Amicus Curiae Brief — Pivotal Software, Inc., et al., Petitioners v. Superior Court of California, City and County of San Francisco, et al.

No. 20-1541

IN THE

Supreme Court of the United States

PIVOTAL SOFTWARE, INC., ET AL.,

Petitioners,

v.

SUPERIOR COURT OF CALIFORNIA,

CITY AND COUNTY OF SAN FRANCISCO, ET AL.,

Respondents.

On Writ of Certiorari to the

Court of Appeal for the State of California,

First Appellate District

BRIEF FOR AMICUS CURIAE

CHAMBER OF COMMERCE OF THE

UNITED STATES OF AMERICA

IN SUPPORT OF PETITIONERS

CHARLOTTE H. TAYLOR

JONES DAY

51 Louisiana Ave., N.W.

Washington, DC 20001

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. CHAMBER

LITIGATION CENTER

1615 H St., N.W.

Washington, DC 20062

ERIC TUNG

Counsel of Record

JEREMY R. KAUFFMAN

JONES DAY

555 South Flower St.

Fiftieth Floor

Los Angeles, CA 90071

(213) 489-3939

etung@jonesday.com

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ....................................... ii

INTEREST OF AMICUS CURIAE ............................ 1

SUMMARY OF ARGUMENT .................................... 2

ARGUMENT ............................................................... 4

I.

THE PLAIN TEXT OF THE DISCOVERY-STAY

PROVISION REQUIRES REVERSAL OF THE

DECISION BELOW ................................................. 4

II.

THE PLAIN TEXT READING IS CONSISTENT

WITH FEDERALISM PRINCIPLES ............................ 7

A.

Precedent demonstrates consistency

with federalism principles.......................... 8

B.

Historical practice dating to the

Founding demonstrates consistency

with federalism principles........................ 13

C.

This Court has approved applications

of federal law in state court that

have gone much further than the

stay provision here ................................... 16

D.

Respondents’ attempt to portray the

discovery-stay provision as purely

procedural is irrelevant and wrong ......... 17

III. DECLINING TO APPLY THE DISCOVERYSTAY PROVISION TO PROCEEDINGS IN

STATE COURTS WILL THWART THE

PURPOSE OF THE REFORM ACT ........................... 20

CONCLUSION ......................................................... 23

ii

TABLE OF AUTHORITIES

Page(s)

CASES

Adams v. Maryland,

347 U.S. 179 (1954) ........................................ 10, 11

Artis v. District of Columbia.,

138 S. Ct. 594 (2018) ...................................... 16, 17

Atl. Coast Line R.R. Co. v. Burnette,

239 U.S. 199 (1915) .................................. 11, 12, 13

Azar v. Allina Health Servs.,

139 S. Ct. 1804 (2019) ............................................ 7

Bostock v. Clayton Cnty,

140 S. Ct. 1731 (2020) ............................................ 6

Brown v. W. Ry. of Ala.,

338 U.S. 294 (1949) ................................................ 8

Carcieri v. Salazar,

555 U.S. 379 (2009) ................................................ 4

Cent. Vt. Ry. Co. v. White,

238 U.S. 507 (1915) ................................................ 8

City of Edmonds v. Oxford House, Inc.,

514 U.S. 725 (1995) ................................................ 6

Collector of Internal Rev. v. Hubbard,

79 U.S. 1 (1870) .................................................... 11

Conn. Nat’l Bank v. Germain,

503 U.S. 249 (1992) ............................................ 4, 5

Cuomo v. Clearing House Ass’n, L.L.C.,

557 U.S. 519 (2009) ................................................ 7

iii

TABLE OF AUTHORITIES

(continued)

Page(s)

Cyan, Inc. v. Beaver Cnty. Emps. Ret. Fund,

138 S. Ct. 1061 (2018) .................................. 2, 5, 17

Davis v. Wechsler,

263 U.S. 22 (1923) .................................................. 8

Dice v. Akron, Canton & Youngstown R.R.,

342 U.S. 359 (1952) .......................................passim

Dodd v. United States,

545 U.S. 353 (2005) ................................................ 4

EEOC v. Abercrombie & Fitch Stores, Inc.,

575 U.S. 768 (2015) ................................................ 6

Free Enter. Fund v. Pub. Co. Acct.

Oversight Bd.,

561 U.S. 477 (2010) .............................................. 15

Garrett v. Moore-McCormack Co.,

317 U.S. 239 (1942) .............................................. 13

Glock v. Glock, Inc.,

797 F.3d 1002 (11th Cir. 2015) ............................ 23

Haywood v. Drown,

556 U.S. 729 (2009) .............................................. 16

Howard v. Ill. Cent. R.R. Co.,

207 U.S. 463 (1908) ................................................ 9

Howlett ex rel. Howlett v. Rose,

496 U.S. 356 (1990) .............................................. 12

In re LaBranche Sec. Litig.,

333 F. Supp. 2d 178 (S.D.N.Y. 2004) ................... 20

iv

TABLE OF AUTHORITIES

(continued)

Page(s)

