. (Dkt. 9). Rather than
`file an amended complaint, plaintiff filed the virtually identical complaint in this case,
`which was assigned to a different judge.
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`specific jurisdiction, which is predicated on FullStory’s alleged eavesdropping. See Dkt.
`30 at 6–10; Dkt. 32 at 2. Plaintiff concedes that FullStory is not subject to general
`jurisdiction in California. Dkt. 31 (“Opp’n to MTD”) at 1 n.1.
`Plaintiff’s Discovery Requests and Interrogatories. One day before filing the
`operative complaint in December 2020, plaintiff served a series of overbroad and
`burdensome discovery requests and interrogatories on defendants. Declaration of Matthew
`Q. Verdin (“Verdin Decl.”) Exs. A–D. For example, plaintiff seeks “[a]ll documents,
`communications and data exchanged between” FullStory and Nike, unlimited in scope to
`any subject matter relevant to this case, as well as “[a]ll versions” of FullStory’s highly
`confidential and proprietary source code. Id. Ex. B at 2 (RFP No. 6); id. Ex. A at 2–3 (RFP
`Nos. 6, 15). Following transfer of the case to this Court, the parties later agreed that
`plaintiff’s discovery requests and interrogatories would be deemed served on April 2, 2021.
`Dkt. 40 at 6.
`In light of defendants’ pending motion to dismiss which, if granted, would dispose
`of all of plaintiff’s claims without the need for discovery, defendants asked plaintiff to
`agree to a temporary stay of discovery pending a ruling on defendants’ motion. Verdin
`Decl. Ex. E. Plaintiff refused. Id.
`
`III. ARGUMENT
`A stay of discovery is necessary to protect defendants from burdensome discovery
`that may well soon be wholly unnecessary in light of the pending motion to dismiss. This
`Court has the power to stay discovery pending resolution of a motion to dismiss. See
`Wenger v. Monroe, 282 F.3d 1068, 1077 (9th Cir. 2002). Courts in the Ninth Circuit apply
`a two-part test, finding good cause for a stay of discovery where (1) the pending motion is
`“potentially dispositive of the entire case” and (2) the pending motion “can be decided
`absent additional discovery.” Quezambra v. United Domestic Workers of Am. AFSCME
`Loc. 3930, 2019 WL 8108745, at *2 (C.D. Cal. Nov. 14, 2019) (collecting cases). This
`test involves taking a “preliminary peek” at the merits of the pending motion. Patten v.
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`Deschamps, 2018 WL 6307895, at *1 (C.D. Cal. Sept. 7, 2018). Because both elements of
`the Queszambra test are satisfied, this Court should stay discovery pending resolution of
`defendants’ motion to dismiss.
`A. A Stay of Discovery is Warranted Because the Pending Motion to
`Dismiss Is Potentially Dispositive.
`Taking a preliminary peek at the merits of the pending motion to dismiss confirms
`that a stay of discovery is appropriate. Courts have already dismissed very similar claims
`brought by the same plaintiff’s counsel in three separate cases without the need for
`discovery. Yale v. Clicktale, Inc., 2021 WL 1428400, at *3 (N.D. Cal. Apr. 15, 2021);
`Graham v. Noom, Inc., 2021 WL 1312765, at *10 (N.D. Cal. Apr. 8, 2021); Johnson v.
`Blue Nile, Inc., 2021 WL 1312771, at *3 (N.D. Cal. Apr. 8, 2021). The pending motion to
`dismiss is thus “potentially,” if not inevitably, “dispositive of the entire case,” and can be
`decided “absent additional discovery,” warranting a stay. Quezambra, 2019 WL 8108745,
`at *2.
`
`Eavesdropping is a critical element of plaintiff’s claims. Plaintiff alleges three
`claims: (1) eavesdropping (Cal. Penal Code § 631(a)); (2) sale and possession of
`eavesdropping software (Id. § 635(a)); and (3) invasion of privacy (under California’s
`Constitution). See Am. Compl. ¶¶ 59–89. The first claim extends liability only to
`defendants who eavesdrop on a communication, Rogers v. Ulrich, 52 Cal. App. 3d 894,
`899 (1975). Similarly, plaintiff predicates the second and third claims on FullStory’s
`alleged eavesdropping on plaintiff’s communications with Nike. See Opp’n. to MTD at 21
`(arguing that plaintiff has standing and a private right of action to bring the second claim
`based on defendants’ “knowledge and active involvement” in “monitor[ing] his
`communications”); id. at 24 (arguing that the third claim rests on plaintiff’s allegation that
`“users are never told that their electronic communications are being wiretapped by
`FullStory”).
