In Re: CenturyLink Sales Practices and Securities Litigation, 0:17-md-02795

Background

CenturyLink faced widespread "cramming" allegations; state AG investigations and consumer suits led to settlements totaling millions and a related securities class settlement.
Shareholder Tim Ault sent a demand (La. R.S. §12:1-742) asking the CenturyLink board to sue certain officers/directors; the board appointed a three-member Special Litigation Committee (SLC).
SLC counsel sent a letter rejecting Ault's demand after a multi-month inquiry, stating the SLC found no evidence to support the demand and would not pursue litigation under La. R.S. §12:1-744.
Multiple shareholder derivative suits were consolidated into an MDL; the Case Management Order required filing a consolidated amended complaint before any discovery.
Lead Plaintiff sought pre-motion limited discovery from the SLC (books, minutes, any SLC report); defendants refused. The court, exercising discretion, authorized limited, time-limited discovery after the consolidated amended complaint is filed but before defendants' motion to dismiss.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether pre-motion discovery from the SLC is permitted under La. R.S. §12:1-744	Ault argued limited discovery is necessary to test SLC good faith, subjectivity of inquiry, and to meet the statute's "burden of proving" provisions	Defendants argued the Case Management Order and Rule 3/Rules generally preclude pre-complaint discovery and Model Act commentary (prior versions) counsels against discovery	Court: Allowed limited discovery, but only after consolidated amended complaint is filed and narrowly tailored to SLC books/records and any written SLC report
Whether the Case Management Order bars any discovery before a consolidated amended complaint	Ault sought modification; argued special circumstances justify limited departure	Defendants relied on the Order, arguing discovery must await the operative pleading	Court: Recognized Order contemplated complaint first but found discretion to permit a narrow exception here
Effect of La. R.S. §12:1-744's "burden of proving" language on need for discovery	Ault said the statute's evidentiary "burden of proving" and the subjective good-faith inquiry make some discovery appropriate	Defendants argued pleading obligations and existing authorities favor deciding threshold issues without discovery	Court: Treated the statutory "burden of proving" as an evidentiary consideration that supports limited fact development via discovery
Proper scope and timing of any permitted discovery	Ault asked for broad SLC books/records and any report before motion to dismiss	Defendants sought no production and invoked protective limits	Court: Limited scope to records relating to the SLC inquiry and determination (no broader than La. R.S. §12:1-1602(C) would allow) and set deadlines for identification, production, status update, and timing of motion to dismiss

Key Cases Cited

Atkins v. Hibernia Corp., 182 F.3d 320 (5th Cir.) (Louisiana public policy disfavors derivative suits for public companies)
Sojitz Am. Cap. Corp. v. Kaufman, 61 A.3d 566 (Conn. Ct. App.) (appellate consideration of SLC materials and recognition that discovery may be ordered in court's discretion)
Booth Family Trust v. Jeffries, 640 F.3d 134 (6th Cir.) (describing derivative dismissal motions as hybrid fact-law inquiries)
Brehm v. Eisner, 746 A.2d 244 (Del.) (availability of statutory inspection procedures influences discovery analysis in derivative contexts)
Burgess v. Patterson, 188 So.3d 537 (Miss.) (holding that a legally sufficient complaint is required before discovery, distinguished by plaintiff’s lack of book-and-records access)
Kunath v. Gafford, 330 So.3d 161 (La.) (statutory words must be given their ordinary meaning in interpretation)
Crawford-El v. Britton, 523 U.S. 574 (U.S. Supreme Court) (trial judge has broad discretion to tailor discovery)
Burks v. Lasker, 441 U.S. 471 (U.S. Supreme Court) (state corporate law governs intra-corporate derivative suits)