Jinks v. Richland Cnty,

538 U.S. 456 (2003) .......................................... 3, 16

Johnson v. Fankell,

520 U.S. 911 (1997) .............................................. 12

Mattco Forge, Inc. v. Arthur Young & Co.,

223 Cal. App. 3d 1429 (1990) ............................... 22

Merrill Lynch, Pierce, Fenner & Smith

Inc. v. Dabit,

547 U.S. 71 (2006) ................................................ 20

Midlantic Nat’l Bank v. N.J. Dep’t

of Env’t Prot.,

474 U.S. 494 (1986) .............................................. 18

Millbrook v. United States,

569 U.S. 50 (2013) .................................................. 5

Monessen Sw. Ry. Co. v. Morgan,

486 U.S. 330 (1988) .............................................. 12

Printz v. United States,

521 U.S. 898 (1997) .............................................. 13

Rapanos v. United States,

547 U.S. 715 (2006) ................................................ 7

Rutan v. Republican Party of Ill.,

497 U.S. 62 (1990) .......................................... 18, 19

Sun Oil Co. v. Wortman,

486 U.S. 717 (1988) .............................................. 17

CONSTITUTIONAL AND STATUTORY AUTHORITIES

U.S. Const. amend. V ................................................ 18

v

TABLE OF AUTHORITIES

(continued)

Page(s)

U.S. Const. amend. VI ............................................... 18

U.S. Const. amend. X ................................................ 13

U.S. Const. art. VI ..................................................... 14

15 U.S.C. § 77z-1 ............................................... 2, 5, 21

Act of Apr. 7, 1798, ch. 26, 1 Stat. 547...................... 15

Act of Apr. 10, 1790, ch. 7, 1 Stat. 109...................... 15

Act of July 6, 1798, ch. 66, 1 Stat. 577...................... 15

Act of July 20, 1790, ch. 29, 1 Stat. 131.................... 14

Act of June 18, 1798, ch. 54, 1 Stat. 566 ................... 14

Act of Mar. 3, 1875, ch. 137, 18 Stat. 470 ................. 14

Act of Mar. 26, 1790, ch. 3, 1 Stat. 103 ..................... 14

Pub. L. No. 59-219, 34 Stat. 232 (1906) ...................... 9

Pub. L. No. 60-100, 35 Stat. 65 (1908) ........................ 9

OTHER AUTHORITIES

Anthony J. Bellia Jr., Federal Regulation

of State Court Procedures,

110 Yale L.J. 947 (2001) ................................ 13, 14

Cal. Prac. Guide Civ. Pro. Before Trial

Chapter 8B-5 (June 2021 Update)....................... 22

Donald S. Chisum, The Allocation of

Jurisdiction Between State and

Federal Courts in Patent Litigation,

46 Wash. L. Rev. 633 (1971) ................................ 15

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

3 Cyc. of Fed. Proc. § 6:46

(3d ed. July 2021 Update) .................................... 19

Fed. R. Evid. 502 ....................................................... 18

Fundamentals of Litig. Prac. Ch. 11

Introduction (2021 ed.)......................................... 22

Joseph Grundfest, Sasha Aganin, and

Joseph Schertler, After Cyan:

Potential Trends in Section 11

Litigation, Law360 (Mar. 27, 2018) ..................... 22

H.R. Rep. No. 104-369 (1995) .................................... 20

Hearings Before S. Comm. on Educ. and

Lab. on S. 5307, 60th Cong. (1908) ........................ 9

Victor Marrero, The Cost of Rules, The Rule

of Costs, 37 Cardozo L. Rev. 1599 (2016) ............ 21

Karel Mazanec, Capping E-Discovery Costs:

A Hybrid Solution to E-Discovery Abuse,

56 Wm. & Mary L. Rev. 631 (2014) ..................... 21

Restatement (Second) of Conflict of Laws

§ 133 (1971) ............................................................ 8

S. Rep. No. 95-989 (1978) .......................................... 18

S. Rep. No. 104-98 (1995) .......................................... 21

A. Scalia & B. Garner, Reading Law: The

Interpretation of Legal Texts (2012) ................... 21

3 J. Story, Commentaries on the Constitution

of the United States § 1900 (1833) ...................... 13

1

INTEREST OF AMICUS CURIAE1

The Chamber of Commerce of the United States of

America is the world’s largest business federation. It

represents approximately 300,000 direct members and

indirectly represents the interests of more than three

million companies and professional organizations of

every size, in every industry sector, and from every

region of the country. An important function of the

Chamber is to represent the interests of its members

in matters before Congress, the Executive Branch, and

the courts. To that end, the Chamber regularly files

amicus curiae briefs in cases that raise issues of

concern to the nation’s business community. Many of

the Chamber’s members have sold or will in the future

sell stock to the public through offerings governed by

the Securities Act of 1933 (the “Securities Act”) and

will be directly affected by the application of the laws

at issue in this case.

All parties have consented to the filing of this brief as

required by Rule 37. No counsel for any party authored this brief

in whole or in part, and no person or entity other than amicus, its

members, or its counsel made a monetary contribution intended

to fund the preparation or submission of this brief.

1

2

SUMMARY OF ARGUMENT

To remedy rampant abuse in federal securities

litigation, Congress enacted the Private Securities

Litigation Reform Act (“Reform Act”). As part of that

statute, Congress provided for an automatic stay of

discovery in any lawsuit brought under the Securities

Act. 15 U.S.C. § 77z-1(b)(1). Because Congress says

what it means and means what it says in legislation,

the word any means just that, and the discovery-stay

provision applies to any Securities Act claim—

regardless of whether it is brought in state or federal

court.

This straightforward interpretation is confirmed by

the statute’s structure. Elsewhere Congress made

clear when it intended to limit the reach of a Reform

Act provision to only those Securities Act claims

brought before a federal tribunal.

E.g., id.

