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Roy John Good, Individually and On Behalf of All Others Similarly Situated v. Ronald J. De Lange et al

December 29, 2011

ROY JOHN GOOD, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
RONALD J. DE LANGE ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: John A. Houston United States District Judge

ORDER GRANTING DEFENDANTS' MOTION TO STAY STATE COURT DISCOVERY [DOC. # 6]

INTRODUCTION

Currently pending before this Court is the motion to stay state court proceedings filed by defendants Ronald J. De Lange, Hubert de Pesquidoux, Ronald W. Buckly, Anthony Colaluca, Jr., Thomas J. Coleman, Jean-Yves Courtois, Carol G. Mills, Michael P. Ressner, and Tekelec (collectively "the Tekelec defendants").

The motion has been fully briefed by the parties. After a review of the pleadings and relevant exhibits submitted, and for the reasons set forth below, this Court GRANTS the Tekelec defendants' motion.

BACKGROUND

On December 2, 2011, plaintiff Roy John Good ("plaintiff") filed a class action complaint against the Tekelec defendants and against defendants Siris Capital Group, LLC; Titan Private Holdings I, LLC; and Titan Private Acquisition Corp. (collectively "the Buyer defendants"). The instant complaint asserts causes of action for (1) breach of fiduciary duties, (2) aiding and abetting the breach of fiduciary duties, and (3) violation of Section 14(a) of the Securities Exchange Act. Plaintiff seeks declaratory and injunctive relief, rescission and rescissory damages, an accounting of defendants' alleged unlawful gains, fees and costs, and such other equitable relief this Court deems just and proper.

Plaintiff alleges, in his complaint, that Tekelec is a California corporation that provides core network solutions and, on November 7, 2011, Tekelec announced it had entered into an agreement whereby the Buyer defendants would purchase all outstanding shares of Tekelec for $11.00 per share, $780 million total. Plaintiff alleges the Tekelec defendants breached their fiduciary duties by failing to disclose material facts in the proxy statement released in anticipation of the shareholders vote set to approve the acquisition on January 25, 2012. Specifically, plaintiff alleges the proxy statement failed to disclose material facts regarding: (1) the sales process used by the Tekelec defendants in deciding to enter the transaction with the Buyer defendants, (2) Tekelec's financial forecasts used by Tekelec's financial advisor, Goldman Sachs, in preparing the fairness opinion, and (3) certain other data and inputs used by Goldman Sachs in preparing information included in the proxy statement.

On December 21, 2011, the Tekelec defendants filed the instant motion to stay state court discovery pursuant to the Securities Litigation Uniform Standards Act ("SLUSA"), 15 U.S.C. § 78u-4(b)(3)(D). Doc. # 6. On December 23, 2011, plaintiff Roy John Good ("the federal plaintiff") filed a notice of non-opposition to the Tekelec defendants' motion. Doc. # 8. On December 23, 2011, the Tekelec defendants filed an ex parte application for an expedited hearing on the motion to stay state court discovery. Doc. # 10. On December 27, 2011, plaintiff filed a notice of non-opposition to the ex parte application for an expedited hearing. Doc. # 13. Also on December 27, 2011, plaintiffs in Friedberg et al. v. Tekelec, et al., Case No. 37-2011-00100833-CU-BT-CT2 ("specially-appearing state court plaintiffs") filed a response in opposition to the Tekelec defendants' motion to stay state court discovery under SLUSA. Doc. # 15. On December 28, 2011, the Tekelec defendants filed a reply to the specially-appearing state court plaintiffs' opposition. Doc. # 16.

DISCUSSION

The Tekelec defendants seek an order staying discovery in three state court actions.*fn1

1. Legal Standard

The SLUSA allows a district court to "stay discovery proceedings in any private action in a State court, as necessary in aid of its jurisdiction, or to protect or effectuate its judgments, in an action subject to a stay of discovery ..." 15 U.S.C. § 78u-4(b)(3)(D). In determining whether to grant such a stay, the district court may consider "the risk of federal plaintiffs obtaining the state plaintiffs' discovery, the extent of factual and legal overlap between the state and federal actions and the burden of state-court discovery on defendants." In re Dot Hill Sys. Corp. Secs. Litig., 594 F.Supp.2d 1150, 1165 (S.D. Cal. 2008)). There are two general purposes behind the stay provisions of the SLUSA: (1) to prevent the imposition of any unreasonable burden on a defendant before disposition of a motion to dismiss; and (2) to avoid the situation where discovery at the state court level allows a federal plaintiff, who would not otherwise be able to meet the PSLRA's heightened pleading requirement, an opportunity to acquire information and resuscitate a complaint otherwise subject to dismissal. See In re Gilead Sciences Sec. Litig., 2004 WL 3712008 *2 (N.D.Cal.); In re DPL Inc. Sec. Litig., 247 F.Supp.2d 946, 947 (S.D. Ohio 2003).

2. Analysis

The Tekelec defendants argue that all considerations weigh heavily in favor of granting a stay of discovery in the pending state court actions. See Doc. # 7. In opposition, the specially-appearing state court plaintiffs contend that (a) an exemption to the SLUSA's stay provision applies; (b) there is little risk the federal plaintiff might obtain discovery; (c) the claims in the federal and state cases do not overlap; and (d) the ...


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