Manger v. Leapfrog Enterprises, Inc. et al

Filing 7

ORDER DENYING EXPEDITED DISCOVERY AND SETTING HEARING ON PRELIMINARY INJUNCTION - Manger's motion for expedited discovery is DENIED. Motion Hearing as to preliminary injunction set for 3/30/2016 02:00 PM in Courtroom 2, 17th Floor, San Franci sco before Hon. William H. Orrick. The parties shall agree upon an expedited briefing schedule that is concluded with a filing by 9 a.m., Pacific Standard Time, on March 28, 2016. Signed by Judge William H. Orrick on 03/16/2016. (jmdS, COURT STAFF) (Filed on 3/16/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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PETE J. MANGER,

Case No. 16-cv-01161-WHO

Plaintiff,
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v.
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LEAPFROG ENTERPRISES, INC., et al.,
Defendants.

ORDER DENYING EXPEDITED
DISCOVERY AND SETTING HEARING
ON PRELIMINARY INJUNCTION
Re: Dkt. No. 6

United States District Court
Northern District of California

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Plaintiff Pete J. Manger, a shareholder of defendant LeapFrog Enterprises, Inc., is

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challenging the acquisition of LeapFrog by VTech Holdings Ltd. through a tender offer set to

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expire on April 1, 2016. His 34 page complaint, which was filed on March 9, 2016, states claims,

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inter alia, that fall under the Private Securities Litigation Reform Act of 1995 (PSLRA). Manger

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intends to file a motion for a preliminary injunction to stop the acquisition and wants expedited

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discovery, including three categories of documents and two depositions, prior to March 23, 2016,

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so that the parties can brief the preliminary injunction argument which Manger hopes will be

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heard on March 30, 2016.

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Manger’s motion for expedited discovery is DENIED. The PSLRA provides that “all

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discovery and other proceedings shall be stayed during the pendency of any motion to dismiss,

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unless the court finds upon the motion of any party that particularized discovery is necessary to

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preserve evidence or to prevent undue prejudice to that party.” 15 U.S.C. 78u-4(b)(3)(B). Given

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the recent filing of the Complaint, defendants have not moved to dismiss yet, but (as in virtually

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all such cases) they assert that they will. In the Ninth Circuit, the PSLRA discovery stay provision

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has been construed to apply until the Court has sustained the legal sufficiency of the complaint.

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See In re JDS Uniphase Corp. Sec. Litig., 238 F. Supp. 2d 1127, 1132-33 (N.D. Cal. 2002).

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There is no necessity shown to preserve evidence here and there is nothing exceptional on
this record that would warrant expedited discovery. I agree with the reasoning in Desmarais v.

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First Niagra Financial Group, Inc., 2016 WL 768257 (D. Del., Feb. 26, 2016), a very similar

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PSLRA case in which the court denied expedited discovery. Manger may file a motion for a

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preliminary injunction and rely on the legal and factual matter in his complaint, as could the

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plaintiff shareholder in Desmarais. If that fails, he has sought other forms of relief, including

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rescissory damages, and he has not shown that such remedies would be inadequate. He has not

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identified any unique circumstances that would differentiate this case from any other matter where

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a shareholder wants to challenge an acquisition; if expedited discovery was granted here, it could

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be granted in any such PSLRA case. That runs counter to Congressional intent and the discovery

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United States District Court
Northern District of California

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stay provision in the PSLRA.

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I will hear argument on March 30, 2016 at 11 a.m. The parties shall agree upon an

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expedited briefing schedule that is concluded with a filing by 9 a.m., Pacific Standard Time, on

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March 28, 2016. If the parties cannot agree on such a schedule, they should notify my Courtroom

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Deputy by March 17, 2016 and I will set it.

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IT IS SO ORDERED.
Dated: March 16, 2016
______________________________________
WILLIAM H. ORRICK
United States District Judge

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