|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
While The PSLRA Does Not Require Preservation Of Documents Held By Non-Parties, The Court May Grant A Plaintiff Leave To Issue Subpoenas To Give Specified Third-Parties Notice Of The Action And To Impose Upon Them A Limited Duty To Preserve Certain Relevant Evidence In Their Possession
Staff Writer
Securities Litigation Alert. December 19, 2005
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EXCERPT: Gervis v. Berg, No. 00-CV-3362 (JS), 2005 WL 3299436 (E.D. N.Y., 10/20/05). Class Actions, Effect of * PSLRA (Discovery Stays) * SIPC * Discovery Issues. We previously summarized two related cases (SLAs 2004-26 & 2005-06). In brief, the Plaintiffs commenced this class action on June 9, 2000, alleging that the Defendants fraudulently induced the Plaintiffs to invest funds in financial services companies ("New Times" and "New Age") that were part of a Ponzi scheme operated by William Goren. At the time the action was commenced, the SEC had already engaged in a civil proceeding against Goren. In connection with the SEC suit, investors in New Times and New Age were afforded protection under the Securities Investor Protection Act of 1970 ("SIPA"). The district court appointed a Trustee to examine the claims made by the Plaintiff-Investors to the Securities Investor Protection Corporation. Discovery was stayed in this action under the PSLRA and thereafter Plaintiffs filed a second amended complaint that is the subject of Defendants' "contemplated" 12(b)(6) motion. At issue here is Plaintiffs' motion seeking leave to commence limited discovery of documents that Defendants submitted to the court-appointed Trustee under SIPA. The Court denies Plaintiffs' motion, although it permits the issuance of a subpoena duces tecum to the SIPA Trustee for the purpose of preserving those documents pending the outcome of the contemplated motions to dismiss. Under the PSLRA, discovery is stayed during the pendency of any motion to dismiss unless the court finds on motion of any party that "particularized discovery" is necessary to preserve evidence or to prevent undue prejudice to the moving party. The SIPA Trustee is not a party to the present action and has no obligation under the PSLRA to preserve the requested documents before the Court substantively rules on the contemplated motions to dismiss. It is not uncommon for courts to grant leave to issue subpoenas to give specified third parties notice of the action and to impose upon them a limited duty to preserve certain relevant evidence in their possession. |
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