JOE FASANO; ALTIMEO OPTIMUM FUND; and ALTIMEO ASSET MANAGEMENT, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. GUOQING LI; PEGGY YU YU; DANGDANG HOLDING COMPANY, LTD.; E-COMMERCE CHINA DANGDANG INC.; KEWEN HOLDING CO. LTD.; SCIENCE & CULTURE LTD.; FIRST PROFIT MANAGEMENT, LTD.; DANQIAN YAO; LIJUN CHEN; MIN KAN; RUBY RONG LU; KE ZHANG; and XIAOLONG LI, Defendants.
16 Civ. 8759 (KPF)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
August 28, 2020
KATHERINE POLK FAILLA, District Judge
KATHERINE POLK FAILLA, District Judge:
In September 2016, the shareholders of E-Commerce China Dangdang Inc. approved a “going private” merger (the “Merger“). Co-Lead Plaintiffs Joe Fasano, Altimeo Optimum Fund, and Altimeo Asset Management brought a putative class action challenging the fairness of and seeking damages related to the Merger, and Defendants responded with a motion to dismiss on forum non conveniens grounds. This Court granted Defendants’ motion, finding that the Cayman Islands was an adequate alternative forum and that the private and public interests favored the adjudication of the parties’ dispute in that forum. See Fasano v. Juoqing Li, No. 16 Civ. 8759 (KPF), 2017 WL 6764692, at *13 (S.D.N.Y. Dec. 29, 2017) (”Fasano I“). However, the Court neglected to take into account a forum selection clause (the “Forum Selection Clause“) contained in a Deposit Agreement between and among E-Commerce China Dangdang Inc., the
On remand, Plaintiffs are proceeding with an Amended Complaint that pleads a mix of federal securities and common law claims regarding Defendants’ alleged misrepresentations about the Merger. Those Defendants that have been served (collectively, “Defendants“) have renewed their motion for dismissal on forum non conveniens grounds, and in the alternative have moved to dismiss under
A. Factual Background2
Although Plaintiffs are proceeding via an Amended Complaint, the facts of this case remain virtually unchanged from when the Court considered Defendants’ initial motion to dismiss. See generally Fasano I, 2017 WL 6764692. Given that, as well as the longevity of this action, the Court assumes the parties’ familiarity with the facts and incorporates by reference the factual background laid out in Fasano I. See id. at *1-3. Instead, the Court reiterates only those facts that are essential to the adjudication of Defendants’ current forum non conveniens motion.
This action involves thirteen defendants — five corporations and eight individuals. (See Am. Compl. ¶¶ 9-18, 20-22). The principal corporate defendant is E-Commerce China Dangdang Inc. (“Dangdang“), a leading e-commerce company based in China but incorporated under the laws of the Cayman Islands. (Id. at ¶ 11). Relevantly to this action, Dangdang had American Depositary Shares (“ADSs“) listed on the New York Stock Exchange
Any controversy, claim[,] or cause of action ... arising out of or relating to ... the American Depositary Shares ... shall be settled by arbitration ...; provided, further, that any such controversy, claim[,] or cause of action ... relating or based upon the provisions of the Federal securities laws of the United States or the rules and regulations promulgated thereunder shall be submitted to arbitration ... if, but only if, so elected by the claimant. ... Any controversy, claim[,] or cause of action ... not subject to arbitration ... shall be litigated in the Federal and state courts in the Borough of Manhattan, The City of New York.
(Id., Ex. 5 at 54).
The other corporate defendants include: Dangdang Holding Company Limited (“DHC“), a company based in China but incorporated under the laws of the Cayman Islands (Am. Compl. ¶ 12); Kewen Holding Co. Limited (“Kewen“), an investment holding vehicle incorporated under the laws of the British Virgin Islands (id. at ¶ 13); Science & Culture International Limited (“SCI“), an investment holding vehicle incorporated under the laws of the British Virgin Islands (id. at ¶ 14); and First Profit Management Limited (“First Profit“), an investment holding vehicle incorporated under the laws of the British Virgin Islands (id. at ¶ 16). According to Plaintiffs, Guoqing Li controls Kewen and SCI, while Danqian Yao controls First Profit. (Id. at ¶¶ 13-14, 16).
