On November 2, 2023, the First Department issued a decision in Camelot Event Driven Fund v. Morgan Stanley & Co. LLC, 2023 NY Slip Op. 05534, holding that a PSLRA stay applies in state court, but does not extend to appeals of unsuccessful motions to dismiss, explaining:
15 USC § 77z-1(b)(1) provides, “In any private action arising under this subchapter, all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss.” By contrast, 15 USC § 77z-1(a)(1) states, “The provisions of this subsection shall apply to each private action arising under this subchapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.” The plain language of the statute demonstrates that subsection (a) applies only to actions in federal court, whereas subsection (b) applies to any private action, whether brought in state or federal court.
Nevertheless, although we find that the PSLRA stay applies to state court actions, we conclude that it does not apply to stay discovery pending appeals from denials of motions to dismiss. As noted, 15 USC § 77z-1(b)(1) states that discovery shall be stayed during the pendency of any motion to dismiss. Thus, its plain language provides for a stay of discovery only while a motion to dismiss is awaiting disposition. Here, because defendants’ motions to dismiss have been decided, the stay no longer applies. They are not entitled to a stay of discovery pending their appeals from the denial of the motions.
Our determination is consistent with the statute’s purpose. The purpose of the statutory stay is to prevent abusive, expensive discovery in frivolous lawsuits by postponing discovery until after the Court has sustained the legal sufficiency of the complaint. In a case where the court already has sustained the legal sufficiency of the complaint, this purpose has been served.
Additionally, in the federal system, there are no interlocutory appeals as of right. Holding that the PSLRA stay does not apply during the pendency of an appeal from a denial of a motion to dismiss would maintain uniformity between the federal and state systems, preventing an incentive for forum shopping.
(Internal quotations and citations omitted).