Ontario Teachers' Pension Plan Board v. Teva Pharmaceutical Industries Ltd.Ontario Teachers' Pension Plan Board v. Teva Pharmaceutical Industries Ltd.
Numerous plaintiffs have sued Teva Pharmaceutical Industries, Ltd. (“Teva“), and several current and former employees and officers of that company. The plaintiffs allege that Teva violated federal securities laws1 by misrepresenting the reasons for its financial success. More specifically, the plaintiffs allege that Teva publicly attributed its success to good business decisions when, in fact, Teva was thriving because it was artificially and collusively inflating the prices of certain generic drugs that it manufactured.
I have consolidated the over two-dozen cases pending before me related to the same subject matter. See Consolidation Ruling, Doc. No. 341;2 Consolidation Order, Doc. No. 352.
The consolidated case consists of four putative class actions3 consolidated for all purposes and twenty-one “direct” actions consolidated for all pre-trial purposes (the “Direct Actions”4), in which the plaintiffs have indicated that
Defendants in twelve of the Direct Actions have made limited motions to dismiss. More specifically, the defendants in those twelve Direct Actions ask me to dismiss two groups of claims: (1) those that fall outside applicable statutes of repose, and (2) those that assert claims under Israeli law. See Mot. to Dismiss on Repose Grounds, Doc. No. 449; Mot. to Dismiss Israeli Law Claims, Doc. No. 450. For the reasons that follow, I grant the Defendants’ motion to dismiss on repose grounds and deny the Defendants’ motion to dismiss Israeli law claims.
I. Standard of Review
A. Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted
A motion to dismiss for failure to state a claim pursuant to
Under Twombly, “[f]actual allegations must be enough to raise a right to relief above the speculative level,” and assert a cause of action with enough heft to show entitlement to relief and “enough facts to state a claim to relief that is plausible on its face.” 550 U.S. at 555, 570; see also Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.“). The plausibility standard set forth in Twombly and Iqbal obligates the plaintiff to “provide the grounds of his entitlement to relief” through more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555 (cleaned up). Plausibility at the pleading stage is nonetheless distinct from probability, and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the claims] is improbable, and . . . recovery is very remote and unlikely.” Id. at 556 (cleaned up).
“When reviewing a motion to dismiss, the court may consider only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of
II. Background
In general,5 the plaintiffs claim that, beginning in 2013, Teva adopted a concerted and secret strategy of raising prices on certain drugs in its generic drug portfolio. Between July 3, 2013 and April 6, 2016, Teva raised prices for its generic drugs 76 times. See Second Am. Compl. (the “SAC“), Doc. No. 310, at ¶¶ 2, 40, 120, 128, App‘x A. The plaintiffs allege that Teva undertook many of those price increases in tandem with competitors in the generic drug market. See id. at ¶¶ 46, 174–81, App‘x A, App‘x B. As a result of those price increases, Teva‘s business boomed, as reflected both in profits and in stock price. See id. at Figure 1 (inflated profit), Figure 2 (stock price). Indeed, by July 27, 2015, Teva‘s stock price had soared to an all-time high of $72 per share. See id. at ¶ 277. In August 2016, Teva was able to leverage its stock price to help finance a $40 billion purchase of Actavis, which was Allergan‘s worldwide generics business. Id. at ¶¶ 8, 93. To aid in that acquisition, Teva made a stock offering in December 2015 and a notes offering in July 2016. See id. at ¶¶ 407–08.
In the middle of 2015, the plaintiffs claim that Teva‘s house of cards began to come crashing down. See id. at ¶ 279. Around that time, investigations into the generic drug industry picked up pace and pressure grew on Teva to explain its financial success. See id. at ¶¶ 101–02, 105, 117. Teva‘s stock price sunk lower and lower. See id. at Figure 2. On May 10, 2019, the Attorneys General from 47 States, the District of Columbia, and Puerto Rico filed a 524-page antitrust complaint regarding the generic drug industry that contained detailed allegations with
respect to Teva‘s alleged collusive conduct. See id. at ¶ 374; see also Compl., Doc. No. 1, in Connecticut, et al. v. Sandoz, Inc., et al., No. 3:20-cv-802 (D. Conn.) (SRU). In August 2020, Teva Pharmaceuticals USA, Inc.—Teva‘s United States subsidiary—was charged in a criminal complaint by the United States Department of Justice‘s Antitrust Division for conduct relating to its alleged collusion to fix certain generic drug prices. See Press Release, U.S. DEP‘T OF JUSTICE (Aug. 25, 2020), https://www.justice.gov/opa/pr/seventh-generic-drug-manufacturer-charged-ongoing-criminal-antitrust-investigation.
Throughout the purported class period in this case (February 6, 2014 through May 10, 2019), the plaintiffs claim that Teva publicly attributed its financial success to good business decisions when, in fact, that success was due to artificial (and coordinated) price increases on generic drugs. See SAC, Doc. No. 310, at ¶¶ 1, 165. Thus, the plaintiffs claim, in part, that Teva violated Sections 10(b) and 20(a) of the
When I consolidated the Direct Actions into the lead action in this matter for all pre-trial purposes, see Consolidation Ruling, Doc. No. 341, at 2, I ordered the plaintiffs in each Direct
Action (the “DAPs“) to either designate their present complaint as operative or to file an amended complaint that complied with my ruling denying in substantial part the defendants’ motion to dismiss in the lead action in this matter, Ontario Teachers’ Pension Plan Bd., et al. v. Teva Pharm. Indus. Ltd., et al., No. 3:17-cv-558. See Consolidation Order, Doc. No. 352, at ¶ 12; Ruling, Doc. No. 283 (regarding motion to dismiss). On May 28, the DAPs largely complied with my order.7
Also in compliance with my prior order, on July 8, 2020, the defendants in certain Direct Actions filed two limited motions to dismiss. See Consolidation Order, Doc. No. 352, at ¶ 13. The first, which addresses nine Direct Actions,8 asks me to dismiss the DAPs’ claims in those actions “to the extent they are based on alleged misstatements or omissions outside the five-year statutes of repose” applicable to claims brought pursuant to Section 10(b) of the Exchange Act and the analogous provision of the Pennsylvania Securities Act of 1972 (the “PSA“). See Mot. to Dismiss on Repose Grounds, Doc. No. 449, at 1. The second, which addresses ten Direct Actions,9 asks me to “decline to exercise supplemental jurisdiction over claims brought under Israeli law or, in the alternative, dismiss the Israeli law claims on forum non conveniens grounds.” Mot. to Dismiss Israeli Law Claims, Doc. No. 450, at 1. On August 7, the relevant plaintiffs filed oppositions. See Israeli Law Pls.’ Opp‘n, Doc. No. 498; Repose Pls.’ Opp‘n, Doc.
No. 501. On September 7, the defendants filed replies. See Israeli Law Defs.’ Reply, Doc. No. 539; Repose Defs.’ Reply, Doc. No. 538. On November 12, I held a Zoom hearing regarding the two motions and took them under advisement. See Min. Entry, Doc. No. 598; Hr‘g Tr., Doc. No. 647.
“A district court may consider timeliness arguments on a motion to dismiss when the circumstances are ‘sufficiently clear on the face of the complaint and related documents as to make the time-bar ruling appropriate.‘” Kuwait Inv. Office v. Am. Int‘l Grp., Inc., 128 F. Supp. 3d 792, 802 (S.D.N.Y. 2015) (quoting LC Capital Partners, LP v. Frontier Ins. Grp., Inc., 318 F.3d 148, 157 (2d Cir. 2003)) (cleaned up).
The plaintiffs in the nine Direct Actions targeted by the Repose Defendants’11 motion to dismiss on repose grounds (the “Repose Plaintiffs“) all filed complaints between February 7, 2019 and April 29, 2020. The Repose Plaintiffs and the plaintiffs in the lead matter rely on mostly the same misstatements and omissions. The earliest misstatement or omission on which any plaintiff relies—both in the lead matter and among the Repose Plaintiffs—occurred on February 6, 2014. See SAC, Doc. No. 310, at ¶ 183. The Exchange Act contains a five-year statute of repose applicable to claims brought pursuant to Section 10(b). See
they are based on misstatements or omissions that occurred more than five years before the Repose Plaintiffs filed their complaints, should be dismissed.
