Court Refuses to Impose PSLRA Stay on Securities Act Action Pending in Commercial Division

On July 1, 2019, Justice Scarpulla of the New York County Commercial Division issued a decision in Matter of PPDAI Group Sec. Litig., 2019 NY Slip Op. 51075(U), refusing to impose a PSLRA stay on a Securities Act action pending in the Commercial Division, explaining:

According to Moving Defendants, Plaintiffs should not be permitted to "skirt the PSLRA's mandatory stay of discovery, which automatically stays all discovery until any motions to dismiss have been resolved." Moving Defendants contend that the PSLRA's discovery stay applies to all private actions including those in state court and that if Congress intended the stay to only apply to federal court actions, it would have said so.

Cyan did not address the applicability of the PSLRA's automatic stay to state court '33 Act cases. Nor do there appear to be any New York cases concerning this issue. States that have considered the relationship of the PSLRA discovery stay to state actions are divided.

Application of the federal PSLRA automatic discovery stay would undermine Cyan's holding that '33 Act cases may be heard in state courts. Accordingly, I am persuaded that the PSLRA's automatic discovery stay is not applicable to an action brought in New York State court. Lastly, in the Commercial Division discovery generally continues during motion practice. I therefore decline to stay discovery in this action.

(Internal citations omitted).

We have substantial experience in litigation regarding securities, both in state and federal court. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client need help regarding a claim related to stocks, bonds or other financial instruments.