ORDER DENYING DEFENDANTS' MOTION TO STAY (Docket No. 73) AND DENYING PLAINTIFF'S CROSS-MOTIONS TO ENJOIN STATE COURT PROCEEDINGS AND LIFT THE PSLRA DISCOVERY STAY (Docket No. 80)

CLAUDIA WILKEN, District Judge.

Defendants Pacific Biosciences of California, Inc. (PacBio); Hugh C. Martin, Susan K. Barnes, Brian B. Dow, William Ericson, Brook Byers, Michael Hunkapiller, Randall Livingston, Susan Siegel and David Singer (collectively, the PacBio Defendants); and J.P. Morgan Securities LLC, Morgan Stanley & Co., Deutsche Bank Securities Inc., Piper Jaffray & Co. (collectively, the Underwriter Defendants) move for a temporary stay of this action pending the final approval of a settlement in state court which, if approved, will extinguish the class claims in this case in their entirety. Lead Plaintiff Thomas J. Primo and Plaintiff Evan Powell (collectively, Plaintiffs) oppose the motion to stay and cross-move to enjoin the state court proceedings and to lift partially the Private Securities Litigation Reform Act of 1995 (PSLRA) discovery stay. See 15 U.S.C. § 78u-4(b)(3)(B). Defendants oppose the cross-motions. Having considered the parties' papers and the entire record in this case, the Court DENIES Defendants' motions to stay (Docket No. 73) and DENIES Plaintiffs' cross-motions to enjoin the state court litigation and lift the PSLRA discovery stay (Docket No. 80).

BACKGROUND

I. Federal Action

Plaintiffs bring this putative class action suit against PacBio, nine of its officers and directors and four underwriting firms, on behalf of themselves and all persons or entities that purchased PacBio common stock between October 27, 2010, the day of PacBio's initial public offering (IPO), and September 20, 2011. Plaintiffs allege that the offering materials filed in connection with PacBio's IPO contained false and materially misleading statements in violation of federal securities laws: sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a)); Rule 10b-5 promulgated under section 10(b), 17 C.F.R. § 240.10b 5; and sections 11, 12(a)(2) and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k, 771(a)(2) and 77o). Second Amended Complaint(2AC) at ¶ 9. On April 26, 2012, the Court granted Plaintiff Primo's motion to be appointed as Lead Plaintiff. Docket No. 18. On April 15, 2013, the Court granted Defendants' motion to dismiss Plaintiffs' First Amended Complaint and granted Plaintiffs leave to amend their complaint within sixty days. Docket No. 72. On June 13, 2013, one day before Plaintiffs' 2AC was due, Defendants filed the instant motion for a temporary stay and the parties stipulated that Defendants' response to the 2AC would not be due until thirty days after any denial of the motion to stay. Defendants' motion to stay is based on the preliminary approval of an earlier-filed state court action discussed below. Plaintiffs filed their 2AC on June 14 and, on July 18, Plaintiffs filed an opposition to Defendants' motion to stay and filed their cross-motions to enjoin the state court proceedings and partially lift the PSLRA discovery stay.

II. State Action

Three state court putative class actions making similar allegations have been filed against Defendants. Those cases have been consolidated into a single case alleging violations of sections 11, 12(a)(2) and 15 of the Securities Act. In re Pacific Biosciences of California, Inc. Securities Litigation, San Mateo County Superior Court, Case No. CIV509210. On June 3, 2013, the state court entered an order preliminarily approving a settlement and setting a final approval hearing for October 25, 2013. The parties do not dispute that approval of the settlement as proposed would "extinguish all claims in this litigation, including Plaintiffs' Exchange Act claims." Plaintiffs' Opposition and Cross-Motion at 4.

LEGAL STANDARD

It is well-established that "the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. North Am. Co., 299 U.S. 248, 254 (1936); see also Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed. Cir. 1988) ("Courts have inherent power to manage their dockets and stay proceedings.") As the Ninth Circuit instructs,

Leyva v. Certified Grocers of Cal., Ltd., 593 F.2d 857, 863-64 (9th Cir. 1979).

In determining whether to grant a stay, courts generally consider the following competing interests: "the possible damage which may result from the granting of a stay, the hardship or inequity which a party may suffer in being required to go forward, and the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay." Lockyer v. Mirant Corp., 398 F.3d 1098, 1110 (9th Cir. 2005) (citation omitted).

DISCUSSION

I. Motion to Stay

Defendants argue that the Court should temporarily stay this action until the settlement is finalized in state court because the release in the state court case would extinguish all of Plaintiffs' claims. Accordingly, Defendants argue, allowing the case to proceed in this Court would be duplicative and a waste of judicial and party resources. Plaintiffs counter that staying their Exchange Act claims would be an improper abdication of this Court's exclusive jurisdiction over such claims. See 15 U.S.C. § 78aa ("The district courts of the United States and the United States courts of any Territory of other place subject to the jurisdiction of the United States shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder . . .").

