Matter of Greensky, Inc. Sec. Litig.
Supreme Court of New York, New York County
November 25, 2019, Decided
DECISION & ORDER
JENNIFER G. SCHECTER, J.:
This consolidated putative class action involves claims under sections 11, 12(a)(2), and 15 of the Securities Act of 1933 (the 1933 Act) concerning statements made in connection with the initial public offering of GreenSky, Inc. (GreenSky). Defendants move to stay this action in deference to a putative class action pending in federal court that was commenced after this one. Alternatively, they seek a stay of discovery until determination of their motion to dismiss. Defendants' motion is granted in part.
On November 12, 2018, the first of multiple putative class actions concerning GreenSky was filed in this court (see Dkt. 1). A couple of months later, all of the actions pending in Supreme Court were consolidated and lead counsel was appointed (see Dkt. 13). Plaintiffs subsequently filed an amended complaint (see Dkt. 37). Defendants move to stay this case based on a later-filed, November 27, 2018 federal action that was consolidated with other federal cases involving virtually identical 1933 Act claims (Dkt. 47; see In re GreenSky Sec. Lit.. No. 18 Civ. 11071 [SDNY]).
New York State was plaintiffs' first choice of forum [*2] and there is no basis for a stay in favor of federal court adjudication (see Island Intellectual Prop. LLC v Reich & Tang Deposit Sols., LLC, 155 AD3d 542, 543, 65 N.Y.S.3d 188 [1st Dept 2017]; L-3 Communications Corp. v SafeNet, Inc., 45 AD3d 1, 7, 841 N.Y.S.2d 82 [1st Dept 2007]). In Cyan, Inc. v Beaver County [**2] Employees Retirement Fund (138 S. Ct. 1061, 200 L. Ed. 2d 332 ), the Unites States Supreme Court made clear that state courts can preside over 1933 Act cases and that "most unusually" Congress barred their removal to federal court so if a plaintiff chooses to bring a 1933 Act suit in state court, the defendant generally cannot change the forum (id. at 1066). Staying 1933 Act state court litigation in deference to federal court proceedings without a compelling reason to do so would undermine this principle. Additionally, pre-Cyan, most 1933 Act cases were brought in federal court; thus, those courts undeniably have more experience dealing with securities litigation. State courts are just as capable. Ceding responsibility to federal courts without good cause for doing so simply based on tradition would erode what Congress expressly intended as recognized by the Supreme Court in Cyan.
The stay in Gordon v Gridsum Holding Inc. (Index No. 653342/2018, 2019 WL 1593484 [Sup Ct, NY County Apr. 10, 2019]), which was issued in favor of a first-filed federal action, does not support a different result. There, plaintiff's counsel chose a federal forum first and, only after losing the lead-counsel contest, [*3] refiled in state court. A stay was warranted to avoid incentivizing gamesmanship Here, by contrast, plaintiffs never filed in federal court. There is no reason not to honor their selection of state court for resolution of their 1933 Act claims.Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.
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2019 N.Y. Misc. LEXIS 6315 *; 2019 NY Slip Op 33515(U) **
[**1] In re GREENSKY, INC. SECURITIES LITIGATION. Index No.: 655626/2018
Notice: THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED OFFICIAL REPORTS.
Prior History: Mustafin v. Greensky, Inc., 2019 U.S. Dist. LEXIS 55296 (S.D.N.Y., Mar. 29, 2019)
state court, discovery, federal court