MILBERG WEISS BERSHAD
HYNES & LERACH LLP
ALAN SCHULMAN (128661)
JAMES A. CAPUTO (120485)
TRAVIS E. DOWNS, III (148274)
TOR GRONBORG (179109)
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058

Attorneys for Plaintiffs

[Additional counsel appear on signature page.]

I. INTRODUCTION

II. FACTUAL AND PROCEDURAL OVERVIEW

III. ARGUMENT

A. The Exchange Act, As Amended By The PSLRA, Neither Preempts Discovery In The State Case, Nor Restricts Its Use In This Action

B. The Federal Law Permits Plaintiffs To Use Information Obtained From Other Actions To Plead Their Federal Claims

C. Neither Procedural Basis For Defendants' Motion Supports The Restrictions They Seek

D. Defendants' Proposed Restrictions Unquestionably Prejudice Plaintiffs

IV. CONCLUSION

I. INTRODUCTION

When plaintiffs moved to be appointed lead plaintiffs, the NetManage defendants objected and, without precedent, legal authority or standing, sought to bar plaintiffs from access to discovery in a parallel state securities action or to enjoin that discovery all together.⁽¹⁾ Defendants contended that the discovery stay provision of §21D of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §78u-4, as added by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), required such a bar. This Court rejected defendants' argument and appointed lead plaintiffs unconditionally. Caputo Decl., Ex. 2.

Now, in repackaged form, defendants make the same argument again. This time they seek to bar plaintiffs from using the "fruits of any discovery" obtained in the state case. Defendants' Motion to Preserve and Enforce the Mandatory Discovery Stay of the PSLRA ("Defs' Mem.") at 12. Defendants assert that "federal policy" compels such an order. Defendants are actually asking this Court to make policy and to do what Congress expressly refused to do -- interfere with enforcement of state securities laws.

However, nothing in the PSLRA expressly prohibits state court litigation of state securities law claims. To the contrary, Congress manifested its clear support of state securities litigation in §28(a) of the Exchange Act which, unamended through the PSLRA's enactment, specifically provides: "The rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity . . . ." 15 U.S.C. §78bb(a). Thus after, just as before, the PSLRA amendments, litigants are free to pursue remedies under state law and to litigate their claims under state law and procedures, including the right to pursue discovery.

Defendants argue that the use in this case of discovery properly obtained in state court will traverse their "federal rights."⁽²⁾ Defs' Mem. at 7. But there is no rule prohibiting plaintiffs from pleading relevant inculpatory facts learned from evidence properly obtained in another action. Nothing in the PSLRA precludes the use of such discovered information. Defendants cannot cite any PSLRA provision which bars a plaintiff from prosecuting a state court claim or using facts obtained through other litigation to plead claims under federal law. In fact, the PSLRA's legislative history is to the contrary.

None of the other contrived procedural bases defendants cite supports their motion. Where the information at issue is obtained in another court action, Fed. R. Civ. P. Rule 26(c) does not prohibit its use -- even when identical parties are involved. Nor can the All Writs Act, 28 U.S.C. §1651(a), be invoked. Nothing in plaintiffs' use of information discovered in another proceeding deprives this Court of its jurisdiction -- the act's necessary prerequisite.

This Court does not make policy. This Court applies the law. Congress did not bar discovery in state court actions. The stay provisions of the PSLRA only apply to federal proceedings. Congress expressly contemplated dual state and federal litigation and did not preclude it. It is not this Court's role to legislate where Congress has failed to do so. Defendants concede they are properly subject to discovery in a state action. Defendants cannot cite any statutory authority, legislative history or case law to support their extraordinary motion to prohibit the use of the fruits of that properly obtained state discovery. Accordingly, their motion should be denied.

