Tuesday, September 07, 2021

Settlement could moot SCOTUS appeal of PSLRA discovery stay issue

By Anne Sherry, J.D.

Parties in the Pivotal Software class action have reached a settlement in principle, potentially mooting an appeal before the Supreme Court on whether the PSLRA stays discovery in Securities Act cases brought in state court, or only those brought in federal court. The parties jointly requested the Supreme Court recalendar oral argument and hold the proceedings in abeyance while the parties seek approval of the settlement by the Superior Court of California, where the underlying litigation is pending (Pivotal Software, Inc. v. Superior Court of California, City and County of San Francisco, August 27, 2021).

The action at issue was filed in the California Superior Court, challenging statements made in a software company's IPO registration statement and bringing claims under Securities Act Sections 11, 12(a)(2), and 15. The trial court denied a motion to stay discovery after concluding that a provision of the PSLRA staying discovery during the pendency of a motion to dismiss applies only in federal courts. The California appellate and Supreme Court both summarily denied relief, and the U.S. Supreme Court granted certiorari in its final order list of October Term 2020.

The petition for certiorari had argued that the plain language of the provision applies to any private action, just like it says, no matter if brought in state or federal court. The state trial courts, however, are split on the issue. Furthermore, more Securities Act claims are brought in state court since the Supreme Court held in Cyan (U.S. 2018) that state courts have concurrent jurisdiction over Securities Act claims. The issue, however, has consistently evaded appellate review since it arises during a stage not reviewable after final judgment and, moreover, the disputes and orders are often unreported. The petition said that since there is no viable path for appellate review of this question, the Court should take the opportunity to clarify the matter.

Now, however, approximately one week after the petitioners filed their brief, the parties asked the Court to hold the proceedings in abeyance "in the interest of conserving judicial resources" while the parties seek approval of the settlement. If the settlement becomes final, the court will jointly move the Court for voluntary dismissal pursuant to its rules. Otherwise, they will ask the Court to restore the case to its argument calendar and propose a resumed briefing schedule. The parties promised to provide the Court with a joint status report every 45 days or on the schedule the Court deems appropriate.

The case is No. 20-1541.