Newett v. Leapfrog Enterprises, Inc. et al

Filing 135

ORDER by Judge Edward M. Chen re 134 Joint Discovery Letter. (emclc2, COURT STAFF) (Filed on 7/28/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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IN RE LEAPFROG ENTERPRISE, INC.
SECURITIES LITIGATION,
___________________________________/
This Document Relates to:
All Actions.

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For the Northern District of California

United States District Court

ORDER RE JOINT DISCOVERY
LETTER OF JULY 27, 2017
Docket No. 134

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Case No. 15-cv-00347-EMC

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The parties have submitted a joint letter, dated July 27, 2017, regarding a discovery
dispute. Having considered the contents of that letter, the Court hereby rules as follows.
The Court is not persuaded by Defendants’ contention that the filing of their motion for

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leave to file a motion to reconsider reinstated the PSLRA discovery stay. The authority cited by

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Defendants is not binding on this Court and, in any event, is distinguishable. Neither case

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involved a motion for leave to file a motion for reconsideration, as here.

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Moreover, the PSLRA refers to a stay pending a motion to dismiss, not a motion for leave

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to file a motion for reconsideration or a motion to reconsider. See 15 U.S.C. § 78u-4(b)(3)(B)

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(providing that “all discovery and other proceedings shall be stayed during the pendency of any

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motion to dismiss, unless the court finds, upon the motion of any party, that particularized

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discovery is necessary to preserve evidence or to prevent undue prejudice to that party”).

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Defendants’ construction of § 78u-4(b)(3)(B) is not without some basis. See Powers v. Eichen,

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961 F. Supp. 233, 235-36 (S.C. Cal. 1997) (focusing on the statute’s use of the term “pendency”

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and asking whether “pendency” “should be read narrowly to mean that discovery may commence

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as soon as the district court rules on a motion to dismiss or more broadly to include the district

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court’s reconsideration of a ruling on a motion to dismiss”; concluding that a narrow reading

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would afford a defendant “very little of the protection that Congress intended in passing the

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Reform Act”). But countervailing that interpretation is the risk of delay and abuse. A defendant

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could file repeated motions for leave to file a motion to reconsider or motions for reconsideration

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and prolong the PSLRA discovery stay. Cf. In re Salomon Analyst Litig., 373 F. Supp. 2d 252,

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254-55 (S.D.N.Y. 2005) (noting that, “[i]n a case where the court already has sustained the legal

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sufficiency of the complaint,” the purpose behind the PSLRA discovery stay “has been served”

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and “[t]o permit defendants indefinitely to renew the stay simply by filing successive motions to

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dismiss would be to invite abuse[;] some judicial discretion to evaluate the desirability of a

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renewed stay appears to be necessary”) (emphasis in original).
Finally, as Plaintiff points out, a motion to reconsider a judgment under Rule 60(b) “does

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not affect the judgment’s finality or suspend its operation.” Fed. R. Civ. P. (c)(2). Defendants do

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For the Northern District of California

United States District Court

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not sufficiently explain why that principle should not equally apply here.
Defendants argue that, even if the PSLRA discovery stay has not been reinstated,

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Plaintiff’s complaints are without merit because Defendants have produced what was agreed

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upon. See Letter at 3 (arguing that “[d]ocuments responsive to [categories] 1, 2, 4, 6, 7, and 9

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have been produced” and, for the “outstanding items – [categories] 3 and 8 (essentially

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duplicative) were expressly subject to the parties’ conferring”) (emphasis in original). Plaintiff

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does not expressly address this argument in its portion of the letter and simply argues instead that

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Defendants have failed to produce documents they agreed to produce before mediation, including

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“written policies, correspondence with the SEC, and the basis for the Company’s projected cash

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flows.” Letter at 1-2.
Because the parties have not adequately appeared to meet and confer on the issue, the

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Court instructs the parties to further meet and confer in person to resolve the discovery dispute.

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Lead trial counsel is required to participate in person, absent good cause. The Court emphasizes

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that it does not expect Defendants to provide full merits discovery at this point; however,

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discovery should be sufficient for an informed mediation to go forward.

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This order disposes of Docket No. 134.

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IT IS SO ORDERED.

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Dated: July 28, 2017
______________________________________
EDWARD M. CHEN
United States District Judge

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For the Northern District of California

United States District Court

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