Case 3:22-cv-03074-CRB Document 37 Filed 08/31/22 Page 1 of 5
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`WILLIAM HERESNIAK,
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`Plaintiff,
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`v.
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`ELON R MUSK, et al.,
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`Defendants.
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`Case No. 22-cv-03074-CRB (SK)
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`ORDER DENYING MOTION TO
`EXPEDITE DISCOVERY
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`Regarding Docket No. 26
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`On August 12, 2022, Plaintiff filed a motion to expedite and coordinate discovery with an
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`action pending in Delaware Chancery Court, Twitter, Inc. v. Musk. et al., C.A. No. 2022-0613
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`KSJM (the “Delaware action”). (Dkt. No. 26.) Plaintiff simultaneously filed an ex parte
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`application to modify the ordinary briefing schedule for the motion to expedite discovery. (Dkt.
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`No. 27.) In the alternative, Plaintiff requested that the Court order Defendants to participate in a
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`conference pursuant to Federal Rule of Civil Procedure 26(f) earlier than required and/or that the
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`Court order Defendants to share all discovery in the Delaware action with Plaintiff in this action.
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`The case was then referred for discovery purposes to the Undersigned. (Dkt. No. 28.) The Court
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`set a briefing schedule for the motion to expedite discovery. (Dkt. No. 31.) The application to
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`modify the briefing schedule is therefore HEREBY DENIED as MOOT.
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`Per the Court’s order, Defendant Twitter, Inc. (“Twitter”) filed an opposition to the motion
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`to expedite discovery on August 23, 2022. (Dkt. No. 35.) Defendants Elon R. Musk (“Musk”), X
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`Holdings II, Inc. (“XHII”), and X Holdings I, Inc. (“XHI”) filed an opposition on the same date.
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`The Court refers to all Defendants collectively as “Defendants.” Having considered the
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`submissions of the parties, the Court HEREBY DENIES the motion to expedite and coordinate
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`discovery, DENIES the motion for an expedited Rule 26(f) conference, and DENIES WITHOUT
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`PREJUDICE the request to obtain all discovery from the Delaware action, for the reasons set forth
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`Case 3:22-cv-03074-CRB Document 37 Filed 08/31/22 Page 2 of 5
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`below.
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`A.
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`Background.
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`On April 25, 2022, Elon Musk, “acting through and with his solely-owned entities [XHI
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`and XHII] agreed buy Twitter for $54.20 per share in cash, for a total of about $44 billion.” (Dkt.
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`No. 26-1 (Redenbarger Decl. Ex. A, ¶ 3).) Plaintiff filed this suit on May 25, 2022, against
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`Defendants Musk and Twitter. (Dkt. No. 1.) In his original Complaint, Plaintiff, a Twitter
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`shareholder in his proposed class action on behalf of all of Twitter’s shareholders, alleged that
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`Musk harmed Twitter’s shareholders by engaging in manipulative transactions and/or made or
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`materially participated in making” false and misleading statements in violation of Cal. Corp. Code
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`§§ 25400 and 25500. (Id.) Plaintiff also alleged that Musk violated Cal. Corp. Code §§ 25401
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`and 25501 by making false statements or omitting material information in his offer to purchase
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`securities from Plaintiff and proposed class members. (Id.) Plaintiff sought declarative and
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`injunctive relief against all defendants in an unspecified manner. (Id.) Plaintiff alleged that both
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`Musk and Twitter were liable under Cal. Corp. Code §§ 25402 and 25502.5 because Musk
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`purchased Twitter’s securities when he knew material information that could significantly affect
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`the market price, and Plaintiff sought declaratory judgment that Twitter has an obligation to
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`investigate Musk’s conduct and take action. (Id.) Finally, Plaintiff asserted unjust enrichment
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`against Musk. (Id.) Plaintiff did not serve that original complaint.
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`Plaintiff then filed a First Amended Complaint (“FAC”) on July 1, 2022. (Dkt. No. 7.)
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`The FAC alleges three claims against three defendants. First, the FAC alleges a class action claim
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`for aiding and abetting breach of fiduciary duty against Musk, XHI, and XHII. (Id. ¶¶ 155-162.)
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`Although Plaintiff does not name them as defendants, Plaintiff alleges that Jack Dorsey and Egon
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`Durban, who are directors of Twitter, breached their fiduciary duties to Twitter and that the named
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`Defendants aided and abetted Dorsey and Egon Durban. (Id. ¶ 105.) Second, Plaintiff alleges an
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`individual claim against Musk, XHI, XHII, and Twitter for declaratory and injunctive relief under
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`California law:
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`Defendants Musk and X Holdings I, Inc. and X Holdings II, Inc
`signed a binding contract to buy Plaintiff’s stock for $54.20. But
`Defendant Musk thereafter publicly stated that the Buyout is
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`Case 3:22-cv-03074-CRB Document 37 Filed 08/31/22 Page 3 of 5
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`“temporarily on hold” and “cannot go forward” until certain
`conditions are met.
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`[. . . ] The conditions that Musk stated be met before the Buyout can
`go forward to not appear to be part of the contract he signed with
`Twitter, Inc. Plaintiff thus seeks a declaration concerning these s
`facts and issues and the parties’ respective rights and obligations.
