1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 IN RE eHEALTH INC. SECURITIES Case No. 20-cv-02395-JST (LJC) LITIGATION 8 ORDER REGARDING DISCOVERY 9 DISPUTE 10 Re: Dkt. No. 128 11
12 13 Before the Court is the parties’ Joint Discovery Letter, in which Lead Plaintiff requests, 14 and Defendants eHealth, Inc., Scott N. Flanders, Derek N. Yung, and David K. Francis 15 (collectively, Defendants) oppose, an order compelling Defendants to engage in the discovery 16 process. Lead Plaintiff seeks an order that includes a requirement that Defendants meet and confer 17 on a Stipulated Protective Order regarding discovery of Electronically Stored Information (ESI) 18 and to produce documents responsive to his “First Request for Production of Documents 19 (‘RFPs’)”. ECF No. 128. The RFPs consist of fifty-two requests for production. Id. at 23–32.1 20 Defendants contend that, pursuant to the Private Securities Litigation Reform Act of 1995 21 (PSLRA), an automatic stay of discovery applies at this stage of the litigation, while Defendants’ 22 Motions for Judgment on the Pleadings are pending. ECF Nos. 117 and 119. This dispute is fully 23 briefed and suitable for decision without oral argument. Civil L.R. 7-1(b). Having read the 24 briefing filed by the parties and carefully considered their arguments and the relevant legal 25 authority, the Court DENIES Lead Plaintiff’s request. 26 27 I. BACKGROUND 1 In the Joint Discovery Letter, the following litigation history is set forth. On August 12, 2 2021, the Court granted in part and denied in part Defendants’ Motion to Dismiss. ECF No. 64. 3 The Court held that the Complaint had sufficiently alleged that Defendants’ statements on April 4 26, 2018, and February 20, 2020, were actionable. Id. Defendants filed an Answer on October 1, 5 2021. ECF No. 76. A suggestion of death was filed shortly thereafter for then-Lead Plaintiff Billy 6 White. ECF No. 78. Chicago & Vicinity Laborers’ District Council Pension Fund was appointed 7 as Lead Plaintiff and filed a Motion to Supplement the Complaint. ECF Nos. 113, 116. Lead 8 Plaintiff served the RFPs on December 19, 2022, and sent a draft of an ESI Protocol to Defendants 9 on December 21, 2022, asking to meet and confer. Defendants declined to engage in any meet and 10 confer, and served their responses and objections to the RFPs on January 18, 2023, stating they 11 would not engage in discovery while their Motions for Judgment on the Pleadings were pending.2 12 II. DISCUSSION 13 Under the PSLRA, “all discovery and other proceedings shall be stayed during the 14 pendency of any motion to dismiss, unless the court finds upon the motion of any party that 15 particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that 16 party.” 15 U.S.C. § 78u-4(b)(3)(B) (emphasis added). The Supreme Court has noted that the 17 stays of discovery under the PSLRA are “automatic”. Chadbourne & Parke LLP v. Troice, 571 18 U.S. 377, 383 (2014); see, also, In re American Funds Securities Litigation, 493 F.Supp.2d 1103, 19 1104 (C.D. Cal. 2007) (PSLRA “enacted the mandatory stay of discovery[.]”). 20 In Petrie v. Electric Game Card, Inc., the Ninth Circuit addressed the application of 21 PSLRA’s discovery stay, specifically the retroactive application of the statute to prohibit a party 22 from accepting third-party responses to properly-issued requests for written discovery. 761 F.3d 23 959, 968 (9th Cir. 2014). The Ninth Circuit stated, “[t]he common sense reading of the PSLRA’s 24 plain language ‘all discovery and other proceedings shall be stayed’ is that no litigant shall take 25 any steps in pursuit of discovery during the pendency of any motion to dismiss.” Id. The parties 26 27 1 in Petrie did not distinguish between motions to dismiss and motions for judgment on the 2 pleadings, and the Ninth Circuit, therefore, assumed that “the PSLRA discovery stay provision is 3 triggered by a motion for judgment on the pleadings in the same manner it is triggered by a motion 4 to dismiss.” Id. at 968 n.11. Indeed, the Ninth Circuit has long held that motions filed pursuant to 5 Rule 12(b) and Rule 12(c) are “functionally identical,” as they test the sufficiency of a plaintiff’s 6 allegations but differ with respect to the time of filing. Cafasso, U.S. ex rel. v. General Dynamics 7 C4 Systems, Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (citing Dworkin v. Hustler Magazine, 8 Inc., 867 F.2d 1188, 1192 (9th Cir. 1989)). 