Plaintiffs cite Silberkleit v. Kantrowitz, in which a district court had stayed a "federal action involving two claims within exclusive federal jurisdiction . . . based on grounds of `wise judicial administration.'" 713 F.2d 433 (9th Cir. 1983). The Ninth Circuit reversed the stay, noting that the "`wise judicial administration' exception to the exercise of jurisdiction is invoked only `when both the federal and state courts have concurrent jurisdiction over particular claims.'" Id. (quoting Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 820-21 (9th Cir. 1982)). The Silberkleit court concluded that "a district court has no discretion to stay proceedings involving claims within exclusive federal jurisdiction." Id.

Defendants argue that Silberkleit concerns abstention rather than a temporary stay. Moreover, Defendants argue that they only seek a stay until the state court acts, at which point the stay will be automatically lifted. Nonetheless, as the parties agree, Plaintiffs' claims will be extinguished if the state court grants final approval of the state court action and Plaintiffs do not opt out.1 If Plaintiffs do opt out of the state court case, there is no reason to stay their individual claims in this Court.

The Court declines to exercise its discretion to stay this case. Defendants' motion to stay is DENIED. However, to manage this case in the most efficient manner possible, the Court sets the following deadlines. If either or both Plaintiffs opt out of the state court action, Defendants' response to the 2AC will be due within two weeks of the date the opt-out form is received by Defendants. If neither Plaintiff opts out and the settlement is not finally approved by the state court, Defendants' response to the 2AC shall be due within two weeks of the date of the state court's order rejecting the settlement. If neither Plaintiff opts out and the settlement is finally approved by the state court, the parties shall file a stipulated order of dismissal within one week of the date of the final approval.

II. Cross-Motion to Enjoin the State Court Proceedings

Plaintiffs have filed a cross-motion to enjoin the state court settlement to the extent that it would release or extinguish the state class members' Exchange Act claims. Plaintiffs cite various cases in support of their argument that the Anti-Injunction Act, 28 U.S.C. § 2283, would not prohibit such an injunction, and that the All Writs Act, 28 U.S.C. § 1651(a), provides the Court with authority to issue such an injunction. However, to the extent the Court has the authority to issue such an injunction, it declines to do so. Plaintiffs have not even moved to certify the class in this case. Accordingly, any request for this Court to act can only be made in their individual capacities. If Plaintiffs wish to pursue their Exchange Act claims, they may opt out of the state court settlement and pursue their individual claims in this Court.

The fact that Plaintiff Primo has been appointed Lead Plaintiff in this action does not change the analysis. Plaintiffs assert that allowing the state court settlement to go forward will interfere with Lead Plaintiff's "fiduciary duty to monitor, manage and control the litigation." In re Terayon Comm'ns Sys., Sec. Litig., 2004 U.S. Dist. LEXIS 3131, at *17 (N.D. Cal.) (internal quotation omitted).

Plaintiffs cite In re BankAmerica Corp. Securities Litigation, a case in which a court in the Eastern District of Missouri enjoined state court proceedings. 95 F.Supp.2d 1044 (E.D. Mo. 2000). However, as Defendants point out, BankAmerica is distinguishable from this case on multiple grounds, primarily because the federal class in BankAmerica had already been certified and there were problems with the certification of the later filed state action. In contrast, Plaintiffs in this federal action have not yet filed a motion to certify the class. Indeed Defendants intend to a file a motion to dismiss the 2AC. Moreover, the state action Plaintiffs seek to enjoin in this case was earlier filed, and, according to the complaints in each case, the named plaintiffs in the state action own significantly more shares than Plaintiffs in this case. This is a far cry from BankAmerica where "competing state court plaintiffs, representing a significantly smaller number of shares [sought to] institute premature settlement negotiations which threaten[ed] the orderly conduct of the federal case and which could result in the release of the federal claims." 95 F. Supp. 2d at 1049.

Accordingly, the Court DENIES Plaintiffs' motion to enjoin the state court proceedings.

III. Motion to Lift the PSLRA Discovery Stay

Plaintiffs further argue that the Court should partially lift the PSLRA Discovery stay to permit "discovery as to the names and contact information of shareholders who obtained shares in the IPO." Plaintiffs' Opposition and Cross-Motion at 16. Plaintiffs explain that such "information will permit Plaintiffs to identify persons for contact who may wish to serve as additional plaintiffs in the Federal Action to enforce the Section 12 claims pursuant to the Securities Act."2

However, the PSLRA provides that "all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party." 15 U.S.C. § 78u-4(b)(3)(B). "Congress clearly intended that complaints in these securities actions should stand or fall based on the actual knowledge of the plaintiffs rather than information produced by the defendants after the action has been filed." Medhekar v. United States Dist. Ct., 99 F.3d 325, 328 (9th Cir. 1996).

Plaintiffs state that they "will be prejudiced without access to documents already produced to the plaintiffs in the State Action" and cite various cases in which courts have found undue prejudice when requested documents have already been produced to other entities. Plaintiffs' Opposition and Cross-Motion at 13. However, Plaintiffs do not provide any additional information regarding the prejudice they will suffer. Accordingly, the Court DENIES Plaintiffs' motion to lift the PSLRA discovery stay.

CONCLUSION

For the reasons set forth above, the Court DENIES Defendants' motion to stay (Docket No. 73) and DENIES Plaintiffs' motions to enjoin the state court action and to lift the PSLRA discovery stay (Docket No. 80).

IT IS SO ORDERED.