The answer depends on when the relevant “Repose Clock” begins running. The Repose Defendants claim that the Repose Clock begins running from the date of each alleged misstatement or omission that could give rise to liability under the Exchange Act because each alleged misstatement or omission can constitute a “violation” of Section 10(b). The Repose Plaintiffs claim that the Repose Clock begins running only from the date of the last alleged misstatement or omission that could give rise liability under the Exchange Act. The parties agree that, once the Repose Clock starts ticking, it cannot be stopped or stalled for any equitable reason.
A. Parties’ Arguments
The Repose Defendants seek to dismiss the Repose Plaintiffs’ claims under the Exchange Act and the PSA “that are based on alleged misstatements or omissions outside those statutes’ five-year repose periods.” Defs.’ Mem. of Law in Supp. Mot. to Dismiss on Repose Grounds (“Repose Defs.’ Mem.“), Doc. No. 464, at 5.12 The Repose Defendants argue that statutes
numerous cases in which, they claim, district courts in this Circuit “dismiss[] Exchange Act claims based on alleged misrepresentations or omissions outside the five-year repose period.” Id. Likewise, the Repose Defendants cite cases in which courts “dismiss or otherwise reject PSA claims that are not brought within the five-year repose period that applies to claims for civil liability under the PSA.” Id. at 9. Given all that, the Repose Defendants request that I dismiss—as set forth in Appendix A—the Repose Plaintiffs’ Exchange Act and PSA claims insofar as those claims are premised on untimely-pled misstatements or omissions. See Repose Defs.’ Mem., Doc. No. 464, at 11–15.
The Repose Plaintiffs see things differently. The Repose Plaintiffs agree that the relevant statute of repose limits their claims to those based on Exchange Act violations that have taken place less than five years before their complaints were filed. However, the Repose Plaintiffs argue that a “violation” of the Exchange Act occurs only on the date of a defendant‘s “last culpable act or omission.” Repose Pls.’ Opp‘n, Doc. No. 501, at 10. The Repose Plaintiffs thus argue that, when a plaintiff alleges that a defendant violated Section 10(b) through a series of misstatements and omissions, the Repose Clock begins running only at the last alleged misstatement or omission. Thus, a plaintiff can bring a Section 10(b) claim against a defendant based on misstatements and omissions that occurred more than five years before a complaint‘s filing date so long as the most recent misstatement or omission occurred within the repose period (i.e., more recently than five years ago).
B. Discussion
Each side claims that the other‘s argument is outrageous and beyond the pale.13 In truth, though, the question of when the Repose Clock begins to tick in a Section 10(b) case is a
relatively open issue. Recently, a district court in Vermont remarked that “[c]ourts are divided as to whether a plaintiff can evade the five-year repose rule by alleging continuing violations,” and that “[w]ithin the Second Circuit, district courts have reached diametrically opposite conclusions on the issue.” Freihofer v. Vermont Country Foods, Inc., 2019 WL 2995949, at *3 (D. Vt. July 9, 2019) (cleaned up). Although the Freihofer Court noted that “[r]ecently . . . district courts have been critical of using a continuing violations theory to sidestep the five-year repose period,” see id., the point remains: This issue is not cut-and-dried.14
(b) Notwithstanding subsection (a), a private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws . . . may be brought not later than the earlier of—
(1) 2 years after the discovery of the facts constituting the violation; or
(2) 5 years after such violation.
Statutes of limitations and statutes of repose serve different purposes. As the Supreme Court recently explained in the context of the statutes of limitations and repose regarding claims brought pursuant to Section 11 of the Securities Act:
Statutes of limitations are designed to encourage plaintiffs to pursue diligent prosecution of known claims. In accord with that objective, limitations periods begin to run when the cause of action accrues—that is, when the plaintiff can file suit and obtain relief. In a personal-injury or property-damage action, for example, more often than not this will be when the injury occurred or was discovered.
In contrast, statutes of repose are enacted to give more explicit and certain protection to defendants. These statutes effect a legislative judgment that a defendant should be free from liability after the legislatively determined period of time. For this reason, statutes of repose begin to run on the date of the last culpable act or omission of the defendant.
Cal. Pub. Emps.’ Ret. Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042, 2049 (2017) (quoting CTS Corp. v. Waldburger, 573 U.S. 1, 8–9 (2014)) (cleaned up). Put differently, “The discovery rule [in statutes of limitations] gives leeway to a plaintiff who has not yet learned of a violation, while the rule of repose protects the defendant from an interminable threat of liability.” Id. at 2049–50. Statutes of repose “grant complete peace to defendants” and “offer defendants full and final security” after the end of the repose period. Id. at 2052. A statute of repose “mandates that there shall be no cause of action beyond a certain point, even if no cause of action has yet accrued,” and so it “can prohibit a cause of action from coming into existence.” Waldburger, 573 U.S. at 16. “[A] statute of repose begins to run without interruption once the necessary triggering event has occurred, even if equitable considerations would warrant tolling or even if the plaintiff has not yet, or could not yet have, discovered that she has a cause of action.” P. Stolz Family P‘ship L.P. v. Daum, 355 F.3d 92, 102–03 (2d Cir. 2004).
As both sides acknowledge, statutes of repose are not subject to equitable tolling. See Repose Pls.’ Opp‘n, Doc. No. 501, at 11; Repose Defs.’ Mem., Doc. No. 464, at 10–11; ANZ
Sec., 137 S. Ct. at 2050 (“In light of the purpose of a statute of repose, the provision is in general not subject to tolling.“); id. at 2051 (“The purpose and effect of a statute of repose . . . is to override customary tolling rules arising from the equitable powers of courts.“); SRM Glob. Master Fund, 829 F.3d at 176 (“[A]s a statute of repose,
To the Repose Defendants, that is the end of the story. In the Repose Defendants’ view, the Repose Plaintiffs are attempting to “revitalize a ‘continuing violations’ argument, a dated and discredited equitable tolling theory in securities cases.” Repose Defs.’ Reply, Doc. No. 538, at 5. The Repose Defendants argue that the Repose Plaintiffs cannot escape that reality simply by cloaking the theory in a new name: The “last-culpable-act doctrine.” See id. at 6, 11. The “continuing violations” doctrine “allows a plaintiff to bring an action for a violation that occurs outside the repose period when a series of misrepresentations have been made and the last misrepresentation occurred during the repose period.” Marini v. Adamo, 995 F. Supp. 2d 155, 183 (E.D.N.Y. 2014). And courts recognize the “continuing violations doctrine . . . as an equitable tolling doctrine.” Kuwait, 128 F. Supp. 3d at 808; see also Freihofer, 2019 WL 2995949, at *4. Thus, to the extent that the Repose Plaintiffs assert a “continuing violations” theory, or any other form of equitable tolling, that attempt should fail.
But the Repose Plaintiffs deny that they assert a “continuing violations” theory or that they ask me to equitably toll the repose period. Instead, the Repose Plaintiffs argue that the Supreme Court and other lower courts have repeatedly stated that the Repose Clock in analogous circumstances begins running at a defendant‘s “last culpable act or omission.” See ANZ Sec.,
137 S. Ct. at 2049; Waldburger, 573 U.S. at 8; China Agritech, Inc. v. Resh, 138 S. Ct. 1800, 1804 n.1 (2018); DeKalb Cty. Pension Fund v. Transocean, Ltd., 817 F.3d 393, 398 (2d Cir. 2016). The Repose Plaintiffs argue that if I accept the Repose Defendants’ argument, I would read “‘last culpable act or omission’ to mean ’each culpable act or omission.‘” Repose Pls.’ Opp‘n, Doc. No. 501, at 14. The Repose Plaintiffs argue that beginning the Repose Clock at the Repose Defendants’ last culpable act or omission does not result in equitable tolling. See id. at 16.