§ 77z-1(a)(1). And Congress used the broad word “any”

in the discovery-stay provision while knowing that the

Securities Act allowed state courts to entertain these

claims. Cyan, Inc. v. Beaver Cnty. Emps. Ret. Fund,

138 S. Ct. 1061, 1066 (2018).

Despite the clarity of the statute’s text, structure,

and history, Respondents demand more still: they

contend that this Court should require an even more

express statement from Congress before interpreting

the discovery-stay provision to apply to proceedings in

state court. But requiring more than what the plain

language already provides would effectively impose a

drafting tax on a coequal branch. To be sure, such a

requirement might be warranted when a statute

effects an unprecedented intrusion on a traditional

area of state sovereignty. But because the discovery-

3

stay provision merely regulates how state courts

should hear federal claims, history and precedent

dating back to the Founding confirm that there is no

such intrusion here.

This Court has repeatedly held that even ostensibly

procedural law must be applied by state courts

whenever that law is “part and parcel” of a federal

claim. Dice v. Akron, Canton & Youngstown R.R., 342

U.S. 359, 363 (1952) (right to a jury trial); see also,

infra § II-A. And this Court’s precedent is consistent

with earlier historical practice. Stretching back to the

Founding, Congress has enacted statutes imposing

obligations on state courts adjudicating federal claims.

See, infra § II-B (discussing examples). Moreover, this

Court has previously approved of applications of

federal law in state court that go far beyond the

discovery-stay provision. See, e.g., Jinks v. Richland

Cnty, 538 U.S. 456, 465 (2003) (federal tolling statute

applied in state courts adjudicating state claims).

Nothing so intrusive exists here: Congress merely

provided for a discovery stay with respect to a federal

claim.

Respondents’ attempt to portray the discovery-stay

provision as purely procedural, and thus inapplicable

in state court, is unavailing. While that concept may,

at a high level, be helpful in describing some aspects

of the Reform Act, a statutory provision’s label does

not determine its applicability—the statute’s text,

structure, and history does.

And given the

unambiguous text of the discovery-stay provision, the

only remaining inquiry is whether the law effects an

unprecedented intrusion on an area of traditional

state sovereignty such that the Court should demand

even more clarity still from Congress. The discovery-

4

stay provision does no such thing. And even if the

procedural–substantive distinction mattered here, the

discovery-stay provision is sufficiently bound up with

the outcome of the case to be viewed as substantive.

Finally, the Court should favor a textually

permissible interpretation of a statute that furthers

rather than obstructs a statute’s purpose. The two key

purposes of the Reform Act and its discovery-stay

provision were to prevent extortionate settlements

and to eliminate fishing expeditions used as a way of

surviving the motion-to-dismiss stage. Both of those

purposes can be easily thwarted if a plaintiff can evade

the discovery-stay provision by filing in state court and

obtaining premature discovery there.

No basis exists in history, precedent, or policy to

demand that Congress use whatever magic words

Respondents require. The discovery-stay provision

applies in “any private action” under the Securities

Act—whether in state or federal court.

ARGUMENT

I. THE PLAIN TEXT OF

PROVISION REQUIRES

DECISION BELOW.

DISCOVERY-STAY

REVERSAL OF THE

THE

Among this Court’s various canons of construction,

one rule reigns supreme: where “statutory text is

plain and unambiguous,” this Court “must apply the

statute according to its terms.” Carcieri v. Salazar,

555 U.S. 379, 387 (2009). The Court “must presume

that [the] legislature says in a statute what it means

and means in a statute what it says there.” Dodd v.

United States, 545 U.S. 353, 357 (2005) (quoting Conn.

Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992)).

5

These principles make this case an easy one, for

Congress said what it meant in the Reform Act and

meant what it said there: the discovery-stay provision

applies in “any private action” arising under the

Securities Act. 15 U.S.C. § 77z-1(b)(1) (emphasis

added). Because the word “any” means just that, the

“judicial inquiry is complete,” Germain, 503 U.S. at

254, and the discovery-stay provision applies in

Securities Act suits brought in state court just the

same as it applies to federal-court suits.

This straightforward textual interpretation is

confirmed by the Reform Act’s structure. Elsewhere

in the statute, Congress explicitly limited the law’s

reach to claims brought in federal courts. For example,

§ 77z-1(a)(1) provides that “[t]he provisions of this

subsection shall apply to each private action arising

under this subchapter that is brought as a plaintiff

class action pursuant to the Federal Rules of Civil

Procedure.” (emphasis added). Congress’s inclusion of

the italicized language demonstrates that it knew how

to add qualifying language when it intended to limit a

Reform Act provision to suits brought in federal court.

Because Congress could have added such qualifying

language to the discovery-stay provision as well—but

chose not to—the Court should “decline to read such a

limitation into [the] unambiguous text.” Millbrook v.

United States, 569 U.S. 50, 57 (2013).

Another structural clue is found in the Securities

Act that the Reform Act amended. The Securities Act

explicitly conferred jurisdiction on both federal and

state courts. See Cyan, 138 S. Ct. at 1066 (“[T]o aid

enforcement of those obligations, the statute created

private rights of action” and “Congress authorized

both federal and state courts to exercise jurisdiction

6

over those private suits”). Congress would therefore

have been well aware that Securities Act suits could

be brought in state courts—indeed, the Reform Act

was amending a statute that explicitly authorized as

much. By writing the discovery-stay provision to

nevertheless apply in “any private action” under the

Securities Act without qualification, Congress made

its intent clear: the discovery-stay provision applies in

state courts too.

And of course, “[a] broad construction of the word

‘any’ is hardly novel.” City of Edmonds v. Oxford

House, Inc., 514 U.S. 725, 739 n.1 (1995) (THOMAS, J.,

dissenting) (collecting examples). In fact, a broad

interpretation of this broad word is the most natural.

