MOBILE MED WORK HEALTH SOLUTIONS, INC. v. MOORE
1:24-cv-01219
| W.D. Tex. | Nov 5, 2024Background:
- Plaintiffs, three business entities, allege they were fraudulently induced by Defendants (individuals and business entities connected to cryptocurrency mining) to invest over $10 million in a series of sale-leaseback transactions involving mining equipment.
- Plaintiffs claim Defendants defaulted on payments and are running a Ponzi scheme affecting them and potentially hundreds of other investors.
- Plaintiffs filed suit in October 2024, simultaneously seeking a temporary restraining order (to freeze assets), expedited preliminary discovery, and, later, broader discovery as more alleged misconduct came to light.
- The Court denied the TRO, finding insufficient evidence of imminent asset dissipation, but allowed for preliminary, targeted discovery before a preliminary injunction hearing.
- Defendants opposed the scope of expedited discovery and argued that the case should be stayed for arbitration under both the PSLRA and contractual clauses, but nonetheless agreed to more limited discovery.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Expedited Discovery | Broad expedited discovery is needed to gather evidence of an alleged Ponzi scheme and for preliminary injunction preparation. | Discovery should be narrow and limited to present/2024 conduct to avoid undue burden and 'fishing expeditions.' | Court grants expedited discovery, but limits it to more targeted requests (the scope in first TRO motion, not the expanded requests). |
| Arbitration/Stay under PSLRA | Preliminary discovery is permitted to avoid undue prejudice, even if PSLRA or arbitration clauses apply. | Case must be sent to arbitration and discovery stayed; only minimal, current info should be disclosed. | Court finds good cause for preliminary discovery before deciding the motion to compel arbitration. |
| Breadth of Discovery | Broader, historical information is necessary to uncover Ponzi scheme mechanics. | Historical discovery is too broad and burdensome; only current financial/activity data should be provided. | Court finds historical info relevant and allows targeted, historical discovery over Defendants' objections. |
| Deposition Time | Requests 4-hour depositions of key individuals due to complexity. | 2-hour depositions are sufficient and 4 hours is overbroad. | Court limits depositions to 2 hours per witness. |
Key Cases Cited
- FMC Corp. v. Varco Int'l, Inc., 677 F.2d 500 (5th Cir. 1982) (affirming authority to order expedited discovery before a preliminary injunction)
- Quilling v. Funding Resource Group, 227 F.3d 221 (5th Cir. 2000) (affirming the district court's discretion to order expedited discovery before a preliminary injunction)
- Janvey v. Alguire, 647 F.3d 585 (5th Cir. 2011) (defines Ponzi scheme relevant to Plaintiffs' allegations)