The Repose Defendants15 and the Repose Plaintiffs16 both cite numerous
The Repose Defendants’ citations are stronger: They are more recent, and they include cases in which district courts within the Second Circuit have granted the precise relief that the Repose Defendants seek here. See, e.g., Kuwait, 128 F. Supp. 3d at 807–09; Sjunde AP-Fonden, 417 F. Supp. 3d at 391–92. The Repose Plaintiffs’ cases are older—that fact lends credence to the Repose Defendants’ assertion that the law on this point leans in their favor. See Repose Defs.’ Reply, Doc. No. 538, at 5 (“Plaintiffs do not and cannot cite a single case since 2013 that supports their argument.“).17
To the extent that the Repose Plaintiffs claim that their position is supported by Supreme Court precedent, I disagree. In ANZ Securities, the Supreme Court discussed the general purpose of statutes of repose and wrote that they “effect a legislative judgment that a defendant should be free from liability after the legislatively determined period of time.” 137 S. Ct. at 2049 (cleaned up). “For this reason,” the ANZ Securities Court wrote, “statutes of repose begin to run on ‘the date of the last culpable act or omission of the defendant.‘” Id. (quoting Waldburger, 573 U.S. at 8). In Waldburger, the Court again was speaking about statutes of repose generally and wrote that, in contrast to a statute of limitations, a statute of repose “puts an outer limit on the right to bring a civil action” that is “measured not from the date on which the claim accrues but instead from the date of the last culpable act or omission of the defendant.” Id. at 8. Neither ANZ
Securities nor Waldburger was an Exchange Act case. And in both cases, the Court was simply emphasizing that a repose period begins to run at the conclusion of a Defendant‘s culpable behavior, rather than when a claim accrues. The Court‘s language in those cases cannot be taken to mean that, in a Section 10(b) case, a “violation” for the purposes of
Importantly, a plaintiff can establish that a defendant has “violated” Section 10(b) by alleging just a single misstatement or omission. See, e.g., Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014) (“To recover damages for violations of section 10(b) and
Because the Repose Plaintiffs have filed complaints that identify numerous, interrelated misstatements and omissions by Teva and its officers over a period of years, it seems odd to isolate any one of them as independently a “violation” of Section 10(b). But relevant law indicates that each alleged misstatement or omission can constitute an independent “violation” of Section 10(b). Even if the time-barred misstatements and omissions cannot themselves constitute a “violation” of Section 10(b), they may still be relevant because they provide
background and context to the Repose Plaintiffs’ Section 10(b) claims that rely on timely misstatements or omissions. See Kuwait, 128 F. Supp. 3d at 809 n.33.
At the hearing on this pending motion to dismiss, the Repose Plaintiffs seemed to gesture at a new theory for liability. The Repose Plaintiffs mentioned that the Repose Defendants were involved in a years-long fraudulent “scheme” and that
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
liability rubric.” In re Smith Barney Transfer Agent Litig., 884 F. Supp. 2d 152, 161 (S.D.N.Y. 2012).
“Where the primary purpose and effect of a purported scheme is to make a public misrepresentation or omission, courts have routinely rejected the plaintiff‘s attempt to bypass the elements necessary to impose misstatement liability under subsection (b) by labeling the alleged misconduct a scheme rather than a misstatement.” In re Mindbody, 2020 WL 5751173, at *19 (quoting SEC v. Kelly, 817 F. Supp. 2d 340, 343 (S.D.N.Y. 2011)) (cleaned up); see also SEC v. KPMG LLP, 412 F. Supp. 2d 349, 378 (S.D.N.Y. 2006) (explaining that, where “the core misconduct alleged is in fact a misstatement, it would be improper to impose primary liability . . . by designating the alleged fraud a ‘manipulative device’ rather than a ‘misstatement‘“); Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 177 (2d Cir. 2005) (“[W]here the sole basis for [
For several reasons, I hold that the Repose Plaintiffs have not alleged a claim for “scheme liability” under
based on the defendants’ statements and omissions regarding both (1) competition in the generic drug market and (2) the sources of Teva‘s revenues and profits).
Relatedly, before the hearing on the pending motion to dismiss, the Repose Plaintiffs had never advanced a “scheme liability” argument under
Put simply, the Repose Plaintiffs have not attempted to allege a scheme liability claim. To be sure, in their complaints, briefs, and at oral argument, the Repose Plaintiffs repeatedly refer to the Repose Defendants’ conduct as a “scheme.” But the “scheme” to which the Repose Plaintiffs refer is the Repose Defendants’ alleged antitrust conspiracy covered up by many interrelated misstatements and omissions. See Hr‘g Tr., Doc. No. 647, at 21:21–22:6, 23:3–15, 24:5–20, 30:13–17. In similar circumstances, courts have held that plaintiffs have not made out
plausible claims for “scheme liability” under
In enacting
Giving repose to a defendant who has ceased to do wrong may well be worthwhile even if it is “unfair” to a plaintiff whose cause of action has not yet accrued. But it is a different thing altogether to give repose to a defendant who continued his wrongful conduct, perhaps even beyond the time specified by the repose period.
Daum, 355 F.3d at 106–07 (Calabresi, J., concurring). Still, in Daum, Judge Calabresi agreed with the majority‘s decision to apply the relevant statute of repose in that potentially harsh way because he was “convinced that Congress intended that [application], however strange the result.” Id. at 107. So, too, here. The Repose Plaintiffs’ equitable arguments are not enough to contravene what appears to be clear congressional intent.23
Although the foregoing discussion relates only to the federal statute of repose
No action shall be maintained to enforce any liability created under section 501 (or section 503 in so far as it relates to that section) unless brought before the expiration of five years after the act or transaction constituting the violation or the expiration of one year after the plaintiff receives actual notice or upon the exercise of reasonable diligence should have known of the facts constituting the violation, whichever shall first expire.
The Repose Plaintiffs bring PSA claims pursuant to Sections 401, 402, and 501 of the PSA. See, e.g., Am. Compl., Doc. No. 391, at ¶¶ 587–600 (Mivtachim, 19-cv-513; Migdal Ins.
Co., 19-cv-655; Migdal Mut. Funds, 19-cv-923; Psagot Mut. Funds, 19-cv-1167).
Although
The Repose Defendants ask me to treat the Repose Plaintiffs’ PSA claims in the same way as their Exchange Act claims: I should dismiss the claims to the extent they are based on alleged misrepresentations or omissions committed more than five years before the relevant cases were filed. See Repose Defs.’ Mem., Doc. No. 464, at 9-10. The Repose Plaintiffs do not separately address the Repose Defendants’ arguments regarding the PSA and, instead, focus their arguments solely on the Exchange Act claims. Implicitly, then, the Repose Plaintiffs concede that my ruling with respect to federal law should determine the outcome of their state law claims.
Indeed, my ruling regarding federal law determines the outcome of the Repose Plaintiffs’ PSA claims because both the respective claims and the applicable statutes of repose appear identical in the important respects. First, the plain language of both
For those reasons, I grant the Repose Defendants’ partial motion to dismiss on repose grounds, doc. no. 449.24 Accordingly, the Repose Plaintiffs’ Exchange Act and PSA claims are limited temporally as set forth in Appendix A to this opinion.
IV. Motion to Dismiss Israeli Law Claims (doc. no. 450)
DAPs in ten Direct Actions25 have brought claims under the Israeli Securities Law, 1968 (the “ISL, 1968“) in addition to claims under federal securities laws (and, in some cases, Pennsylvania state laws). I will refer to those plaintiffs as the “Israeli Law Plaintiffs.” The Defendants in those ten actions—the “Israeli Law Defendants“—have made a partial motion to dismiss the Israeli Law Plaintiffs’ complaints insofar as they allege violations of Israeli law. The Israeli Law Defendants argue that I should “decline to exercise supplemental jurisdiction over claims brought under Israeli law or, in the alternative, dismiss the Israeli law claims on forum non conveniens grounds.” Mem. in Supp. Israeli Law Defs.’ Mot. to Dismiss (“Israeli Law Defs.’ Mem. of Law“), Doc. No. 450-1, at 5.
The Israeli Law Plaintiffs include a claim under the ISL, 1968 because Teva sells its shares both as American Depositary Shares (“ADS“) on the New York Stock Exchange (“NYSE“) and also as common stock on the Tel Aviv Stock Exchange (“TASE“). The Israeli Law Plaintiffs bought both ADS and common stock. Their ISL, 1968 claims are attempts to recover for the losses they endured on common stock purchased on the TASE.26 Initially, the putative class action complaint in the lead matter in this case contained such an Israeli law claim.
See, e.g., First Am. Compl., Doc. No. 141, at ¶¶ 1076-85. In the SAC, though, the putative
A. Background
Teva is a dual-listed Israeli company. That means that its shares are registered for trading both on the TASE and another foreign exchange—in this case, the NYSE.27 Today, the securities of over 50 companies are dual-listed on the TASE and another major foreign stock exchange; the securities of those companies account for about half of the TASE‘s market capitalization. See Decl. of A. Licht in Supp. Israeli Law Pls.’ Opp‘n (“Licht Decl.“), Doc. No. 499, at ¶ 34.