Ask any ordinary speaker of the English language

whether “any private action [under the Securities Act]”

has been brought by Zhung Tran and his fellow

plaintiffs against Pivotal Software and its codefendants.

Undoubtedly, our hypothetical

interlocutor would answer affirmatively. Cf. Bostock

v. Clayton Cnty, 140 S. Ct. 1731, 1738 (2020) (“This

Court normally interprets a statute in accord with the

ordinary public meaning of its terms at the time of its

enactment.”).

Respondents’ arguments to the contrary ultimately

distill to a request that the Court “add words to the

law.” EEOC v. Abercrombie & Fitch Stores, Inc., 575

U.S. 768, 774 (2015). Yet there is no compelling reason

for the Court to do so. If Congress wanted to limit the

discovery-stay provision to any private action brought

in federal court, all it had to do was say so.

Respondents are thus “left with nothing but the

doubtful proposition that Congress sought to

accomplish in a surpassingly strange manner what it

7

could have accomplished in a much more

straightforward way.” Azar v. Allina Health Servs.,

139 S. Ct. 1804, 1813 (2019) (cleaned up).

II. THE PLAIN TEXT READING IS CONSISTENT WITH

FEDERALISM PRINCIPLES.

Respondents contend that federalism principles

require this Court to demand a clearer statement from

Congress before interpreting the discovery-stay

provision as applying to Securities Act claims brought

in state court. See Brief in Opp. to Cert. at 19. That

contention is incorrect. To start, a straightforward

reading of the text already requires application of the

discovery-stay provision in state court, and demanding

that Congress say more imposes an unwarranted

drafting tax. True, such a tax might be justified when

a statute purportedly authorizes “an unprecedented

intrusion into traditional state authority,” and courts

want to be extra sure that Congress truly meant what

it said. Rapanos v. United States, 547 U.S. 715, 738

(2006) (plurality opinion) (emphasis added). But the

discovery stay-provision here does not constitute an

unprecedented intrusion into traditional state

authority. Rather, it merely supplies a rule for state

courts to follow if they open their door to plaintiffs

asserting federal claims, which is well within

historical practice. Cf. Cuomo v. Clearing House Ass’n,

L.L.C., 557 U.S. 519, 554 (2009) (THOMAS, J.,

concurring in part and dissenting in part)

(presumption against preemption is not triggered

where the regulation is in an area “where there has

been a history of significant federal presence”).

8

A. Precedent demonstrates

with federalism principles.

consistency

Far from being an unprecedented intrusion into

traditional state authority, the discovery-stay

provision fits comfortably within this Court’s

precedent, which has repeatedly required even

ostensibly procedural federal law to be applied in state

courts when such law is “part and parcel” of a federal

claim. Dice, 342 U.S. at 363.

For example, in Central Vermont Railway Co. v.

White, 238 U.S. 507, 512 (1915), the Court held that a

state court should apply federal law on the burden of

proof for contributory negligence, rather than the

forum state’s law. Although the Court recognized that

state courts can generally “follow their own practice

even in the trial of suits arising under the Federal law,”

it refused to treat the burden-of-proof law as a “mere

matter of state procedure” because it was an integral

part of the federal cause of action created by Congress.

Id. at 512–13. The Court reached this holding despite

the fact that burdens of proof are commonly viewed as

“procedural.”

See, e.g., Restatement (Second) of

Conflict of Laws § 133 (1971).

In Davis v. Wechsler, 263 U.S. 22 (1923), the Court

held that a state pleading rule could not be applied to

defeat the assertion of a federal claim brought in state

court: “Whatever springes the State may set for those

who are endeavoring to assert rights that the State

confers, the assertion of Federal rights, when plainly

and reasonably made, is not to be defeated under the

name of local practice.” Id. at 24; see Brown v. W. Ry.

of Ala., 338 U.S. 294, 295–96 (1949) (reversing a state

9

court’s dismissal of a federal claim based on a local

rule construing the complaint against the pleader).

This Court’s decision in Dice is particularly

instructive. There, the Court required an ostensibly

procedural federal rule be applied in state courts

hearing claims brought under the Federal Employers’

Liability Act (“FELA”). Dice, 342 U.S. at 363. An early

version of FELA provided that “[a]ll questions of

negligence and contributory negligence shall be for the

jury.” Pub. L. No. 59-219, § 2, 34 Stat. 232 (1906). But

after that statute was held unconstitutional on other

grounds in Howard v. Illinois Central Railroad Co.,

207 U.S. 463 (1908), Congress passed a revised version

of the law—this time omitting the clause providing for

a jury trial. See Pub. L. No. 60-100, § 2, 35 Stat. 65,

65–66 (1908). Apparently, a majority of legislators

thought that the jury-trial language would be

surplusage in light of the Seventh Amendment. See

Hearings Before S. Comm. on Educ. and Lab. on S.

5307, 60th Cong. 8–9, 45–46 (1908).

Despite those changes to the statute, the Court in

Dice held that the right to a jury trial was “part and

parcel” of the remedy that Congress conferred to

injured employees under FELA and a state court could

not apply conflicting state rules that would permit the

judge to decide whether a contractual release was

fraudulently obtained. 342 U.S. at 363. To deprive

plaintiffs of a jury on that question was “to take away

a goodly portion of the relief which Congress has

afforded them.” Id. According to this Court, the right

to a jury trial is “too substantial a part of the rights

10

accorded by the Act to permit it to be classified as a

mere ‘local rule of procedure.’” Id.2

The same can be said for the discovery-stay

provision. It is part and parcel of the protections

afforded for defendants under the Reform Act. It

ensures that a complaint under the Securities Act be

sufficient to survive a motion to dismiss before forcing

defendants to undertake the burdens of discovery.

