Latham v. Matthews et al

Filing 179

ORDER denying 132 Motion to Enforce Stay; granting 139 Motion for Joinder; granting 142 Motion for Joinder; granting 164 Motion for Joinder; granting 170 Motion for Joinder. Signed by Magistrate Judge Kevin McDonald on 8/20/10.(ladd, )

Latham v. Matthews et al

Doc. 179

IN THE DISTRICT COURT OF THE UNITED STATES F O R THE DISTRICT OF SOUTH CAROLINA G R E E N V IL L E DIVISION

R O B E R T A. LATHAM, individually and on B e h a lf of All Others Similarly Situated,

) ) ) Plaintiff, ) ) vs. ) ) M IT C H E L L J. STEIN, BILL MATTHEW S , ) P A M E L A M. BUNES, BUDIMIR S. DRAKULIC, ) R O B E R T C. SCHERNE, KEVIN F. PICKARD, ) L O W E L L R. HARMISON, MARVIN H. FINK ) a n d SIGNALIFE, INC., ) ) Defendants. ) ) D A R R YL K. ROTH, individually and on B e h a lf of All Others Similarly Situated, Plaintiff, vs. M IT C H E L L J. STEIN, W IL L IA M R. M A T T H E W S , PAMELA M. BUNES, B U D IM IR S. DRAKULIC, ROBERT C. S C H E R N E , KEVIN F. PICKARD, L O W E L L R. HARMISON, MARVIN H. FINK a n d SIGNALIFE, INC., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No. 6:08-2995-RBH

ORDER

Civil Action No. 6:08-3183-RBH

T h is matter is before the court on the motion of defendants Pickard, Scherne a n d Drakulic to enforce the Private Securities Litigation Reform Act of 1995 ("PSLRA") stay. D e f e n d a n ts Bunes, Harmison, and Signalife, Inc. have filed motions to join in the motion to e n fo rce the stay. The motions, which were filed in each of the above-captioned cases, were

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re fe rre d to this court for adjudication by the Honorable R. Bryan Harwell, United States District J u dg e .

B AC K G R O U N D T h e plaintiffs are putative class members in consolidated actions involving a lle g ed violations of federal securities laws and regulations. The defendants are a medical d e vic e corporation and certain employees, officers, and board members of that corporation. F o r their consolidated class action complaint, the plaintiffs have alleged violations of Sections 1 0 (b) and 20(a) of the Securities Exchange Act of 1934. 15 U.S.C. § 78a, et seq.; 17 C.F.R. § 240.10b-5. On February 11, 2009, defendants Signalife, Inc., Harmison, Matthews, Scherne, P ic k ard , and Bunes filed various motions to dismiss the plaintiffs' complaint. On September 4, 2 0 0 9 , Judge Harwell entered an order granting in part and denying in part the motions to d is m i s s and staying the case pending the Supreme Court's decision in Merck & Co., Inc. v. R e y n old s , 129 S.Ct. 2432 (2009). Judge Harwell's order provided that the plaintiffs could seek re c o n s id e ra tio n of the court's dismissal of certain claims, which were based on statute of lim itation s grounds, after Merck was issued and the court-imposed stay was lifted. A f te r being served with the complaint on or about September 2, 2009, defendant D rak u lic filed a motion to dismiss on October 8, 2009. The plaintiffs filed their opposition to D ra k ulic 's motion to dismiss on October 29, 2009, and on November 9, 2009, Drakulic filed a reply in support of his motion. On December 23, 2009, Judge Harwell granted the parties' jo in t motion to stay the determination of Drakulic's motion to dismiss until February 9, 2010. O n May 11, 2010, Judge Harwell lifted the stay imposed by the September 4, 2009 order, in c lu d in g the stay relating to Drakulic's motion to dismiss. On June 8, 2010, the plaintiffs m o v e d for reconsideration of the September 4, 2009, order denying in part and granting in part

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th e defendants' joint and separate motions to dismiss. D ra k ulic 's motion to dismiss remain pending.

The motion to reconsider and

O n June 16, 2010, the plaintiffs sent defendants a letter requesting a Rule 26(f) c o n fe ren c e . Counsel for defendants Pickard, Scherne, and Drakulic (the "moving defendants") res p o n d e d on June 18 that a Rule 26(f) conference was inappropriate because the automatic d is c ov e ry stay under the PSLRA was in effect. On June 21, the moving defendants received b y mail a request for production of documents and a Rule 30(b)(6) deposition notice to S ig n alife . Also on June 21, the plaintiffs sent another letter contending that the PSLRA stay w a s not in effect and threatening to move to compel under Rule 37. The moving defendants re s po n de d the next day, reiterating their position that the PSLRA discovery stay applies, and th e plaintiffs again disagreed. The instant motion was filed by the moving defendants on J u n e 25, and the plaintiffs filed their opposition on July 12. The motion was referred to this c o u rt by Judge Harwell on July 19, and the moving defendants filed a reply on July 21. A h e arin g on the motion was held before this court on August 17 by telephone.

