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New York State Teachers' Retirement System v. General Motors Co.

United States District Court, Eastern District of Michigan, Southern Division

April 8, 2015

NEW YORK STATE TEACHERS’ RETIREMENT SYSTEM, Individually and on Behalf of All Other Persons Similarly Situated, Plaintiff,
v.
GENERAL MOTORS COMPANY, DANIEL F. AKERSON, NICHOLAS S. CYPRUS, CHRISTOPHER P. LIDDELL, DANIEL AMMANN, CHARLES K. STEVENS, III, MARY T. BARRA, THOMAS S. TIMKO, and GAY KENT, Defendants.

OPINION AND ORDER GRANTING LEAD PLAINTIFF’S MOTION FOR PARTIAL MODIFICATION OF THE PSLRA DISCOVERY STAY

LINDA V. PARKER U.S. DISTRICT JUDGE

This matter currently is before the Court on a motion filed by Lead Plaintiff New York State Teachers’ Retirement System (“NYSTRS”) to partially lift the stay of discovery imposed pursuant to the Private Securities Litigation Reform Act of 1934 (“PSLRA”), 15 U.S.C. § 78u-4(b)(3)(B). The motion, filed on February 4, 2015, has been fully briefed. (See ECF Nos. 64-66.) The Court finds the legal arguments adequately presented in the parties’ papers such that the decision-making process would not be significantly aided by oral argument. Therefore, the Court is dispensing with oral argument with respect to the motion pursuant to Eastern District of Michigan Local Rule 7.1(f)(2). For the reasons that follow, the Court grants NYSTRS’ motion to partially lift the stay.

I. Relevant Background

In this lawsuit, initiated on March 21, 2014, a putative class of investors who purchased securities in General Motors Company (“GM”) between November 17, 2010 and July 24, 2014 (inclusive of both dates), claim that Defendants’ fraud in connection with faulty ignition switches in GM vehicles caused loss to the value of their investments. Several movants sought to be appointed Lead Plaintiff and, on October 14, 2014, this Court appointed NYSTRS. (ECF No. 44.) On January 15, 2015, NYSTRS filed an Amended Complaint. (ECF No. 62.) Defendants have filed motions to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF Nos. 70, 73.)

In the meantime, NYSTRS filed the pending motion to partially lift the PSLRA’s stay of discovery, which remains in effect while Defendants’ motions to dismiss are pending. NYSTRS asks the Court to enter an order partially modifying the stay by: (1) permitting discovery of documents that GM has already gathered, reviewed, and produced, or will produce, to private litigants in multidistrict litigation currently pending before The Honorable Jesse M. Furman of the U.S. District Court for the Southern District of New York (the “MDL Litigation”); and (2) permitting NYSTRS to serve document preservation subpoenas on certain third parties.

The faulty ignition switches and Defendants’ conduct in relation to the defects have been investigated by the National Highway Traffic Safety Administration (“NHTSA”), the U.S. House Committee on Energy and Commerce, the Securities and Exchange Commission, and at least forty-five states. The Department of Justice also launched a criminal investigation and GM hired Anton R. Valukas, a lawyer at the firm of Jenner & Bloch, to conduct an internal investigation. During these various investigations, GM produced millions of pages of documents. On May 16, 2014, GM signed a Consent Order with NHTSA in which GM admitted that it violated the National Traffic and Motor Vehicle Safety Act of 1966 and agreed to pay the maximum $35 million fine in connection with its failure to timely report the ignition switch defects.

The MDL Litigation is comprised of numerous consolidated cases in which private litigants are suing GM and other defendants, seeking damages for economic loss, personal injury, and/or wrongful death allegedly arising from the faulty ignition switches in GM vehicles. Judge Furman, who is presiding over the MDL Litigation, has entered orders requiring GM to produce to the plaintiffs the documents it provided to Congress, NHTSA, and other government agencies, as well as pursuant to Valukas’ investigation. Judge Furman also ordered GM to provide the names of all witnesses interviewed during Valukas’ investigation who were not named in the report ultimately prepared by him. The parties also are engaged in discovery in the MDL Litigation which has resulted in GM producing additional documents.

II. NYSTRS’ Motion and Defendants’ Response

In its pending motion, NYSTRS asks the Court to partially lift the PSLRA stay to obtain the documents already produced in the MDL Litigation, as well as any documents provided in future productions. NYSTRS also seeks to serve preservation subpoenas on the following third parties: (1) GM’s longtime auditor Deloitte & Touche; (2) the supplier of the defective ignition switch, Delphi Corporation; (3) the lead underwriters of GM’s initial public offering, J.P. Morgan Securities LLC and Morgan Stanley & Co., Inc.; (4) rental car companies that had the defective GM vehicles in their fleets and which NYSTRS maintains warned GM that the vehicles were likely defective; and (5) certain Wall Street analysts that covered GM during the Class Period.[1] The preservation subpoenas do not ask any third party to produce any documents and, in fact, emphasize: “No production of documents is required or being sought at this time.” (See ECF No. 64-14, capitalization and emphasis removed.) Instead, the “subpoenas” simply instruct the third parties to retain documents in their custody, possession or control relating to certain proscribed categories (which vary according to the category in which the third party falls). (See id.)

NYSTRS argues that discovery of the documents produced, or which will be produced, in the MDL Litigation is necessary to prevent undue prejudice to the putative class members in this litigation. Specifically, NYSTRS contends that it will suffer prejudice resulting from not having the information which parties in other proceedings have so that it can develop its litigation strategy and weigh its options moving forward. In light of other pending litigation and investigations, NYSTRS also argues that without this discovery, it is deprived of information essential to protect its interests in this “rapidly shifting landscape.” Because GM already collected and produced the documents in the MDL Litigation (and probably, as well, in response to the various investigations), NYSTRS maintains that Defendants will suffer no undue burden in having to produce them here.[2]

NYSTRS argues that service of the preservation subpoenas is necessary to maintain the status quo-- i.e., to guarantee that relevant documents in the hands of third parties are not destroyed while the stay is in effect. NYSTRS points out that these third parties are not obligated to retain these documents and, because some of the conduct at issue occurred more than eleven years ago, may very well be ready to dispose of the documents in accordance with their document retention policies.

NYSTRS maintains that its discovery requests are particularized. As to the document production, NYSTRS notes that its requests are limited specifically to what is or will be produced in the MDL Litigation. As to the preservation subpoenas, NYSTRS indicates that it has specifically identified what types of documentation the third parties should retain.

Defendants respond that NYSTRS has not met its burden of showing that the requested discovery is necessary to preserve evidence or to prevent undue prejudice. Defendants also argue that NYSTRS’ requests are not particularized. According to Defendants, because NYSTRS seeks all documents that will be produced in the MDL Litigation, there is no way for GM or the Court to know what documents NYSTRS’ request will ultimately require GM to produce and thus whether those documents will be relevant to this securities lawsuit. In addition to claiming that they do not know what a “preservation subpoena” is, Defendants argue that NYSTRS’ request is not sufficiently particularized because it has not specifically identified ...


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