Plaintiffs, holders of American depository receipts (ADRs) representing shares in defendant Sadia S.A., a Brazilian food processing company, brought a securities fraud action pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Defendant moved to dismiss the complaint, thereby triggering an automatic stay of discovery pursuant to the Private Securities Litigation Reform Act of 1995 (PSLRA) pending the resolution of the motion.
Plaintiffs moved to lift the stay to the extent of requiring defendant to produce a report issued at the conclusion of an internal investigation of Sadia (Report) which had already been produced to Brazilian shareholders in a parallel action pending in Brazil.
The court first found that the discovery stay under the PSLRA “may be lifted only when the request is sufficiently particularized and when maintenance of the stay would either generate an impermissible risk of the destruction of evidence or create undue prejudice.” (Emphasis in original.) The court ruled that the request, which was limited to a single identifiable report, was sufficiently particularized. Further, in granting plaintiffs access to the Report, the court ruled that given the existence of the parallel litigation, without access to the Report, the plaintiffs in the New York action would be disadvantaged “vis-à-vis [the] Brazilian litigants.” In reaching its decision, the court noted that there would be little or no burden on Sadia to produce the Report because Sadia had already produced it in the lawsuit in Brazil. (Westchester Putnam Heavy & Highway Laborers Local 60 Benefit Funds v. Sadia S.A., No. 08 Civ. 9528(SAS), 2009 WL 1285845 (S.D.N.Y. May 8, 2009))