That protection is too substantial a part of the Reform

Act to be disregarded in state courts.

This Court’s holding in Adams v. Maryland, 347 U.S.

179, 180 (1954), is likewise instructive. There, the

Court considered a federal statute conferring

immunity to witnesses who testified before Congress.

Id. at 181. Such immunity was to apply in any

criminal proceeding “in any court.” Id. This Court

rejected the argument that “any court” was limited to

federal courts only: Congress’s “[l]anguage could be no

plainer” and Congress was “well aware that an

2 Four Justices in Dice dissented while concurring in the

judgment. 342 U.S. at 364 (FRANKFURTER, J., concurring in the

judgment). But even they did not dispute the core proposition

that federal law that is part and parcel of a federal claim applies

in state courts. Rather, the dissenting Justices simply disagreed

that a jury trial was in fact part and parcel of a FELA claim. See

id. at 366–67. The dissent in Dice took the view that the absence

of any right to a jury in the statutory text, coupled with

Congress’s knowledge that state courts would exercise concurrent

jurisdiction over FELA claims, meant that state courts should be

free to follow their own procedures in such claims. Id. at 366–68.

But even the dissent’s reasoning applies in Petitioners’ favor here:

Congress enacted the discovery-stay provision with broad

language calling for it to be applied to “any” Securities Act claim

knowing that state courts would exercise concurrent jurisdiction

over such claims.

11

ordinary person would read the phrase ‘in any court’

to include state courts.” Id. at 181–82; see also id. at

184 (JACKSON, J., concurring) (“If words mean

anything, the statute extends its protection to all

witnesses, to all testimony, and in all courts.”). The

Court also upheld the statute’s constitutionality and

held that “since Congress in the legitimate exercise of

its powers enacts ‘the supreme Law of the Land,’ state

courts are bound by [the statute], even though it

affects their rules of practice.” Id. at 183.

And it is immaterial that the discovery-stay

provision protects defendants rather than plaintiffs. A

federal law that sets limits on the enforcement of a

federal cause of action must be enforced all the same

whether in federal court or state court.

In Collector of Internal Revenue v. Hubbard, 79 U.S.

1, 15 (1870), the Court held that a statute requiring a

taxpayer to appeal to the Commissioner of Internal

Revenue before bringing suit in “any court” applied in

state courts as in federal courts. Congress was free to

“add new conditions to the exercise of that right [it had

created] whenever in its discretion the public interest

might require such additional regulation.” Id. at 15.

“Unquestionably,” then, “if the provision is a good bar

in the Federal courts, it is a good bar in all courts

acting under the same act of Congress.” Id.

Atlantic Coast Line Railroad Co. v. Burnette, 239

U.S. 199 (1915), is also a good example of this principle.

There, this Court held that a federal statute of

limitations—rather than a longer state statute of

limitations—must be applied by state courts hearing

federal claims. Id. at 201. Just as a court cannot

“allow substantive rights to be impaired under the

12

name of procedure,” the Court reasoned, when “a law

that is relied on as a source of an obligation” and “sets

a limit to the existence of what it creates,” courts

applying that law “have been disinclined to press the

obligation farther.”

Id. (emphasis added).

In

affirming the dismissal of the case in favor of the

defendant, the Court concluded: “If it be available in

a state court to found a [federal] right, and the record

shows a lapse of time after which the act says that no

action shall be maintained, the action must fail in the

courts of a state as in those of the United States.” Id.

Similarly, in Monessen Southwestern Railway Co. v.

Morgan, 486 U.S. 330 (1988), the Court held that a

state court erred in awarding prejudgment interest

under a local rule in a FELA action. Id. at 336.

Following the reasoning in Dice, the Court held that

such interest was too intertwined with a defendant’s

potential liability to be treated as a mere rule of local

procedure. Id.

As these cases demonstrate, despite state courts

generally retaining authority to dictate their own

procedures, e.g., Howlett ex rel. Howlett v. Rose, 496

U.S. 356, 372 (1990), they are obligated to apply the

federal law that Congress has designated to govern the

adjudication of a federal claim. Here, Congress made

a judgment that defendants in “any” Securities Act

suit should not be subject to discovery until after the

plaintiffs sufficiently state a claim. We need only look

to the text and structure of the statute itself for

confirmation that the right to be free from premature

discovery is part and parcel of the federal claim: the

discovery-stay provision is in the very same statute

giving rise to the underlying cause of action. Cf.

Johnson v. Fankell, 520 U.S. 911, 921 n.12 (1997)

13

(distinguishing between a preexisting background

rule of federal procedure from the jury trial in Dice on

the grounds that in Dice, “Congress had provided in

FELA” for the procedure in question).

Such a rule makes sense too. “The power to create

rights of action should include the power to specify a

fitting means of judicial enforcement.” Anthony J.

Bellia Jr., Federal Regulation of State Court

Procedures, 110 Yale L.J. 947, 1001 (2001) (arguing

that there is a distinction between federal regulation

of state procedure in state-law cases, and federal

regulation of state procedure in cases arising under

federal law). Or, in this Court’s words, when a state

has “opened its courts” to “enforce federally created

rights,” the parties are “entitled to the benefit of the

full scope of these rights,” Garrett v. MooreMcCormack Co., 317 U.S. 239, 249 (1942), and at the

same time, courts must adhere to the “limit[s]” of those

rights, Atl. Coast Line R. Co., 239 U.S. at 201.

