In re Cardinal Health, Inc. Securities Litigation, Master File No. C2-04-575.

365 F.Supp.2d 866

In re CARDINAL HEALTH, INC. SECURITIES LITIGATION This Document Relates To: All Securities Actions.

Master File No. C2-04-575.

United States District Court, S.D. Ohio, Eastern Division.

March 1, 2005.

Ramzi Abadou, Lerach Coughlin Stoia Geller Rudman & Robbins, San Diego, CA, for Pension Fund Group, Plaintiff.

Daniel N. Abraham, Colley Shroyer & Abraham Co., L.P.A., Columbus, OH, for Wood Asset Management, Inc., Plaintiff.

James Edward Arnold, Clark Perdue Arnold & Scott — 2, Columbus, OH, for David L. McKeehan, Timothy E. Ferguson, Movants.

David Bershad, Milberg Weiss Bershad Hynes & Lerach LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

Joseph J. Braun, Strauss & Troy — 1, Cincinnati, OH, for Wood Asset Management, Inc., Plaintiff.

Luke O. Brooks, Lerach Coughlin Stoia Geller Rudman & Robb, San Francisco, CA, for Pension Fund Group, Plaintiff.

Robert N. Cappucci, Entwistle & Cappucci LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

Vincent R. Cappucci, Entwistle & Cappucci LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

Solomon B. Cera, Gold, Bennett, Cera & Sidener, LLP, San Francisco, CA, for Wood Asset Management, Inc., Plaintiff.

Stephen Eric Chappelear, Hahn Loeser & Parks — 2, Columbus, OH, for Public Employees Retirement System of Mississippi, Movant.

Martin D. Chitwood, Chitwood & Harley, Atlanta, GA, for First New York Securities, LLC, Pension Fund Group, Gerald Burger, Plaintiffs.

John R. Climaco, Climaco Lefkowitz Peca Wilcox & Garofoli LPA — 1, Cleveland, OH, for Gerald Burger, Wood Asset Management, Inc., Plaintiffs.

John Kevin Cogan, Jones Day, Columbus, OH, for Cardinal Health Inc, Richard J. Miller, Robert D. Walter, Defendants.

Paul P. Eyre, Baker & Hostetler, Cleveland, OH, for Cardinal Health Inc, Richard J. Miller, Robert D. Walter, Defendants.

John Ryan Gall, Squire Sanders & Dempsey — 2, Columbus, OH, for Ernst & Young LLP, Defendant.

Tor Gronborg, Lerach Coughlin Stoia Geller Rudman & Robb, San Diego, CA, for Pension Fund Group, Plaintiff.

Stuart J. Gube, Chitwood & Harley LLP, Atlanta, GA, for First New York Securities, LLC, Pension Fund Group, Gerald Burger, Plaintiffs.

Shirley H. Huang, Lerach Coughlin Stoia Geller Rudman & Robb, San Francisco, CA, for Pension Fund Group, Plaintiff.

Mark Alan Johnson, Baker & Hostetler — 2, Columbus, OH, for Cardinal Health Inc, Richard J. Miller, Robert D. Walter, Defendant.

Daniel Richard Karon, Goldman Scarlato & Karon, P.C., Cleveland, OH, for Gerald Burger, Wood Asset Management, Inc., Plaintiffs.

Sylvia Wahba Keller, Lerach Coughlin Stoia Geller Rudman & Robb, San Francisco, CA, for Pension Fund Group, Plaintiff.

J. Todd Kennard, Jones Day, Columbus, OH, for Cardinal Health Inc, Richard J. Miller, Robert D. Walter, Defendants.

Jack Landskroner, Landskroner — Grieco — Madden, Ltd., Cleveland, for Wood Asset Management, Inc., Plaintiff.

Jeffrey W. Lawrence, Lerach Coughlin Stoia Geller Rudman & Robbins, San Diego, CA, for Pension Fund Group, Plaintiff.

William S. Lerach, Lerach Coughlin Storia Geller Rudman & Robbins LLP, San Diego, CA, for Pension Fund Group, Plaintiff.

David P. Meyer, David P. Meyer & Associates Co LPA, Columbus, OH, for Wood Asset Management, Inc., Plaintiff.

Brian P. Muething, Keating Muething & Klekamp, Cincinnati, OH, for The State of New Jersey, Department of Treasury, Division of Investment, Movant.

Joseph F. Murray, Murray Murphy Moul & Basil — 2, Columbus, OH, for Pension Fund Group, Wood Asset Management, Inc., Plaintiffs.

John M. Newman, Jr., Jones, Day, Reavis, & Pogue, Cleveland, OH, for Cardinal Health Inc., Richard J. Miller, Robert D. Walter, Defendants.

Walter W. Noss, Scott & Scott LLC, Chagrin Falls, OH, for Pacific Southwest Funding Corp., The Engel Family Trust, Movants.

Stephen D. Oestreich, Entwistle & Cappucci LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

Shawn J. Organ, Jones Day, Columbus, OH, for Cardinal Health Inc, Richard J Miller, Robert D Walter, Defendants.

Geoffrey J. Ritts, Jones Day Reavis & Pogue, Cleveland, OH, for Cardinal Health Inc, Richard J. Miller, Robert D. Walter, Defendants.

Darren J. Robbins, Lerach Coughlin Stoia Rudman & Robbins, San Diego, CA, for Pension Fund Group, Plaintiff.