The origins of the Israeli dual-listing regime are important to understanding the current dispute. In the late 1990s, the TASE had a relatively small market capitalization; as a result, many Israeli companies eschewed listing on the TASE and, instead, listed exclusively on a foreign market‘s stock exchange. See id. at ¶¶ 18-21. If they listed on the TASE, Israeli companies would have had to “comply with two separate legal regimes, one in Israel and one in the country of their other listing, with all the concomitant costs.” Id. at ¶ 22. That was an unattractive proposition, and Israel sought to address the situation by adopting the dual-listing regime.
The dual-listing regime—which is codified in an amendment to the ISL, 1968 and in regulations enacted pursuant to the ISL, 1968 and the Companies Law, 1999—“enables issuers listed on certain foreign markets to list their securities on the TASE based solely on disclosures
they make abroad.” Id. at ¶ 31. In other words, by Israeli statutory law, a dual-listed company‘s reporting requirements for listing on the TASE are determined entirely by the foreign market‘s reporting and disclosure requirements. See id. at ¶¶ 43-44. Thus, Israel intentionally adopted a dual-listing regime that includes explicit “concessions on its sovereignty by subordinating its jurisdiction to prescribe, to adjudicate, and to enforce relevant securities laws and anti-fraud statutes to that of” foreign jurisdictions, including the United States. Id. at ¶ 16.
But the dual-listing regime left open an important question regarding what country‘s law applies in determining the civil liability of a dual-listed company when that company is alleged to have broken Israeli securities law. More specifically: Does Israeli law apply or does the foreign law apply? The parties disagree about whether that question has been definitively answered. Cf. id. at ¶ 53 (“While the Israeli Securities Law includes a statutory provision applying the foreign law with regard to reporting, the law applicable to liability has been determined by case law.“). The Israeli Law Defendants claim that it is an open and complex question and so I should decline jurisdiction and allow Israeli courts to address that issue. The Israeli Law Plaintiffs claim that the issue is settled and clear (foreign—here, United States—law applies), and so I should retain jurisdiction over the Israeli law claims. What follows is a summary of the relevant Israeli case law, so far as I understand it.
In 2008 in Verifone I,28 an Israeli district court first shed light on the issue. In staying
serve as a ‘second fiddle’ as opposed to the foreign legal system, primarily the American system.” Id. at ¶ 55; Verifone I, Ex. 4 to Licht Decl., Doc. No. 499-4, at ¶ 6(l). The Verifone I Court also reasoned that “[i]t is appropriate that the proceeding be handled, in a given case, with respect to one forum and according to one law.” Verifone I, Ex. 4 to Licht Decl., Doc. No. 499-4, at ¶ 6(n). The Verifone I Court concluded:
[I]t appears that the Israeli legislature has adopted, in the framework of the “double registration” arrangement, the requirements of the foreign law not only as to the technical aspect, which sets forth the manner for filing of the reports, but also as to the substantive aspect, which deals with the responsibility of the foreign company traded in Israel, out of a desire to concentrate all of the legal proceedings in one place under one law, which is the American law.
Id. at ¶ 6(u).
In 2010, the United States Supreme Court delivered its opinion in Morrison v. Nat‘l Australia Bank, Ltd., 561 U.S. 247 (2010). In Morrison, the Supreme Court held that
Several courts have analyzed Morrison‘s effect on dual-listed companies. For instance, in 2011 the same Israeli district court that ruled in Verifone I held that Morrison did not change the conclusion that, as a matter of Israeli law, foreign law “applies to civil liability with regard to the purchase or sale in Israel of securities subject to the dual listing regime.” Licht Decl., Doc. No. 499, at ¶¶ 59-60. The United States district court presiding over the parallel class action noted the same in allowing Israeli investors to be included in the class settlement in that case.
See id. at ¶ 61; see also In re VeriFone Holdings, Inc. Sec. Litig., 2014 WL 12646027, at *3 (N.D. Cal. Feb. 18, 2014).
In a 2011 comment letter to the SEC regarding Morrison‘s effect, the Israel Securities Authority (the “ISA“)29 essentially adopted the Verifone I Court‘s reasoning. See ISA Comment, Ex. 10 to Licht Decl., Doc. No. 499-10. (I will refer to that letter as the “ISA Comment.“) Indeed, the ISA Comment reflects the ISA‘s view that Morrison‘s reasoning applies especially poorly to Israeli dual-listed companies. See id. at 6 (“[T]he test suggested by the court in Morrison . . . results in an irrational outcome.“); id. at 9 (“[T]he effect of Morrison on the regulation and orderly trading of dual listed securities is entirely negative
In the ISA‘s view, notwithstanding Morrison, “claimants who believe they have a valid claim under
in
In 2017, two more Israeli district courts—Damti30 and Tower31—endorsed the Verifone I Court‘s holding that, as a matter of Israeli law, “U.S. law applies to civil liability” in securities law claims against dual-listed companies and reaffirmed that Morrison did not affect that outcome. See Licht Decl., Doc. No. 499, at ¶¶ 68-82.
In 2018, the Israeli Supreme Court heard an appeal32 in the Damti and Tower cases. Apparently, the Israeli Supreme Court held two hearing sessions. According to Professor Licht, at the first, on October 4, 2018, “the Court stated its position that the Israeli district courts correctly determined that U.S. substantive law governs Israeli securities claims, and that the appellant and movant‘s appeal would be denied.” Id. at ¶ 83. The same day, the Israeli Supreme Court issued the following Order:
On reading the key written arguments and hearing the supplementary oral arguments, we opined and also stated that the District Courts were correct in the above-captioned files in their judgments as to the application of the foreign law. We additionally stated, without setting anything in stone, that there is reason to consider a legislative amendment that will explicitly clarify the position on the matter.
Damti (Supreme Court) I,33 Ex. 7 to Licht Decl., Doc. No. 499-7, at 5. Subsequently, the appellant and movant withdrew their appeal to avoid losing and having to pay the winner‘s
litigation costs—apparently a common occurrence in Israel—and, on October
As you will recall, upon the conclusion of the hearing held on October 4, 2018, we said, orally, and we repeated the main essence of the matters in our decision in writing, that, in our opinion, the District Courts were right in the judgments that are the subject of the above-captioned [appeal] . . . , when they ruled with respect to the application of the foreign law.
. . .
On a marginal note, we wish to reiterate, without laying down any hard and fast rules, that it would be appropriate to consider a legislative amendment that will explicitly clarify the state of affairs with respect to the issue at hand.
Damti (Supreme Court) II,34 Ex. 8 to Licht Decl., Doc. No. 499-8, at 5; see also Licht Decl., Doc. No. 499, at ¶ 84. Based on the above, the Israeli Law Plaintiffs argue that “the substantive issue of applicable law is now resolved.” Licht Decl., Doc. No. 499, at ¶ 86.
Another important aspect of the Israeli dual-listing regime is the permissive stay provision of the ISL, 1968. That provision (§ 35Z) reads:
Stay of proceedings in an action in Israel. If action was brought before a court in Israel under any law, on grounds that derive from an interest in the securities of a foreign corporation, the court may, on application by a party, stay the proceedings in the action, if it learns that action was brought before a court abroad on the same cause or on a similar cause, and that until a judgment that is no longer subject to appeal is handed down in that action.
Id. at ¶ 87. As several Israeli district courts have acknowledged, that provision allows Israeli courts to stay cases involving dual-listed companies while parallel cases proceed in foreign forums because those foreign cases might affect or resolve the cases pending in Israel. Id. at ¶¶ 90-92. Indeed, two securities class action cases that parallel this litigation—Gat35 and
Lightcom36—are currently stayed in Israel. See Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 16. Those cases are stayed on Teva‘s motion. See id. at 16-17; Lightcom, Ex. 3 to Licht Decl., Doc. No. 499-3, at ¶¶ 26-41 (ordering stay).
B. The Relevant Law
1. Supplemental Jurisdiction
All the Israeli Law Plaintiffs allege that subject matter jurisdiction exists for their federal securities law claims pursuant to both
No Israeli Law Plaintiff pleads or argues that I have subject matter jurisdiction over the Israeli law claims based on diversity of citizenship, so I do not consider that matter further. See Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998) (“[W]hen the question to be considered is one involving the jurisdiction of a federal court, jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.“); In re Mylan N.V. Sec. Litig., 2018 WL 1595985, at *18 n.13 (S.D.N.Y. Mar. 28, 2018) (holding in similar circumstance that “the Court presumes that the only possible basis for jurisdiction over the Israeli claim is supplemental jurisdiction, as alleged in the Complaint“).
