Motion (joint motion to stay discovery) — United States ex rel. Pietschner v. Petralia, Frohwein & Robinson (E.D. Tex.)

Record facts

U.S. District Court for the Eastern District of Texas, Sherman Division · No. 4:21-cv-00110-SDJ · Doc. 71 · 2025-04-14 · Docket on CourtListener

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IN THE UNITED STATES DISTRICT COURT 
FOR THE EASTERN DISTRICT OF TEXAS 
SHERMAN DIVISION 
 
UNITED STATES OF AMERICA, ex rel.  
PAUL PIETSCHNER, 
v. 
KATHRYN PETRALIA, ROBERT 
FROHWEIN, and SPENCER ROBINSON. 
 
Case No. 4:21-cv-110-SDJ 
 
 
 
DEFENDANTS’ JOINT MOTION TO STAY DISCOVERY 
 
 
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Table of Contents 
INTRODUCTION .......................................................................................................................... 1 
BACKGROUND ............................................................................................................................ 1 
LEGAL STANDARD ..................................................................................................................... 2 
ARGUMENT FOR A TEMPORARY STAY ................................................................................ 3 
I. 
Defendants’ Motions to Dismiss Present Compelling Challenges to Personal 
Jurisdiction and Venue ............................................................................................ 3 
II. 
A Stay Will Enhance Judicial Efficiency................................................................ 4 
III. 
The Government Will Not Suffer Prejudice From A Stay ..................................... 5 
IV. 
This Court Has Granted Temporary Stays of Discovery In Similar Cases............. 5 
CONCLUSION ............................................................................................................................... 6 
 
 
 
 
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Table of Authorities 
Cases  
Page(s) 
Gardner v. Gary Sinise Found., 
No. 4:23-CV-99-SDJ, 2023 WL 5987397 (E.D. Tex. June 5, 2023).....................................3, 6 
Ruhrgas AG v. Marathon Oil Co., 
526 U.S. 574 (1999) ...................................................................................................................3 
Smith v. Potter, 
400 F. App’x 806 (5th Cir. 2010) ..............................................................................................3 
Spadafora v. Hotel Rsrv. Serv., Inc., 
No. 4:23-CV-735-SDJ, 2023 WL 11762558 (E.D. Tex. Dec. 29, 2023) ..........................3, 5, 6 
Williams v. Tava Ventures, Inc., 
No. 4:24-CV-122-SDJ, 2024 WL 4024037 (E.D. Tex. May 14, 2024).........................2, 3, 4, 5 
Other Authorities 
Federal Rule of Civil Procedure 12(b) .....................................................................................1, 2, 3 
Federal Rule of Civil Procedure 26 .................................................................................................2 
 
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INTRODUCTION 
Defendants Kathryn Petralia, Robert Frohwein, and Spencer Robinson (collectively 
“Defendants”) respectfully move this Court to enter a short stay of discovery pending resolution 
of the gating venue and jurisdictional defenses raised in their individual Motions to Dismiss (Dkt. 
Nos. 65, 67, 68).1  As laid out in their individual Motions, venue is improper here and this Court 
lacks personal jurisdiction over the Defendants—none of whom reside in or have minimum 
contacts with Texas—making Defendants’, non-parties’, and this Court’s participation in 
discovery both unnecessary and improper.  Staying discovery is entirely within this Court’s 
discretion.  There is good cause to enter a short stay where, as here, there is a pending jurisdictional 
motion that is likely to dispose of the entire case, and discovery will impose undue burden without 
aiding the resolution of Defendants’ pending motions.  Moreover, because of its broad power to 
obtain pre-litigation discovery, the Government will not be prejudiced by a short stay through the 
pleadings stage.  For these reasons, as laid out more fully below, Defendants respectfully request 
that the Court enter a short stay of discovery until it decides Defendants’ jurisdictional Motions to 
Dismiss.     
BACKGROUND 
 
On March 11, 2025, Defendants filed a Joint Motion to Dismiss (Dkt. No. 66) and 
individual Motions to Dismiss (“Motions to Dismiss”) (Dkt. Nos. 65, 67, 68) the United States of 
America’s Complaint in Intervention (“Complaint”) (Dkt. No. 40) under Federal Rule of Civil 
Procedure 12(b).  In their individual Motions to Dismiss, which are currently pending before the 
Court, Defendants argue that the Complaint should be dismissed for lack of personal jurisdiction 
and improper venue under Rule 12(b)(2)-(3), as well as for failing to state a claim under Rule 
 
