Court Stays Lawsuit in Favor of Earlier-Filed Federal Class Action

On November 14, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Matter of Qudian Sequrities Litig., 2018 NY Slip Op. 32919(U), staying a lawsuit in favor of an earlier-filed federal class action, explaining:

CPLR 3211(a)(4) provides that a case may be dismissed if there is another action pending between the same parties for the same cause of action in a court of any state or the United Sates; the court need not dismiss upon this ground but may make such order as justice requires. Dismissal of the present action, i.e., the New York action in which the CPLR 3211(a)(4) motion is made, is only appropriate if the present action and the other action involve the same parties and the same cause of action. The present action and the other action involve the same parties and the same cause of action if the following elements of the two actions are substantially similar: (1) the parties: (2) the cause of action: and (3) the relief sought. If there is another action pending in any court within the United States that involves the same parties and the same cause of action as the present action, the court must consult the first-in-time rule, which provides that generally the action that was commenced first will be the one that is allowed to proceed. The general rule favoring the action that was commenced first is not ironclad; the presence of special circumstances permits a court to depart from the first-in-time rule and favor the later-commenced action.

Here, there is another, earlier-filed, action pending in the SDNY. That action asserts the claims brought here. All of the defendants in this action are defendants in the SDNY action, and plaintiff does not deny it is a member of the putative class laid out by that complaint. As plaintiff argues, some of the specific misrepresentations allege.din this action are not specified as actionable misrepresentations in the SDNY action and the plaintiffs here are not named in that action. Until the class in the SDNY action is certified and the plaintiffs here opt in to that action, they are prospective class members in that action, no more.

CPLR 2201 provides that the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just. Alter, relied upon by the plaintiffs, notes that a motion for stay of proceedings is primarily addressed to court's discretion. Further, as stated in Alter, when seeking a stay, it is not necessary that the parties in the state case and the federal action be identical or that the respective parties in each action assume identical positions. Thus, where a federal action was commenced first, and the state claims are encompassed within the federal action, a stay may be appropriate, even if there is only a substantial identity between the two actions. A stay appropriate here.

(Internal quotations and citations omitted).

It is far from rare that litigants file more than one lawsuit regarding the same issue. As this decisions shows, courts often stay later-filed lawsuits for the sake of efficiency. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding duplicative litigations.