On November 2, 2023, a New York state appeals court held, in a matter of first impression for the court, that New York state courts hearing claims under the Securities Act of 1933 are required to stay discovery pending the resolution of a motion to dismiss under the Private Securities Litigation Reform Act (PSLRA) of 1995.
In its Camelot Event Driven Fund v. Morgan Stanley & Co. opinion, the First Judicial Department held that the plain language of the PSLRA demonstrates that the discovery stay "applies to any private action, whether brought in state or federal court." The First Judicial Department also concluded that the PSLRA stay does not apply during the pendency of appeals from lower court rulings denying a defendant's motion to dismiss.
The Camelot decision is the first appellate division decision on this issue and will be binding or persuasive authority for a majority of New York courts, unless or until another appellate decision or New York state appeals court weighs in on the issue.
Milbank LLP Litigation & Arbitration partner Katherine Kelly Fell and associate Jeremy Wertz discuss the significant ramifications that this decision will have for securities litigation in New York state courts in a recent article for Law360. Read “NY Discovery Stay Ruling Empowers Securities Defendants” here.
