PSLRA Discovery Stay

The automatic discovery stay of the PSLRA was partially lifted by Judge Gerald Rosen on February 15th in the Delphi securities class action (In re Delphi Corp. Secs. Litig., 2007 U.S. Dist. LEXIS 10408 (E.D. Mich. Feb. 15, 2007)). The Court granted the securities plaintiffs access to the materials produced by Delphi, other defendants and third parties to federal authorities, including the SEC and FBI. The Court held that the plaintiffs had sufficiently particularized their request, in accordance with 15 USC § 78u-4(b)(3)(B), by seeking only "'the closed universe of materials that Delphi and third parties have already assembled and produced to other entities in the course of the ongoing investigations.'" Judge Rosen found that the plaintiffs had not established that a lifting of the stay was necessary to preserve evidence. He did find, however, that they would be unduly prejudiced if the stay were not lifted because, as in WorldCom and Enron, the securities plaintiffs were essentially competing claimants for a fixed common fund -- competing with the SEC (which had already settled) and various bankruptcy committees (creditor and equity) that already had access to the documents in dispute. "Lead Plaintiffs here, too, face 'being left with nothing' if this litigation does not keep pace with the bankruptcy and the SEC action.'"

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