Discovery Stay Overstaying Welcome

As reported right here at the Nugget, Plaintiffs won the motions to dismiss in the McDonald’s (NYSE MCD) securities class action last September. So why are Plaintiffs still fighting to lift the PSLRA discovery stay? Actually, it turns out that even though Plaintiffs won, Judge Blanche M. Manning (N.D. Ill.) took the unusual step of ordering Plaintiffs to amend their complaint. Why? Because she “considered certain facts not alleged in the complaint but raised instead by plaintiffs' response to the motion to dismiss,” so she wanted them to include those facts in a revised complaint.

So here Plaintiffs are, six months later, trying to get Magistrate Judge Sidney I. Schenkier (N.D. Ill.) to lift the discovery stay. Judge Schenkier concluded “at bottom, plaintiffs' argument is that the stay should not apply because the current motion to dismiss is meritless -- a point they press vigorously in seeking to lift the stay. Certainly, plaintiffs' argument about the strength of the original motion to dismiss would not be a basis to lift the stay before the motion is decided -- and plaintiffs do not argue otherwise. Plaintiffs have not cited any authority to support the proposition that we may preview the outcome of a second motion to dismiss in deciding whether to lift the stay. Moreover, it is not our province to rule on the merits of defendants' second motion to dismiss, which is pending before the district judge; and we therefore express no view as to the outcome of that motion.”

Result? The stay remains in place.

You can read Selbst V. McDonald’s, issued March 1, 2006, at 2006 U.S. Dist. LEXIS 8862.

Nugget: “The gist of plaintiffs' argument before this Court is that defendants' current motion to dismiss pending before the district judge is frivolous. However, we note that plaintiffs have not availed themselves of the procedural tools to raise that contention with the district judge: they have not sought sanctions on the ground that the motion to dismiss is being brought for an improper purpose or lacks a basis in law or fact, FED.R.CIV.P. 11(b), or that the motion "multiplies the proceedings in . . . [the] case unnecessarily and vexatiously.”