Assad v. Pershing Square Tontine Holdings, Ltd.

Background

The plaintiff brought this action concerning special purpose acquisition companies, including Pershing Square Tontine Holdings, Ltd. The Pershing Square defendants—Pershing Square Tontine Holdings, Ltd.; Pershing Square TH Sponsor, LLC; Pershing Square, L.P.; Pershing Square International, Ltd.; and Pershing Square Holdings, Ltd.—had filed a motion to dismiss at Docket No. 62.

Before the dismissal motion was resolved, the plaintiff served broad document requests. The defendants filed a letter-motion asking the court to stay, or pause, discovery until the court ruled on the dismissal motion. The plaintiff took no position on that request. The order states that an earlier proposed arrangement under which discovery would begin after a ruling on the dismissal motion had not been presented to the court as a motion for a stay.

The Defendants’ Arguments

The defendants argued that the dismissal motion presented substantial grounds that could independently dispose of the action. They identified arguments concerning the plaintiff’s alleged lack of a private right to bring the claims, standing, the failure to make a pre-suit demand on the board, timeliness, ripeness, whether Pershing Square Tontine Holdings could qualify as an investment company, whether the complaint alleged an underlying violation of the Investment Company Act or Investment Advisers Act, and whether certain claims were brought in the proper forum.

The defendants also argued that discovery would be unusually burdensome. They described the plaintiff’s requests as seeking 33 broad categories of documents and communications, including information about social relationships, communications with the Securities and Exchange Commission, attorney-related communications, board and management activities, and documents concerning anything relevant to the action. They argued that responding would likely generate significant disputes and expense before the court decided whether the case could proceed.

Finally, the defendants argued that a stay would not cause undue delay or prejudice because the plaintiff had previously agreed that discovery should wait until after the dismissal motion was resolved, and the motion was being briefed on an expedited schedule. They also argued that the derivative nature of some claims supported pausing discovery to avoid interfering with the board’s management of the company.

Ruling

Judge Moses granted the application. Discovery is stayed pending resolution of the Pershing Square defendants’ motion to dismiss at Docket No. 62. The parties must submit a joint letter with a proposed discovery schedule within 10 days after the court rules on that motion. The clerk was directed to close the letter-motion at Docket No. 73.

The order addressed only whether discovery should be paused. It did not decide the motion to dismiss or the underlying claims.