`The failure to plausibly allege that FullStory eavesdropped on plaintiff’s
`communications with Nike, as argued in defendants’ pending motion, would therefore
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`dispose of all of plaintiff’s claims. Two virtually identical complaints alleging the same
`three claims against FullStory and other website operators have already been dismissed on
`this ground. In both cases, as here, the website operator allegedly used FullStory’s software
`code on its website to collect data regarding a user’s interactions with the website (e.g.,
`keystrokes, mouse clicks, and page scrolling) to improve the website design and the user’s
`experience. Noom, 2021 WL 1312765, at *1; Blue Nile, 2021 WL 1312771, at *1. The
`district court in both cases held that, “as a service provider, FullStory is an extension of
`[the website operator],” and thus “is not a third-party eavesdropper” on the plaintiff’s
`communications with the website operator. Noom, 2021 WL 1312765, at *5–6; see Blue
`Nile, 2021 WL 1312771, at *2 (incorporating Noom’s reasoning by reference). Therefore,
`the claims were dismissed against both FullStory and the website operators, which could
`“not [be] liable for aiding and abetting FullStory’s wrongdoing because there is no
`wrongdoing.” Id.
`Nor is discovery necessary to decide the pending motion. The motion to dismiss is
`fully briefed (see Dkts. 30–32), and the dismissal of virtually identical complaints in Noom
`and Blue Nile establish that the motion can be decided without discovery. What is more,
`another complaint filed by plaintiff’s counsel, alleging the same claims against a different
`software-services vendor, was recently dismissed on the same basis as Noom and Blue Nile
`without the need for discovery. Clicktale, 2021 WL 1428400, at *3.
`B.
`
`FullStory’s Challenge to Personal Jurisdiction Strongly Favors a Stay of
`Discovery.
`While the pending motion to dismiss justifies a stay of discovery as to both
`defendants, a stay of discovery as to FullStory is “strongly favor[ed]” because of
`FullStory’s pending challenge to personal jurisdiction. Hologram USA, Inc. v. Pulse
`Evolution Corp., 2015 WL 1600768, at *1 (D. Nev. Apr. 8, 2015).
`Where, as here, a court may have no jurisdiction over a defendant, the defendant
`“should not be required to engage in expensive and burdensome discovery.” Liberty Media
`Holdings, LLC v. Letyagin, 2012 WL 3135671, at *5 (D. Nev. Aug. 1, 2012). For that
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`reason, courts routinely stay discovery pending resolution of personal jurisdiction
`challenges. See, e.g., LG Corp. v. Huang Xiaowen, 2017 WL 2868416, at *1 (S.D. Cal.
`Feb. 23, 2017) (staying discovery pending resolution of motion to dismiss for lack of
`personal jurisdiction); In re Nexus 6P Prods. Liab. Litig., 2017 WL 3581188, at *2 (N.D.
`Cal. Aug. 18, 2017) (same) Hologram, 2015 WL 1600768, at *2 (same); Orchid
`Biosciences, Inc. v. St. Louis Univ., 198 F.R.D. 670, 672 (S.D. Cal. 2001) (staying merits
`discovery pending a motion to dismiss for lack of personal jurisdiction because “any
`discovery which seeks to reach the merits of this case would be unnecessary, costly and
`burdensome at this time”).
`A preliminary peek reveals both that FullStory’s jurisdictional challenge is
`potentially dispositive of the entire case against FullStory, and that discovery is not
`necessary to address FullStory’s challenge. Plaintiff concedes that FullStory is not subject
`to general jurisdiction in California. Opp’n. to MTD at 1 n.1. Plaintiff’s only asserted
`basis for specific jurisdiction over FullStory is the alleged eavesdropping on plaintiff’s
`communications with Nike. Id. at 3 (arguing that specific jurisdiction is supported by the
`allegations that “FullStory intentionally wiretapped visitors to nike.com”). The same
`alleged basis for personal jurisdiction over FullStory was already raised and rejected in
`Noom and Blue Nile without the need for discovery because the plaintiffs there, as here,
`failed to plausibly allege any eavesdropping by FullStory. Noom, 2021 WL 1312765, at
`*10; Blue Nile, 2021 WL 1312771, at *3.
`C. A Temporary Stay of Discovery Will Not Prejudice Plaintiff and Will
`Preserve the Parties’ Resources.
