In Re Rational Software Securities Litigation

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR LIMITED DISCOVERY

[Docket No. 70]

Plaintiffs’ motion for limited discovery was heard on November 30, 1998. For the reasons set forth below, the motion is granted in part and denied in part.

I. BACKGROUND

This class action arises from Plaintiffs’ allegations that they were injured as a result of insider stock trading which occurred on October 8, 1997. On that date, the Chief Executive Officer of Defendant Rational Software, Paul Levy (“Levy”), allegedly told a market analyst named Rehan Syed (“Syed”) that Rational would be announcing unexpectedly low third quarter and year' end earnings. Plaintiffs allege that this information was not then available to the public. Plaintiffs further allege that upon receiving the information from Levy, Syed immediately advised the clients of his firm, Defendant Cowen & Co. (“Cowen”), to sell Rational stock. Large blocks of Rational stock in fact were sold on October 8, 1997, which caused the stock price to drop nearly nineteen percent by the end of the trading day. Plaintiffs, who were not aware that Rational would be announcing low earnings, assert that they bought Rational…