- (1) the claim raises a novel or complex issue of State law,38
- (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
- (3) the district court has dismissed all claims over which it has original jurisdiction, or
- (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
The Second Circuit has said that, before declining to exercise supplemental jurisdiction, a district court should consider the
2. Forum non conveniens
The common law doctrine of forum non conveniens primarily allows a court to dismiss claims over which it has jurisdiction because a foreign forum is the best place for the claims to be heard. See generally Sinochem Int‘l Co., Ltd. v. Malaysia Int‘l Shipping Corp., 549 U.S. 422, 430 (2007); Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S. 49, 60-61 (2013); ICC Indus., Inc. v. Israel Disc. Bank, Ltd., 2005 WL 1844616, at *5 (S.D.N.Y. July 29, 2005). In deciding whether to grant a motion to dismiss based on forum non conveniens,
a court should undertake a multi-factor balancing test. See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 257-61 (1981) (articulating and applying the balancing test). More
At step one, a court determines the degree of deference properly accorded the plaintiff‘s choice of forum. At step two, it considers whether the alternative forum proposed by the defendants is adequate to adjudicate the parties’ dispute. Finally, at step three, a court balances the private and public interests implicated in the choice of forum.
Norex Petroleum, Ltd. v. Access Indus., Inc., 416 F.3d 146, 153 (2d Cir. 2005) (citing Iragorri v. Utd. Techs. Corp., 274 F.3d 65, 73-74 (2d Cir. 2001)) (cleaned up). A court should grant a motion to dismiss based on forum non conveniens only when “the balance of convenience tilts strongly in favor of trial in the foreign forum.” R. Maganlal & Co. v. M.G. Chemical Co., Inc., 942 F.2d 164, 167 (2d Cir. 1991).
At step one, the amount of deference afforded a plaintiff‘s choice of forum “moves on a sliding scale depending on several relevant considerations.” Iragorri, 274 F.3d at 71. Traditionally, courts gave great deference to a plaintiff‘s choice of her home forum and weak deference to a foreign plaintiff‘s choice of a United States forum, see Piper Aircraft, 454 U.S. at 255-56; but the court‘s inquiry is more holistic than that. Indeed, a court “must consider a plaintiff‘s likely motivations in light of all the relevant indications.” Iragorri, 274 F.3d at 73. In general, a court should “give greater deference to a plaintiff‘s forum choice to the extent that it was motivated by legitimate reasons, including the plaintiff‘s convenience and the ability of a U.S. resident plaintiff to obtain jurisdiction over the defendant, and diminishing deference to a plaintiff‘s forum choice to the extent that it was motivated by tactical advantage.” Id.
At step three (step two is not at issue here),39 a court should consider both private-interest and public-interest factors. Private-interest factors are a proxy for the “convenience of the litigants.” Id. Those factors include: (1) “the relative ease of access to sources of proof“; (2) “availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses“; (3) “possibility of view of premises, if view would be appropriate to the action“; and (4) “all other practical problems that make trial of a case easy, expeditious and inexpensive.” Id. at 73-74 (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)). A court “should focus on the precise issues that are likely to be actually tried, taking into consideration the convenience of the parties and the availability of witnesses and the evidence needed for the trial of these issues.” Id. at 74. “The court should consider also whether the plaintiff‘s damages are genuinely in dispute and where the parties will have better access to the evidence relating to those damages.” Id. Regarding public-interest factors, a court should consider, among other things:
[T]he administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the
action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.
Piper Aircraft, 454 U.S. at 241 n.6 (quoting Gilbert, 330 U.S. at 509) (cleaned up); see also Atl. Marine, 571 U.S. at 62 n.6.
In general, a court should grant a motion to dismiss based on forum non conveniens “only if the chosen forum is shown to be genuinely inconvenient and the selected forum significantly
preferable.” Iragorri, 274 F.3d at 74-75. In making such a consideration, a district court “should be mindful that, just as plaintiffs sometimes choose a forum for forum-shopping reasons, defendants also may move for dismissal under the doctrine of forum non conveniens not because of genuine concern with convenience but because of similar forum-shopping reasons.” Id. at 75. Indeed, district courts should “arm themselves with an appropriate degree of skepticism in assessing whether the defendant has demonstrated genuine inconvenience and a clear preferability of the foreign forum.” Id.
C. Mylan
In March 2018, a court in the Southern District of New York declined to exercise supplemental jurisdiction in a case highly similar to this one. See In re Mylan N.V. Sec. Litig., 2018 WL 1595985 (S.D.N.Y. Mar. 28, 2018). Because the parties contest whether Mylan was rightly decided—and whether I should follow the Mylan Court‘s lead—I include a summary of the case here.
In Mylan, a putative class alleged that the drug manufacturer Mylan N.V. had violated both the Exchange Act and the ISL, 1968. See Mylan, 2018 WL 1595985, at *1, *3. On the defendants’ motion to dismiss, the Mylan Court allowed the Exchange Act claims to proceed but dismissed the Israeli law claim, which was asserted “on behalf of individuals who purchased Mylan stock on the” TASE. Id. at *18. In particular, the Mylan Court declined to exercise supplemental jurisdiction over the Israeli law claim. The Mylan Court also noted that—although it did not reach the question—“several of the factors compelling the Court to decline supplemental jurisdiction would also weigh in favor of a dismissal” on the grounds of forum non conveniens. Id. at *18 n.13.
The Mylan Court explained that considerations pursuant to both
With respect to
to litigate their claims under Israeli law.” Id. at * 19. Citing Morrison, the Mylan Court noted that foreign countries’ securities markets can differ from the United States‘s securities markets in myriad and important ways. See id. The Mylan Court also cited “the interests of international comity” and “hesitate[d] to impinge on Israeli courts’ ability to adjudicate the claims of their own citizens under their own securities laws—even if Israel has chosen, as a matter of Israeli law, to apply U.S. securities law.” Id. The Mylan Court continued: “Respect for foreign law would be completely subverted if foreign claims were allowed to be piggybacked into virtually every American securities fraud case, imposing American procedures, requirement, and interpretations.” Id. (quoting In re Toyota Motor Corp. Sec. Litig., 2011 WL 2675395, at *7 (C.D. Cal. July 7, 2011)) (cleaned up).
The Mylan Court held that the Israeli plaintiffs’ interest in litigating their Israeli law claims in United States federal court was entitled to negligible deference. The Mylan Court said:
[T]he United States has only a minimal interest, if any, in providing a forum to litigate the claims of foreign stockholders under foreign securities laws. See Dar El-Bina Eng‘g & Contracting Co. v. Republic of Iraq, 79 F. Supp. 2d 374, 388 (S.D.N.Y. 2000); see also Morrison, 561 U.S. at 270 (“While there is no reason to believe that the United States has become the Barbary Coast for those perpetrating frauds on foreign securities markets, some fear that it has become the Shangri-La of class-action litigation for lawyers representing those allegedly cheated in foreign securities markets.“).
Id. at *20. Finally, the Mylan Court held that “declining jurisdiction over the Israeli Plaintiffs avoids the risk of exposing Defendants to inconsistent or double liability.” Id.
D. Discussion
1. A Preliminary Issue: Judicial Estoppel and Teva‘s Prior Arguments
The Israeli Law Plaintiffs argue that the Israeli Law Defendants should be judicially estopped from pursuing their current argument because they have already successfully argued that the United States—and, particularly, the District of Connecticut—is a proper forum to
litigate the Israeli law claims at issue. The Israeli Law Defendants disagree; they say that they have not taken any contradictory positions. Although the Israeli Law Defendants’ prior positions are relevant to aspects of my supplemental jurisdiction and forum non conveniens analysis (discussed further below), I will not judicially estop the Israeli
The equitable doctrine of judicial estoppel “is designed to prevent a party who plays fast and loose with the courts from gaining unfair advantage through the deliberate adoption of inconsistent positions in successive suits.” Ashmore v. CGI Grp., Inc., 923 F.3d 260, 272 (2d Cir. 2019) (cleaned up). “Where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.” New Hampshire v. Maine, 532 U.S. 742, 749 (2001) (quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)) (cleaned up).
Three factors govern a court‘s application of judicial estoppel. “First, a party‘s later position must be clearly inconsistent with its earlier position.” Id. at 750 (cleaned up). “[T]here must be a true inconsistency between the statements in the two proceedings,” and “[i]f the statements can be reconciled there is no occasion to apply an estoppel.” Ashmore, 923 F.3d at 272 (cleaned up). “Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party‘s earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled.” New Hampshire, 532 U.S. at 750 (cleaned up). Third, a court should consider “whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Id. at 751.
