City of North Miami Beach Police Officers' and Firefighters' Retirement Plan v…

Background

The plaintiffs brought a securities case against National General Holdings Corp. and other defendants. The court had previously granted defendants’ motion to dismiss and allowed the plaintiff an opportunity to amend its complaint. The plaintiffs then moved to lift the discovery stay imposed by the Private Securities Litigation Reform Act, a federal law that generally pauses discovery while a motion to dismiss is pending.

The plaintiffs argued that defendants were engaging in gamesmanship by concealing the identities of people who attended meetings where the alleged illegal scheme was discussed. They argued that particularized discovery was necessary to prevent undue prejudice.

Legal Standard

The Act requires discovery to be stayed during the pendency of a motion to dismiss unless the court finds that particularized discovery is necessary to prevent undue prejudice. The opinion noted that courts in the Southern District of New York had disagreed about whether plaintiffs must also show exceptional circumstances. The court did not need to resolve that disagreement because it found that the plaintiffs had not shown undue prejudice under either approach.

Ruling

The court denied the plaintiffs’ motion to lift the discovery stay. It emphasized defendants’ representation that no individual defendant attended the meetings described by the plaintiffs. The court concluded that allowing discovery on that record would allow the exception to the statutory stay to swallow the rule. The clerk was directed to close the motion at Docket Number 93.