Opinion
Case No. 2:09-cv-1054.
June 18, 2010
ORDER
Counsel for all parties appeared before the Court on June 15, 2010, for the initial Rule 16 conference. At the conference, the Court heard argument on the motion to stay discovery (#47) which was filed on behalf of all defendants on May 28, 2010, and to which plaintiffs responded on June 14, 2010. This order reflects the Court's ruling on the motion to stay.
In their arguments, all parties acknowledged that the Court has the discretion to order, or not to order, a stay of discovery while a motion to dismiss is pending, and that the Court should take into account such factors as the potential merits of the motion to dismiss, the relative cost and benefit of proceeding with discovery while such a motion is pending, and the potential of the motion not only to effect the dismissal of the case in its entirety, but to affect the scope of future discovery. Because there is essentially no disagreement about the appropriate legal standard, but only how that standard should be applied, the Court will not devote additional discussion to that standard.
In applying the law to the facts of this particular case, defendants argue that given the scope of the complaint, which puts at issue more than 300 separate transactions or "deals," discovery, if not limited in some way, will be extraordinarily burdensome. The files relating to such deals are composed of a combination of electronically-stored documents and paper documents, and each deal may have involved different people in both the initial assessment process and the review process. Thus, to produce documentation about those deals, or even a sample of them, would be very time-consuming. Moreover, the motion to dismiss has the potential to change the number of transactions which will be involved in the case. Finally, a litigation hold has been instituted with respect to these documents, so there is little chance that a delay in their production will result in the loss of any significant information. For these reasons, defendants argued that no discovery, even of limited scope, should take place with respect to individual deals. For the most part, the Court agreed with defendants' position on this issue.
Plaintiffs had suggested a compromise which would allow some discovery to begin while the motion to dismiss is pending. The primary focus of that discovery would be documents already produced to government regulatory agencies. Plaintiffs argued that if an index of those documents were produced, they could then select groups of documents which they believed to be relevant to issues in this case, and the defendants would not be excessively burdened by that production because those documents have already been vetted for privilege issues and have been organized for production. Defendants opposed this compromise not only because they believe a total stay of discovery is the most appropriate disposition of the issue, but also because the documents produced to regulators are not currently indexed (and to do so would, again, be time-consuming) and because the regulatory agencies' interests differ from plaintiffs' in important respects, so the productions made to those agencies would have to be re-reviewed for relevancy issues. With some refinements, reflected below, the Court agreed with plaintiffs on this issue, recognizing that a delay in producing basic documents can be prejudicial to the Court's and the parties' interest in having this case decided in an expeditious fashion, and that allowing discovery which imposes only a relatively slight burden on defendants while their motion remains undecided is an appropriate case management decision.
Taking these various interests and arguments into account, and being further informed by counsel's description of the nature of the documents that would be most readily available for production, the Court ordered the following. Discovery is stayed pending a decision on the motion to dismiss with the exception of the following:
1. Defendants shall produce to plaintiffs documents already produced to various state or federal regulators which describe the way in which each defendant evaluated the types of securities involved in this case prior to issuing their published credit ratings, including the procedures and criteria used during the evaluation process.
2. Defendants shall produce documents, or respond to inquiries, relating to the way in which deal-specific documents were created and are currently maintained, including information about the process which defendants would use to collect all documents relevant to each deal, the person or people who would necessarily be involved in that effort (identified by job description), and the categories of documents which would be collected, including specific information about the names given to the deal-specific documents and how and where they are maintained.
3. If plaintiffs believe that more information about the process of identifying and collecting deal-specific documents is needed in order for them to fashion written discovery requests which relate to those documents, they may request a deposition of someone with knowledge about that particular process.
No time frame for this discovery was discussed. Therefore, the parties shall confer about a reasonable time for completion of this discovery and present an agreed order to the Court, if possible, or request a conference on that issue if no agreement can be reached.
This order is premised upon the likelihood that a decision on the motion to dismiss will be forthcoming within the next sixty to ninety days. If that does not occur, and the plaintiffs desire to conduct discovery beyond that permitted by this order, they may, after conferring with opposing counsel, request a modification of this order to permit additional discovery.
Once the motion to dismiss is resolved, and assuming that the case is still pending, the Court will schedule a continued case management conference.
The Clerk shall remove the motion to stay discovery (#47) from the Court's pending motions list.