`Plaintiff also seeks appropriate injunctive relief to be determined by
`the Court.
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`(Id. ¶¶ 164-165.) Finally, Plaintiff alleges a claim for unjust enrichment under Delaware law
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`against Musk alone. (Id. ¶¶ 166-169.) Plaintiff has not sought a temporary restraining order or a
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`preliminary injunction in this action.
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`On July 12, 2022, Twitter sued Musk, XHI, and XHII in the Delaware action for specific
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`performance to enforce the merger agreement. (Dkt. No. 26-1 (Redenbarger Decl. Ex. A).) The
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`merger agreement called for the purchase by October 24, 2022. (Id.) On July 29, 2022, the
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`Delaware Chancery Court set a trial date of October 17, 2022, on an expedited basis, with all
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`discovery to be completed by September 12, 2022. (Dkt. Nos. 26, 36.)
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`On July 28, 2022, the parties in this action agreed to extend the deadline for Defendants’
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`motions to dismiss to September 9, 2022, with a hearing date of November 21, 2022. (Dkt. No.
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`20.)
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`After the Court in the Delaware action ordered that discovery be expedited there, in late
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`July 2022, Plaintiff sked that the parties expedite and coordinate discovery in this action with the
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`Delaware action and that Defendants provide Plaintiff with all discovery from the Delaware
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`action. (Dkt. No. 36-1 (Sarles Decl. ¶ 2).) Plaintiff claimed that he needed the expedited
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`discovery to determine what type of preliminary injunction he would seek int his action. (Id.)
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`On August 10, 2022, before the Rule 26(f) conference, Plaintiff served his First Requests
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`for Production of Documents in which he seeks all discovery in the Delaware action. (Dkt. No.
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`36-1 (Sarles Decl. Ex. 2).)
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`B.
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`Analysis.
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`Plaintiff does not meet the standards for expedited discovery in this action. In considering
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`whether to grant expedited discovery, courts consider the following factors:
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`Case 3:22-cv-03074-CRB Document 37 Filed 08/31/22 Page 4 of 5
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`(1) whether a preliminary injunction is pending, (2) the breadth of the
`discovery requests, (3) the purpose for requesting the expedited
`discovery, (4) the burden on the defendants to comply with the
`requests; and (5) how far in advance of the typical discovery process
`the request was made.
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`American LegalNet, Inc. v. Davis, 673 F. Supp. 2d 1063, 1067 (C.D. Cal. 2019). Here, there is no
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`preliminary injunction pending. Although Plaintiff claims that he needs the discovery now for a
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`contemplated motion for preliminary injunction, he provides no explanation for what he plans to
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`seek in that motion. Plaintiff also does not deny that he told Defendants in earlier discussion that
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`he wanted to see the discovery before determining what type of relief to seek. Thus, the first
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`factor weighs against expedited discovery. Second, the breadth of the discovery requests is broad,
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`as Plaintiff seeks everything produced and every deposition transcript in the Delaware action. The
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`third and fourth factors are combined: the purpose for seeking expedited discovery is ostensibly to
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`increase efficiency and decrease duplicative work, but here, given the extremely tight schedule the
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`Court in the Delaware action set, production here would, at least in the short term, be very
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`burdensome to Defendants. The schedule in the Delaware action is extremely fast-paced,
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`particularly for a case of its magnitude, with the parties ordered to conclude discovery only two
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`months after filing of the suit and go to trial only three months after filing suit. Adding an
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`additional Plaintiff to that rapid process would substantially increase the burden on the parties in
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`the Delaware action. Finally, Plaintiff made this request far in advance of the typical discovery
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`process, as the time for a Rule 26(f) conference has not even occurred. All of these factors weigh
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`against expedited discovery.
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`Separately, the Court considers Plaintiff’s request that the Court coordinate discovery in
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`this matter with the discovery in the Delaware action. The Court declines to do so, again because
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`of the speed in which the discovery and trial are taking place in the Delaware action and the
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`increased burden that requiring coordination will create.
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`Plaintiff seeks an early Rule 26(f) conference, but again, there is no justification for
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`advancing the schedule. Plaintiffs seek an order that Defendants must produce all discovery from
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`the Delaware action. That request is premature. It is not clear whether the Delaware action and
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`this action will have perfect unity of interests that would make all of the Delaware action
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`discovery relevant to this action. Until this case progresses and until the Delaware action
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`Case 3:22-cv-03074-CRB Document 37 Filed 08/31/22 Page 5 of 5
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`concludes, it is difficult to determine what claims, if any, Plaintiff will have remaining. If, at a
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`later point in this litigation on the regular schedule for discovery, Plaintiff seeks this information,
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`Plaintiff can seek this information by following the regular procedure to compel production, i.e.,
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`after Defendants respond, after meeting and conferring, and with a discovery letter brief pursuant
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`to this Court’s Standing Order.
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`IT IS SO ORDERED.
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`Dated: August 31, 2022
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`______________________________________
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`SALLIE KIM
`United States Magistrate Judge
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