|  | | 2006 News and Press Releases | | |
HEADLINE NEWS:
Some Courts: PSLRA Stay-Provision Language Ambiguous
Jeff G. Hammel and Robert J. Malionek - Latham & Watkins
New York Law Journal. December 11, 2006
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EXCERPT: Most securities litigators expect that, while a motion to dismiss is pending in any private securities fraud litigation brought under the Private Securities Litigation Reform Act (PSLRA), discovery will be stayed unless a showing of exceptional circumstances can be made. The basis for this is the PSLRA itself, which states that 'all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss.' It may be surprising to learn that some plaintiffs argue, notwithstanding this language, that such a stay is not required if only some defendants have a motion to dismiss pending. It may be even more surprising to learn that, at times, plaintiffs win that argument. … At bottom, the question is whether the terms 'all discovery,' 'shall' and 'any motion' in the statute mean what they say. Most courts analyzing this language have concluded that they do. Thus, according to the express terms of the statute, as long as a motion to dismiss by any defendant is pending, discovery is stayed for the entire case. The analysis should end there. Those who bypass this step in the analysis and argue that Congress' intent is upheld by allowing discovery against those defendants whose motions to dismiss are denied (and thus for whom the complaint is found to be nonfrivolous) are putting the cart before the horse. In other words, the statutory language is clear, and it does not provide that the stay may be lifted simply because one defendant's motion is denied. In any event, most courts have held that the statute's requirement of an automatic stay is buttressed by the legislative history, which illuminates Congress' intent to hold all unnecessary discovery at bay while a court determines whether, and in what shape, a case should proceed. The full contours of the case about which the parties are to take discovery will not be determined until all motions to dismiss are decided. |
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