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Equifax Data Breach Suit Gets Discovery Stay Modification

June 20, 2018, 5:21 PM

A shareholder suing Equifax Inc. over alleged securities law violations convinced a federal judge to modify a discovery stay so they may engage in activities that are already ongoing in parallel litigation.

Union Asset Management Holding AG is the lead plaintiff in a putative class action alleging that Equifax committed securities fraud in connection with a 2017 data breach affecting approximately 140 million consumers.

UAMH now has the green light to serve document requests on the company, and the parties must begin negotiating how electronically stored information should be searched.

Under the automatic stay provision of the Private Securities Litigation Reform Act, shareholders can’t get discovery while a motion to dismiss is pending.

A modification of the discovery stay will help keep the securities litigation apace with related consumer class action litigation arising out of the breach, District Judge Thomas W. Thrash Jr., of the U.S. District Court for the Northern District of Georgia, said in a June 18 decision.

The Northern District of Georgia is overseeing multidistrict litigation over whether Equifax lacked adequate safeguards to protect consumer data.

UAMH would be at a disadvantage should it not be allowed to engage in case management and discovery planning activities that are already underway in the parallel proceedings, Thrash said.

“The MDL is not a garden-variety multidistrict litigation—it is comprised of a consolidation of hundreds of different cases,” Thrash said. “Thus, even though Equifax is not bankrupt and has not already entered into settlement agreements with other plaintiffs, the unusually massive nature of this case presents a serious risk of undue prejudice to [UAMH] if it falls too far behind the parties in the related actions.”

The court also found that the modification doesn’t conflict with the purposes behind the PSLRA’s automatic discovery stay.

Equifax will be only slightly burdened by the modification, Thrash said. And UAMH won’t be able to discover facts to support new claims because its not requesting the actual production of documents, he said.

However, the court declined to modify the stay with respect to Equifax executives who had also been sued in the securities fraud case. The bulk of the discovery preparation efforts don’t involve the executives, and the vast majority of documents are likely in Equifax’s custody, Thrash said.

The case is In re Equifax Secs. Litig., 2018 BL 214738, N.D. Ga., No. CIVIL ACTION FILE NO. 1:17-CV-3463-TWT, 6/15/18

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