AP P L IC AB L E LAW AND ANALYSIS T h e moving defendants argue that the PSLRA requires that discovery be stayed u n til the court has decided defendant Drakulic's motion to dismiss or the plaintiffs' motion to re c on s id e r, whichever is later. Having carefully considered the briefs, exhibits, and oral a rg u m e n ts of the parties, the court denies the motion. T h e PSLRA states: In any private action arising under this Act, all discovery and other p ro c ee d in g s shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party th a t particularized discovery is necessary to preserve evidence o r to prevent undue prejudice to that party. 1 5 U.S.C. § 78u-4(b)(3)(B).

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T h e moving defendants argue the statute is unambiguous, and the stay applies d u rin g the pendency of any motion to dismiss. This court disagrees. As stated by the United S ta te s District Court for the Southern District of New York in In re Global Crossing, LTD. S e c u ritie s Litigation, "The statute does not specify how the stay is to be applied in cases in v olv in g multiple defendants bringing multiple motions to dismiss." 322 F.Supp.2d 319, 352 (S .D .N .Y. 2004). Similarly, the United States District Court for the District of Massachusetts h a s stated as follows: D e fe n da n ts argue that the language "all discovery shall be stayed ... during the pendency of any motion to dismiss" is plain on its fa c e and should be interpreted as precluding discovery, even as to those four defendants whose motions to dismiss were denied, s o long as any other defendant's motion to dismiss is pending. A close reading of the statutory provision suggests that its m ea n ing is not as plain as defendants contend. The language "all d is c o v e ry ... shall be stayed during the pendency of any motion to dismiss" suggests two competing reasonable interpretations. O n e , which defendants support, would read "any" as "all," s u gg e stin g that no discovery may proceed against any party to an a c tio n until all motions by all parties are resolved. The provision c o uld also be read to mean that all discovery against a party must b e stayed during the pendency of any motion to dismiss filed by th a t party. I conclude that the provision is ambiguous on its face. In re Lernout & Hauspie Securities Litigation, 214 F.Supp.2d 100, 105 (D. Mass. 2002). The c o urt then looked to the legislative history of the PSLRA and determined that "[i]t does not a p p e a r that Congress specifically considered the scenario of multiple defendants with multiple m o tion s to dismiss." Id. at 106. This court agrees. T h e PSLRA's stay of discovery provision "clearly contemplates that `discovery s h ou ld be permitted in securities class actions only after the court has sustained the legal s u ffic ie n cy of the complaint.'" SG Cowen Sec. Corp. v. U.S. Dist. Court for Northern Dist. of C A , 189 F.3d 909, 912-13 (9th Cir. 1999) (citing S.Rep. No. 104-98, at 14 (1995) reprinted in

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U .S .C .C .A .N . 693) (emphasis in original). In In re Salomon Analyst Litig., the district court s ta te d : T h e purpose of the [PSLRA] stay is to prevent abusive, e x p en s iv e discovery in frivolous lawsuits by postponing discovery u n til `after the Court has sustained the legal sufficiency of the c o m p lain t.' In a case where the court has already sustained the le g al sufficiency of the complaint, this purpose has been served. T o permit defendants indefinitely to renew the stay simply by filing s u c c e s s iv e motions to dismiss would be to invite abuse. 373 F.Supp.2d 252, 254-55 (S.D.N.Y. 2005) (citation omitted; emphasis in original). T h e court in In re Lernout concluded that allowing discovery to proceed against the four defendants whose motions to dismiss had been denied was appropriate as "discovery a g a ins t those defendants cannot be deemed merely a `fishing expedition' to find a sustainable c la im . Senate Report at 14, 693. Nor can discovery against those defendants be an attempt to force `innocent parties to settle frivolous class actions.' Conference Report at 37, 735." In re Lernout, 214 F.Supp.2d at 106. Similarly, the purpose of the statutory stay has been served in this case, and discovery should proceed as to defendants Signalife, Inc., Harmison, M a tth e w s , Scherne, Pickard, and Bunes. The complaint in this case was filed nearly two years a g o. The court's September 4, 2009, order found the plaintiffs' complaint is legally sufficient a s to defendants Signalife, Inc., Harmison, Matthews, Scherne, Pickard, and Bunes. There is no indication the plaintiffs need to or intend to use discovery to replead any of their claims. F u rth e rm o re , discovery will proceed as to these defendants regardless of whether defendant D ra k ulic 's motion to dismiss is granted. In addition, discovery will proceed as to these d e fe n da n ts whether or not the plaintiffs' motion for reconsideration is granted or denied as the m o tio n requests only that the court reconsider its decision to dismiss two claims under the s ta tu te of limitations based on the Merck decision. Accordingly, this court finds that the motion to enforce the PSLRA stay should be denied, and discovery should proceed as to defendants S ign a life , Inc., Harmison, Matthews, Scherne, Pickard, and Bunes.

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C O N C L U S IO N B a s e d upon the foregoing, IT IS ORDERED that the motions of defendants Bunes, Harmison, and Signalife, In c . to join in the motion to enforce the PSLRA stay are granted. The motion to enforce the P S L R A stay is denied.

s /K e v in F. McDonald U n ite d States Magistrate Judge A u g u st 20, 2010 G re e nv ille , South Carolina

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