The Ninth Circuit Court of Appeals recently reversed a district court decision granting limited discovery to plaintiffs who filed a class action, see Cadwalader Counsellor, Vol. 1, Issue 3, at 13 (Feb. 1999), holding that the plaintiffs' failure to muster sufficient facts to meet the heightened pleading standards under the Private Securities Litigation Reform Act (the "PSLRA") cannot constitute "undue prejudice" sufficient to lift the PSLRA's automatic stay of discovery that commences upon the filing of a motion to dismiss or for summary judgment. To hold otherwise, the court noted, would frustrate Congress's intent that securities complaints "stand or fall based on the actual knowledge of the plaintiffs rather than information produced by the defendants after the action has been filed," and contravene the purpose of the PSLRA's heightened pleading requirements. *
In re Rational Software Sec. Litig., 28 F. Supp. 2d 562 (N.D. Cal. 1998), writ granted, judgment vacated sub nom. SG Cowen Sec. Corp. v. United States District Court for the Northern District of California, - F.3d -, 1999 WL 669181 (9th Cir. Aug. 30, 1999).