1 By filing this Motion, Defendants do not waive, and expressly preserve, their objection to this 
Court’s exercise of jurisdiction over them. 
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12(b)(6).  See Dkt. No. 65 at 6-10; Dkt. No. 67 at 2-9; Dkt. No. 68 at 9-16.  The Government’s 
opposition briefs are due on April 17, 2025, the Defendants’ reply briefs are due on May 9, 2025, 
and any sur-replies are due on May 30, 2025.  See Dkt. No. 64 at 2.   
On March 25, 2025, the Court issued an Order Governing Proceedings, which requires the 
parties to:  (1) hold a Rule 26(f) attorney conference on or before April 16, 2025; (2) complete 
their initial mandatory disclosures by April 28, 2025; (3) file their joint Rule 26(f) conference 
report by May 2, 2025; and (4) attend the Rule 16 management conference on May 28, 2025.  See 
Dkt. No. 69 at 1.  The parties held their Rule 26(f) conference on April 9, 2025 and will comply 
with the Court-ordered deadline for the exchange of initial mandatory disclosures on or before 
April 28, 2025.  By way of this motion, Defendants seek to stay all discovery and deadlines, other 
than the exchange of initial mandatory disclosures, until after a decision on their jurisdictional 
Motions to Dismiss.   
LEGAL STANDARD 
 
