The opinion of the court was delivered by: HAROLD BAER JR., District Judge
Lead plaintiffs John Moretto ("Moretto") and the Canadian
Commercial Workers Industry Pension Plan ("CCWIPP")
(collectively, "plaintiffs") bring this putative class action
against Royal Group Technologies Limited ("Royal Group" or "the
Company"), Vic De Zen ("De Zen"), Douglas Dunsmuir ("Dunsmuir"),
Gary Brown ("Brown"), Ron Goegan ("Goegan") and Domenic D'Amico
("D'Amico") (collectively, the "Individual Defendants") for
violations of sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 (the "Exchange Act"). Defendants have moved to
dismiss the consolidated amended complaint on the grounds that:
1) this Court lacks subject matter jurisdiction over plaintiffs'
claims; 2) the doctrine of forum non conveniens favors
dismissal; 3) this Court lacks personal jurisdiction over the
Individual Defendants; 4) plaintiffs fail to state a claim for
relief under the Exchange Act; and 5) certain of plaintiffs'
claims are barred by the statute of limitations. Also before the
Court is Lewis R. Messinger's ("Messinger's") motion to intervene
as an additional class representative. For the reasons set forth
below, defendants' motion to dismiss is GRANTED.
Royal Group is a Canadian corporation engaged in the
manufacture of construction products. (Compl. ¶ 16).*fn1
Royal Group's headquarters are located in Ontario, Canada and its
shares are traded on both the New York Stock Exchange ("NYSE")
and on the Toronto Stock Exchange. (Compl. ¶¶ 16-17). De Zen
co-founded Royal Group, and served as chairman of its board from
1994 until November 2004. (Compl. ¶ 18). Dunsmuir and Brown were
directors of the Company, and its CEO and CFO, respectively. (Compl. ¶¶ 19-20). Goegan was CFO beginning in
December, 2001. (Compl. ¶ 21). D'Amico, a co-founder of Royal
Group, was employed by the Company, and owned a significant
number of shares in Royal Group's stock. (Compl. ¶ 22).
CCWIPP is one of Canada's largest multi-employer pension plans.
(Compl. ¶ 15 n. 1). Both CCWIPP and Moretto purchased shares of
Royal Group on the Toronto Stock Exchange. (Def.'s Mem. at 2).
Proposed intervenor Messinger is a U.S. citizen who purchased
shares of Royal Group on the NYSE. (Affidavit of Lewis R.
Messinger, dated July 29, 2005 ("Messinger Aff.") ¶¶ 1, 4).
Plaintiffs allege that the Individual Defendants "caus[ed] the
Company to engage in financial transactions either with
themselves or with companies under their control" and that they
failed to disclose these related-party transactions to
shareholders as required by SEC regulations. (Compl. ¶¶ 2, 35-6).
Plaintiffs allege that, when these transactions came to light in
2004 through investigations initiated by Canadian authorities,
Royal Group's stock price declined significantly. (Compl. ¶¶
Defendants move to dismiss the complaint on, inter alia,
grounds of forum non conveniens. As a general matter, courts
must defer to a plaintiff's choice of forum. See Iragorri v.
United Technologies Corp., 274 F.3d 65, 70 (2d Cir. 2001).
"`[U]nless the balance [of factors] is strongly in favor of the
defendant, the plaintiff's choice of forum should rarely be
disturbed.'" Id. quoting Gulf Oil Corp. v. Gilbert,
330 U.S. 501, 508 (1947). However, the degree of deference accorded
plaintiff's choice varies based upon the circumstances of the
case. Thus, in deciding whether the doctrine of forum non
conveniens requires dismissal, courts must first determine the
degree of deference due to plaintiff's choice of forum. See
Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 70
(2d Cir. 2003). Having made this determination, a court must next
decide "whether an adequate alternative forum exists." Id. If
there exists an alternative forum, the court should then balance
the "private and public interest" factors set forth by the
Supreme Court in Gilbert to determine, based on "the relative
hardships involved, whether the case should be adjudicated in the
plaintiff's chosen forum or in the alternative forum suggested by
the defendant." Id. citing Gilbert, 330 U.S. at 507-09. A decision to dismiss a matter "on forum nonn conveniens grounds
lies wholly within the broad discretion of the district court."
Iragorri, 274 F.3d at 72.
"[T]he choice of a United States forum by a foreign plaintiff
is entitled to less deference" than that accorded a domestic
plaintiff suing in his or her home district. Id. at 71. Here,
lead plaintiffs Moretto and CCWIPP are Canadian
citizens.*fn2 "[T]he greater the plaintiff's or the
lawsuit's bona fide connection to the United States, the more
difficult it will be for the defendant to gain dismissal for
forum non conveniens." Id. at 72. The converse is also true.
