United States District Court, E.D. Missouri, Eastern Division
CARPENTERS PENSION FUND OF ILLINOIS, et al., derivatively and on behalf of the nominal defendant Centene Corporation, Plaintiffs,
MICHAEL F. NEIDORFF, et al., Defendants, and CENTENE CORPORATION, Nominal Defendant.
MEMORANDUM AND ORDER
CATHERINE D. PERRY UNITED STATES DISTRICT JUDGE
defendant Centene Corporation moves to stay this shareholder
derivative action pending resolution of a separate, yet
related, securities class action over which another judge in
this district presides. Considering the parties'
respective positions as well as factors relevant in
determining Centene's motion to stay, I will deny the
motion to stay this action indefinitely but will impose a
temporary stay pending resolution of the motion to dismiss in
the securities action.
shareholder derivative action is brought by
plaintiff-shareholders of nominal defendant Centene
Corporation, in which plaintiffs allege that certain members
of Centene's board of directors and certain of its
officers violated federal securities laws, breached their
fiduciary duties, engaged in insider trading, and were
unjustly enriched by and in relation to their alleged false
and misleading statements regarding the extent of liabilities
inherited by Centene in a March 2016 merger with Health Net,
Inc., resulting in millions of dollars in damages to Centene.
About fourteen months before this derivative action was
filed, however, other shareholders brought a federal
securities class action against Centene and certain of its
officers, making similar allegations. That action -
Sanchez, et al. v. Centene Corp., et al., No.
4:17CV806 AGF - is pending before another judge in this
district. A motion to dismiss filed in that action has been
fully briefed and argued, and is now under submission for
ruling. Centene seeks to stay all proceedings in this
derivative action until the Sanchez securities
action is resolved in its entirety.
determining Centene's motion to stay, the parties agree
that I should consider the following factors: 1) potential
prejudice to the nonmoving party; 2) hardship and inequity to
the moving party if the action is not stayed; and 3) the
judicial resources that would be saved by avoiding
duplicative litigation. See Simmons v.
GlaxoSmithKline, LLC, No. 4:15CV1397 CDP, 2015 WL
6063926, at *1 (E.D. Mo. Oct. 14, 2015). Upon such
consideration, I find that all three factors favor a
temporary stay; not an indefinite stay as Centene requests.
I agree with plaintiffs that an indefinite stay runs the risk
of potential loss of evidence, especially as to the memories
of witnesses in this undoubtedly fact-intensive litigation.
Although there will certainly be significant overlap in
witnesses in both cases, not all witnesses will necessarily
be the same and those witnesses that are the same may not be
asked questions during discovery in the securities action
that plaintiffs here may want answered. Additionally, the
documentary evidence sought in the securities action may not
encompass all of the documentary evidence sought by
plaintiffs here. Because an indefinite delay in discovery in
this action could potentially harm the nonmoving parties,
this factor weighs against an indefinite stay.
there is a “fair possibility” that plaintiffs
will be harmed by a stay, Centene “must make out a
clear case of hardship or inequity in being required to go
forward.” Landis v. North Am. Co., 299 U.S.
248, 255 (1936). See also In re Galena Biopharma, Inc.
Derivative Litig., 83 F.Supp.3d 1033, 1043 (D. Or.
2015). To grant a lengthy or indefinite stay in the absence
of a pressing need is an abuse of discretion.
Landis, 299 U.S. at 255; In re Galena
Biopharma, 83 F.3d at 1043 (burden on moving party is
greater if indefinite stay is sought). Here, Centene argues
that financial and management resources devoted to defending
itself in the securities action will be diverted and drained
if it is required to simultaneously litigate this action.
Centene also argues that its defense in the securities case
will be jeopardized if this derivative action proceeds. These
concerns are not so pressing to warrant an indefinite stay.
cases are pending in this district court and both are in
early procedural stages such that discovery in the two cases
going forward can be coordinated, thus conserving
Centene's resources. If this case is stayed and discovery
progresses in the securities action, Centene could be subject
to duplicative discovery, possibly years down the road, which
would be a greater drain on its managerial and financial
resources. See Galena Biopharma, 83 F.Supp.3d at
1044 (citing Smith ex rel. Apollo Grp., Inc. v.
Sperling, 2012 WL 79237, at *3 (D. Ariz. Jan. 11,
2012)). In addition, given the early stages of both cases, it
is not known whether any of Centene's officers and
directors committed any wrongdoing. Thus, any conflict in
Centene's position in the two cases “exists only
under a purely formalistic construct based on the fact that
[Centene] is a nominal plaintiff in the derivative action and
an actual defendant in the securities class action.”
Id. at 1045 (citing Smith ex rel. Apollo,
2012 WL 79237, at *2). Beyond this formalistic construct,
“the Court cannot ascertain any direct conflict between
the shareholders seeking damages from the corporation based
on the wrongdoing of its Officers and Directors in [the
securities class] action, and the shareholder seeking to
protect the corporation's rights against the wrongdoing
of its Officers and Directors in [the derivative]
action.” Id. Centene has thus failed to show a
genuine conflict between its defense in the securities action
and its interest in this derivative action.
judicial resources are best used by granting a temporary stay
of this action instead of an indefinite one. Duplicative
discovery efforts and disputes can be avoided through
appropriate case management between the two cases. Resolution
of similar issues in the securities action can inform this
Court in the present instead of being made to wait ad
infinitum, with such delay being exacerbated by the halt
of discovery in this case. Appropriate case management with
informed scheduling between the two cases can also minimize
the risk of inconsistent judicial rulings.
has not carried its burden of showing that it will suffer a
clear case of hardship or inequity if I do not grant an
indefinite stay as requested. I do find, however, that a
temporary stay pending the resolution of the motion to
dismiss in the related securities action is warranted, given
that such a temporary stay would result in less hardship to
all parties and better use of judicial resources.
IT IS HEREBY ORDERED that Centene
Corporation's Motion to Stay this Action Pending
Resolution of Sanchez, et al. v. Centene Corp., et
al.  is granted in part and denied in part.
IS FURTHER ORDERED that this action is stayed
pending resolution of the motion to dismiss now under
submission in Sanchez.
IS FURTHER ORDERED that within fourteen (14) days of
the court's ruling of the motion to dismiss in
Sanchez, counsel for the parties in this derivative
action shall meet and confer and file an appropriate motion
to lift the stay and a joint status report setting
out what effect, if any, the court's ruling in
Sanchez has on the claims now pending in this
action, including whether the ...