II. FACTUAL AND PROCEDURAL OVERVIEW

NetManage develops and markets software protocols which allow computer network connections. ¶2.⁽³⁾ Its growth in 1993 and 1994 was spectacular. ¶3. But by early 1995, the Microsoft Corporation was preparing to release the Windows 95ô operating system which contained its own connection protocol. ¶6. Defendants knew, but did not disclose, the negative impact the Windows 95 release would have on NetManage's product marketing and sales. At the same time, they also became aware of the similar negative impact Netscape Communications, Inc.'s network browser and applications software would have on the Company's business prospects. Id.

Defendants scrambled to establish marketing and pricing strategies which would preserve their growth image. ¶¶7-9. These efforts foundered, and NetManage turned to subterfuge, misstating the status and prospects of its business and products, and improperly recognizing revenue to boost its earnings. ¶9. This unlawful conduct succeeded, at least temporarily, allowing defendants to sell over $14 million of their NetManage stock and to reduce the effective price of NetManage's stock-for-stock acquisition of software companies. ¶¶95, 110, 145.

On January 12, 1996, NetManage shocked securities analysts and the market by revealing a significant revenue shortfall for the fourth quarter of its 1995 fiscal year. ¶14. Defendant Alon conceded that revenues from certain booked sales could not be recognized because various contingencies affecting those sales had not been resolved. NetManage's stock, which had traded as high as $34 during the Class Period (July 25, 1995 - January 11, 1996), plunged to as low as $10 per share on this news. ¶¶15-16. NetManage stock has never recovered and currently trades at the $3-$4 per share range.

On January 9, 1997, the state plaintiffs⁽⁴⁾ filed a class action complaint against the NetManage defendants for violations of California securities laws (Cal. Corp. Code §§25400 and 25500). Plaintiffs also filed this action to preserve their federal claims against the pending statute of limitations.⁽⁵⁾

Defendants have tried repeatedly to invoke the PSLRA to challenge plaintiffs' right to pursue the state court action. First, defendants sought an "advisory ruling" as to whether a class action was appropriate in state court in light of the PSLRA. The state court denied this motion, holding "a parallel federal action cannot be deemed a superior method of proceeding without assurances that defendants will not oppose class certification in the federal action." Caputo Decl., Ex. 5.

Making many of the same arguments they advance here, defendants' next moved in state court to stay discovery.⁽⁶⁾ That motion was also denied. Caputo Decl., Ex. 7.⁽⁷⁾ Next defendants objected to plaintiffs' state court discovery because of the federal court discovery stay the PSLRA imposed. Plaintiffs' motion to compel the requested discovery was granted. Caputo Decl., ¶3⁽⁸⁾

Defendants are engaged in the same seriatim, repetitive motion practice here. First, without legal basis or standing, they opposed the lead plaintiff appointment in this action unless the appointment was conditioned upon restricting plaintiffs' access to and conduct of discovery in the state case. This Court overruled defendants' objection and appointed lead plaintiffs and approved their selection of counsel without condition. Caputo Decl., Ex. 2. Defendants now bring virtually the same motion again.

III. ARGUMENT

A. The Exchange Act, As Amended By The PSLRA, Neither Preempts Discovery In The State Case, Nor Restricts Its Use In This Action

Defendants argue that the "spirit" of the PSLRA should be applied to prohibit the use in this case of the "fruits of discovery" obtained in the state court. This argument ignores the Exchange Act's express limitation which deems the PSLRA to be in addition to state law rights and remedies, demeans the equal dignity of the state court and state securities laws, and turns on the unargued premise that the PSLRA preempts state securities laws. It does not.

In enacting the PSLRA, Congress comprehensively revisited private litigation under the federal securities laws. Nowhere in the resulting Exchange Act amendments did Congress state its intent to preempt state securities laws, or to limit discovery in state court. The added introductory paragraph to §21D of the Exchange Act specifically provides that the provisions of the PSLRA apply only "in each private action arising under this chapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure." 15 U.S.C. §78u-4(a)(1).

