Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03447/USCOURTS-cand-5_06-cv-03447-4/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

In re Altera Corp Deriv. Litigation

This Document Relates to:

ALL ACTIONS

 /

NO. C 06-03447 JW 

ORDER STAYING DISCOVERY

PENDING DEFENDANTS' ANTICIPATED

MOTION TO DISMISS

On October 2, 2006, the Court conducted a Case Management Conference ("CMC"). In

attendance were Travis Downs of Lerach Coughlin Stoia Geller Rudman & Robbins LLP ("Lerach

Coughlin") and Sandra Smith of Schiffrin & Barroway for Plaintiffs, Craig Martin of Morrison &

Foerster for Nominal Defendant Altera Corp., and Individual Defendants except Erik Cleage, and

Bruce Kelson of Shearman & Sterling for Individual Defendant Erik Cleage. 

During the CMC, the parties disputed whether the Private Securities Litigation Reform Act

of 1995 ("PSLRA") applies to this shareholder derivative case, which alleges violations of the

Securities Exchange Act and Rule 10b-5, breach of fiduciary duty, and unjust enrichment. Plaintiffs

contended that the PSLRA discovery stay does not apply to shareholder derivative actions, but only

to class actions. Defendants contended that the PSLRA discovery stay applies to derivative actions

that allege federal securities law claims. 

In any private action arising under 15 U.S.C. §§ 78a et seq., the PSLRA mandates that the

Court stay discovery during the pendency of any motion to dismiss, unless it is found pursuant to a

party's motion that particularized discovery is necessary to preserve evidence or prevent undue

prejudice to that party. 15 U.S.C. § 78u-4(b)(3)(B). 

Case 5:06-cv-03447-JW Document 36 Filed 10/11/06 Page 1 of 3
United States District Court

For the Northern District of California

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The federal courts have previously applied the PSLRA discovery stay to shareholder

derivative actions alleging violations of federal law. See Erickson v. Horing, 2000 U.S. Dist. LEXIS

22432, *19-*23 (D. Minn. Oct. 23, 2000). The discovery stay applies even when no motion to

dismiss has yet been filed due to the parties' schedule for filing a revised version of the complaint. 

In re Trump Hotel Shareholder Derivative Litig., 1997 U.S. Dist. LEXIS 11353, *3-*4 (S.D.N.Y.

Aug. 5, 1997). In order to fulfill the purposes underlying the PSLRA, the discovery stay also applies

to pendent state law claims and initial disclosures. See, e.g., Medhekar v. Hockey, 99 F.3d 325, 328

(9th Cir. 1996) (initial disclosures); SG Cowen Securities Corp. v. U.S. Dist. Ct., 189 f.3d 909, 913

n.1 (9th Cir. 1999) (pendent state law claims). The Court finds that the PSLRA's discovery stay

applies in this case.

The cases cited by Plaintiffs for the proposition that the PSLRA does not apply to

shareholder derivative actions are distinguishable. Three of Plaintiffs' cases find the PSLRA's

discovery stay inapplicable to derivative actions asserting solely state law claims. See In re First

Bancorp Derivative Litig., 407 F. Supp. 2d 585 (S.D.N.Y. 2006); In re Firstenergy Shareholder

Derivative Litig., 219 F.R.D. 584, 586 (N.D. Ohio 2004); In re Tyco Int'l Ltd. Multidistrict Litig.,

2003 WL 23830479, *3 (D. N.H. Jan. 29, 2003). Because the Plaintiffs have asserted federal

securities claims, these three cases are inapposite. Plaintiffs' fourth case stands for the proposition

that the PSLRA discovery stay does not apply to non-fraud state law claims (e.g. tortious

interference with contract, breach of contract) unrelated to a plaintiff's federal securities fraud

claims. Tobias Holdings, Inc. v. Bank United Corp., 177 F. Supp. 2d 162, 169 (S.D.N.Y. 2001). 

The court there had diversity jurisdiction over the relevant state law claims. Id. at 164. Here,

Plaintiff's state law claims are not wholly distinct, and Tobias Holdings is inapposite.

The Court ORDERS all discovery STAYED pending Defendants' anticipated motion to

dismiss. Defendants shall notice the motion to dismiss for a hearing no later than December 20,

2006. (See Docket Item No. 34.)

Dated: October 11, 2006 

JAMES WARE

United States District Judge

Case 5:06-cv-03447-JW Document 36 Filed 10/11/06 Page 2 of 3
United States District Court

For the Northern District of California

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

Betsy C. Manifold manifold@whafh.com

Bruce B. Kelson bkelson@shearman.com

Elizabeth C Guarnieri ecg@classcounsel.com

Eric L. Zagar ezagar@sbclasslaw.com

Rachele R. Rickert rickert@whafh.com

Robert S. Green RSG@CLASSCOUNSEL.COM

Sean M. Handler ecf_filings@sbclasslaw.com

Travis E. Downs travisd@lerachlaw.com

Dated: October 11, 2006 Richard W. Wieking, Clerk

By: /s/ JW Chambers 

Elizabeth Garcia

Courtroom Deputy

Case 5:06-cv-03447-JW Document 36 Filed 10/11/06 Page 3 of 3