On May 5, 2022, the First Department issued a decision in Nurlybayev v. SmileDirectClub, Inc., 2022 NY Slip Op. 03053, affirming the dismissal of a securities class action in favor of a prior pending class action in another state, explaining:
Supreme Court properly dismissed this action under CPLR 3211(a)(4). Plaintiff in this action and plaintiffs in the Tennessee actions assert substantially similar causes of action and seek substantially similar relief. Moreover, there is substantial identity of the parties in the two actions. Although plaintiff in this action is not a party to the Tennessee actions, he is a potential member of the class in those actions. Furthermore, there are 19 overlapping defendants between this action and the Tennessee actions, and only two different defendants in this action.
In addition, Supreme Court providently exercised its discretion in determining that dismissal, rather than a stay, was the appropriate action. After the instant appeal was fully briefed, the Tennessee Court of Appeals modified the trial court’s order in the Tennessee state litigation. In its decision the Tennessee Court of Appeals held that the class plaintiffs in the Tennessee state litigation do not have standing to bring claims under section 12(a)(2) of the Securities Act of 1934. Plaintiff argues that the instant case, in which he alleges such standing, should accordingly be stayed and not dismissed. However, there is already a pending putative class action in New York County asserting a section 12(a)(2) claim. That action is stayed. Plaintiffs in the consolidated federal class action pending in Tennessee also assert a claim under 12(a)(2). Accordingly, section 12(a)(2) claims remain in other cases that preexist this one, should such claims maintain their viability upon the termination of the Tennessee state litigation.
Plaintiff also argues that he would be entitled to greater damages in this action than in the Tennessee actions because the stock price had dropped by the time he filed this complaint. That argument fails, as federal courts have tried to prevent the practice of date shopping for Securities Act § 11 damages by directing that damages are to be calculated as of the date of filing of the first action. To stay this action and allow plaintiff to calculate damages as of its filing date would create an opportunity for that very practice.
(Internal citations omitted).