Congress could have preempted state court securities litigation if it had chosen to do so.⁽⁹⁾ But defendants can cite no provision of the statute nor its legislative history which states that Congress intended to control private securities litigation in state court.⁽¹⁰⁾

Actually, just the opposite is true. The PSLRA's legislative history consistently evidences Congress's intent to preserve actions and remedies under state securities laws. First, the fact that Congress did not amend §28(a) of the Exchange Act evidences

Congressional intent to preserve state law remedies.⁽¹¹⁾ See Edgar v. MITE Corp., 457 U.S. 624, 631-32 (1982).⁽¹²⁾ Thus, Congress's continuing directive is to permit state laws to protect securities investors from fraud and misrepresentation, and to adopt necessary procedures to do so.⁽¹³⁾ As the Supreme Court has confirmed: "Congress plainly contemplated the possibility of dual litigation in state and federal courts relating to securities transactions." Matsushita Elec. Indus. Co. v. Epstein, ___ U.S. ___, 116 S. Ct. 873, 882 (1996) (full faith and credit given to state court judgment releasing federal claims within the federal court's exclusive jurisdiction).

Second, the legislators themselves plainly contemplated that litigation of state securities law remedies in state court would be unaffected by the PSLRA. For example, Representative Mineta endorsed the limitation on liability for forward-looking statements in part because "there are State regulations or there is common law fraud that would still subject the maker of those kinds of statements to action." See 141 Cong. Rec. H 2844 (daily ed. Mar. 8, 1995), Caputo Decl., Ex. 10. The legislative history materials also contain numerous statements by Congressional members reflecting the understanding that the PSLRA was not intended to preempt state law. See, e.g., Hearings before the Subcommittee on Telecommunications and Finance of the House of Representatives Commerce Committee, Serial No. 104-2, 104th Cong., 1st Sess., at p. 109 (1995) (colloquy between Representative Cox and University of Chicago Professor Daniel Fischel expressing the understanding that a proposed attorneys fee provision would not affect actions brought under state law) Caputo Decl., Ex. 11; 141 Cong. Rec. S 9319 (daily ed. June 28, 1995) (comments of Senator Rockefeller noting that certain of his colleagues supported a shorter federal statute of limitations because "there are other adequate remedies including State actions") Caputo Decl., Ex. 12; 141 Cong. Rec. H 2834 (daily ed. March 8, 1995) (statement by Representative Cox that legislation would not affect actions filed in Orange County Superior Court), Caputo Decl., Ex. 10.

Defendants want nothing less here than an absolute bar to properly obtained state discovery. Neither the text nor the legislative history of the PSLRA, however, support this far reaching ban.

B. The Federal Law Permits Plaintiffs To Use Information Obtained From Other Actions To Plead Their Federal Claims

Defendants' attempt to proscribe the use of facts obtained through discovery in the state action to plead their federal claims is contrary to well-established federal precedent. That information discovered in one lawsuit may be used to in another is beyond peradventure.⁽¹⁴⁾ Federal courts addressing the use of related discovery for such purposes "have overwhelmingly and decisively endorsed the sharing of discovery information among different plaintiffs, in different cases, in different courts." Burlington City Bd. of Education v. U.S. Mineral Products Co., 115 F.R.D. 188, 190 (M.D.N.C. 1987).⁽¹⁵⁾ Over objections to disclosure, federal courts have permitted, for example, dissemination among plaintiffs' counsel of a defense expert's videotaped deposition concerning asbestos damage,⁽¹⁶⁾ corporate trade secrets regarding a fuel system's integrity,⁽¹⁷⁾ and confidential clinical evaluations of the health effects of an intrauterine device.⁽¹⁸⁾

Central to the reasoning of these cases is that a "'just, speedy and inexpensive determination'" of litigation is served by permitting discovery obtained in one action to be used to support the pleading and prosecution in another action.⁽¹⁹⁾ Moreover, federal courts have consistently rejected the argument made by defendants here that the use of discovery from one action militates against a proper defense in subsequent actions. As the Burlington City Bd. of Education court held:

Defendants will not be heard to complain that sharing information will burden their defending similar type lawsuits. To some extent, that result is both a desired and expected consequence of the expediting and evening process which sharing produces.

