American Bank v. City of Menasha
627 F.3d 261
7th Cir.2010Background
- PSLRA provides an automatic stay of discovery during a motion to dismiss in federal securities suits, with an immaterial exception.
- SLUSA amended PSLRA to authorize district courts to stay discovery in private actions in state courts to aid jurisdiction or protect judgments.
- American Bank, plaintiff in a federal securities class action against the City of Menasha, sought Wisconsin public records related to the city’s power-plant conversion project.
- The City of Menasha invoked SLUSA to obtain a district-court stay, arguing the records request should be treated as discovery.
- The district court granted a stay; American Bank appealed, challenging both the stay and its characterization under federal law.
- The Seventh Circuit ultimately held that the stay functioned as an injunction against enforcement of state public-records law and reversed, resolving both jurisdiction and merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SLUSA authorizes a stay that preempts state public-records access | American Bank contends the stay is discovery-related and within SLUSA's stay authority. | Menasha argues the request is not discovery and the stay merely blocks state-law access. | Yes; the stay operates as an injunction against state-law production, within SLUSA's scope. |
Key Cases Cited
- Reise v. Board of Regents of University of Wisconsin System, 957 F.2d 293 (7th Cir. 1992) (discovery orders generally not appealable)
- Allendale Mut. Auto. Ins. Co. v. Bull Data Systems, Inc., 32 F.3d 1175 (5th Cir. 1994) (interlocutory discovery orders typically non-appealable)
- Goodman v. Harris County, 443 F.3d 464 (5th Cir. 2006) (collateral-order doctrine and mandamus considerations)
- International Prod. Corp. v. Koons, 325 F.2d 403 (2d Cir. 1963) (discovery-like access issues and appellate reach)
- Mohawk Industries, Inc. v. Carpenter, 130 S. Ct. 599 (U.S. 2009) (standard for final-judgment review and risk of irreparable harm)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (pleading standards and inference pleading context)
- Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (U.S. 1975) (principles related to securities litigation and pleading)
- Schleicher v. Wendt, 618 F.3d 679 (7th Cir. 2010) (context on pleading standards in appellate review)
- Cozzarelli v. Inspire Pharmaceuticals Inc., 549 F.3d 618 (4th Cir. 2008) (context on PSLRA and discovery/superseding stays)
- Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (U.S. 2006) (settlement pressure and PSLRA intent)