The named plaintiffs' lack of bona fide connections to this
district indicates that their choice of forum should be accorded
less deference than that due a resident plaintiff seeking
redress. See Pollux, 329 F.3d at 71 ("when a foreign
plaintiff sues in a United States forum such choice is entitled
to less deference because one may not easily presume that choice
Next, I must consider whether an adequate alternative forum
exists. "An alternative forum is adequate if the defendants are
amenable to service of process there, and if it permits
litigation of the subject matter of the dispute." Pollux,
329 F.3d at 75. Here, all of the defendants are Canadian. (See
Def.'s Mem. at 10). In addition, the Second Circuit has concluded
that Ontario, Canada is an adequate forum to try class actions
based on violations of federal securities laws. See DiRienzo
v. Philip Servs. Corp., 232 F.3d 49, 57-60 (2d Cir. 2000)
("DiRienzo I"), vacated on other grounds by, DiRienzo v.
Philip Servs. Corp., 294 F.3d 21 (2d Cir. 2002) ("DiRienzo
II"). Indeed, plaintiffs have presented no argument as to why
the Canadian courts are not an adequate forum to try this action.
(See Pl.'s Mem. at 15).*fn3
Since an adequate alternative forum exists, this Court must
balance the relevant private and public interest factors. The
private interest factors include: "1) the ease of access to
evidence; 2) the availability of compulsory process for the
attendance of unwilling witnesses; 3) the cost of the willing witnesses'
attendance . . . [and] all other factors that might make the
trial quicker or less expensive." DiRienzio II, 294 F.3d at 29.
Here, defendants correctly assert that the vast majority of
documents and witnesses relevant to plaintiffs' claims are
located in Canada. (See Declaration of Scott D. Bates, dated
July 15, 2005 ("Bates Dec.") ¶ 3). Plaintiffs do not dispute
defendants' assertion, but rather argue that relevant documents
could easily be transported here and that willing witnesses could
travel between Ontario and the Southern District of New York
without undue hardship. Plaintiffs are correct that documents and
witnesses can be transported, nonetheless, the location of
documents and witnesses weighs in favor of a Canadian forum. More
importantly, any non-party witnesses with knowledge of the
underlying transactions at issue in this litigation, of which
there are several, are located outside this Court's subpoena
power. While plaintiffs are correct that depositions can be taken
abroad pursuant to letters rogatory, see DiRienzo II,
294 F.3d at 30, "[l]ive testimony is especially important in a fraud
action where the factfinder's evaluation of witnesses'
credibility is central to the resolution of the issues." Id. At
trial, a jury in this District would be deprived of the live
testimony of, inter alia, Royal Group's auditors as well as the
independent directors and forensic accountants involved in the
investigation of the alleged fraud (assuming those witnesses
proved unwilling to testify voluntarily). (See Compl. ¶¶ 68,
The public interest factors to be considered include: "1)
administrative difficulties associated with court congestion; 2)
the unfairness of imposing jury duty on a community with no
relation to the litigation; 3) the local interest in having
localized controversies decided at home; and 4) avoiding
difficult problems in conflict of laws and the application of
foreign law." DiRienzo II, 294 F.3d at 31. Here, "Ontario['s]
courts, like the Southern District of New York, suffer from
congestion." Id. In addition. while the United States has an
interest in addressing allegations of fraud against corporations
listed on the NYSE, Canada has an interest in addressing
allegations of fraud against its domestic corporations and its
individual citizens. Unlike DiRienzo, in which plaintiffs'
complaint alleged that the vast majority of defendants' shares
were traded on American stock exchanges, see DiRienzo II,
294 F.3d at 31, here less than 12% of Royal Group's shares traded on
an American exchange during the class period. (See Declaration
of Marc D. Ashley, dated August 23, 2005 ("Ashley Dec.") ¶ 2). Put
another way, the local interest in trying this action here is
weaker than that identified in DiRienzo. Finally, while a
Canadian court may have to apply U.S. law to claims based on
purchases of Royal Group's shares by U.S. citizens on the NYSE,
"an American court would likely apply Canadian law to claims by
non-resident class members based on the purchase of securities
outside the United States." DiRienzo II,
294 F.3d at 31.*fn4
Ultimately, while the public interest factors are largely
neutral, the private interest factors clearly weigh in favor of a
Canadian forum. This action will hinge in large part on the
testimony and evidence of non-party witnesses, including Royal
Group's auditors, the banks involved in the underlying
transactions, and the independent directors and outside
consultants who investigated the alleged fraud. None of these
entities or individuals may be compelled to testify in this