Id. at 190.

This rationale culminates in the important Ninth Circuit case, In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693 (9th Cir. 1993). In that case, plaintiff Go-Video, Inc. ("Go-Video") obtained information from discovery supporting allegations of new antitrust violations. Despite a protective order which provided that discovery was to be used "solely" in the original antitrust action, Go-Video sought to plead new claims based on the discovered information. The court denied plaintiff's motion for leave to amend, and Go-Video filed a second lawsuit. Although Go-Video did not disclose confidential information through the filing of its second lawsuit, the district court in the original action held Go-Video in contempt for filing the second action in violation of the protective order. Id. at 695. The Ninth Circuit reversed, finding that immunity from suit was not the legitimate purpose of the protective order. Id. at 696.

The ruling in Frymire v. Peat, Marwick, Mitchell & Co., No. 85 C 10460, 1987 U.S. Dist. LEXIS 6295 (N.D. Ill. June 16, 1987) Caputo Decl., Ex. 13, reflects this same reasoning. There, the defendant corporation sought a protective order prohibiting plaintiff shareholders from using discovery in two other related actions. Defendants argued this shared use would be a discovery abuse contravening Fed. R. Civ. P. 9(b)'s pleading particularity requirements for fraud. The court denied defendants' protective order motion, holding:

If discovery here should turn up evidence supporting other claims (and the posture of the case here is that discovery may proceed) there would be nothing unusual about a plaintiff amending his complaint here to add counts or in bringing an action elsewhere if that were a more appropriate forum.

Id. at *2-*3. The court continued:

If valid discovery here should disclose other claims, . . . there is no basis for foreclosing the plaintiffs from pursuing them.

Id. at *3. Caputo Decl., Ex. 13.

Dual-Deck Video and Frymire teach that discovered information cannot be precluded from supporting allegations in another matter. Under these cases, there is no question that information discovered in a contract action with a NetManage customer or in a wrongful termination action by a former NetManage employee, could be used to support plaintiffs' federal claims. Nothing in the PSLRA or in any case defendants cite contravenes the controlling authorities or requires that the state court discovery here be treated differently.

C. Neither Procedural Basis For Defendants' Motion Supports The Restrictions They Seek

Lacking substantive support for their motion, defendants turn to Fed. R. Civ. P. 26(c), and the All Writs Act, 28 U.S.C. §1651(a). Neither supports defendants' proposed restrictions nor provides an independent basis for defendants' motion.

Rule 26(c) protections do not reach discovery taken in another action. Bridge C.A.T. Scan Associates v. Technicare Corp., 710 F.2d 940, 944-45 (9th Cir. 1983) (Rule 26(c) only authorizes a court to condition discovery in the action pending before it). This is so even when the parties to both actions are identical. Whittaker Corp. v. Execuair Corp., 736 F.2d 1341, 1347 (9th Cir. 1984). Thus here, where the discovered information at issue is from a state court action, defendants cannot invoke Rule 26(c) to restrict its use.⁽²⁰⁾ Several controlling Ninth Circuit cases are instructive.

In Whittaker Corp. v. Execuair, 736 F.2d 1341, plaintiff Whittaker sued defendant Execuair for, inter alia, trade mark infringement and misappropriation of trade secrets. On summary judgment, Whittaker sought to use documents he had obtained in a separate antitrust action after the discovery cutoff in the trade secrets case. The district court granted defendants' protective order motion and barred the discovery from the antitrust action. Id. at 1344. Reversing, the Ninth Circuit ruled the district court's power to control discovery in the case before it did not extend to documents obtained in a separate action, even though the parties were identical:

Excluding evidence discovered in the antitrust action after the discovery cutoff date in the case at bar was improper. . . . A discovery cutoff date does not . . . affect admissibility of evidence obtained outside of the discovery process of the case in which the cutoff is ordered.

Id. at 1347.