Henry Rosen, Lerach Coughlin Stoia Geller Rudman & Robb, San Diego, CA, for Pension Fund Group, Plaintiff.

Mark R. Rosen, Barrack Rodos & Bacine, Philadelphia, PA, for The State of New Jersey, Department of Treasury, Division of Investment, Movant.

Neil Rothstein, Scott & Scott LLC, San Diego, CA, for The Engel Family Trust, Movant.

Steven G. Schulman, Milberg, Weiss, Bershad, Hynes & Lerach, New York, NY, for First New York Securities, LLC, Plaintiff.

David R. Scott, Scott & Scott, Colchester, CT, for The Engel Family Trust, Movant.

Peter E. Seidman, Milberg Weiss Bershad Hynes & Lerach LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

Brian G. Selden, Jones Day, Columbus, OH, for Cardinal Health Inc, Richard J. Miller, Robert D Walter, Defendants.

Arthur L. Shingler, Scott & Scott, LLC, San Diego, CA, for The Engel Family Trust, Movant.

Scott D. Simpkins, Climaco Lefkowitz Peca Wilcox & Garofoli LPA — 1, Cleveland, OH, for Gerald Burger, Wood Asset Management, Inc., Plaintiffs.

Scott E. Smith, Smith Phillips & Associates Co LPA, Worthington, OH, for Wood Asset Management, Inc., Plaintiff.

Pamela H Thurston, Squire Sanders & Dempsey — 2, Columbus, OH, for Ernst & Young LLP, Defendant.

Marc A Topaz, Schiffrin & Barroway LLP — 1, Bala Cynwyd, PA, for Gerald Burger, Plaintiff.

Sylvia Wahba-Keller, Lerach Coughlin Stoia Geller Rudman & Robbins LLP, San Francisco, CA, for Pension Fund Group, Plaintiff.

Patrick G. Warner, David P. Meyer & Associates Co LPA, Columbus, OH, for Gerald Burger, Plaintiff.

Richard Stuart Wayne, Strauss & Troy — 1, Cincinnati, OH, for First New York Securities, LLC, Wood Asset Management, Inc., Plaintiffs.

Lesley E. Weaver, Lerach Coughlin Stoia Geller Rudman & Robb, San Francisco, CA, for Pension Fund Group, Plaintiff.

Melvyn I. Weiss, Milberg Weiss Bershad Hynes & Lerach, New York, NY, for First New York Securities, LLC, Plaintiff.

William W. Wickersham, Entwistle & Cappucci LLP, New York, NY, for First New York Securities, LLC, Plaintiff.

David J. Worley, Chitwood & Harley LLP, Atlanta, GA, for First New York Securities, LLC, Pension Fund Group, Gerald Burger, Plaintiffs.

ORDER

MARBLEY, District Judge.

I. INTRODUCTION

This matter comes before the Court on Defendants' Motion For Partial Stay of Overlapping State Court Proceedings. [Docket No. 123]. Specifically, Defendants request a stay of all proceedings and/or discovery in the state-court derivative action relating to the accounting issues raised in the federal securities complaints. The Court GRANTS Defendants' Motion to stay all discovery in the state court case relating to the accounting issues raised in the federal securities complaints. This stay shall remain in effect pending this Court's disposition of any motion to dismiss the ongoing consolidated federal securities case, In re Cardinal Health Securities Litigation, No. C2-04-575 (S.D. Ohio filed July 2, 2004).

II. BACKGROUND and PROCEDURAL HISTORY

The consolidated federal securities case pending in this Court consists of putative class actions against Cardinal Health, Inc. ("Cardinal" or "the Company"), its officers, and related parties. The claims arise from announcements in July 2004 that the Company was the subject of a federal criminal investigation and that its Chief Financial Officer had resigned. After these announcements, the price of the Company's stock fell, and several class actions were filed alleging various violations of the federal securities laws, including Section 11 of the Securities Exchange Act of 1933, 15 U.S.C. § 77k, Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.¹

Pursuant to the Private Securities Litigation Reform Act ("PSLRA"), 104-67, 109 Stat. 737, this Court consolidated all securities class actions filed against Cardinal and related Defendants on December 16, 2004² and appointed Lead Plaintiff and Lead Plaintiff's Counsel on January 26, 2005. The PSLRA provides for a stay of discovery in federal securities fraud lawsuits during the pendency of any motion to dismiss:

In any private action arising under this chapter, all discovery and other proceedings shall be stayed during the pendency of the 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). Thus, any discovery in In re Cardinal Health Securities Litigation is presumptively stayed during "the pendency of a motion to dismiss."³ Id.

The target of Defendants' Motion for a Partial Stay is Staehr v. Walter, No. 02-CVG-11-639, a pending state court shareholder derivative action against Cardinal's officers and directors in the Common Pleas Court of Delaware County, Ohio ("state court").⁴ The original complaint in Staehr was filed on November 8, 2002. It alleged that the state court defendants ("State Defendants") breached their fiduciary duties in connection with Cardinal's acquisition of Syncor International Corporation ("Syncor") in 2002. An Amended Verified Derivative Complaint was filed on March 21, 2003, which acknowledged that Cardinal had remedied the allegations set forth in the first complaint, but contained new allegations that State Defendants were improperly indemnifying Monty Fu, Syncor's former board chairman. In April 2003, the Wall Street Journal published an article regarding alleged accounting manipulations at Cardinal; consequently, the state court plaintiff ("Staehr" or "State Plaintiff") filed a Second Amended Complaint on June 3,...