Tuesday, August 23, 2005

Stay it Again Sammy

So picture you’re representing a Lead Plaintiff and you win the motion to dismiss. Your hard work has paid off, and you start drafting those document requests. However, six weeks later, the controlling appellate court issues a decision in an unrelated case. Who cares, right? Well, now you do, because Defendants have “renewed” their motions to dismiss, arguing that the new decision requires the dismissal of your claims. At the same time, they say that discovery must again be stayed pursuant to the PSLRA. That’s exactly what happened in the Salomon analyst litigation overseen by Judge Gerard E. Lynch (S.D.N.Y.).

Defendants got their stay, but were arguably their own worst enemy, as Judge Lynch noted that their “assertion that the law is well established that successive motions . . . do stay discovery under the PSLRA is, to say the least, overstated.” In fact, the court noted that the “three district court opinions” cited by Defendants are either “distinguishable, or are flatly misstated.” But lucky for them, Judge Lynch held that he “need not accept defendants' argument in order to grant a stay.” Noting that the Second Circuit’s “intervening appellate decision” in Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005)) “advances new reasoning addressing a significant issue in the case,” “revisiting the Court's analysis of the issue of loss causation” is warranted.

Thus, “in view of the policy of the PSLRA to deny discovery until a complaint has been authoritatively sustained by the court, it is appropriate to extend the stay under the present circumstances. Since that result is appropriate as an exercise of the Court's discretion, there is no need to decide whether the filing of a successive motion, or even of any non-frivolous motion, after a court has already denied on the merits an earlier motion to dismiss would trigger an automatic stay under the PSLRA.”

You can read In re Salomon Analyst Litigation at 2005 U.S. Dist. LEXIS 3629.

Nugget: “To permit defendants indefinitely to renew the stay simply by filing successive motions to dismiss would be to invite abuse. Some judicial discretion to evaluate the desirability of a renewed stay appears to be necessary.”

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