the Securities Exchange Act of 1934 and the second count alleges a violation of RICO, with the Securities Exchange Act violation listed as one of the predicate offenses. The Third Circuit Court of Appeals had also held that such a claim was not arbitrable in Jacobson.3 Thus, it is apparent that defendants invoked the arbitration provision at their earliest opportunity. We conclude, therefore, that defendants have not waived their right to seek arbitration of plaintiffs' claims against them.
Plaintiffs, perhaps aware of the weakness of their position in opposing any stay of court proceedings pending arbitration, have an alternative position. They note, correctly, that not all of the defendants here were parties to the arbitration agreement. Consequently, plaintiffs are not bound to submit their claims against the non-partnership defendants to arbitration. (Lehigh Group, Ltd., Carabillo and Marmar). Plaintiffs thus contend that if arbitrable claims are to be stayed, the remaining non-arbitrable claims should proceed, along with all claims against the three defendants who were not parties to the partnership agreement. In addition, plaintiffs request that discovery proceed.
It is true that the Court has discretion to proceed as plaintiffs request, and the Court, likewise, has discretion to stay all proceedings here pending the arbitration proceedings. See, e.g., Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923 (3d Cir. 1985), G. & V. General Contractors, Inc. v. W. Wilson Goode, 1987 U.S. Dist. LEXIS 3097 No. 86-7408, slip op. (E.D. Pa. April 21, 1987). Under the circumstances of this case, the Court concludes that the best course is to allow the case to proceed against the non-partnership defendants, at least through discovery. Accordingly, we will not include defendants Lehigh Group, Ltd., Ernest Carabillo and Joel Marmar in the stay order and will also deny their motion for a protective order.
The Court's discretion to allow discovery on the underlying claim to proceed against the arbitrating defendants is somewhat more circumscribed. The Court is permitted to allow such discovery when the action is stayed pending arbitration where extraordinary circumstances are present. Levin v. Ripple Twist Mills, Inc., 416 F. Supp. 876 (E.D. Pa. 1976). Otherwise, a stay of proceedings pending arbitration extends to discovery as well. Id. Here, the underlying dispute concerns the transfer of partnership property to the corporation, Lehigh Group, Ltd., and the circumstances surrounding plaintiff Marcune's relinquishing of his partnership interest. Plaintiff Marcune alleges that defendant Kobrovsky controls the corporation. Consequently, we presume that it is he who will be deposed on behalf of the corporation. It would be wasteful and duplicative to have him appear for deposition and not allow him to testify as to other aspects of plaintiffs' claims. We will, therefore, allow discovery to proceed against him generally, as well as against Fairmeadows Securities, Inc., also allegedly controlled by Kobrovsky.
It does not appear that plaintiffs have sought discovery against the remaining partnership defendants at this time. If that statement is not an accurate reflection of plaintiffs' position on that issue, plaintiffs may move to allow discovery as to those defendants during the stay. Plaintiffs must, if they choose that course, demonstrate the extraordinary circumstances which would justify such an order in their motion.
AND NOW, this 11th day of January, 1988, upon consideration of defendants' motions to stay proceedings in this action pending arbitration and plaintiffs' response thereto, IT IS ORDERED that the action is STAYED between plaintiffs and defendants Kobrovsky, Fairmeadows Securities, Inc., Coker, Dandridge and Calliott pending arbitration pursuant to their partnership agreement.
IT IS FURTHER ORDERED that the action will proceed against defendants Lehigh Group, Ltd., Carabillo and Marmar.
IT IS FURTHER ORDERED that discovery may proceed as to plaintiffs' claims against defendants Kobrovsky and Fairmeadows Securities, Inc., although other Court action with respect to the claims against them is stayed pending arbitration.
IT IS FURTHER ORDERED that the motion of defendants Kobrovsky, Fairmeadows Securities, Inc., Carabillo and Marmar for a protective order is DENIED.