The principal individual defendants are Guoqing Li and Peggy Yu Yu, both of whom are co-founders and directors of Dangdang. (Am. Compl. ¶¶ 9-
Plaintiff Joe Fasano is a resident of New York and was the owner of Dangdang ADSs, amounting to the equivalent of five common shares, prior to the Merger. (Am. Compl. ¶ 6). Plaintiff Altimeo Optimum Fund (“AOF“) is a French investment fund that held over 440,000 Dangdang ADSs, amounting to the equivalent of approximately 2.2 million common shares, prior to the Merger. (Id. at ¶ 7). See Fasano I, 2017 WL 2764692, at *2. Plaintiff Altimeo Asset Management (“AAM“), a French company, is AOF‘s asset management company and authorized agent. (Am Compl. ¶ 8). See Fasano I, 2017 WL 2764692, at *2.
Plaintiffs allege that on July 9, 2015, a group comprised of Defendants Guoqing Li, Peggy Yu Yu, Danqian Yao, Lijun Chen, Min Kan, Kewen, SCI, and First Profit (the “Controlling Group“), submitted a bid to buy out Dangdang‘s minority shareholders. (Am. Compl. ¶ 50). The Controlling Group submitted a
On May 31, 2016, the special committee voted to approve the Controlling Group‘s buyout bid — now reduced to $6.70 per ADS — despite the fact that Dangdang had received a competing offer of $8.80 per ADS. (Am. Compl. ¶¶ 66, 75). Following acceptance of the Merger, Plaintiffs allege that Defendants made numerous misrepresentations in their filings with the SEC. (Id. at ¶¶ 81-104). Specifically, Defendants allegedly misrepresented that (i) Maples was independent counsel, whereas it was actually conflicted due to its ongoing relationship with Dangdang (id. at ¶¶ 82-83); (ii) the Merger was both substantively and procedurally fair to the minority shareholders, whereas in actuality the Merger resulted in an unfairly low price and lacked basic
On September 20, 2016, the Merger closed and became effective when the plan of merger and agreement were filed with the Cayman Islands Registrar of Companies. Fasano I, 2017 WL 6764692, at *3. Nine shareholders objected to the Merger, but Plaintiffs did not. Id. On November 29, 2016, Dangdang filed a petition in the Grand Court of the Cayman Islands asking that court to determine the fair value of the shares held by the objecting shareholders (the “Cayman Islands Proceeding“). Id. It is the Court‘s understanding that the Cayman Islands Proceeding concluded in May 2018. (See Brown Decl., Ex. A).
B. Procedural Background
On November 10, 2016, Plaintiffs filed their original complaint in this action against Defendants. (Dkt. #1). The complaint sought damages for “breaches of fiduciary duties, violations of U.S. securities law and New York common law, and a quasi-appraisal due to misrepresentations and omissions in the Forms 13E-3 for the Merger.” (Id.). On January 30, 2017, Plaintiffs filed a motion to be appointed Co-Lead Plaintiffs, pursuant to Section 21D(a)(3)(B) of the Securities Exchange Act of 1934 (the “Exchange Act“), as amended by the
On March 15, 2017, Defendants Dangdang, DHC, First Profit, Kewen, and SCI (collectively, the “Corporate Defendants“) filed their initial motion to dismiss on forum non conveniens grounds, along with an accompanying memorandum and declarations. (Dkt. #38-45). On April 28, 2017, Plaintiffs filed a memorandum and declaration, both in opposition to the Corporate Defendants’ motion to dismiss and in support of a motion for substitute service on the individual defendants. (Dkt. #48-49). On May 17, 2017, the Corporate Defendants filed a memorandum and declaration in reply. (Dkt. #52-53). On December 20, 2017, certificates of service were filed for Defendants Peggy Yu Yu, Danqian Yao, Lijun Chen, and Min Kan. (Dkt. #56-59).