The application of judicial estoppel is “strong medicine,” and courts do not undertake it lightly. See Ashmore, 923 F.3d at 274. Indeed, “[t]he application of judicial estoppel constitutes an exercise of a court‘s inherent power to sanction misconduct.” Montrose Med. Grp. Participating Savings Plan v. Bulger, 243 F.3d 773, 784 (3d Cir. 2001). “[T]he Supreme Court has made clear that courts should impose sanctions pursuant to their inherent authority only in rare circumstances.” Yukos Capital S.A.R.L. v. Feldman, 977 F.3d 216, 235 (2d Cir. 2020) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)).
The Israeli Law Plaintiffs argue that all the elements of the judicial estoppel test have been met. First, they note that the Israeli Law Defendants have previously argued on multiple occasions and in multiple forums—(1) a motion to dismiss in the lead action in this matter,41 (2) a motion to transfer the Phoenix action, and (3) a motion to stay a parallel Israeli securities class action—that Israeli securities law “mirrors” United States securities law in that both reporting requirements and civil liability under the ISL, 1968 are determined by United States law. See Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 18-19. Second, the Israeli Law Plaintiffs argue that the Israeli Law Defendants’ positions were adopted by each relevant court because the Israeli Law Defendants prevailed
dismiss because the Israeli Law Defendants’ “end game is . . . to deprive Plaintiffs of any forum to hear their Israeli law claims.” Id. at 21.
In articulating the Israeli Law Defendants’ prior inconsistent position, the Israeli Law Plaintiffs focus heavily on Teva‘s motion to stay the parallel Lightcom case in Israel. In that motion to stay,43 Teva argued that United States law controls both disclosure requirements and civil liability under the ISL, 1968. See Teva‘s Mot. to Stay, Ex. 2 to Licht Decl., Doc. No. 499-2, at ¶¶ 16-20. Teva also argued that “courts in the United States are . . . the most natural forum for the purpose of deciding” whether Teva breached reporting duties and was liable under United States securities laws. See id. at ¶¶ 8, 37. Further, Teva argued that the questions in dispute were “similar or identical to those that were brought up in the actions in the United States.” Id. at ¶ 56a. The Israeli Law Plaintiffs explain that they filed their direct actions in the United States after Teva successfully obtained the stay in Lightcom so that they could “recover damages for all losses caused by Defendants’ misconduct” as expeditiously as possible. Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 18.
The Israeli Law Plaintiffs also point to Teva‘s efforts to consolidate all the pending actions against it in the United States into one judicial district and before one judge (me). Again, in the Israeli Law Plaintiffs’ view, Teva‘s arguments in that posture contradict its current arguments. The Israeli Law Plaintiffs focus particularly on Teva‘s motion to transfer in Phoenix, 19-cv-449.44 Filed on August 3, 2018 in the Eastern District of Pennsylvania, the complaint in
Phoenix includes claims based on federal securities law, Pennsylvania state securities law, and Israeli securities law. See Compl., Phoenix, 19-cv-449, Doc. No. 1. On October 9, 2018, Teva made a motion to transfer. See Mot. to Transfer, Phoenix, 19-cv-449, Doc. No. 30. In that motion, Teva argued that the Phoenix plaintiffs’ Israeli law claims were no impediment to transfer because they “add nothing significant to the federal law claims because . . .
The Israeli Law Defendants submit that judicial estoppel should not apply for several reasons. First, the Israeli Law Defendants note that judicial estoppel cannot be employed to prevent a court from considering its own subject matter jurisdiction. See Israeli Law Defs.’ Reply, Doc. No. 539, at 12 (citing Da Silva v. Kinsho Int‘l Corp., 229 F.3d 358, 361 (2d Cir. 2000)). Indeed, in Da Silva, the Second Circuit noted that the parties’ “prior litigating positions do not preclude either side from asserting its current position since the issue of subject matter jurisdiction is one we are required to consider, even if the parties have ignored it or, as here, have switched sides on the issue.” 229 F.3d at 361.
In any event, the Israeli Law Defendants argue that none of the factors of the judicial estoppel test is satisfied. First, the Israeli Law Defendants state that their “position is fully consistent with what they argued previously.” Israeli Law Defs.’ Reply, Doc. No. 539, at 12. In their motion to transfer in Phoenix, the Israeli Law Defendants acknowledged that the Israeli and state law claims mirrored the federal securities law claims, but that “does not mean that
Defendants supported a U.S. court exercising jurisdiction over those claims.” Id. Second, the Israeli Law Defendants argue that even if they had made a contradictory statement, no court has “adopted” such a statement. For instance, in granting Teva‘s motion to transfer in Phoenix, Judge Diamond did not mention Israeli law in his decision. Id. at 13. Third, the Israeli Law Defendants argue that their litigation tactics have not resulted in an unfair advantage. For example, even if the Phoenix case had not been transferred to me, the Israeli Law Defendants “still would have moved to dismiss in Phoenix (and any other cases raising Israeli law claims) on the same grounds as” they do now. Id.
I will not apply judicial estoppel. I cannot apply judicial estoppel to bar the Israeli Law Defendants’ argument regarding supplemental jurisdiction because that is a question of subject matter jurisdiction, an issue I am “required to consider.” Da Silva, 229 F.3d at 361; see also Khodeir v. Sayyed, 323 F.R.D. 193, 198 (S.D.N.Y. 2017) (discussing counterclaim plaintiffs invoking “this Court‘s subject matter jurisdiction under
I will also not apply judicial estoppel to bar the Israeli Law Defendants’ argument regarding forum non conveniens. First, applying judicial estoppel is “strong medicine,” and it is well within my discretion not to do so. Second, in my view, the Israeli Law Defendants’ arguments have not been, strictly speaking, inconsistent. Interpreting their prior positions charitably, one could conclude that the Israeli Law Defendants have argued that (1) Israeli securities law mirrors United States securities law but also (2) United States securities law claims should be resolved in the United States and Israeli securities law claims should be resolved in Israel. For instance, in their motion to stay in Lightcom, the Israeli Law Defendants did not specifically argue that the United States was the most appropriate forum to hear ISL, 1968 claims. Rather, they argued that because the ISL, 1968 incorporates
2. Parties’ Arguments on the Merits
a. Supplemental Jurisdiction
The Israeli Law Defendants argue that—even if Israeli securities law closely mirrors or incorporates United States law—I should decline to exercise supplemental jurisdiction over the Israeli law claims because they are simply piggybacked onto an American securities fraud case. See Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 11. The Israeli Law Defendants rely heavily on Mylan and argue that I should reach the same result. Indeed, the Israeli Law Defendants claim that numerous courts in analogous circumstances have also declined to exercise supplemental jurisdiction. See id. at 11–12.45
The Israeli Law Plaintiffs claim that I should exercise supplemental jurisdiction because no provision of Section 1367(c) counsels otherwise, and neither do the Gibbs factors. See Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 24–37. Indeed, the Israeli Law Plaintiffs argue that two courts in analogous instances have exercised supplemental jurisdiction over Israeli securities law claims. See id. at 24.46 Regarding Mylan,
The Israeli Law Defendants counter that it is not a settled, “open and shut” tenet of Israeli law that United States securities law determines liability under the ISL, 1968. Indeed, the Israeli Law Defendants point out that the Israeli Law Plaintiffs’ “own recounting of the recent legal history proves the issue is more ‘complex’ than” they suggest. Israeli Law Defs.’ Reply, Doc. No. 539, at 6; see also Hr‘g Tr., Doc. No. 647, at 41:2–5 (“The submission of a 40-page Israeli law professor‘s opinion hardly helps to show that all Israeli issues that may arise are open and shut and already resolved.“). The Israeli Law Defendants argue that that legal history reveals that “Israeli courts have repeatedly grappled with this question in recent years, and the most relevant guidance from the Israeli Supreme Court was in an appeal that was withdrawn.” Israeli Law Defs.’ Reply, Doc. No. 539, at 6.
In any event, the Israeli Law Defendants argue, even if the relevant question were settled, that hardly matters. That is because the Mylan Court‘s reasoning went far beyond its perceived openness of that issue. Indeed, the Mylan Court explicitly said that it would have reached the same result had the question been settled just as the Israeli Law Plaintiffs argue it has been. See id. at 5; Mylan, 2018 WL 1595985, at *19 (indicating that concerns of international comity militated against exercising supplemental jurisdiction “even if Israel has chosen, as a matter of Israeli law, to apply U.S. securities law“).
