In re Meta Platforms, Inc., Securities Litigation

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA [6] 7 In re Meta Platforms, Inc., Securities Case No. 21-cv-08812-AMO Litigation [8] ORDER DENYING MOTION TO 9 MODIFY PSLRA DISCOVERY STAY AND ORDERING NEW CHART RE: 10 MOTION TO DISMISS 11 Re: Dkt. Nos. 110, 134 [12] Before the Court are Plaintiffs’ motion to modify the PSLRA discovery stay and [13] Defendants’ motion to dismiss the complaint. This Order assumes familiarity with the facts of the [14] case. Having read the papers filed by the parties and carefully considered their arguments therein, [15] as well as relevant legal authority, the Court hereby DENIES the motion to modify the discovery [16] stay and ORDERS the parties to prepare a new chart related to the motion to dismiss. [17] I. Motion to Modify PSLRA Discovery Stay [18] Plaintiffs move to partially modify the Private Securities Litigation Reform Act’s [19] (“PSLRA”) automatic stay to allow Plaintiffs to request all documents produced by Defendants to [20] the state attorney general offices that filed suit against Meta in October and November 2023 and [21] the civil plaintiffs in In re Social Media Adolescent Addiction/Personal Injury Products Liability [22] Litigation, No. 4-22-MD-3047 (N.D. Cal.) and Social Media Cases, No. 22 STCV No. 5255 (Cal. [23] Sup. Ct.). Motion (ECF 134) at 5. [24] Under the PSLRA, the district court “must stay all discovery pending a ruling on a motion [25] to dismiss, unless exceptional circumstances exist where particularized discovery is necessary to [26] preserve evidence or to prevent undue prejudice to a party.” SG Cowen Sec. Corp. v. U.S. Dist. [27] 1 78u-4(b)(3)(b); Petrie v. Elec. Game Card, Inc., 761 F.3d 959, 966 (9th Cir. 2014). The stay is 2 intended to prevent discovery abuses such as the “unnecessary imposition of discovery costs on 3 defendants.” Petrie, 761 F.3d at 969 (quoting SG Cowen, 189 F.3d at 911). Accordingly, 4 discovery is generally only permitted “after the court has sustained the legal sufficiency of the 5 complaint.” SG Cowen, 189 F.3d at 912-13 (citation omitted). 6 Plaintiffs move to modify the automatic PSLRA stay, arguing that the documents they seek 7 constitute particularized discovery, and that they will face undue prejudice if the stay is not 8 modified. The Court is not convinced that Plaintiffs’ discovery request is particularized as 9 Plaintiffs’ broad request for all materials disclosed in three sets of cases fails to identify the 10 volume of discovery requested or the subject matter of the documents. See, e.g., In re Am. Funds 11 Sec. Litig., 493 F. Supp. 2d 1103, 1107 (C.D. Cal. 2007) (plaintiffs’ request for all documents 12 produced by defendants to the California Attorney General’s office in pending litigation was not 13 particularized as it failed to identify “specific categories or types of documents sought or how the 14 documents sought will be relevant to the claims Plaintiffs intend to assert in this case”); In re 15 Finisar Corp. Derivative Litig., No. C-06-07660 RMW, 2012 WL 609835 , at *2 (N.D. Cal. Feb. 16 24, 2012) (request for “documents collected in connection with Finisar’s internal investigation,” 17 which covered thousands of documents, was not particularized). 18 Even if Plaintiffs’ request was sufficiently particularized, they have not shown that they 19 will face undue prejudice. Plaintiffs argue that they will face undue prejudice if the Court does not 20 lift the stay because they “will not be able to intelligently assess their position and form a litigation 21 strategy” without these documents and they will be at an “informational disadvantage” to the other 22 parties litigating against Meta. Motion at 27. These circumstances are insufficient to warrant 23 modifying the PSLRA discovery stay. Wanting discovery and not having access to it is not the 24 kind of undue prejudice that justifies lifting a discovery stay. See In re PMC-Sierra, Inc. 25 Derivative Litig., No. C 06-05330 RS, 2008 WL 2024888 , at *4 (N.D. Cal. May 8, 2008) (denying 26 relief from stay where “plaintiffs’ request for leave to conduct discovery [was] based on no more 27 than their desire to ‘uncover facts sufficient to satisfy the Act’s pleading requirements.’ ”). Nor 1 discovery stay.” See In re Facebook, Inc. Shareholder Derivative Privacy Litig., 411 F. Supp. 3d 2 649, 653 (N.D. Cal. 2019) (citing cases). Instead, the need to preserve evidence justifies a court 3 lifting the discovery stay. See SG Cowen, 189 F.3d at 912 (explaining that “the terminal illness of 4 an important witness might require the deposition of the witness prior to the ruling on the motion 5 to dismiss”) (citation omitted). Plaintiffs rely on out-of-circuit cases, but even those cases do not 6 support their position. See, e.g., In re Massey Energy Co. Sec. Litig., No. CIV.A. 5:10-0689, 2011 7 WL 4528509 , at *6 (S.D.W. Va. Sept. 28, 2011) (lifting discovery stay where there was an 8 acquisition of defendant’s company that could “result in the inadvertent destruction of documents” 9 as the new company had no obligation to retain documents). Plaintiffs have not alleged any such 10 risk of loss of evidence here.1 11 Indeed, the very point of the PSLRA stay is that Plaintiffs’ complaint must “stand or fall 12 based on the actual knowledge of the plaintiffs rather than information produced by the defendants 13 after the action has been filed.” Petrie, 761 F.3d at 966 (quoting SG Cowen, 189 F.3d at 912); see, 14 e.g., In re Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prod. Liab. Litig., No. 15-6167, [15] 2016 WL 11796891 , at *3 (N.D. Cal. June 23, 2016) (“Every PSLRA plaintiff is unable to obtain 16 discovery to formulate its litigation strategy until after the court addresses the sufficiency of the 17 pleadings.”). Therefore, there is a risk if the Court permits discovery “before the Court has 18 sustained the legal sufficiency of the Consolidated Complaint, [that] Plaintiffs might attempt to 19 use the information in . . . amending their claims in direct contravention of one of the purposes of 20 the PSLRA.” In re Am. Funds Sec. Litig., 493 F. Supp. 2d 1103, 1106-07 (C.D. Cal. 2007). 21 Accordingly, the Court DENIES Plaintiffs’ motion to modify the automatic discovery stay. 22 II. MOTION TO DISMISS 23 Also pending before the Court is Defendants’ motion to dismiss. At the August 17, 2023 24 hearing, the Court requested that the parties submit a table to help the Court assess the allegations [25] 1 Plaintiffs also argue, relying on an out-of-circuit case, that Defendants are involved in “criminal, [26] civil and administrative investigations and actions . . . with the possibility that settlements might occur and/or fines and penalties might be imposed.” Motion at 26 (citing Massey, 2011 WL 27 4528509, at *6). Even if the Court found this authority persuasive, Plaintiffs have not suggested 1 in the Complaint that 59 statements were misleading or false. The 431-page table that the parties 2 provided did not assist the Court’s analysis of the sufficiency of the pleadings. Accordingly, to 3 aid the Court’s analysis of Plaintiffs’ Complaint, Plaintiffs shall prepare the following chart within 4 30 days, and send it as a Word document to Defendants: 5 Defendants’ Statement Falsity Scienter Ruling Argument [6] When: Compl. ¶¶ A, B, C Compl. ¶¶ X, Y, Z 7 Where: [Leave blank] [Leave blank] Speaker(s): 8 Statement: “ . . . ” 9 Plaintiffs shall not include argument in this chart. They shall simply provide the statements and 10 point the Court to which paragraphs in the Complaint show that the statement was misleading or 11 false, and which paragraphs show scienter. Defendants shall have 15 days to include their 12 arguments in the fourth column, which should be limited to short phrases as to why the statement 13 is not misleading or false, or why there is no scienter, and may at most direct the Court to the 14 pages in their motion that support the argument. The Court cautions Defendants not to provide 15 argument beyond these short phrases and citations, as well as nothing not already presented in 16 their briefing. See the sample for Defendants below: 17 Defendants’ Statement Falsity Scienter Ruling Argument [18] E.g., “vague” or [Do not edit] [Do not edit] [Do not edit] “not objectively [Leave blank] [19] verifiable” 20 (Motion at X) 21 The motion to dismiss will not be considered ripe until the Court has received this chart. 22 III. CONCLUSION 23 For the foregoing reasons, the Court DENIES Plaintiffs’ motion to modify the PSLRA 24 discovery stay. The Court ORDERS the parties to provide a new chart related to the motion to 25 dismiss. Plaintiffs SHALL provide the requested chart to Defendants within 30 days and 26 /// 27 /// 1 Defendants SHALL submit the chart to the Court 15 days thereafter. Defendants shall also 2 submit the chart as a Word document to the Court’s proposed order inbox. [3] 4 IT IS SO ORDERED. 5 Dated: March 4, 2024 coh Wad 4 . ARACELI MARTINEZ-OLGUIN 8 United States District Judge [12] = 13 i [17] Z 18