On December 29, 2017, the Court issued its Opinion and Order regarding the Corporate Defendants’ motion to dismiss for forum non conveniens and Plaintiffs’ motion for substitute service. (Dkt. #61). See generally Fasano I, 2017 WL 6764692. In that Opinion, the Court first determined that Plaintiffs’ choice of forum in New York was entitled to little deference, both because the only New York resident — Fasano — had little financial interest in the litigation as compared to AOF and AAM and because Plaintiffs were suing in a representative capacity. See Fasano I, 2017 WL 6764692, at *6-7. Next, the Court found that the Cayman Islands was an adequate alternative forum, both because all of the Defendants who had been served were amenable to service in that forum and because the Cayman
Finally, the Court found that while the private interests of the parties were neutral as between the Cayman Islands and New York, the public interests of the two fora favored dismissal. See Fasano I, 2017 WL 6764692, at *9. While the Court acknowledged that the United States had an interest in the litigation, due to Dangdang‘s listing of ADSs on the NYSE and Fasano‘s status as a New York resident, the Court found that the Cayman Islands had a much closer nexus to the litigation. See id. at *10-11. As the Court noted, “[t]he principal actor in the dispute ... is a Cayman Islands corporation[;] [t]he events giving rise to the litigation took place in the Cayman Islands and involved a ‘going private’ merger between two Cayman Islands entities[;] [t]he law firm that advised Dangdang ... and the Special Committee in reviewing the merger bid has its principal North American offices in the Cayman Islands and the British Virgin Islands[;] [a]nd a Cayman Islands court [was] already engaged in a proceeding” regarding the Merger. Id. at *10. The Court also determined that Plaintiffs’ common law claims would likely require the application of Cayman Islands law, and therefore the Court would be in a position of overseeing a proceeding governing primarily by foreign law. See id. at *12-13. Taken together, the public interest considerations counseled in favor of dismissal of the action. See id. at *13.
On January 10, 2018, Plaintiffs appealed the Court‘s Opinion and Order granting the motion to dismiss to the Second Circuit. (Dkt. #63). On April 12,
Following the Second Circuit‘s remand, all Defendants save Guoqing Li, Ruby Rong Lu, Ke Zhang, and Xiaolong Li renewed their motion to dismiss for forum non conveniens, and additionally moved to dismiss pursuant to
On October 7, 2019, Defendants (again with the exception of Guoqing Li, Ruby Rong Lu, Ke Zhang, and Xiaolong Li, who all remained unserved at that time), moved to dismiss the Amended Complaint both on forum non conveniens grounds and for failure to state a claim. (Dkt. #81-84). Plaintiffs filed their opposition papers on November 15, 2019, and also requested that the Court hold oral argument on the motion. (Dkt. #88-91; see also Dkt. #92 (Court response)).
Separately, on November 18, 2019, Plaintiffs filed a motion seeking alternative service as to Defendants Guoqing Li, Ruby Rong Lu, Ke Zhang, and Xiaolong Li. (Dkt. #93). The served Defendants responded to that motion on December 2, 2019. (Dkt. #94). On December 10, 2019, the Court granted Plaintiffs’ motion as to Defendant Guoqing Li alone. (Dkt. #95). Defendants filed their reply papers for their motion to dismiss on December 16, 2019. (Dkt. #96-97). On December 30, 2019, Plaintiffs requested leave to file a sur-reply (Dkt. #98), to which Defendants responded on January 7, 2020 (Dkt. #99). On January 8, 2020, the Court informed the parties that it would take into account their letter regarding the sur-reply, but otherwise would not
DISCUSSION
The Court Grants Defendants’ Renewed Motion to Dismiss for Forum Non Conveniens
A. Applicable Law
The decision to grant a motion to dismiss on grounds of forum non conveniens “lies wholly within the broad discretion of the district court.” Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en banc) (citation omitted). “The doctrine of forum non conveniens is a discretionary device permitting a court in rare instances to dismiss a claim even if the court is a permissible venue with proper jurisdiction over the claim.” Carey v. Bayerische Hypo-Und Vereinsbank AG, 370 F.3d 234, 237 (2d Cir. 2004) (internal quotation marks and citation omitted). The party seeking dismissal “bears the burden of proof on all elements of the motion.” Bank of Credit and Commerce Int‘l (Overseas) Ltd. v. State Bank of Pakistan, 273 F.3d 241, 246 (2d Cir. 2001).