9 Lead Plaintiff does not argue that the discovery stay provision is ambiguous or explain 10 how the text lends itself to a meaning other that the common sense reading that the Ninth Circuit 11 articulated. Instead, Lead Plaintiff argues that Defendants’ Motions for Judgment on the 12 Pleadings “are really improper requests for reconsideration” of the Court’s prior order finding 13 sufficient allegations for certain securities claims, or alternative the motions present questions of 14 fact that must be considered at summary judgment or trial. ECF No. 128 at 2. However, the 15 undersigned is not in a position to prejudge the merits of Defendants’ pending motions. 16 Lead Plaintiff has not offered any compelling argument as to why this Court should 17 interpret the PSLRA differently from district courts that treat a Rule 12(c) motion the same as a 18 Rule 12(b)(6) motion for purposes of the discovery stay provision. In the Eastern District of New 19 York, a court found that “a Rule 12(c) motion is a ‘motion to dismiss’ within the meaning of the 20 PSLRA automatic stay provision, and that therefore the stay is triggered by defendants’ Rule 12(c) 21 motion.” Gardner v. Major Auto. Companies, No. 11-CV-1664 FB, 2012 WL 1230135, at *4 22 (E.D.N.Y. Apr. 12, 2012). Lead Plaintiff contends that this Court should disregard Gardner, as a 23 Report and Recommendation issued by a magistrate judge. However, no objections to the 24 recommendations were filed, and thus, the Report and Recommendation serves as the District 25 Court’s discovery order. See Gardner v. Major Auto. Companies, No. 11-CV-1664 FB, 26 (E.D.N.Y.), ECF Nos. 40–41. In the Southern District of Texas, a court found a “motion for 27 judgment on the pleadings under Rule 12(c) may trigger the [PSLRA] stay in the same way as a 1 & Co. LLC, No. CV H-12-CV-1777, 2012 WL 12894738, at *2 (S.D. Tex. Oct. 30, 2012). 2 At most, Lead Plaintiff asserts a policy argument. Congress, however, has balanced the 3 various policy interests at stake in securities litigation, including a plaintiff’s need for discovery, 4 and adopted an automatic stay provision that necessarily entails some delay. Lead Plaintiff warns 5 that allowing successive stays would result in undue delays in discovery, citing, a “defendant 6 could file repeated motions for leave to file a motion to reconsider or motions for reconsideration 7 and prolong the PSLRA discovery stay.” In re LeapFrog Enter., Inc. Sec. Litig., No. 15-CV- 8 00347-EMC, 2017 WL 3263114, at *1 (N.D. Cal. July 28, 2017). The LeapFrog court was 9 concerned with motions for reconsideration, which are different from the Motions for Judgment 10 on the Pleadings pending in this case. As this Court already noted, a “motion for judgment on the 11 pleadings, like a motion to dismiss for failure to state a claim, addresses the sufficiency of a 12 pleading,” and a court “applies essentially the same standard on a Rule 12(c) motion as motions 13 brought pursuant to Rule 12(b)(6).” Plumbers & Pipefitters Loc. 572 Pension Fund v.
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 IN RE eHEALTH INC. SECURITIES Case No. 20-cv-02395-JST (LJC) LITIGATION 8 ORDER REGARDING DISCOVERY 9 DISPUTE 10 Re: Dkt. No. 128 11
12 13 Before the Court is the parties’ Joint Discovery Letter, in which Lead Plaintiff requests, 14 and Defendants eHealth, Inc., Scott N. Flanders, Derek N. Yung, and David K. Francis 15 (collectively, Defendants) oppose, an order compelling Defendants to engage in the discovery 16 process. Lead Plaintiff seeks an order that includes a requirement that Defendants meet and confer 17 on a Stipulated Protective Order regarding discovery of Electronically Stored Information (ESI) 18 and to produce documents responsive to his “First Request for Production of Documents 19 (‘RFPs’)”. ECF No. 128. The RFPs consist of fifty-two requests for production. Id. at 23–32.1 20 Defendants contend that, pursuant to the Private Securities Litigation Reform Act of 1995 21 (PSLRA), an automatic stay of discovery applies at this stage of the litigation, while Defendants’ 22 Motions for Judgment on the Pleadings are pending. ECF Nos. 117 and 119. This dispute is fully 23 briefed and suitable for decision without oral argument. Civil L.R. 7-1(b). Having read the 24 briefing filed by the parties and carefully considered their arguments and the relevant legal 25 authority, the Court DENIES Lead Plaintiff’s request. 