In Whittaker, then, defendant had a continuing obligation to cooperate in discovery in the antitrust case, even though its discovery burden had been terminated, by discovery cut-off, in the case at bar. Here, defendants, like those in Whittaker, seek to preclude the use of discovery to which they are indisputably subject, because their obligation to produce federal discovery has been stayed. As in Whittaker, Rule 26 affords no constraint on the state discovery's use.

In Kirshner v. Uniden Corp. of America, 842 F.2d 1074 (9th Cir. 1988), the Ninth Circuit similarly limited Rule 26(c)'s reach. There, defendants sought a protective order requiring return of a document plaintiffs' counsel obtained in a separate case in which plaintiffs' counsel was representing a different plaintiff against the same defendant. Id. at 1076. Again reversing a district court's protective order grant, the Ninth Circuit ruled:

As we held in Whittaker Corp., a district court's power to control discovery does not extend to material discovered in a separate action, notwithstanding the fact that the parties were identical. . . . In the matter before us, the district court lacked the power to issue a valid protective order to compel return of documents obtained through discovery in a separate action.

Id. at 1081 (citation omitted); accord Bridge C.A.T. Scan Associates, 710 F.2d at 944-45 (court lacked authority to prohibit disclosure of information obtained in a separate action); Culinary Foods v. Raychem Corp., 153 F.R.D. 614, 615 (N.D. Ill. 1993) (court's power to control discovery does not extend to material discovered in other actions).

None of the authorities defendants cite support the Rule 26(c) restriction they propose. In Sperry Rand Corp. v. Rothlein, 288 F.2d 245 (2d Cir. 1961), the federal court had issued a protective order sequencing and restricting discovery. Id. at 246-47. When plaintiff subsequently brought an action in state court, the federal court enjoined the state discovery to protect its prior discovery order. Id. at 249. No such order exists in this case, and nothing in plaintiffs' use of state court discovery affects this Court's jurisdiction or requires the protective response of Sperry Rand. Indeed, defendants have specifically declined to request injunctive relief similar to that granted in Sperry Rand. Defs' Mem. at 7.

Defendants also offer a number of arbitration cases⁽²¹⁾ and Supreme Court dicta involving those cases⁽²²⁾ as authority for a protective order grant. They are not. In contrast to defendants' suggestion, there is no absolute stay of discovery under the Federal Arbitration Act. See Defs' Mem. at 8. Notwithstanding pending arbitrations, courts may permit discovery upon a showing of "extraordinary circumstances." See Harry F. Ortlip Co., 126 F.R.D. at 497. This was the question before each of the courts' cases defendants cite. But this is a distinctly different exercise and procedural posture from what this Court faces.⁽²³⁾ Here, the discovery at issue is from a separate state action. And the question is whether discovered information, properly obtained in the state action, can be barred by a protective order issued from this case. Rule 26(c), however, does not reach beyond this action and cannot be invoked to restrict the use of pending state discovery. In sum, the cited arbitration cases do not support defendants' proposed protective order.

Similarly, the All Writs Act fails to assist defendants. That act provides:

The Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law.

28 U.S.C. §1651(a). Defendants contend, without authority, that plaintiffs' use of state court discovery will deprive this Court of its jurisdiction. Plainly, it will not.

The PSLRA neither restricts state court discovery proceedings nor gives this Court supervisory power over them. Plaintiffs are fully authorized, as defendants concede, to conduct state court discovery. Similarly, this discovery's subsequent use in this action is not barred by law. Nothing then in this sharing of discovered information will affect, let alone frustrate, this Court's exercise of its jurisdiction over this matter. For this reason, defendants have no recourse under the All Writs Act. See Plum Creek Lumber Co. v. Hutton, 608 F.2d 1283, 1289-90 (9th Cir. 1979) (act "is not a grant of plenary power" and does not authorize restrictions "not otherwise demanded by law").

D. Defendants' Proposed Restrictions Unquestionably Prejudice Plaintiffs

Defendants finally contend neither restrictions on discovered information nor plaintiffs' disqualification is prejudicial because plaintiffs themselves have "manufactured a conflict between federal statutory law and California procedure." Defs' Mem. at 10. This is nonsense.