Typically when a court is faced with a motion to dismiss for forum non conveniens, it must assess: (i) the deference to be accorded to the plaintiff‘s choice of forum; (ii) the adequacy of the alternative forum proposed by the
With that said, the presumption that a forum selection clause is enforceable is “not automatic.” Fasano II, 921 F.3d at 335. “Instead, a district court must consider three factors ...: whether [i] the clause was reasonably communicated to the party resisting its enforcement; [ii] the clause is mandatory of permissive; and [iii] the claims and parties to the dispute are subject to the clause.” Id. (citing Magi XXI, Inc. v. Stato Della Citta del Vaticano, 714 F.3d 714, 721 (2d Cir. 2013)). And even if the court determines that the
B. Analysis
1. The Forum Selection Clause Does Not Cover All Claims
There is no question that the Forum Selection Clause was reasonably communicated to Defendants and that it is mandatory. Defendants, however, dispute whether the Forum Selection Clause covers all of Plaintiffs’ claims. (See Def. Br. 3, 4-6). Specifically, Defendants argue that while Plaintiffs’ federal securities law claims fall within the Forum Selection Clause, their claims for negligent misrepresentation and breach of fiduciary duty do not. (See id.). Plaintiffs, for their part, assert that the Forum Selection Clause contains classically broad language that necessarily covers all claims at issue in this action. (See Pl. Opp. 5-7).
“Under New York law, the words and phrases used by the parties in a forum-selection clause ‘must, as in all cases involving contract interpretation, be given their plain meaning.‘” ICICI Bank Ltd. v. Essar Glob. Fund Ltd., 565 B.R. 241, 252 (S.D.N.Y. 2017) (quoting Brooke Grp. Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 534 (1996)).
At the outset, the Court acknowledges that the Forum Selection Clause uses language that typically signals a broad application of the clause. See, e.g., Prod. Res. Grp., L.L.C. v. Martin Prof‘l, A/S, 907 F. Supp. 2d 401, 412 (S.D.N.Y. 2012) (noting that terms such as “in connection with,” “relating to,” or “associated with” indicate a broader scope for forum selection clauses). Specifically, and when read in isolation, the Deposit Agreement provides that:
[A]ny such controversy, claim[,] or cause of action brought by a party hereto against the Company relating to or based upon the provisions of the Federal securities laws of the United States or the rules and regulations promulgated thereunder ... shall be litigated in the Federal and state courts in the Borough of Manhattan.
(Am. Compl., Ex. 5 at 54 (emphasis added)). However, terms such as “relating to” are not talismans that automatically render contractual clauses broad in scope; what controls is the language when read in its proper context, not the
Reading the Forum Selection Clause within its context, it is clear that it is only designed to cover a narrow subset of claims. The Forum Selection Clause is contained within and connected to the Deposit Agreement‘s arbitration provisions. (See Am. Compl., Ex. 5 at 54). The Deposit Agreement broadly provides that all claims arising out of or relating to the ADSs or the Deposit Agreement must be settled by arbitration. (See id. (“Any controversy, claim[,] or cause of action brought by any party hereto against the Company arising out of or relating to the Shares or other Deposited Securities, the American Depositary Shares, the Receipts[,] or the Deposit Agreement ... shall be settled by arbitration.“)). However, further down, the Deposit Agreement provides a narrow carveout for any claim “relating to or based upon the provisions of the Federal securities laws of the United States or the rules and regulations promulgated thereunder.” (Id.). For that subset of claims, arbitration is only required if elected by the claimant. (See id.). And critically, it is only those claims “not subject to arbitration” that must be litigated in New York. (Id.). Therefore, a plain reading of the Deposit Agreement makes clear that the Forum Selection Clause only applies to those claims “relating to or
Defendants argue that Plaintiffs’ negligent misrepresentation and breach of fiduciary duty claims are not related to or based upon the provisions of any federal securities law (Def. Br. 5), and the Court is inclined to agree. It is evident that such common law causes of action are in no way based upon or related to federal law, and are purely creatures of state law. See Flynn ex rel. Moody‘s Corp. v. McDaniel, 689 F. Supp. 2d 686, 691 (S.D.N.Y. 2010) (explaining that a “breach of fiduciary duty claim[] rest[s] on duties created by state, not federal, law“); Sung ex rel. Lazard Ltd. v. Wasserstein, 415 F. Supp. 2d 393, 405-06 (S.D.N.Y. 2006) (noting that the elements of a breach of fiduciary duty claim “are unrelated to federal law“); Fin. & Trading, Ltd. v. Rhodia S.A., No. 04 Civ. 6083 (MBM), 2004 WL 2754862, at *6-7 (S.D.N.Y. Nov. 30, 2004) (noting that a negligent misrepresentation claim, even one involving misrepresentations “contained in prospectuses filed with the SEC, ... do[es] not depend on any rights or causes of action created by federal law“). Moreover, the connection between Plaintiffs’ common law claims and provisions of federal securities law is even more attenuated given that, as the Court explains more fully later in this Opinion, those common law claims should be governed by Cayman Islands law, as opposed to New York law.