26 27 I. BACKGROUND 1 In the Joint Discovery Letter, the following litigation history is set forth. On August 12, 2 2021, the Court granted in part and denied in part Defendants’ Motion to Dismiss. ECF No. 64. 3 The Court held that the Complaint had sufficiently alleged that Defendants’ statements on April 4 26, 2018, and February 20, 2020, were actionable. Id. Defendants filed an Answer on October 1, 5 2021. ECF No. 76. A suggestion of death was filed shortly thereafter for then-Lead Plaintiff Billy 6 White. ECF No. 78. Chicago & Vicinity Laborers’ District Council Pension Fund was appointed 7 as Lead Plaintiff and filed a Motion to Supplement the Complaint. ECF Nos. 113, 116. Lead 8 Plaintiff served the RFPs on December 19, 2022, and sent a draft of an ESI Protocol to Defendants 9 on December 21, 2022, asking to meet and confer. Defendants declined to engage in any meet and 10 confer, and served their responses and objections to the RFPs on January 18, 2023, stating they 11 would not engage in discovery while their Motions for Judgment on the Pleadings were pending.2 12 II. DISCUSSION 13 Under the PSLRA, “all discovery and other proceedings shall be stayed during the 14 pendency of any motion to dismiss, unless the court finds upon the motion of any party that 15 particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that 16 party.” 15 U.S.C. § 78u-4(b)(3)(B) (emphasis added). The Supreme Court has noted that the 17 stays of discovery under the PSLRA are “automatic”. Chadbourne & Parke LLP v. Troice, 571 18 U.S. 377, 383 (2014); see, also, In re American Funds Securities Litigation, 493 F.Supp.2d 1103, 19 1104 (C.D. Cal. 2007) (PSLRA “enacted the mandatory stay of discovery[.]”). 20 In Petrie v. Electric Game Card, Inc., the Ninth Circuit addressed the application of 21 PSLRA’s discovery stay, specifically the retroactive application of the statute to prohibit a party 22 from accepting third-party responses to properly-issued requests for written discovery. 761 F.3d 23 959, 968 (9th Cir. 2014). The Ninth Circuit stated, “[t]he common sense reading of the PSLRA’s 24 plain language ‘all discovery and other proceedings shall be stayed’ is that no litigant shall take 25 any steps in pursuit of discovery during the pendency of any motion to dismiss.” Id. The parties 26 27 1 in Petrie did not distinguish between motions to dismiss and motions for judgment on the 2 pleadings, and the Ninth Circuit, therefore, assumed that “the PSLRA discovery stay provision is 3 triggered by a motion for judgment on the pleadings in the same manner it is triggered by a motion 4 to dismiss.” Id. at 968 n.11. Indeed, the Ninth Circuit has long held that motions filed pursuant to 5 Rule 12(b) and Rule 12(c) are “functionally identical,” as they test the sufficiency of a plaintiff’s 6 allegations but differ with respect to the time of filing. Cafasso, U.S. ex rel. v. General Dynamics 7 C4 Systems, Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011) (citing Dworkin v. Hustler Magazine, 8 Inc., 867 F.2d 1188, 1192 (9th Cir. 1989)). 9 Lead Plaintiff does not argue that the discovery stay provision is ambiguous or explain 10 how the text lends itself to a meaning other that the common sense reading that the Ninth Circuit 11 articulated. Instead, Lead Plaintiff argues that Defendants’ Motions for Judgment on the 12 Pleadings “are really improper requests for reconsideration” of the Court’s prior order finding 13 sufficient allegations for certain securities claims, or alternative the motions present questions of 14 fact that must be considered at summary judgment or trial. ECF No. 128 at 2. However, the 15 undersigned is not in a position to prejudge the merits of Defendants’ pending motions. 16 Lead Plaintiff has not offered any compelling argument as to why this Court should 17 interpret the PSLRA differently from district courts that treat a Rule 12(c) motion the same as a 18 Rule 12(b)(6) motion for purposes of the discovery stay provision. In the Eastern District of New 19 York, a court found that “a Rule 12(c) motion is a ‘motion to dismiss’ within the meaning of the 20 PSLRA automatic stay provision, and that therefore the stay is triggered by defendants’ Rule 12(c) 21 motion.” Gardner v. Major Auto. Companies, No. 11-CV-1664 FB, 2012 WL 1230135, at *4 22 (E.D.N.Y. Apr. 12, 2012). Lead Plaintiff contends that this Court should disregard Gardner, as a 23 Report and Recommendation issued by a magistrate judge. However, no objections to the 24 recommendations were filed, and thus, the Report and Recommendation serves as the District 25 Court’s discovery order. See Gardner v. Major Auto. Companies, No. 11-CV-1664 FB, 26 (E.D.N.Y.), ECF Nos. 40–41. In the Southern District of Texas, a court found a “motion for 27 judgment on the pleadings under Rule 12(c) may trigger the [PSLRA] stay in the same way as a 1 & Co. LLC, No. CV H-12-CV-1777, 2012 WL 12894738, at *2 (S.D. Tex. Oct. 30, 2012). 