Jones v. Syron et al

Filing 14

ORDER transferring 1 Motion to Quash directing this case be resolved in the Southern District of New York further granting 1 Motion to Stay, the compliance dated for the subpoenas at issue are temporarily stayed. Signed by Honorable Paul K. Holmes, III on July 27, 2011. (sh)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
IN RE:

FEDERAL HOME LOAN MORTGAGE
CORP. (FREDDIE MAC)
SECURITIES LITIGATION

JERRY JONES

PLAINTIFF

v.

Case No. 2:11-mc-00019

RICHARD SYRON and
ANTHONY PISZEL

DEFENDANTS
ORDER

This matter is before the Court on Plaintiff’s Motion to Quash
Subpoenas (Doc. 1) directed to non-parties, or in the alternative
to stay compliance dates pending resolution of the motion by this
Court or the proposed transferee Court - the United States District
Court for the Southern District of New York - who is currently
presiding over the underlying Multi-District Litigation action.
Defendants have filed a prompt Response (Doc. 5). On or about July
12, 2011, Defendants served a total of eight subpoenas on Jones’
Fort Smith broker, John Taylor, and his firm, Sterne Agee, seeking
both production of documents and deposition testimony. Jones seeks
to quash the third-party subpoenas only as relates to an included
“catch-all”

provision

requesting

“[a]ny

other

documents

or

communications” between Jones and Taylor or Sterne Agee. (See,
e.g., Doc. 2.2, p. 8, para. 8). The compliance date to produce
documents is July 27, 2011. Jones’ motion was filed on July 25,
2007 with a request for expedited review.

Jones argues that the documents requested under the catch-all
provision should be quashed due to the fact that his securities
fraud claim is premised on a fraud on the market theory of reliance
such that any evidence of his investment trading history tending to
show his sophistication as an investor is irrelevant. The Court has
conducted as thorough a review of case law as possible given the
expedited nature of the motion, and it appears it would be better
suited for the Court actually handling the underlying litigation to
decide

whether

the

discovery

requested

by

the

subpoenas

is

relevant. What case law there is on this issue indicates that
resolution of similar discovery issues in “fraud on the market”
class action cases often hinges on how discovery and the litigation
of the case itself are structured. For instance, some courts have
held that discovery into a single plaintiff’s investment history
will not become appropriate, if at all, either until after class
certification

or

even

until

after

the

matter

of

class-wide

liability has been adjudicated. See, e.g., Lawrence E. Jaffe
Pension Plan v. Household International, Inc., 2005 U.S. Dist.
LEXIS 8610 (N.D. Ill. 2005). Thus, the United States District Court
for the Southern District of New York is better placed to determine
the relevance of the requested discovery, having far more knowledge
as to the history and structure of the underlying litigation than
this Court can hope to glean based on the limited record before it.
There is conflicting case law, as set forth in the parties’
briefs, as to whether an individual plaintiff’s investment history

or

sophistication

is

relevant

in

class

action

securities

litigation. However, based on its review of the case law, the Court
is

persuaded

individual
securities

that

there

plaintiff’s
litigation

is

a

substantial likelihood

investment
is

not

history

relevant

at

in

class

this

stage

that

an

action
of

the

proceedings. As such, the Court finds it appropriate to stay the
compliance dates of the subpoenas pending resolution of the motion
to quash. The purpose of this temporary stay is to preserve the
status quo while giving the MDL Court sufficient opportunity to
consider the merits of the motion to quash. See Brady v. National
Football League, 638 F.3d 1004, 1005 (8th Cir. 2011).
IT IS THEREFORE ORDERED that Plaintiff’s Motion to Quash (Doc.
1) be TRANSFERRED to the United States District Court for the
Southern District of New York for resolution. Plaintiff’s motion to
stay compliance pending resolution of the motion is GRANTED. The
compliance dates for the subpoenas at issue are TEMPORARILY STAYED.

IT IS SO ORDERED this 27th day of July 2011.

/s/Paul K. Holmes, III
PAUL K. HOLMES, III
UNITED STATES DISTRICT JUDGE