Plaintiffs seek to rely on numerous cases that support the inclusion of diverse claims within the scope of a forum selection clause where broad language such as “relating to” is used. (See Pl. Opp. 5-7). However, all of these
Based on these cases, and other cases on which Plaintiffs rely, the Court would readily agree that if the Forum Selection Clause applied by its terms to any claims relating to the Deposit Agreement or the ADSs, then all of Plaintiffs’ claims would fall within its scope. That, however, is not the language in the Deposit Agreement. In order for Plaintiffs’ claims to fall within the scope of the Forum Selection Clause, they must “relat[e] to or [b]e based upon the provisions of the Federal securities laws of the United States or the rules and regulations promulgated thereunder.” (Am. Compl., Ex. 5 at 54). That
2. The Forum Selection Clause Does Not Cover All Defendants
Much as Defendants argue that the Forum Selection Clause does not cover all of Plaintiffs’ claims, they similarly argue that the Clause does not cover all Defendants. (Def. Br. 6). Indeed, Defendants note that of the thirteen defendants in this action, only Dangdang is a signatory to the Deposit Agreement. (See id.). Of course, “the fact a party is a non-signatory to an agreement is insufficient, standing alone, to preclude enforcement of a forum selection clause.” Aguas Lenders Recovery Grp., LLC v. Suez, S.A., 585 F.3d 696, 701 (2d Cir. 2009). And New York courts have held that “a signatory to a contract may invoke a forum selection clause against a non-signatory if the
Plaintiffs argue that all the non-signatories (i.e., all Defendants but Dangdang) are closely related to Dangdang because, as a matter of New York law, “‘officers, directors, a ‘parent company,’ and a ‘principal shareholder’ are deemed ‘closely related.‘” (Pl. Opp. 7 (citing Universal Inv. Advisory, 62
Based on Plaintiffs’ pleadings, the Court concludes that Defendants Guoqing Li and Min Kan are covered by the Forum Selection Clause. Putting aside the fact that Mr. Li is Dangdang‘s co-founder and CEO, and was involved in the decision to list Dangdang on the NYSE through the issuance of the ADSs (see Am. Compl. ¶ 9) — which alone would be sufficient to be deemed “closely related” to Dangdang — Mr. Li is a holder of Dangdang ADSs, and therefore is expressly bound by the Deposit Agreement (see id., Ex. 3 at 3). Mr. Kan, too, is a holder of Dangdang ADSs, and therefore is bound by the Deposit Agreement as well. (See id.). The Court also finds that it would be foreseeable that Peggy Yu Yu would be bound by the Forum Selection Clause, given her position as co-founder and executive chairwoman of Dangdang and her involvement in the
However, Plaintiffs have failed to show through their pleadings that it would have been foreseeable to any of the other non-signatories that they would have been bound by the Forum Selection Clause. For example, Defendants Kewen, SCI, and First Profit — the investment vehicles controlled by Guoqing Li and Danqian Yao — have no relationship with Dangdang whatsoever. (See Am. Compl. ¶¶ 13-14, 16). It would therefore be wholly unreasonable to find that either of the three Defendants should have foreseen being bound by a Forum Selection Clause in a contract to which they had no connection, merely because they participated in a merger six years after the formation of the Deposit Agreement. Defendant Danqian Yao was a senior vice president at Dangdang at the time the company was listed on the NYSE (id. at ¶ 15), but there is otherwise no other indication that Mr. Yao played a role in the listing of the ADSs or would have been aware of the Deposit Agreement and its Forum Selection Clause. He, too, should not be bound by the Forum Selection Clause. As for Defendant Lijun Chen, he was not even an employee of Dangdang when the ADSs were issued. (See id. at ¶ 17). There is therefore no basis on which the Court can find that enforcement of the Forum Selection Clause would have been foreseeable to Mr. Chen. Finally, insofar as the Unserved Defendants are relevant to the instant motion, the Amended Complaint does not offer any indication that either Ruby Rong Lu, Ke Zhang, or
To summarize the Court‘s analysis up to this point, there is no dispute between the parties as to whether the Forum Selection Clause at issue in this action either was reasonably communicated or is mandatory. Accordingly, the presumption of enforceability should apply to whichever claims and parties fall within the scope of the Forum Selection Clause. See Fasano II, 921 F.3d at 335. However, the Court has thus far found that the Forum Selection Clause covers neither Plaintiffs’ common law claims nor the majority of Defendants. Therefore, the Forum Selection Clause is only presumptively enforceable as to Plaintiffs’ federal securities law claims against Defendants Dangdang, DHC, Guoqing Li, Peggy Yu Yu, and Min Kan.