2 At most, Lead Plaintiff asserts a policy argument. Congress, however, has balanced the 3 various policy interests at stake in securities litigation, including a plaintiff’s need for discovery, 4 and adopted an automatic stay provision that necessarily entails some delay. Lead Plaintiff warns 5 that allowing successive stays would result in undue delays in discovery, citing, a “defendant 6 could file repeated motions for leave to file a motion to reconsider or motions for reconsideration 7 and prolong the PSLRA discovery stay.” In re LeapFrog Enter., Inc. Sec. Litig., No. 15-CV- 8 00347-EMC, 2017 WL 3263114, at *1 (N.D. Cal. July 28, 2017). The LeapFrog court was 9 concerned with motions for reconsideration, which are different from the Motions for Judgment 10 on the Pleadings pending in this case. As this Court already noted, a “motion for judgment on the 11 pleadings, like a motion to dismiss for failure to state a claim, addresses the sufficiency of a 12 pleading,” and a court “applies essentially the same standard on a Rule 12(c) motion as motions 13 brought pursuant to Rule 12(b)(6).” Plumbers & Pipefitters Loc. 572 Pension Fund v. Cisco Sys., 14 Inc., 411 F. Supp. 2d 1172, 1174 (N.D. Cal. 2005). In other words, a court is concerned with the 15 sufficiency of the complaint in examining a motion for judgment on the pleadings, granting relief 16 only after “taking all the allegations in the pleading as true.” Heliotrope Gen., Inc. v. Ford Motor 17 Co., 189 F.3d 971, 978–79 (9th Cir. 1999) (internal quotation marks omitted). And the purpose 18 for the PSLRA automatic stay is to solidify sufficient pleadings before engaging in costly 19 discovery. In contrast, a motion for reconsideration does not focus on the pleadings but allows a 20 court the discretion “to vacate judgments whenever such action is appropriate to accomplish 21 justice.” Phelps v. Alameida, 569 F.3d 1120, 1135 (9th Cir. 2009) (internal quotation marks 22 omitted). 23 Moreover, a party seeking a motion for judgment on the pleadings is entitled to a PSLRA 24 automatic stay notwithstanding a prior filing of a motion to dismiss. As the Ninth Circuit has 25 noted, “[w]hen an amended complaint is filed after an earlier complaint has been upheld (at least 26 in part), the bulk of district courts have ruled that filing a motion to dismiss the amended 27 complaint also triggers a stay of any discovery.” Petrie, 761 F.3d at 968 (citing multiple cases, 1 *3 (D. Nev. Nov. 20, 2012)); see, e.g., Wang v. Lightspeed Env’t, Inc., No. 12-14283, 2014 WL 2 || 29120, at *10 n.2 (E.D. Mich. Jan. 3, 2014) (“[T]he automatic stay has been held to apply to both 3 || initial and successive motions to dismiss.”). Lead Plaintiff's reliance on In re Salomon Analyst 4 Litigation, 373 F. Supp. 2d 252, 254-56 (S.D.N.Y. 2005), is unpersuasive, compared to the 5 reasoning advanced in a later decision, Fosbre, 2012 WL 5879783, at *2-3. 6 As such, on this record, this Court holds that Defendants’ Motions for Judgment on the 7 || Pleadings trigger the PSLRA automatic stay of discovery. 8 Lead Plaintiff is not without recourse to seek a court order allowing discovery. Under the 9 || PSLRA, the automatic stay of discovery can be lifted if “the court finds upon the motion of any 10 || party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice 11 to that party.” 15 U.S.C. § 78u-4(b)(3)(B). Lead Plaintiff, at this time, has not shown the need to 12 || preserve evidence or any evidence of prejudice such that this Court should lift the discovery stay. 13 Indeed, Lead Plaintiff had not made a particularized demand for discovery or advanced argument 14 || to establish undue prejudice. 15 || I. CONCLUSION 16 The Court DENIES Plaintiffs’ request to compel discovery while Defendants’ have their 3 17 Motions for Judgment on the Pleadings pending. 18 IT IS SO ORDERED. 19 || Dated: June 12, 2023 20 21 J.C ROS 22 ted States Magistrate Judge 23 24 25 26 27 28