`Although the pending motion to dismiss alone is sufficient good cause for a stay of
`discovery, a stay is particularly appropriate here because it would preserve the parties’
`resources and result in no prejudice to plaintiff. In re Nexus 6P Prod. Liab. Litig., 2017
`WL 3581188, at *2 (granting three-month stay of discovery until hearing motions to
`dismiss where the stay would not unduly prejudice plaintiff).
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`This case is at an early stage, and no scheduling order has issued. Plaintiff cannot
`plausibly maintain that waiting for the Court to resolve the pending motion would be
`prejudicial, given that plaintiff waited two months before filing an amended complaint.
`See Dkts. 1, 24. To the extent that plaintiff asserts prejudice based on the inability to seek
`discovery to uncover potential factual allegations for any amended complaint, that position,
`as the Ninth Circuit observed, is “unsupported and defies common sense.” Rutman, 829
`F.2d at 738; see also APL Co. Pte. v. UK Aerosols Ltd., Inc., 452 F. Supp. 2d 939, 945
`(N.D. Cal. 2006) (“plaintiff is required to state a viable claim at the outset, not allege
`deficient claims and then seek discovery to cure the deficiencies”).
`Defendants, by contrast, will suffer significant prejudice if required to engage in
`costly and time consuming discovery, contravening the purpose of a motion to dismiss,
`which is “to enable defendants to challenge the legal sufficiency of complaints without
`subjecting themselves to discovery.” Rutman Wine, 829 F.2d at 738. Plaintiff has already
`served facially overbroad and burdensome discovery in this matter, including requests
`seeking “[a]ll documents, communications and data exchanged between” FullStory and
`Nike, unlimited in scope to any subject matter relevant to this case, as well as “[a]ll
`versions” of FullStory’s highly confidential and proprietary source code. Verdin Decl. Ex.
`B at 2 (RFP No. 6); id. Ex. A at 2–3 (RFP Nos. 6, 15). It is clear that such overbroad and
`disproportionate requests may result in expensive discovery and motion practice, and
`defendants should not be burdened with that expense if this Court finds that plaintiff has
`failed to state a claim, or that this Court lacks jurisdiction over FullStory. See Rutman
`Wine, 829 F.2d at 738.
`Staying discovery will also preserve the parties’ resources if this case proceeds past
`the pleadings stage. As noted, plaintiff’s counsel filed two virtually identical complaints
`against FullStory and other website operators in the Northern District of California (see
`supra pp. 1, 4–5). The commencement of discovery was postponed in those two cases,
`Noom and Blue Nile, when the district court postponed the initial case management
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`conference until August 2021, following the dismissal of all the claims with leave to
`amend. Clerk’s Notice Resetting Initial Case Management Conference, Graham v. Noom,
`No. 3:20-cv-06903-LB (N.D. Cal. Apr. 8, 2021) (Dkt. 52); Clerk’s Notice Resetting Initial
`Case Management Conference, Johnson v. Blue Nile, No. 3:20-cv-08183-LB (N.D. Cal.
`Apr. 8, 2021), Dkt. 50. Should discovery proceed in any of the cases, staying discovery
`would put this case on a similar discovery track as Noom and Blue Nile, facilitating
`efficiency and better coordination of discovery across all three cases.
`
`IV. CONCLUSION
`For the foregoing reasons, this Court should grant this motion and stay discovery
`pending decision on defendants’ motion to dismiss.
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`DATED: May 6, 2021
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`
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`COVINGTON & BURLING LLP
`
`By: /s/ Matthew Q. Verdin
`EMILY JOHNSON HENN (SBN 269482)
`ehenn@cov.com
`COVINGTON & BURLING LLP
`3000 El Camino Real
`5 Palo Alto Square, 10th Floor
`Palo Alto, CA 94306-2112
`Telephone: + 1 (650) 632-4700
`Facsimile: + 1 (650) 632-4800
`
`SIMON J. FRANKEL (SBN 171552)
`sfrankel@cov.com
`PATRICK R. CAREY (SBN 308623)
`pcarey@cov.com
`MATTHEW Q. VERDIN (SBN 306713)
`mverdin@cov.com
`JENNA L. ZHANG (SBN 336105)
`jzhang@cov.com
`COVINGTON & BURLING LLP
`Salesforce Tower
`415 Mission Street, Suite 5400
`San Francisco, CA 94105-2533
`Telephone: + 1 (415) 591-6000
`Facsimile: + 1 (415) 591-6091
`
`Attorneys for Defendants
`Nike, Inc. and FullStory, Inc.
`
`DEFENDANTS’ NOTICE OF MOTION AND MOTION TO STAY DISCOVERY
`Case No.: 2:20-cv-09581-FLA-RAO
`9
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`