B. Historical practice dating to the

Founding demonstrates consistency

with federalism principles.

The Tenth Amendment reserves to the States all

powers not delegated to the federal government. See

U.S. Const. amend. X (“The powers not delegated to

the United States by the Constitution, nor prohibited

by it to the States, are reserved to the States

respectively, or to the people.”); 3 J. Story,

Commentaries on the Constitution of the United

States § 1900 (1833). But as this Court recognized in

Printz v. United States, 521 U.S. 898, 907 (1997), the

federal government’s power to impose “federal

prescriptions” on state courts is “implicit in one of the

14

provisions of the Constitution, and was explicit in

another.” The implicit power is found in Article III,

which created only one Supreme Court and left the

creation of lower federal courts to Congress’s

discretion. With this structure, it “was obvious that

the Supreme Court alone could not hear all federal

cases throughout the United States,” id., and thus,

that federal claims would be heard by state courts. Cf.

Bellia, supra, at 958 n.62. (“In the early years of the

Union, state courts were the only forum available for

enforcement of many federal claims. Not until 1875

did Congress confer general federal question

jurisdiction on district courts[.]”) (citing Act of Mar. 3,

1875, ch. 137, § 1, 18 Stat. 470). The explicit power is

found in the Supremacy Clause, which provides that

federal laws “shall be the supreme Law of the Land;

and the Judges in every State shall be bound thereby.”

U.S. Const. art. VI, cl. 2.

Consistent with these principles, several Foundingera statutes required state courts to apply even

ostensibly procedural laws when adjudicating federal

claims.

For example, state courts resolving controversies

under federal law about the seaworthiness of a vessel

had to appoint “three persons in the neighbourhood”

who were “most skil[l]ful in maritime affairs” to

provide a report to the court expressing their opinion

on the ship’s seaworthiness. Act of July 20, 1790, ch.

29, § 3, 1 Stat. 131, 132. Other statutes required state

courts considering applications for admission to the

United States to record applications for citizenship,

Act of Mar. 26, 1790, ch. 3, § 1, 1 Stat. 103, and to

transmit certain naturalization records to the

Secretary of State, Act of June 18, 1798, ch. 54, § 2, 1

15

Stat. 566, 567. The Patent Act of 1790 created a

remedy for patent infringement in the form of an

“action on the case” and provided a right to a jury trial,

even though such claims would be pressed in state

courts. Act of Apr. 10, 1790, ch. 7, § 4, 1 Stat. 109, 111

(providing that a patentee was entitled to “damages as

shall be assessed by a jury”); Donald S. Chisum, The

Allocation of Jurisdiction Between State and Federal

Courts in Patent Litigation, 46 Wash. L. Rev. 633,

635–36 (1971) (state courts had jurisdiction over

patent cases until the Patent Act of 1800).3

These early statutes “provid[e] contemporaneous

and weighty evidence of the Constitution’s meaning

since many of the Members of the First Congress had

taken part in framing that instrument.” Free Enter.

Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477, 492

(2010). The existence of these statutes demonstrates

that requiring a state court to apply a law governing

the enforcement of a federal claim—such as the

discovery-stay provision here—does not run afoul of

any principle of federalism. That they imposed

ostensibly procedural rules on state courts reaffirms

that the discovery-stay provision presents no

unprecedented intrusion into an area of traditional

state sovereignty.

3 Other statutes imposed more substantive obligations still.

See Act of Apr. 7, 1798, ch. 26, § 3, 1 Stat. 547, 548 (permitting

state courts to take proof of the claims of the Canadian refugees

who had assisted the United States during the Revolutionary

War); Act of July 6, 1798, ch. 66, § 2, 1 Stat. 577, 577–78

(requiring state courts to order the deportation of alien enemies

in times of war).

16

C. This Court has approved applications of

federal law in state court that have gone

much further than the stay provision

here.

On several occasions this Court has gone even

further in imposing federal law on state courts—in

some instances, over the objections of other members

of this Court that doing so violated state sovereignty.

For example, in Jinks v. Richland County, 538 U.S.

456, 465 (2003), the Court upheld the constitutionality

of a federal tolling statute that applied to state-law

claims in state court if they were initially brought in

federal court. Subsequently, in Artis v. District of

Columbia, 138 S. Ct. 594 (2018), the Court upheld the

constitutionality of that tolling statute even when the

statute was interpreted as adopting a “stop clock”

approach (rather than a “grace period” approach) that

yielded longer tolling periods. Id. at 606–07. And in

Haywood v. Drown, 556 U.S. 729 (2009), the Court

held that a state court could not refuse to hear federal

claims where it has jurisdiction to adjudicate

analogous state-law claims. Members of this Court

have stated (in dissent) that those intrusions upon

state sovereignty violated the Constitution. See id. at

742 (THOMAS, J., dissenting); Artis., 138 S. Ct. at 614

(GORSUCH, J., dissenting).

But a discovery stay with respect to a federal claim

represents no such intrusion. In Haywood, Justice

Thomas distinguished between forcing state courts to

entertain federal claims when state law deprives them

of jurisdiction to do so (which in his view would be

unconstitutional) and requiring that the state court

follow federal law “if it adjudicates the claim” (which

would be constitutional). 556 U.S. at 751 (THOMAS, J.,

17

dissenting) (emphasis added). This is the latter case:

Congress has said that the discovery-stay provision

applies in “any” action brought under the Securities

Act, so the Supremacy Clause requires that state

courts that entertain such claims abide by that rule.