There simply is no conflict in separately litigating plaintiffs' state and federal claims. Nevertheless, plaintiffs have offered to stay this case during the pendency of the state action to address defendants' concerns. Defendants have not accepted plaintiffs' offer. They instead continue their efforts to restrict plaintiffs' use of state court discovery.

Defendants' proposed restriction will improperly bar relevant evidence of defendants' culpable conduct from this action. Plaintiffs will be significantly prejudiced by being denied the opportunity to use this information to plead and prosecute their federal claims.

IV. CONCLUSION

For the foregoing reasons, defendants' Motion to Preserve and Enforce the Mandatory Discovery Stay of the PSLRA must be denied in its entirety.

NETMANAG\ROO03314.BRF

1. Defendants' Memorandum re: Plaintiffs' Motion for Appointment as Lead Plaintiffs and Lead Plaintiffs' Counsel is attached as Ex. 1 to the Declaration of James A. Caputo ("Caputo Decl."), filed in support of plaintiffs' opposition; all exhibits referenced in plaintiffs' opposition are attached to the Caputo Decl. The NetManage defendants include NetManage, Inc. ("NetManage" or the "Company") and "Individual Defendants" Zvi Alon, Walter Amaral, Uzia Galil, Amatzia Ben-Artzi, Robert Williams, Richard Koretz and Dan Geisler.

2. State courts have rejected the argument that the PSLRA bars state court discovery and have repeatedly refused to stay discovery in parallel state court securities action on that ground. See, e.g., Judge Flaherty's Order Denying Motion to Stay Merits Discovery in Werczberger v. StorMedia, Inc., No. CV760825 (Santa Clara Super. Ct. Dec. 31, 1996) and Judge Marshall's Order Denying Motion to Stay Proceedings in Thompson v. Veterinary Centers of America, No. BC168547 (Los Angeles Super. Ct. July 21, 1997), Caputo Decl., Exs. 3-4.

3. All "¶__" references are to the First Amended Complaint for Violations of the Securities Exchange Act of 1934; all emphasis is added and all internal citations are omitted.

4. The state plaintiffs include Walter W. Head, III, Gregory Selmanson, Dominic Castaldo, Leila Waldman, John Velonis, Jr. and Don H. Atherly. These same plaintiffs, except for Don H. Atherly, also brought this federal action.

5. To advance the state court proceeding, plaintiffs offered to stay the federal case pending disposition of the state action. Although such a stay would eliminate the concerns raised on this motion, defendants have yet to respond to plaintiffs' stay proposal. Caputo Decl., ¶4.

6. NetManage also demurred to the First Amended Complaint. The state court overruled the demurrer, holding that plaintiffs had properly pleaded state securities' claims against the Company. Caputo Decl., Ex. 6.

7. Defendants sought, but were denied, extraordinary writ relief from the Court of Appeal on this order. Caputo Decl., Ex. 8.

8. Defendants also argued the PSLRA's discovery stay provisions to oppose entry of a protective order which permitted confidential information discovered in the state action to be used in this action. Over defendants' objection, the Discovery Master approved the order and conditioned its entry on procedural guarantees that confidentiality would be maintained in both actions. Caputo Decl., ¶3.

9. For example, when Congress chose to preempt state restrictions on attorney bonds, the Statement of Managers states:

In this regard, the Conference Committee intends to preempt any contrary state bar restrictions that may inhibit attorneys' provision of such undertakings in [sic] behalf of their clients.

H.R. Rep. No. 104-369, at 40-41, 109 Stat. 679, 739-40 (1995) be no need for the legislation, now proposed in Congress, preempting class action prosecution of state securities law violations. See, e.g., Caputo Decl., Ex. 9.

11. "The rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity . . . ." 15 U.S.C. §78bb(a).

12. It is well-settled that the enactment of the federal securities laws did not preempt parallel state laws. See CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 86 (1987); Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101, 1107 (4th Cir. 1989); Ryan v. Foster & Marshall, Inc., 556 F.2d 460, 464 (9th Cir. 1977).