The Court has “‘broad discretion and inherent power to stay discovery until preliminary 
questions that may dispose of the case are determined.’”  Williams v. Tava Ventures, Inc., No. 
4:24-CV-122-SDJ, 2024 WL 4024037, at *1 (E.D. Tex. May 14, 2024) (quoting Fujita v. U.S., 
416 F. App’x 400, 402 (5th Cir. 2011)).  The Court “may, for example, stay discovery for ‘good 
cause’ under Federal Rule of Civil Procedure 26(c)(1).”  Id. (staying discovery pending a decision 
on defendant’s motion to dismiss for lack of personal jurisdiction).  “Good cause may exist when 
‘resolving a motion to dismiss might reduce or preclude the need for discovery or when further 
discovery will impose undue burden or expense without aiding the resolution of the dispositive 
motions.’”  Id. (citations omitted).   
While discovery stays in this circuit are “the exception rather than the rule,” courts here 
repeatedly stay discovery in the specific context that this case presents:  where there is a pending 
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motion to dismiss that raises a defense of lack of jurisdiction.  Id. (citation omitted); see, e.g., 
Gardner v. Gary Sinise Found., No. 4:23-CV-99-SDJ, 2023 WL 5987397, at *1 (E.D. Tex. June 
5, 2023) (granting motion to stay where defendant’s motion to dismiss “raise[d] significant 
procedural and substantive challenges” including a challenge to subject-matter jurisdiction); Smith 
v. Potter, 400 F. App’x 806, 813 (5th Cir. 2010) (affirming district court’s order staying discovery 
where there was a pending motion to dismiss for lack of jurisdiction).  Indeed, as this Court has 
previously found, jurisdictional issues are “[o]f particular importance” and “should be determined 
early.”  Williams, 2024 WL 4024037, at *1; see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 
574, 584 (1999) (“Personal jurisdiction . . . is an essential element of the jurisdiction of a district 
court, without which the court is powerless to proceed to an adjudication.”) (cleaned up). 
ARGUMENT FOR A TEMPORARY STAY 
I. 
Defendants’ Motions to Dismiss Present Compelling Challenges to Personal 
Jurisdiction and Venue  
The Court may consider the strength of a motion to dismiss in deciding a motion to stay.  
See Williams, 2024 WL 4024037, at *1; Spadafora v. Hotel Rsrv. Serv., Inc., No. 4:23-CV-735-
SDJ, 2023 WL 11762558, at *1 (E.D. Tex. Dec. 29, 2023); Gardner, 2023 WL 5987397, at *1.  
Here, there is good cause for a stay pending the resolution of Defendants’ Motions to Dismiss 
because Defendants assert significant threshold legal issues with the Complaint:  lack of personal 
jurisdiction and improper venue.  As this Court well knows, Rules 12(b)(2) and 12(b)(3) require 
dismissal if the Court lacks either personal jurisdiction over a defendant or venue is improper.  
Each of the Defendants is a non-resident of Texas, and, unless and until the Court decides that this 
case was properly brought before this Court (which it was not), it would be improper and 
unnecessary for the parties to plan for and engage in discovery where none is needed to resolve 
the legal issues raised in Defendants’ Motions.   
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Defendants present compelling arguments to dismiss based on the face of the Complaint, 
and no discovery is required to resolve whether personal jurisdiction or venue are proper in this 
Court.  Across all three Defendants, each asserts that the government improperly seeks to establish 
jurisdiction and venue by imputing Kabbage’s corporate actions in Texas to them where the 
longstanding fiduciary shield doctrine precludes such imputation.  See Dkt. No. 65 at 9; Dkt. No. 
68 at 14-15; Dkt. No. 67 at 9 n.4.  Moreover, in her Motion to Dismiss, Ms. Petralia argues that 
the Court lacks personal jurisdiction over her because the Complaint contains no allegations that 
Ms. Petralia was directly involved in any actions relating to Texas and therefore jurisdiction here 
does not comport with due process.  Dkt. No. 65 at 6-9.  Ms. Petralia also asserts that venue is 
improper because the Complaint does not allege that Ms. Petralia personally ever transacted 
business in the Eastern District of Texas.  See Dkt. No. 65 at 9-10.  Mr. Frohwein similarly asserts 
in his Motion to Dismiss that personal jurisdiction here is lacking because the Complaint contains 
no allegations that Mr. Frohwein has any relationship with Texas or took any act in Texas related 
to the claims at issue in this lawsuit.  See Dkt. No. 68 at 12-13.  Moreover, Mr. Frohwein asserts 
that venue is improper because the Complaint fails to allege that Mr. Frohwein presently transacts 
business or ever personally transacted business in Texas.  Id. at 9-10.  Finally, Mr. Robinson asserts 
that personal jurisdiction is lacking because venue is improper.  He asserts that the Complaint 
merely alleges, in the past tense, that Defendants—via Kabbage—transacted business in the 
district, fails to allege that Mr. Robinson purposely forged a substantial connection with Texas, 
and fails to allege that Mr. Robinson personally conducted any business in Texas.  Dkt. No. 67 at 
6-9.   
II. 
A Stay Will Enhance Judicial Efficiency 
Good cause may exist for a stay where “resolving a motion to dismiss might reduce or 
preclude the need for discovery.”  Williams, 2024 WL 4024037, at *1 (citation omitted).  Here, a 
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temporary stay of discovery is appropriate because it will serve judicial efficiency and economy 
given that a favorable disposition of Defendants’ Motions to Dismiss based on lack of personal 
jurisdiction or improper venue “‘might preclude the need for discovery altogether.’”  See id. 
(quoting Spadafora, 2023 WL 11762558, at *1).  It would be a waste of the parties’ and the Court’s 
resources to proceed with the discovery stage.  The Court should therefore enter a stay so that the 
parties can avoid the undue burden and expenses of needless discovery at this preliminary stage. 
III. 
The Government Will Not Suffer Prejudice From A Short Stay 
Finally, a temporary stay would not prejudice the government which, using its broad 
investigative powers, already has much of the discovery it would want to litigate this case.  On the 
other hand, Defendants would suffer prejudice if compelled to participate in discovery at this stage, 
at least because the parties expect to depose dozens of third parties, including former Kabbage 
employees and current and former officials from the Small Business Administration and other 
government agencies, which will require significant effort and resources on both sides.  
Accordingly, this is a short-term request, and any claim of prejudice is properly mitigated by the 
benefit of avoiding the expenditure of time and resources to engage in discovery that may 
ultimately be superseded by the Court’s personal jurisdiction or venue ruling.   
IV. 
This Court Has Granted Temporary Stays of Discovery In Similar Cases 
This Court has granted motions to stay in similar circumstances.  For example, in Williams, 
this Court granted a motion to stay discovery pending the resolution of a motion to dismiss that 
raised “significant challenges to Plaintiff’s complaint,” including for lack of personal jurisdiction, 
failure to state a claim upon which relief can be granted, and improper service.  2024 WL 4024037, 
at *1.  In reaching its conclusion, this Court “note[d] that jurisdictional issues should be determined 
early in the case.”  Id.  As in Williams, here too “the question of personal jurisdiction over [three] 
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defendants has been briefed and is ripe for determination without needing discovery.”  Id.  “[O]n 
these grounds alone,” the Court should find good cause for a stay.  Id.   
Similarly, in Gardner, this Court granted a motion to stay discovery pending the resolution 
of the defendant’s motion to dismiss.  2023 WL 5987397, at *1.  There, as here, the defendant’s 
dismissal motion raised a threshold jurisdictional issue as well as “weighty legal questions which 
c[ould] be resolved without discovery.”  Id.  This Court concluded there was good cause to stay 
discovery because the presence of proper jurisdiction was a predicate to assessing the merits of the 
plaintiff’s claim.  Id. 
Likewise, in Spadafora, this Court found a stay was appropriate where the defendant’s 
motion to dismiss “provide[d] substantial arguments for dismissal of many, if not all, of Plaintiffs’ 
claims.”  2023 WL 11762558, at *1.  Similar to the present case, this Court noted that “[a] stay of 
discovery is also appropriate given that the issues addressed in the motion to dismiss [were] largely 
legal, rather than factual, in nature.”  Id.  Here too, Defendants present purely legal arguments for 
dismissal that may be resolved without the benefit of discovery. 
CONCLUSION 
For the foregoing reasons, Defendants request that the Court grant this Motion and enter 
an order staying discovery until after the Court rules on the venue and jurisdictional defenses raised 
in their Motions to Dismiss.  
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Dated: April 14, 2025  
 
