Couture on PLRSA Discovery

Wendy Gerwick Couture has posted The PSLRA Discovery Stay Meets Complex Litigation: Five Questions Answered on SSRN with the following abstract:

The Private Securities Litigation Reform Act (“PSLRA”) was enacted nearly 20 years ago in order to combat perceived abuses in private securities litigation. One key provision of the Act is the discovery stay, which applies in any private action under the Securities Act of 1933 or the Securities Exchange Act of 1934 and which states that “all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss.” Congress enacted the discovery stay to prevent the perceived abuses of fishing-expedition and extortive discovery. This stay, which applies in a straightforward fashion in simple cases, raises myriad issues in complex cases with multiple defendants, multiple claims, and staggered briefing schedules. The application of the discovery stay in complex cases is often outcome-determinative because, absent discovery, it is extraordinarily difficult for a plaintiff to meet the PSLRA’s heightened pleading standards. Yet, these complexities are rarely addressed by the appellate courts, leaving the district courts in disarray. In this essay, I seek to answer the following five questions that arise when the PSLRA discovery stay meets complex litigation: (1) When does the discovery stay begin? (2) Does the discovery stay apply to successive motions to dismiss, even if the first motion to dismiss was denied in part? (3) Does the discovery stay apply to 12(c) motions for judgment on the pleadings? (4) Does the discovery stay apply to the entire case, even if only a subset of defendants have pending motions to dismiss? (5) After the discovery stay has been lifted, does the PSLRA prevent the plaintiff from relying on discovered materials to assert additional claims against existing, new, or previously dismissed defendants?

I hope that this essay will help guide litigants and courts as they seek to apply the PSLRA discovery stay in complex litigation. I also hope that this essay will encourage other scholars and commentators to delve into this messy and unsettled, yet frequently outcome-determinative, area of securities litigation.