As previously mentioned, the presumption of enforceability can be rebutted. See Fasano II, 921 F.3d at 336. In order to rebut the presumption of enforceability, however, the party resisting enforcement of a forum selection clause must make
“a sufficiently strong showing” that either: “[i] its incorporation was the result of fraud or overreaching; [ii] the law to be applied in the selected forum is fundamentally unfair; [iii] enforcement contravenes a strong public policy of the forum state; or [iv] trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of his day in court.”
TGG Ultimate Holdings, Inc. v. Hollett, 224 F. Supp. 3d 275, 285-86 (S.D.N.Y. 2016) (citing Phillips v. Audio Active Ltd., 494 F.3d 378, 392 (2d Cir. 2007)). Defendants do not, and cannot, make a strong showing of any of the above
Instead, Defendants argue that enforcement of the Forum Selection Clause would be unreasonable seemingly because it would require this Court to bifurcate the instant action between those claims and parties that are covered by the Forum Selection Clause and those that are not. (See Def. Br. 8). However, even if such bifurcation were the necessary outcome of this Court‘s findings, sister courts in this District have found that the creation of parallel proceedings regarding the same subject matter is insufficient to defeat a presumptively enforceable forum selection clause. See, e.g., Tulepan v. Roberts, No. 14 Civ. 8716 (KBF), 2014 WL 6808313, at *3 (S.D.N.Y. Dec. 3, 2014) (declining to grant transfer of New York-filed action to Florida where there was a forum selection clause providing for New York jurisdiction, even though there was a parallel and related proceeding already underway in Florida); Allianz Glob. Corp. & Specialty v. Chiswick Bridge, Nos. 13 Civ. 7559 (RA), 13 Civ. 7565 (RA), 2014 WL 6469027, at *3 (S.D.N.Y. Nov. 17, 2014) (enforcing forum selection clause that would require parallel proceedings in New York and Tokyo even though such a split would be “unduly costly and prejudicial“). And insofar as Defendants’ cited cases are relevant to the question at hand (see Def. Br. 8-9), they all precede the Supreme Court‘s elucidation of the deference required to valid forum selection clauses in Atlantic Marine, and are therefore inapposite. Therefore, the Court cannot find, under the prevailing criteria required by the Second Circuit, see Phillips, 494 F.3d at 392, that Defendants have rebutted the presumption that the Forum Selection Clause is enforceable.
