United States District Court, E.D. California
ORDER DENYING DEFENDANTS' MOTION TO STAY
PROCEEDINGS PENDING APPEAL
L. Nunley United States District Judge.
matter is before the Court pursuant to Defendants SynGen
Inc., Philip Coelho and PHC Medical Inc. (collectively
“Defendants”) Motion to Stay Proceedings Pending
Appeal. (ECF No. 74.) Plaintiff Cesca Therapeutics Inc.
(“Cesca” or “Plaintiff”) opposes
Defendants' motion. (ECF No. 75.) Defendants filed a
reply. (ECF No. 78.) The Court has carefully considered the
arguments raised by both parties. For the reasons set forth
below, Defendants' Motion to Stay Pending Appeal (ECF No.
74) is hereby DENIED.
Background and Procedural History
action arises from Defendants' alleged misappropriation
of Cesca trade secrets. Cesca is a company that designs,
develops, and commercializes medical products. (Compl., ECF
No. 2 ¶ 15.) Cesca is the surviving entity of a 2014
merger between ThermoGenesis Corp.
(“ThermoGenesis”) and TotiPotentRX Corporation.
(ECF No. 2 ¶ 3.) Defendant Philip Coelho
(“Coelho”) is a founder and former Chief
Executive Officer of Cesca. (ECF No. 2 ¶ 18.) As a
former employee, Mr. Coelho designed and invented new
products and technology for Cesca. (ECF No. 2 ¶ 18.)
2007, Mr. Coelho and ThermoGenesis entered into an Executive
Employment Agreement which contained an arbitration
provision. (ECF No. 2 ¶ 20; Ex. 1, ECF No. 11 §
11.) In 2008, Thermogenesis and Mr. Coelho terminated his
employment, and the parties entered into an Employment
Severance Agreement which contained an arbitration provision.
(ECF No. 2 ¶ 21; Ex. 2, ECF No. 11 § 14.5.) That
year, ThermoGenesis and Defendant PHC Medical
(“PHC”), an entity of which Mr. Coelho was
President, entered into a Consulting Agreement. (ECF No. 2
¶ 22.) The Consulting Agreement included an arbitration
provision and a Proprietary Information and Confidentiality
Agreement. (Ex. 3, ECF No. 11 § 13, 19.) The Proprietary
Information and Confidentiality Agreement contained a
“Governing Law” section, which states in
pertinent part: “Any legal action or proceeding
relating to this Agreement shall be instituted in a state or
federal court in Sacramento County, California.” (Ex. A
in Ex. 3, ECF No. 11 § 5.1.)
2009, ThermoGenesis, Mr. Coelho, and PHC Medical entered into
a Mutual Termination Agreement (“MTA”) which
terminated the Executive Employment Agreement, Employment
Severance Agreement, and Consulting Agreement, but not the
Proprietary Information and Confidentiality Agreement. (ECF
No. 2 ¶ 23.) The Mutual Termination Agreement's
Governing Law section states: “Any legal action or
proceeding relating to this Agreement shall be instituted in
a state or federal court in Sacramento County,
California.” (Ex. 4, ECF No. 11 § 9.) After his
employment with Cesca, Mr. Coelho formed SynGen Inc. (ECF No.
2 ¶ 43.)
filed their complaint alleging inter alia that Mr.
Coelho and PHC breached their obligations to Cesca by using
trade secrets to develop SynGen products. (ECF No. 2 ¶
43-50.) Defendants moved to compel arbitration (ECF No. 41),
and Judge Garland E. Burrell, Jr. denied Defendants'
motion. (ECF No. 46.) Pursuant to 9 U.S.C. § 16(a)(1),
Defendants timely filed an interlocutory appeal to the Ninth
Circuit, which is still pending. (Not. of Appeal, ECF No.
48.) Defendants now move to stay all proceedings pending the
Ninth Circuit appeal.
Federal Arbitration Act grants a party the right to file an
interlocutory appeal from the denial of a motion to compel
arbitration. 9 U.S.C. § 16(a); Ontiveros v.
