The plaintiff filed a class action suit in the U.S. District Court for the Southern District of California, alleging that the defendants omitted material facts from a proxy statement, breaching their fiduciary duties and violating the Securities Exchange Act of 1934. In the District Court, defendants moved to stay discovery in three related state court proceedings until a motion to dismiss the federal suit was resolved. The defendants argued that the Court should exercise its power under the Securities Litigation Uniform Standards Act, which permits a district court to stay discovery proceedings in state court in aid of the district court’s jurisdiction.

The court held that a stay of discovery was warranted finding that even though based solely on state law claims, the state court proceedings concerned nearly identical factual allegations to those before it. As a result, the court determined that a stay would reduce the chance of duplicative judicial effort and excessive burden on the defendants. The court was also concerned that the plaintiff in the federal case might receive the benefit of information revealed in state court discovery through “public channels” despite the presence of a protective order from the state court judge that prohibited the sharing of that information. Therefore, the court granted the defendants’ motion and granted the stay of discovery.

Good v. De Lange, Civ. No. 11cv2826 JAH (BGS), 2011 WL 6888649 (S.D. Cal. Dec. 29, 2011).