482 F.Supp.3d 158
S.D.N.Y.2020Background:
- Dangdang, a Cayman Islands corporation, listed American Depositary Shares (ADSs) on the NYSE pursuant to a Deposit Agreement that contains an arbitration provision and a Forum Selection Clause requiring litigation in Manhattan for claims not subject to arbitration and for certain federal securities claims.
- In September 2016 Dangdang completed a going-private merger; minority shareholders (plaintiffs: Fasano, AOF, AAM) allege lowball pricing and misrepresentations by directors, officers, and related entities (mix of federal securities and common-law claims).
- The district court originally dismissed on forum non conveniens in favor of the Cayman Islands; the Second Circuit vacated and remanded because the district court failed to analyze the Deposit Agreement’s Forum Selection Clause (Fasano II).
- On remand plaintiffs filed an Amended Complaint adding two federal securities claims; defendants renewed a forum non conveniens motion and alternatively moved to dismiss for failure to state a claim.
- The district court held the Forum Selection Clause: (i) applies only to claims "relating to or based upon" U.S. federal securities laws (so not plaintiffs’ common-law claims), and (ii) is enforceable only as to Dangdang and a limited subset of non-signatories (DHC, Guoqing Li, Peggy Yu Yu, Min Kan).
- Because the clause covered only a minority of parties/claims and the public-interest and internal-affairs considerations favored the Cayman Islands (common-law claims governed by Cayman law, substantial nexus to Cayman litigation), the court dismissed the entire action on forum non conveniens.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of forum-selection clause as to claims | Clause’s broad "relating to" language covers all claims | Clause is limited to claims "relating to or based upon" federal securities laws | Clause covers only federal securities claims; common-law claims fall outside |
| Scope as to parties | Clause binds all defendants closely related to Dangdang | Only signatory (Dangdang) and foreseeable non-signatories (those tied to ADS issuance/holders) are bound | Clause enforceable against Dangdang, DHC, Guoqing Li, Peggy Yu Yu, and Min Kan only |
| Whether enforcement is unreasonable/rebutted | Plaintiffs: enforcement appropriate; bifurcation acceptable | Defendants: enforcement would be unreasonable, forcing bifurcated/parallel proceedings | Defendants failed to rebut presumption; clause enforceable as to covered parties/claims |
| Whether partial applicability requires retention or dismissal on forum non conveniens | Plaintiffs: clause counsels retention of NY forum for covered claims | Defendants: public/private interests and internal-affairs doctrine favor Cayman Islands; dismissal appropriate | Because clause only covers a minority of parties/claims and Cayman has stronger nexus, court dismissed on forum non conveniens |
Key Cases Cited
- Fasano v. Yu Yu, 921 F.3d 333 (2d Cir. 2019) (remanding for district court analysis of forum-selection clause enforceability)
- Atlantic Marine Constr. Co. v. U.S. Dist. Ct., 571 U.S. 49 (2013) (valid forum-selection clauses get controlling weight; exceptional circumstances required to override)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses presumptively enforceable absent fraud or unreasonableness)
- Magi XXI, Inc. v. Stato Della Citta del Vaticano, 714 F.3d 714 (2d Cir. 2013) (factors for presumption of enforceability: communicated, mandatory, and scope as to claims/parties)
- Martinez v. Bloomberg LP, 740 F.3d 211 (2d Cir. 2014) (forum-selection clause modifies deference to plaintiff's forum choice)
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (standards for rebutting enforcement: fraud, unfair law, contravening public policy, or practical denial of day in court)
- In re Rolls-Royce Corp., 775 F.3d 671 (5th Cir. 2014) (framework when some but not all defendants are subject to forum-selection clauses)
- In re Howmedica Osteonics Corp., 867 F.3d 390 (3d Cir. 2017) (multi-step approach where contracting and non-contracting parties’ interests conflict)
- Roby v. Corp. of Lloyd’s, 996 F.2d 1353 (2d Cir. 1993) (broad clause language can encompass noncontract claims when clause scope is clearly expansive)
- Scottish Air Int’l, Inc. v. British Caledonian Grp., PLC, 81 F.3d 1224 (2d Cir. 1996) (internal-affairs doctrine: corporate internal affairs governed by place of incorporation)