In Cyan v. Beaver County Employees' Retirement Fund, 138 S. Ct. 1061 (2018), the Supreme Court unanimously held that state courts have jurisdiction over class actions alleging only violations of the Securities Act of 1933 (1933 Act). The court did not address whether all of the procedural protections of the Private Securities Litigation Reform Act (PSLRA) apply with equal force when plaintiffs bring 1933 Act suits in state court. It is exceedingly unlikely, however, that the Cyan court intended to permit plaintiffs to circumvent the PSLRA's limitations by bringing class actions asserting 1933 Act claims in state court rather than federal court.

One of the PSLRA's key procedural protections is the automatic stay of discovery during the pendency of a motion to dismiss. This serves "to protect defendants … from the burden and expense of premature discovery … until the court sustains the sufficiency of the complaint." ATSI Communications v. Shaar Fund, Ltd., 2003 WL 1877227, at *2 (S.D.N.Y. April 2, 2003). "The legislative history of the PSLRA 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." In re LaBranche Sec. Litig., 333 F. Supp. 2d 178, 181 (S.D.N.Y. 2004). Congress also aimed "to prevent plaintiffs from … using [a meritless lawsuit] as a vehicle 'in order to conduct discovery in the hopes of finding a sustainable claim not alleged in the complaint.'" In re Vivendi Universal, S.A. Sec. Litig., 381 F. Supp. 2d 129, 129-30 (S.D.N.Y. 2003) (quoting S. Rep. No. 104-98, at 14 (1995)).

Post-Cyan courts are divided on whether the PSLRA's discovery stay applies in state court actions asserting 1933 Act claims. Two New York state court judges—Justice Saliann Scarpulla and Justice Andrew Borrok—have reached opposite conclusions on this question. But both the language and the purpose of the PSLRA's discovery stay demonstrate that it reaches state court actions as well as federal court actions.