13. Congress's failure to disturb longstanding private litigation under state securities laws, in light of the PSLRA's far reaching changes, effectively ratifies state law actions. See Lorillard, Div. of Loew's Theatres, Inc. v. Pons, 434 U.S. 575, 580-81 (1978); Cannon v. University of Chicago, 441 U.S. 677, 698-99 (1979); Evans v. U.S., 504 U.S. 255, 268-69 (1992).

14. See, e.g., Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987) (securities fraud complaint properly grounded on information from Securities and Exchange Commission's investigation); Epstein v. Haas Sec. Corp., 731 F. Supp. 1166, 1173 (S.D.N.Y. 1990) (information obtained from criminal proceedings may serve as a "proper factual foundation" for securities fraud claims).

15. See also Cipollone v. Liggett Group, Inc., 113 F.R.D. 86, 91 (D.N.J. 1986) ("Federal Rules do not foreclose collaborative use of discovery."); Johnson Foils, Inc. v. Huyck Corp., 61 F.R.D. 405, 410 (N.D.N.Y. 1973) ("[F]ederal courts do allow full use of the information in other forums.").

16. Burlington City Bd. of Education, 115 F.R.D. at 190 ("'[C]ollaboration among plaintiffs' attorneys . . . comes squarely within the purposes of the Federal Rules of Civil Procedure.'").

17. Ward v. Ford Motor Co., 93 F.R.D. 579, 580 (D. Colo. 1982) ("Efficient administration of justice requires, that courts encourage, not hamstring, information exchanges.").

18. Deford v. Schmid Products Co., 120 F.R.D. 648, 654 (D.M.D. 1987) ("The plaintiffs' primary argument in favor of disclosure is their desire to share information with other litigants and their counsel. This is an appropriate goal under the Federal Rules of Civil Procedure . . . .").

19. See, e.g., Cipollone v. Liggett Group, Inc., 113 F.R.D. at 91); Wauchop v. Domino's Pizza, Inc., 138 F.R.D. 539, 546 (N.D. Ind. 1991).

20. Sasu v. Yoshimura, 147 F.R.D. 173 (N.D. Ill. 1993), offers no support for defendants' proposed Rule 26 protective order. In that case, the district court restricted the disclosure of police officers' and witnesses' identities obtained through discovery in the action before it. Sasu merely demonstrates a proper application of Rule 26 and has no bearing on the control of discovery generated in a separate action. It is noteworthy that the Sasu court did permit complete dissemination of the remaining discovery materials. Id. at 176.

21. Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D. 558, 566-67 (S.D. Miss. 1976); Econo-Car Int'l, Inc. v. Antilles Car Rental, Inc., 61 F.R.D. 8, 10 (D.V.I. 1973); Harry F. Ortlip Co. v. George Hyman Constr. Co., 126 F.R.D. 494 (E.D. Pa. 1989).

22. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 352 n.17 (1978).

23. The question of whether plaintiffs' state discovery requests are "outside the ambit of their [state] allegations" is a matter properly decided by the state court. See Defs' Mem. at 8. And that matter has been resolved in plaintiffs' favor. Caputo Decl., Ex. 8.

I, the undersigned, declare:

1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of San Diego, over the age of 18 years, and not a party to or interested in the within action; that declarant's business address is 600 West Broadway, Suite 1800, San Diego, California 92101.

2. That on September 26, 1997, declarant served PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION TO ENFORCE THE MANDATORY DISCOVERY STAY OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 by depositing a true copy thereof in a United States mailbox at San Diego, California in a sealed envelope with postage thereon fully prepaid and addressed to the parties listed on the attached Service List and that this document was forwarded to the following designated Internet site at:

http://securities.milberg.com

3. That there is a regular communication by mail between the place of mailing and the places so addressed.

I declare under penalty of perjury that the foregoing is true and correct. Executed this 26th day of September 1997, at San Diego, California.