S&C Litigation Partner Andrew Finn Authors Bloomberg Insights Article on Influx of Securities Class Actions in New York CourtsSeptember 3, 2019
Following the U.S. Supreme Court’s 2018 decision in Cyan Inc. v. Beaver County Employees Retirement Fund, New York state courts have seen a wave of putative shareholder class actions filed against securities issuers and underwriters. S&C litigation partner Andrew Finn, along with associates Inbar Gal and Elizabeth Young, have authored an article for Bloomberg Insights exploring this trend and extrapolating guidance for parties litigating these types of claims. The article draws on recent decisions, as well as Andrew’s personal experience litigating putative securities class actions before New York state courts.
In the article, Andrew notes that although it is still early in the history of putative securities class actions in New York state courts, “recent decisions suggest that the Commercial Division bench is willing and able to move them along like any other case.” Nonetheless, “significant uncertainty remains about whether and to what extent state courts will work alongside parallel federal securities action, whether defendants will face early and onerous discovery before a motion to dismiss is decided, or whether the Commercial Division (and Appellate Division) will adopt well-settled federal court precedent governing Securities Act claims.” For each of these observations, Andrew offers recent cases to illuminate the challenges and uncertainty faced by defendants in New York state courts in the post-Cyan environment.
With respect to the question of whether discovery can proceed before a motion to dismiss is decided, Andrew says that “uncertainty abounds.” Although it is well-settled in federal court that the Private Securities Litigation Reform Act of 1995 (PSLRA) bars all discovery pending a court’s decision on a motion to dismiss, there is no binding precedent on whether this stay applies in state court, and, as Andrew notes, “initial rulings from the Commercial Division have been divided.” One court has twice ruled that the automatic stay does not apply in New York state court, while Andrew and S&C litigation group managing partner Sharon Nelles were recently successful in persuading another court in the Commercial Division that the stay does apply. However, “[u]ntil the Appellate Division is able to weigh in,” Andrew concludes, “defendants…should be prepared for plaintiffs to attempt to obtain early discovery.”
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