The parties also disagree regarding whether exercising supplemental jurisdiction over the ISL, 1968 claims would promote or erode international comity. The Israeli Law Plaintiffs claim that Mylan was off the mark in its assessment that exercising supplemental jurisdiction would erode international comity. According to the Israeli Law Plaintiffs, considerations of international comity “are simply irrelevant,” and, if they are relevant, they actually “militate for exercising supplemental jurisdiction.” Licht Decl., Doc. No. 499, at ¶¶ 99–101. The Israeli Law Plaintiffs claim that “[t]he whole [dual-listing] arrangement is premised on adjudicating all private claims in a concentrated and efficient manner in the foreign forum according to the foreign law of liability with regard to breaches of the foreign law of disclosure.” Id. at ¶ 101. The Israeli Law Plaintiffs rely heavily on the ISA Comment; the Israeli Law Defendants argue that reliance is weak because the ISA Comment was issued in 2011 and was thus already considered in Mylan. Israeli Law Defs.’ Reply, Doc. No. 539, at 6–7.47 The Israeli
The parties also disagree regarding the other “exceptional circumstances” that the Mylan Court highlighted, particularly: (1) the existence of parallel litigation in Israel, and (2) the possible difficulties that could arise from a United States court engaging with Israeli law. The Israeli Law Defendants argue that the pendency of two stayed parallel class actions—Gat and Lightcom—in Israel is decisive because it indicates that the Israeli Law Plaintiffs can simply litigate their Israeli law claims in Israel. Further, the Israeli Law Defendants claim that allowing the Israeli law claims to proceed here might force them “to engage in additional litigation in Israel to ensure that the Israeli courts recognize a judgment from a U.S. court on the Israeli law claims.” Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 11. That is, “[e]ven if Defendants prevailed on or agreed to settle Israeli law claims in this Court, plaintiffs in the previously filed Israeli cases might endeavor to relitigate the same claims in Israel.” Id. An Israeli court would then have to employ “a multi-factor test to determine the enforceability of a U.S. securities law judgment.” Id. Even if this possibility is “remote,” it counsels in favor of declining to exercise supplemental jurisdiction. See id. at 11 n.7.
On the other hand, the Israeli Law Plaintiffs argue that the situation is entirely straightforward. First, the Israeli Law Plaintiffs focus on what they perceive to be Teva‘s about-face: Because Teva argued for Gat and Lightcom to be stayed pending the outcome in this case (and succeeded), how can the existence of Gat and Lightcom be an extraordinary circumstance? See Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 28. The Israeli Law Plaintiffs also argue that the legal reasoning in Morrison (and its adoption in Mylan) is inapplicable here because all relevant indications—the ISA Comment, Israeli case law, and Teva‘s own arguments in different litigation postures—suggest that my exercising jurisdiction would promote international comity. See id. at 29.
In addition, the Israeli Law Plaintiffs argue that declining to exercise supplemental jurisdiction would not further any of the Gibbs factors: economy, convenience, fairness, or comity. See id. at 32. The Israeli Law Plaintiffs claim that the Israeli Law Defendants’ fears are illusory. First, the notion that litigating Israeli law claims here may expose the Israeli Law Defendants to inconsistent or double liability is entirely speculative. Id. at 32–33. Second, the idea that a judgment from this court would be difficult to enforce in Israel is, as Teva itself acknowledged in its motion to stay in Lightcom, “virtually inconceivable.” Id. at 33; Licht Decl., Doc. No. 499, at ¶¶ 102–08; Teva‘s Mot. to Stay, Ex. 2 to Licht Decl., Doc. No. 499-2, at ¶ 46.
In contrast, the Israeli Law Plaintiffs argue, declining to exercise supplemental jurisdiction would force them to “hire separate Israeli counsel” and “institute a separate lawsuit” in Israel for “significant losses numbering in the hundreds of millions of dollars suffered on the TASE“—based on the same facts and misstatements already being litigated in this case. Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 34. According to the Israeli Law Plaintiffs, the lawsuits would then “proceed in tandem with the current U.S. lawsuits,” and the Israeli Law Plaintiffs would be forced into entirely duplicative litigation. See id. Because United States law would govern the Israeli action, confusion might be sown in the Israeli action. See id. at 34–35. If the Israeli action were stayed, the Israeli Law Plaintiffs also claim that they “would be further prejudiced . . . as they would be
b. Forum non conveniens
The parties sharply disagree regarding both whether the Israeli Law Plaintiffs’ choice of forum should be afforded significant deference and whether the private-interest and public-interest factors weigh in their favor. The Israeli Law Defendants point out that nine of the ten Israeli Law Plaintiffs are foreign, and, in fact, seven of them are Israeli residents. See Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 13. That fact “hardly supports deference to Plaintiffs’ forum choice.” Israeli Law Defs.’ Reply, Doc. No. 539, at 8. Indeed, in the Israeli Law Defendants’ view, the Israeli law claims regard “purchases on an Israeli stock exchange [that] have little connection to the United States” and are merely “tacked on to” the United States securities law claims; thus, the Israeli Law Plaintiffs’ choice of forum is “an unavoidable acknowledgment of the secondary status of the Israeli law claims.” Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 13. Because the amount of deference afforded a plaintiff‘s choice of forum occurs on a “sliding scale,” Iragorri, 274 F.3d at 71, it matters little on the facts of this case that the Schwab plaintiffs are United States residents. See Israeli Law Defs.’ Reply, Doc. No. 539, at 9.
The Israeli Law Plaintiffs claim that the Schwab plaintiffs’ choice of forum is entitled to “great weight” because they are United States residents. See Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 38. In the Israeli Law Plaintiffs’ view, all their choices of forum should be afforded “great weight” because this “litigation has a ‘bona fide connection to the United States.‘” Id. (quoting Iragorri, 274 F.3d at 72). Indeed, the United States is simply the common sense forum for this litigation because the Israeli Law Plaintiffs “purchased Teva securities on the NYSE and TASE and, as a result of Defendants’ singular course of misconduct occurring in the U.S. generic drug market, Plaintiffs suffered significant losses on both exchanges.” Id. Thus, the Israeli Law Plaintiffs’ losses on the TASE trades are “directly connected to the United States and inextricably linked to their U.S. securities claims.” Id. at 38–39. The Israeli Law Plaintiffs also claim that by bringing their Israeli law claims here, they are not forum shopping but are simply trying to abide by the “spirit of Israel‘s dual-listing regime.” Id. at 39. The fact that Teva sought to stay parallel litigation in Israel in favor of litigating in the United States (and succeeded) further supports the view that the United States is the proper forum to hear the Israeli Law Plaintiffs’ Israeli law claims. See id. If anything, the Israeli Law Plaintiffs claim, Teva‘s “hypocritical and diametrically opposed posturing suggests that what they are actually seeking to do here is not find a convenient forum, but to ensure no forum is available to hear Plaintiffs’ Israeli law claims.” Id. at 40.
The parties also both argue that the private-interest factors relevant to the forum non conveniens analysis weigh in their favor. The Israeli Law Defendants hypothesize that, if forced to defend Israeli law claims in this court, they “might have to engage in further litigation to ensure the recognition of a judgment from this Court based on an interpretation of Israeli law.” Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 14. In contrast, the Israeli Law Defendants argue, it “can hardly be an undue inconvenience for plaintiffs who purchased stock on a[n] Israeli exchange to litigate securities claims based on those purchases in Israel—particularly when, as
The Israeli Law Plaintiffs disagree. They argue that, in general, the significant (near total) overlap between their United States securities law claims and their Israeli law claims indicate that trying the claims together will be most convenient for all parties. The Israeli Law Plaintiffs note that the United States and Israeli law claims “will be proved through the same discovery, which is well underway in the Consolidated Action, with over one million pages of discovery produced by Defendants thus far.” Israeli Law Pls.’ Opp‘n, Doc. No. 498, at 41.48 If forced to file new, parallel suits in Israel, the Israeli Law Plaintiffs suggest that all parties and both court systems would incur “significant and duplicative costs.” Id. Further, the witnesses in this case “with direct knowledge are mostly—if not all—located in the United States.” Id. (Those are executives from Teva‘s U.S. generics division and potentially employees from third-party generic drug manufacturing companies involved in those companies’ U.S. generics markets. See id. at 42.) The Israeli Law Plaintiffs claim that the Israeli Law Defendants “offer no argument or evidence of how those third parties are available by compulsory process in Israel.” Id. Finally, the Israeli Law Plaintiffs submit that the Israeli Law Defendants’ concern that “they ‘might’ have to engage in additional litigation in Israel” to get an Israeli court to recognize a judgment from this court is “speculative” and “unfounded.” Id. at 43.
