Partner Jesse L. Jensen and Associate Alexandra E. Forgione authored an informative article entitled “NY Securities Class Action Ruling Holds Rare Timing Insights,” published by Law360.  The article examines the recent decision in Leone v. ASP Isotopes Inc., in which U.S. District Judge Colleen McMahon simultaneously ruled on motions to dismiss and for class certification—an uncommon occurrence in securities class action litigation.

In examining the court’s discretion on the timing of class certification, the authors note that, while the federal rules do not generally require resolution of motions to dismiss or class certification in any particular order, concurrent briefing and a simultaneous ruling on both “is highly unusual in the securities class action context.”  They point to the Private Securities Litigation Reform Act (PSLRA) as a principal cause, which generally stays discovery during the pendency of any motion to dismiss unless particularized discovery is necessary.  Consequently, the authors explain, “in staying discovery, the PSLRA effectively prohibits class certification until after any motion to dismiss has been decided.”  

Jesse and Alex also highlight the increasingly evidentiary challenges to class certification, discussing decisions such as Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, in which the Supreme Court ruled that “courts have an obligation before certifying a class to determine that Rule 23 is satisfied, even when that requires inquiry into the merits,” and Rensel v. Central Tech Inc., in which the 11th Circuit Court of Appeals observed that Rule 23 “not only supports the expectation that plaintiffs will have some opportunity for discovery before moving for class certification; it also places the onus of ensuring a timely certification decision on the district court, rather than on plaintiffs.”

In contrast, Jesse and Alex outline that, in Leone v. ASP Isotopes Inc., Judge McMahon entered a schedule setting the deadline for filing the amended complaint followed by overlapping briefing scheduled for the defendants’ motion to dismiss and the plaintiffs’ motion for class certification.

Jesse and Alex assess the implications of this scheduling, noting that “it is not immediately clear to what extent the impact of the PSLRA discovery stay was considered in Leone,” but that “this posture required the parties to undertake the expense and burden in developing an evidentiary record around class certification,” emphasizing that this “is no light burden.”  The authors also observe, however, that “the approach in Leone potentially limited far-ranging discovery,” but also potentially raised “an opportunity for earlier appellate consideration” because the federal rules uniquely contemplate potential interlocutory appeal of class certification.  Thus, the authors note, the posture in Leone of ruling on class certification concurrently with the motion to dismiss “conceivably opens the door to appeal earlier than would typically occur.”

Jesse and Alex assess the significance of the case, stating that, by requiring overlapping briefing on both the motion to dismiss and motion for class certification at the outset of the case, “the district court in Leone utilized its discretion in scheduling and resolved both issues early” and “altered the ordinary course of securities class action litigation, including by front-loading certain fact- and expert-specific issues and the prospect of interlocutory appeal.”