October 2, 2003

Hiding The Ball

When a court grants a motion to dismiss a securitites class action based on the failure to meet the heightened pleading standards of the PSLRA, the plaintiffs often seek to file an amended complaint addressing the identified deficiences. At least one court has found, however, that plaintiffs cannot take a wait-and-see-what-happens approach if they are aware of additional facts.

In In re Stone & Webster, Inc. Sec. Litig., 217 F.R.D. 96 (D. Mass. 2003), the court addressed whether to grant a motion for leave to file a second consolidated and amended complaint after dismissing most of the claims in the case because they were not plead with the required specificity. The plaintiffs premised their motion "on the theory that the facts that would allegedly remedy the pleading defects identified in the [court's] order were 'newly discovered,' [but] conceded at the scheduling conference that much of this information was in fact available to them during the pendency of the motions to dismiss." The court found that the plaintiffs' failure to provide these additional facts while the court considered the motion to dismiss was "precisely the sort of 'undue delay' that should result in a denial of leave to amend."

Holding: Motion for leave to amend denied.

Quote of note: "The fact that the plaintiffs chose to oppose the motions to dismiss on the grounds that their complaint was, in their view, sufficiently pleaded, rather than providing the additional information known to them during the necessarily lengthy period during which the motions to dismiss were being considered, smacks of gamesmanship bordering on bad faith."

Posted by Lyle Roberts at October 2, 2003 7:45 PM | TrackBack
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