And in Artis, Justice Gorsuch reasoned that the

majority’s interpretation would render the federal

tolling statute an “unconstitutional intrusion on the

core state power to define the terms of state law claims

litigated in state court proceedings.” 138 S. Ct. at 614

(GORSUCH, J., dissenting) (emphasis added). But here,

the discovery-stay provision requires nothing of state

courts in their adjudication of state-law claims.

Rather, it merely dictates a rule that applies when

state courts hear federal Securities Act claims.

D. Respondents’ attempt to portray the

discovery-stay provision as purely

procedural is irrelevant and wrong.

Respondents try to portray the discovery-stay

provision as purely procedural, and thus, inapplicable

to Securities Act claims brought in state courts. But

that argument overreads Cyan v. Beaver County

Employees Ret. Fund, 138 S. Ct. 1061 (2018), which

used the procedural and substantive labels as a

general descriptor without holding that the label given

to a provision dictates its applicability in state court,

as opposed to the statute’s text, structure, and history.

See id. at 1067. Nor did Cyan dispute the oftrecognized reality that the distinction between

procedure and substance is difficult to draw. See, e.g.,

Sun Oil Co. v. Wortman, 486 U.S. 717, 726 (1988)

(“Except at the extremes, the terms ‘substance’ and

‘procedure’ precisely describe very little except a

dichotomy . . . .”).

18

Often the law endows “procedural” rights with

“substantive” status to be applied in state and federal

courts alike: The Fifth Amendment confers a right to

“due process of law” and a right not to be “twice put in

jeopardy” for the same offense. See U.S. Const. amend.

V. The Sixth Amendment confers rights to certain

procedures, like confrontation of witnesses and a

speedy and public trial, in criminal prosecutions. See

U.S. Const. amend. VI. Federal Rule of Evidence 502

states that the attorney-client privilege and workproduct rule “applies to state proceedings.” Simply

put, substantive protections are often found in

“procedural” rights. Cf. Midlantic Nat’l Bank v. N.J.

Dep’t of Env’t Prot., 474 U.S. 494, 503 (1986) (“The

automatic stay provision of the Bankruptcy Code,

§ 362(a), has been described as ‘one of the fundamental

debtor protections provided by the bankruptcy laws.’”)

(quoting S. Rep. No. 95-989, at 54 (1978)). Hence,

classifying a provision as “procedural” or “substantive”

cannot resolve the issue of state-court application here.

Instead, in light of the clear text, the only remaining

inquiry turns on history: whether the law effects an

unprecedented intrusion on an area of traditional

state sovereignty. And as explained, supra § II-A–C,

the discovery-stay provision, far from being an

unprecedented intrusion of traditional state authority,

falls well within historical tradition and this Court’s

precedent. To the extent the “procedure” or “substance”

label has any purchase here, it serves only to reflect

and approximate what the historical practice has been,

as historical “traditions are themselves the stuff out of

which the Court’s principles are to be formed.” Rutan

v. Republican Party of Ill., 497 U.S. 62, 95–96 (1990)

(SCALIA, J., dissenting). Where there is a tradition of

19

state courts applying federal rules that Congress

mandated to govern the enforcement of a federal cause

of action, even in state courts, such “tradition is not to

be laid on the examining table and scrutinized for its

conformity

to

some

abstract

principle

of

[constitutional] adjudication devised by this Court.”

Id. However “abstract[ly]” labeled, the discovery-stay

provision applicable to a federal securities action does

not break with this tradition.

But even if the label mattered, Respondents’ efforts

to depict the discovery-stay provision as purely

procedural fall short. The outcome-determinative

nature of a discovery stay would make it sufficiently

“substantive” to justify state-court application. Cf. 3

Cyc. of Fed. Proc. § 6:46 (3d ed. July 2021 Update)

(“The relevant inquiry is . . . whether application of the

rule would have so important an effect upon the

fortunes of one or both of the litigants that failure to

enforce the state rule would be likely to cause a

plaintiff to choose the federal court.”). Unless and

until a plaintiff can survive a motion to dismiss,

defendants are not to be subject to discovery. Indeed,

preventing early discovery from being weaponized to

extort meritless settlements was a major impetus

behind the Reform Act—reflecting the reality that the

timing of discovery can be outcome-determinative as a

practical matter. See, infra § III. Treating the

discovery-stay provision as inapplicable to suits

brought in state courts gives short shrift to Congress’s

judgment that while plaintiffs should be entitled to

recover for violations of the Securities Act, defendants

should be free from discovery until after the plaintiffs

have sufficiently stated a claim.

20

There seems to be little doubt that if the situation

were reversed—if federal law guaranteed discovery by

prohibiting any pre-trial stay when adjudicating

federal securities actions—Respondents would clamor

for its application in state court. This Court’s holding

should not turn on whether it benefits defendants or

plaintiffs. The plain text mandates application of the

discovery-stay provision in state and federal court.

That text implements the clear legislative objective of

preventing discovery burdens from unfairly driving

outcomes in federal securities cases. And there is

nothing in the Constitution or our history that would

bar implementation of such an objective in state or

federal court.

III. DECLINING TO APPLY THE DISCOVERY-STAY

PROVISION TO PROCEEDINGS IN STATE COURTS

WILL THWART THE PURPOSE OF THE REFORM ACT.