The parties also view the public-interest factors differently. The Israeli Law Defendants note the “obvious public interest in having Israeli law claims, concerning stock on an Israeli exchange, considered and decided by an Israeli court.” Israeli Law Defs.’ Mem. of Law, Doc. No. 450-1, at 14 (citing USHA (India), Ltd. v. Honeywell Int‘l, Inc., 421 F.3d 129, 134 (2d Cir. 2005)). The Israeli Law Defendants point out that, in their view, courts have dismissed claims on forum non conveniens grounds in similar circumstances. See id. at 15.49
The Israeli Law Plaintiffs disagree. They claim that, even if I dismiss their
3. Discussion
I will exercise supplemental jurisdiction over the Israeli Law Plaintiffs’ Israeli law claims, and I will not dismiss them on the grounds of forum non conveniens. Put simply, the Israeli Law Plaintiffs’ federal securities law and Israeli securities law claims seem to me, in every important respect, identical. The Israeli Law Defendants’ concerns are, essentially, phantom concerns: The Israeli Law Defendants have not identified a serious possibility that any significant issue might arise that would counsel against exercising supplemental jurisdiction over the Israeli law claims.
Because of the slippery nature of these issues, the analytical frameworks of the supplemental jurisdiction and forum non conveniens tests can sometimes seem artificial and can encroach upon one another. Still, the frameworks provide a useful frame of reference, so I build my discussion upon them.
In my view, the Israeli Law Plaintiffs’ ISL, 1968 claims do not “raise[] a novel or complex issue of State law.”
Similarly, the question whether United States securities law establishes civil liability under the ISL, 1968 does not present such a “complex” issue of Israeli law that I should decline jurisdiction. To be sure, the issue is not completely straightforward. First, the Israeli Knesset has not resolved the question as a matter of statutory law. That is potentially significant because (1) the Knesset did establish that foreign markets’ reporting and disclosure requirements would define those requirements under Israeli securities law, and (2) the Israeli Supreme Court has twice (somewhat cryptically) voiced its opinion that a legislative amendment would be helpful to clarify “the position” and the “state of affairs” with respect to the issue. See Damti (Supreme Court) I, Ex. 7 to Licht Decl., Doc. No. 499-7, at 5;
On the other hand, though, the absence of any contrary precedent and the logic of Israel‘s dual-listing regime indicate that the issue is no longer especially “complex.” In other words, the only potential complexities do not arise from existing evidence but instead regard speculations about what Israeli courts or the Knesset might say or do in the future. In my view, that speculation does not introduce enough potential complexity to warrant declining jurisdiction over the Israeli law claims based on Section 1367(c)(1) considerations.
I also hold that there are no “exceptional circumstances” or “compelling reasons” that favor declining supplemental jurisdiction over the ISL, 1968 claims.
However, in my view, the record does not identify any potential idiosyncrasies that legitimately might arise. For instance, I have not been provided with an explanation why any of the italicized concerns in the above quotation from Morrison might arise in this case. In fact, when I asked the Israeli Law Defendants at the hearing in this matter “what issues of Israeli law do you foresee are going to have to be decided by me if I keep the Israeli law claims,” the Israeli Law Defendants admitted that they anticipated none. See Hr‘g Tr., Doc. No. 647, at 41:19–44:10; 57:1–3.
As described above, see supra n.46, two district courts recently have exercised supplemental jurisdiction over Israeli securities law claims in analogous circumstances: (1) Roofer‘s Pension Fund v. Papa (”Perrigo“), 2018 WL 3601229 (D.N.J. July 27, 2018), and (2) Costas v. Ormat Techs, Inc., 2019 WL 6700199 (D. Nev. Dec. 6, 2019). The Perrigo and Costas courts did not explain their reasoning, and I do not rely on their reasoning. However, the practical experience in those cases helps inform my view regarding the potential issues that might arise from my exercising supplemental jurisdiction over ISL, 1968 claims.
So far as I can tell, the decisions by the Perrigo and Costas courts to exercise supplemental jurisdiction over Israeli law claims have not resulted in any thorny issues in those cases. My review of the dockets in the Perrigo and Costas cases confirms that the presence of the Israeli
I also will not dismiss the Israeli law claims based on the doctrine of forum non conveniens. Regarding the level of deference to afford the Israeli Law Plaintiffs’ choice of forum, I afford it a medium amount. On the one hand, the Israeli Law Plaintiffs—except for the Schwab plaintiffs—are foreign, and most are Israeli. In addition, there is no question that the Israeli Law Plaintiffs—if they wanted to—would be able to litigate their Israeli law claims in Israel. On the other hand, it is economical—because the Israeli law claims seem truly to mirror the federal securities law claims—for the Israeli Law Plaintiffs to litigate their claims in one place all at once. Clearly, the United States is the place to do that. The lion‘s share of evidence and witnesses are in the United States because the case regards Teva‘s U.S. generic drugs market. Because the Israeli Law Defendants have already acknowledged the secondary status of the Israeli law claims in this case, it is difficult to see how the Israeli Law Defendants would be so prejudiced from having to litigate the claims in the same forum.
The most important public-interest factors at play are those regarding the potential difficulty of engaging with foreign law. See Piper Aircraft, 454 U.S. at 241 n.6 (listing the following as public-interest factors: “[T]he local interest in having localized controversies decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law.“) (quoting Gilbert, 330 U.S. at 509) (cleaned up). But, as already discussed, that is a general concern, and the Israeli Law Defendants do not substantiate that concern with enough particularity.
The issue of comity—whether considered as a part of the public-interest factors under a forum non conveniens analysis or an “exceptional circumstance” under
Related is the concern that the United States will become an unwanted haven for opportunistic plaintiffs’ lawyers. Indeed, in Morrison, the Supreme Court mentioned that “some fear” that the United States “has become the Shangri-La of class-action litigation for lawyers representing those allegedly cheated in foreign securities markets.” Morrison, 561 U.S. at 270. The Israeli Law Defendants reiterate
Finally, the Israeli Law Defendants’ prior litigating positions are informative and undercut their current argument. In a forum non conveniens analysis a district court “should be mindful that, just as plaintiffs sometimes choose a forum for forum-shopping reasons, defendants also may move for dismissal under the doctrine of forum non conveniens not because of genuine concern with convenience but because of similar forum-shopping reasons.” Iragorri, 274 F.3d at 75. Although the Israeli Law Defendants claim that they have always planned on attempting to litigate the United States securities claims in the United States and the Israeli securities law claims in Israel, some of their prior arguments have been broad and purposefully attempted to lump together the two types of claims. For instance, in their motion to dismiss earlier in this matter, the Defendants had no issue acknowledging that Israeli law perfectly mirrored United States law. See Mem. in Supp. Mot. to Dismiss, Doc. No. 189-1, at 64–65 & n.49. And in their motion to transfer in Phoenix and motion to stay in Lightcom, Teva likewise assured the courts that Israeli law and United States law were the same in every important respect. Now, the Israeli Law Defendants try to make a distinction that is not quite contradictory to their prior positions, but it is eyebrow-raising, and, in my view, too clever by half.
Courts require a strong showing of inconvenience to dismiss a claim based on the doctrine of forum non conveniens. See R. Maganlal & Co., 942 F.2d at 167 (noting that courts should grant motions to dismiss on the basis of forum non conveniens only when “the balance of convenience tilts strongly in favor of trial in the foreign forum“); Iragorri, 274 F.3d at 74–75 (explaining that courts should grant motions to dismiss on the basis of forum non conveniens “only if the chosen forum is shown to be genuinely inconvenient and the selected forum significantly preferable“). Here, the Israeli Law Defendants have not come close to clearing that high bar.
V. Conclusion
For the foregoing reasons, I grant the Repose Defendants’ partial motion to dismiss on repose grounds, doc. no. 449, and deny the Israeli Law Defendants’ partial motion to dismiss Israeli law claims, doc. no. 450.
As I have already ordered, the Defendants in all the Direct Actions shall “answer or otherwise respond to the operative complaints in the Direct Actions” by 120 days from today, which is May 24, 2021. See Consolidation Order, Doc. No. 352, at ¶ 14.
So ordered.
Dated at Bridgeport, Connecticut, this 22d day of January 2021.
/s/ STEFAN R. UNDERHILL
Stefan R. Underhill
United States District Judge