Zamora, No. 2:08-CV-0567-LKK, 2013 WL 1785891, at *1
(E.D. Cal. Apr. 25, 2013). A stay is “not a matter of
right” but “an exercise of judicial discretion
and the propriety of its issue is dependent on the
circumstances of the particular case.” Nken v.
Holder, 556 U.S. 418, 433 (2009) (internal quotation
marks and citations omitted). District courts have discretion
to stay a case pending an appeal of a denial to compel
arbitration. Britton v. Co-op Banking Grp., 916 F.2d
1405, 1412 (9th Cir. 1990). An appeal from a district
court's order denying a motion to compel arbitration does
not trigger an automatic stay pending determination of the
appeal. Id. at 1411-12. The Ninth Circuit has
reasoned that automatic stays in this context “would
allow a defendant to stall a trial simply by bringing a
frivolous motion to compel arbitration.” Id.
moving party has the burden of persuading the court that the
circumstances of the case justify a stay. DKS, Inc. v.
Corp. Bus. Sols., Inc., No. 2-15-CV-0132-MCE-DAD, 2015
WL 6951281, at *1 (E.D. Cal. Nov. 10, 2015). Courts consider
four factors when determining whether to grant a stay pending
appeal of a civil order: (1) whether the stay applicant has
made a strong showing that he is likely to succeed on the
merits; (2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will
substantially injure the other parties interested in the
proceeding; and (4) where the public interest lies.
Hilton v. Braunskill, 481 U.S. 770, 776 (1987). The
first two factors are the most critical. Nken, 556
U.S. at 434. In light of Nken, the Ninth Circuit
clarified its treatment of the first two factors, holding
that the movant's “burden with regard to
irreparable harm is higher than it is on the likelihood of
success prong, as she must show that an irreparable injury is
the more probable or likely outcome.” Leiva-Perez
v. Holder, 640 F.3d 962, 968 (9th Cir. 2011).
weighing these factors, courts apply a “sliding
scale” approach whereby the factors are balanced
“so that a stronger showing of one ... may offset a
weaker showing of another.” Id. at 964;
see also Morse v Servicemaster Global Holdings,
Inc., No. 10-CV-0628-SI, 2013 WL 123610, at *1-2 (N.D.
Cal. Jan. 8, 2013). Under this sliding scale approach, a
moving party who cannot show a strong likelihood of success
on the merits may nonetheless be entitled to a stay where she
shows that her appeal is a substantial case which
“raises serious legal questions, or has a reasonable
probability or fair prospect of success.”
Leiva-Perez, 640 F.3d at 971; see also
Britton, 916 F.2d at 1412 (noting that a stay pending an
appeal from an order declining to compel arbitration may be
appropriate where “the court finds that the motion
presents a substantial question”). A party satisfying
this lower threshold under the first Nken factor
“is not required to show that it is more likely than
not to win on the merits, but must then demonstrate that the
balance of hardships under the second and third factors tilts
sharply in its favor.” Morse, 2013 WL 123610,
at *2 (internal citations and modifications omitted); see
also Ward v. Estate of Goossen, No. 14-CV-03510-TEH,
2014 WL 7273911, at *3 (N.D. Cal. Dec. 22, 2014).
Strong Showing of Likelihood to Succeed on the
argue they have satisfied the first prong by attempting to
lessen the first stay factor's standard with one of their
own: that “a movant need only demonstrate a
‘minimum quantum of likely success' -
i.e., that its appeal has a ‘reasonable
probability or fair prospect' of success.” (ECF No.
74 at 12) (citing Leiva-Perez, 640 F.3d at 967-68).
Defendants claim “the standard is satisfied even if the
movant has less than a 50% chance of winning its appeal. (ECF
No. 74 at 12) (citing Leiva-Perez, 640 F.3d at 967).
Defendants go so far as to claim the question “is
merely whether there is some possibility that the Ninth
Circuit could reach a conclusion different than the one that
this Court reached.” (ECF No. 74 at 13) (citing
Leiva-Perez, 640 F.3d at 967-68; Ontiveros,
2013 WL 1785891, at *3-4). Plaintiff points out that
Defendants “merely recycle the already-rejected
arguments” advanced in their unsuccessful motion to
compel arbitration. (ECF No. 75 at 11.) ...