Second Circuit Takes Position on Confidential Witnesses in Securities Class Actions, Approves Depositions for Purposes of Motion to Dismiss
By Christopher H. McGrath, Barry G. Sher, Carla R. Walworth, and Kimberley A. Donohue
In 2000, the Second Circuit Court of Appeals found that plaintiffs relying on confidential witnesses and other factual allegations in securities class action complaints did not need to identify such witnesses in order to defeat a motion to dismiss. Novak v. Kasaks, 216 F. 3d 300 (2d Cir. 2000). Ten years later, in light of intervening Supreme Court decisions on pleading standards, the Second Circuit reversed course and affirmed the dismissal of a securities class action where the lower court had ordered depositions of purported confidential witnesses and had considered the deposition testimony in deciding the motion.