After much reluctance, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York recently adjourned the SEC trial against the Galleon defendants for alleged insider trading.1 Although no party opposed the U.S. Attorney’s Office motion to adjourn the SEC trial, Judge Rakoff had balked at such an adjournment because of the “strong public interest in having cases of this kind move forward promptly.”2 What tipped the balance toward adjournment was an order by the U.S. Court of Appeals for the Second Circuit staying another Judge Rakoff order which directed certain defendants to turn over to the SEC wiretap recordings produced to the defendants in the parallel criminal action.
That the Second Circuit not only agreed to hear an interlocutory appeal on a discovery issue, but then imposed a stay of a discovery order, is rare. The Galleon case highlights the types of unique issues that may arise in the future as courts become more willing to craft alternatives to complete stays of discovery in parallel civil actions. These types of complicated issues arising from partial stays are more likely to occur in the future in light of the Department of Justice’s new stated policy of not seeking to stay parallel SEC actions.3
The Perils
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