4. The Unusual Posture of This Action and Public Interest Factors Nevertheless Warrant Dismissal
Having found that the Forum Selection Clause is valid, but solely as to a minority of Defendants and half of the asserted claims, the Court finds itself in murky waters. Atlantic Marine — the Supreme Court case that established the governing framework for when a district court must factor a forum selection clause into either a
The Court is also unable to find persuasive guidance from the various circuit courts. The most analogous cases to the current situation come from the Fifth Circuit, see In re Rolls Royce Corp., 775 F.3d 671 (5th Cir. 2014), and Third Circuit, see In re: Howmedica Osteonics Corp, 867 F.3d 390 (3d Cir. 2017). In Rolls Royce, the Fifth Circuit grappled with what course to take where “some, but not all, litigants are subject to a forum selection clause, and one of the parties to the clause files a motion to sever and transfer its claims to the forum chosen in the contract.” 775 F.3d at 673. In response to this unusual situation, the Fifth Circuit developed a complex framework that required a district court, as an initial matter, to follow Atlantic Marine as to the parties bound by the forum selection clause, but then to consider as well the private interests of the parties not bound by the clause. See id. at 681. Finally, the Fifth Circuit held that a district court “must ask whether this preliminary weighing is outweighed by the judicial economy considerations of having all claims determined in a single lawsuit.” Id. Although the Fifth Circuit ended up severing and transferring the claims of the parties that were bound by the forum selection clause, see id. at 683, the Circuit recognized that “the need — rooted in the valued public interest in judicial economy — to pursue the same claims in a single action in a single court
Somewhat similarly to Rolls Royce, the Third Circuit in Howmedica questioned “how district courts should apply Atlantic Marine where all defendants seek a transfer to one district under
Unfortunately, neither case proves helpful to this Court for the simple reason that they both involved analytically distinct mechanisms from forum non conveniens. Although
Acknowledging all of the above, the Court must nevertheless decide whether it should retain an action that is almost entirely between foreign parties and that arose from a merger executed in a foreign jurisdiction, solely on the basis of a Forum Selection Clause that binds only five of thirteen
Moreover, as the Court noted in Fasano I, the public interest factors at play in this action still favor dismissal. See 2017 WL 6764692, at *10-13. Although the United States certainly has some interest in adjudicating this dispute — given that the ADSs were listed on the NYSE, Dangdang filed alleged misrepresentations with the Securities and Exchange Commission, and Plaintiff Fasano is a New York resident — “the Cayman Islands has a closer nexus to the parties and events that are at the heart of this case.” Id. at *11. And, indeed, litigation relating to this same dispute has already taken place in the Cayman Islands. (See Brown Decl., Ex. A). The Cayman Islands therefore has an interest in having this localized controversy decided at home — a factor that favors dismissal.
Additionally, and despite Plaintiffs’ best efforts to persuade otherwise (see Pl. Opp. 24-25), the Court remains convinced that Plaintiffs’ common law claims will be governed by Cayman Islands law, as opposed to New York law. Under Second Circuit precedent, “questions relating to the internal affairs of corporations are decided in accordance with the law of the place of incorporation,” Scottish Air Int‘l, Inc. v. British Caledonian Grp., PLC, 81 F.3d 1224, 1234 (2d Cir. 1996) — in this case, the Cayman Islands. The Supreme Court has recognized “that only one State should have the authority to regulate a corporation‘s internal affairs — matters peculiar to the relationships among
Plaintiffs’ negligent misrepresentation claim likely also will be governed by Cayman Islands law, given that it arises in part from Defendants’ “fiduciary duties to Plaintiffs” (Am. Compl. ¶ 163), and relates directly to the fairness of the Merger, see Hahn v. Breed, 587 F. Supp. 1369, 1381 (S.D.N.Y. 1984) (explaining that a claim that “raises the issue of the fairness of [a] merger to a shareholder ... involves the internal affairs of a [ ] corporation“). Plaintiffs attempt to argue that their negligent misrepresentation claim will be governed not by the internal affairs doctrine, but by New York‘s “locus of the tort” test. (See Pl. Opp. 24-25). However, this would only be the case if “the rights of
In Atlantic Marine, the Supreme Court recognized that while “forum-selection clauses should control except in unusual cases,” it was “conceivable in a particular case” that a district court might “refuse to transfer a case notwithstanding the counterweight of a forum-selection clause.” 571 U.S. at 64 (quoting Stewart, 487 U.S. at 30-31). The Court believes that this is such an unusual case. Public interest factors counsel in favor of this action being litigated in the Cayman Islands, and the only counterweight pulling against
CONCLUSION
For the reasons stated in this Opinion, the Court GRANTS Defendants’ motion to dismiss for forum non conveniens. The Court does not address Defendants’ motion to dismiss under
SO ORDERED.
Dated: August 28, 2020
New York, New York
KATHERINE POLK FAILLA
United States District Judge