A key purpose of the Reform Act was to curb abusive

securities litigation that “was being used to injure ‘the

entire U.S. economy.’” Merrill Lynch, Pierce, Fenner

& Smith Inc. v. Dabit, 547 U.S. 71, 81 (2006). An

important part of this effort was the discovery-stay

provision, which was necessary because the “cost of

discovery often forces innocent parties to settle

frivolous securities class actions.” H.R. Rep. No. 104369, at 37 (1995); see also In re LaBranche Sec. Litig.,

333 F. Supp. 2d 178, 181 (S.D.N.Y. 2004) (“The

legislative history of the [Reform Act] indicates that

Congress enacted the discovery stay to prevent

plaintiffs from filing securities class actions with the

intent of using the discovery process to force a coercive

settlement.”). A twin aim of the discovery-stay

provision was preventing plaintiffs from filing

meritless lawsuits in order to unlock the keys to

21

discovery “in the hopes of finding a sustainable claim

not alleged in the complaint.” S. Rep. No. 104-98, at

14 (1995).

To achieve these goals, Congress provided that in

any private action under the Securities Act, the filing

of a motion to dismiss requires a stay of discovery until

the court resolves that motion. See 15 U.S.C. § 77z1(b)(1). Yet neither of these purposes can be achieved

if the discovery stay-provision is not applied to “any”

private action brought under the Securities Act. Cf. A.

Scalia & B. Garner, Reading Law: The Interpretation

of Legal Texts 72 (2012) (“A textually permissible

interpretation that furthers rather than obstructs the

document’s purpose should be favored.”). Plaintiffs

hoping to use litigation and abusive discovery as a

means of extorting a settlement would remain free to

do so: they would simply need to file their case in state

court.

It is well understood that “[r]equesting parties make

overbroad requests, file frivolous suits, and otherwise

seek to intentionally drive the cost of e-discovery up”

and that “[p]roducing parties have no choice but to

settle or pay exorbitant e-discovery costs.” Karel

Mazanec, Capping E-Discovery Costs: A Hybrid

Solution to E-Discovery Abuse, 56 Wm. & Mary L. Rev.

631, 664 (2014); see also Victor Marrero, The Cost of

Rules, The Rule of Costs, 37 Cardozo L. Rev. 1599,

1656–57 (2016) (“[D]iscovery is unmatched among the

major sources of litigation costs; it generates more

legal fees and expenses than any other round of court

proceedings.

According to various estimates,

discovery can consume from fifty to as much as ninety

percent of total legal costs in some cases.”). Such

discovery burdens are particularly asymmetric in

22

Securities Act claims, where plaintiffs will want and

need more discovery from the defendants than vice

versa.

And discovery abuses are particularly acute in state

courts, where the standard for discovery might be

more lenient. See, e.g., Fundamentals of Litig. Prac.

Ch. 11 Introduction (2021 ed.) (“State laws typically

permit a wider scope of relevancy and broader

discovery.”); Cal. Prac. Guide Civ. Pro. Before Trial Ch.

8B-5 (June 2021 Update) (“Discovery proceedings are

subject to much stricter control in federal courts.”). It

should come as no surprise, then, that from 2011 to

2015, the median settlement amount for Section 11

claims filed in California state court was more than

twice the median settlement amount in federal court.

See Joseph Grundfest, Sasha Aganin, and Joseph

Schertler, After Cyan: Potential Trends in Section 11

Litigation,

Law360

(Mar.

27,

2018),

https://www.law360.com/articles/1026323/after-cyanpotential-trends-in-section-11-litigation.

Refusing to apply the stay in state courts would

allow plaintiffs to engage in state-court fishing

expeditions to avoid dismissal of an otherwise

meritless case. State courts often allow—or even

encourage—plaintiffs to use discovery as a way to find

a claim capable of surviving a motion to dismiss. See,

e.g., Mattco Forge, Inc. v. Arthur Young & Co., 223 Cal.

App. 3d 1429, 1436 n.3 (1990) (“Pleading deficiencies

generally do not affect either party’s right to conduct

discovery and this right (and corresponding obligation

to respond) is particularly important to a plaintiff in

need of discovery to amend its complaint.” (internal

citations omitted)). And materials discovered in a

state court action might be used in a later or parallel

23

federal suit. See Glock v. Glock, Inc., 797 F.3d 1002,

1007 (11th Cir. 2015) (“As a general rule, in United

States litigation, to help prosecute or defend their

lawsuits, parties may use any evidence they lawfully

possess” and a plaintiff need not “apply to the court in

either lawsuit before being able to, say, draft a

complaint in the second case based on information

contained in the documents discovered in the first

case.”).

Thus, the goals of the discovery-stay provision will

be thwarted if plaintiffs can evade that provision by

simply bringing their claims in state court. The

Congress that passed a statute specifically designed to

curb

litigation

and

discovery

abuses—by

automatically staying discovery in any private action

brought under the Securities Act—would not have

intended such a bizarre result.

CONCLUSION

For the foregoing reasons, the Amicus respectfully

requests that the Court reverse the trial court’s

decision that the discovery-stay provision does not

apply in state court.

24

August 23, 2021

Respectfully submitted,

CHARLOTTE H. TAYLOR

JONES DAY

51 Louisiana Ave., N.W.

Washington, DC 20001

ERIC TUNG

Counsel of Record

JEREMY R. KAUFFMAN

JONES DAY

555 South Flower St.

Fiftieth Floor

Los Angeles, CA 90071

(213) 489-3939

etung@jonesday.com

DARYL JOSEFFER

JENNIFER B. DICKEY

U.S. CHAMBER

LITIGATION CENTER

1615 H St., N.W.

Washington, DC 20062

Counsel for Amicus Curiae