 
 
         Respectfully submitted, 
 
/s/ Melissa R. Smith                  
Melissa R. Smith 
Gillam & Smith LLP 
303 South Washington Ave. 
Marshall, TX 75670 
Telephone: (903) 934-8450 
Fax: (903) 934-9257 
melissa@gillamsmithlaw.com 
 
Anjan Sahni (pro hac vice) 
Wilmer Cutler Pickering Hale and Dorr LLP  
7 World Trade Center, 250 Greenwich Street  
New York, NY 10007  
Tel: (212) 230-8800 
Fax: (212) 230-8888 
anjan.sahni@wilmerhale.com 
 
Christopher E. Babbitt (pro hac vice) 
Michaela S. Wilkes Klein (pro hac vice) 
Wilmer Cutler Pickering Hale and Dorr LLP  
2100 Pennsylvania Avenue NW  
Washington, DC 20037  
Telephone: (202) 663-6000  
Fax: (202) 663-6363  
christopher.babbitt@wilmerhale.com 
michaela.wilkesklein@wilmerhale.com 
 
George P. Varghese (pro hac vice) 
Wilmer Cutler Pickering Hale and Dorr LLP 
60 State Street  
Boston, MA 02109 
Telephone: (617) 526-6000 
Fax: (617) 526-5000 
george.varghese@wilmerhale.com 
Counsel for Kathryn Petralia 
/s/ Alexander J. Chern       
Nicholas M. Mathews 
Alexander J. Chern 
McKool Smith, PC - Dallas 
300 Crescent Court, Suite 1500 
Dallas, TX 75201 
Telephone: (214) 978-4258  
Fax: (214) 978-4044 
NMathews@mckoolsmith.com 
AChern@mckoolsmith.com 
 
Miranda Hooker (pro hac vice) 
Kate E. MacLeman (pro hac vice) 
Kara N. Czekai (pro hac vice) 
Goodwin Procter LLP 
100 Northern Avenue 
Boston, Massachusetts 02210 
Telephone: (617) 570-1000 
Fax: (617) 523-1231 
MHooker@goodwinlaw.com 
KMacLeman@goodwinlaw.com 
KCzekai@goodwinlaw.com 
Counsel for Robert Frohwein 
 
/s/ Henry W. Asbill          
Henry W. Asbill (pro hac vice) 
Christopher B. Mead (pro hac vice) 
Lisa H. Schertler (pro hac vice) 
Paola Pinto (pro hac vice) 
Schertler Onorato Mead & Sears  
555 13th Street NW Suite 500W 
Washington DC 20004 
Telephone: 202-628-4199 
Facsimile: 202-628-4177 
hasbill@schertlerlaw.com  
cmead@schertlerlaw.com 
lschertler@schertlerlaw.com 
ppinto@schertlerlaw.com 
Counsel for Spencer Robinson 
 
 
 
 
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CERTIFICATE OF CONFERENCE 
 
Pursuant to Local Rule CV-7(i), undersigned counsel certifies compliance with the meet 
and confer requirement in Local Rule CV-7(h).  Undersigned counsel met and conferred in good 
faith with Kelly Phipps, Sarah Loucks, and Betty Young (counsel for the Government) and Julie 
Bracker and Sarah Frazier (counsel for Relator) via teleconference on April 9, 2025 and via email 
on April 11 & 14, 2025.  The parties’ discussions conclusively ended in an impasse on April 14, 
2025.  Plaintiffs oppose the present Motion. 
 
/s/ George P. Varghese   
  
                                George P. Varghese 
 
                                Counsel for Kathryn Petralia  
  
 
 
/s/ Miranda Hooker   
  
                                Miranda Hooker 
 
                                                                                Counsel for Robert Frohwein  
  
 
 
/s/ Henry W. Asbill   
  
                                Henry W. Asbill 
 
                                Counsel for Spencer Robinson  
  
 
 
  
 
 
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CERTIFICATE OF SERVICE 
 
I hereby certify that on April 14, 2025, I caused the foregoing to be electronically filed 
with the Clerk of the Court using the CM/ECF system, which sent notification of filing to all 
attorneys of record. 
 
 
 
 
 
 
/s/ Alexander J. Chern               
 
 
Alexander J. Chern          
 
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