United States District Court, S.D. New York
JOE FASANO, ALTIMEO OPTIMUM FUND, and ALTIMEO ASSET MANAGEMENT, Plaintiffs,
JUOQING 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.
OPINION AND ORDER
KATHERINE POLK FAILLA UNITED STATES DISTRICT JUDGE
putative class action, the co-Lead Plaintiffs - Joe Fasano,
Altimeo Optimum Fund, and Altimeo Asset Management -
challenge the fairness of, and seek damages related to, a
“going private” merger approved by the
shareholders of E-Commerce China Dangdang Inc. on September
12, 2016. Before the Court is a motion to dismiss for
forum non conveniens grounds filed by those
Defendants that have been served (collectively,
“Defendants”). In brief, Defendants argue that
Plaintiffs' choice of forum should be accorded little
deference; that the Cayman Islands presents an adequate
alternative forum; and that the balance of public and private
interests favors dismissal. Plaintiffs oppose the motion and
urge the Court instead to grant substituted service on the
individual Defendants who have not yet been served. For the
reasons set forth below, the Court grants Defendants'
motion to dismiss, and denies as moot Plaintiffs' request
for substituted service.
case involves five corporate and eight individual defendants.
The principal corporate defendant is E-Commerce China
Dangdang Inc. (“Dangdang”), an online retailer
founded in 2000 that sells merchandise to customers in China.
(Compl. ¶¶ 27-28). The company is incorporated in
the Cayman Islands, though its principal offices and
substantially all of its employees, operations, and company
files are located in China. (Dangdang Decl. ¶¶
3-5). In 2014, Dangdang had 24.3 million active customers.
(Compl. ¶ 27). On December 8, 2010, Dangdang completed
an initial public offering (“IPO”) of American
Depositary Shares (“ADS”) on the New York Stock
Exchange (“NYSE”). (Id. at ¶ 29).
Through the IPO, Dangdang sold 17 million ADS at $16.00 per
share, raising $272 million in capital. (Id.). Since
then, Dangdang has been listed exclusively on the NYSE. (Pl.
Dangdang Holding Company Limited (“DHC”) is a
company incorporated under the laws of the Cayman Islands
with its principal place of business in Beijing, China.
(Compl. ¶ 12). Defendants Kewen Holding Co. Limited
(“Kewen”), Science & Culture International
Limited (“SCI”), and First Profit Management
Limited (“First Profit”) are companies that serve
as investment holding vehicles and that are incorporated
under the laws of the British Virgin Islands. (Id.
at ¶¶ 13-16). Kewen and SCI are controlled by Mr.
Guoqing Li; First Profit, by Mr. Danqian Yao. (Id.).
individual defendants include Mr. Guoqing Li
(“Li”) and Ms. Peggy Yu Yu (“Yu”),
who co-founded Dangdang and have retained control over the
company. (Compl. ¶ 28). Mr. Li is Dangdang's Chief
Executive Officer and Ms. Yu is its Chairwoman. (Id.
at ¶¶ 7, 10). As of August 1, 2016, Li and Yu owned
31.2% of the company's common stock and held 75% of its
voting power. (Id.). Other individual defendants
include: Mr. Danqian Yao (“Yao”), a Dangdang
Senior Vice President; Mr. Lijun Chen (“Chen”)
and Mr. Min Kan. (“Kan”), two Dangdang Vice
Presidents; and Ms. Ruby Rong Lu (“Lu”), Mr. Ke
Zhang (“Zhang”), and Mr. Xiaolong Li
(“Xiaolong”), former Dangdang Directors who were
members of the committee that approved the going private
merger at issue here (“Special Committee”).
(Id. at ¶¶ 15-23).
Joe Fasano (“Fasano”), a New York resident, owned
approximately 3, 000 ADS shares, equivalent to approximately
15, 000 common shares of Dangdang. (Compl. ¶ 4; Def. Br.
4). Plaintiff Altimeo Optimum Fund (“AOF”) is a
French investment fund that held over 440, 000 ADS shares, or
approximately 2.2 million common shares, prior to the merger.
(Compl. ¶ 5). Plaintiff Altimeo Asset Management
(“AAM”), a French company, is AOF's asset
management company and authorized agent. (Id. at
9, 2015, Defendants Li, Yu, Yao, Chen, Kan, DHC, Kewen, SCI,
and First Profit - a group holding 83.6% of Dangdang's
voting power (“Controlling Group”) - submitted a
bid to “buy out” Dangdang minority shareholders,
including Plaintiffs Fasano, AOF, and AAM. (Compl. at
¶¶ 19, 37, 41). They bid $7.81 per ADS share.
(Id. at ¶ 37). Dangdang created a Special
Committee, comprised of individual Defendants Lu, Zhang, and
Xiaolong, to evaluate the offer. (Id. at ¶ 42).
The Special Committee retained legal counsel, Maples and
Calder (“Maples”), which specializes in the laws
of the Cayman Islands, Ireland, and the British Virgin
Islands. (Id. at ¶ 65). Maples also served as
legal counsel to Dangdang, including in connection with
Dangdang's registration statement for its NYSE IPO.
March 9, 2016, a third-party private equity firm, iMeigu
Capital Management, submitted an all-cash offer of $8.80 per
ADS share. (Compl. ¶ 43). On May 28, 2016, the Special
Committee and Dangdang's Board of Directors accepted the
Controlling Group's bid for $7.81 per share and approved
the proposed merger. (Def. Br. 4). Thereafter, Dangdang filed
a Schedule 13E-3 Transaction Statement with the Securities
and Exchange Commission (“SEC”). (Id.).
their submissions to the SEC, the Controlling Group, Special
Committee, and Dangdang stated that Maples provided the
Special Committee with “independent control of the
sales process.” (Compl. ¶ 67). They did not
indicate that Maples was then, or that it had previously
been, Dangdang's counsel. (Id.). On September
12, 2016, Dangdang held a shareholder meeting in China, where
97.7% of Dangdang's shares voted to approve the merger.
(Dangdang Decl. ¶ 16). 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. (Id. at ¶ 17).
shareholders - none of whom is a Plaintiff in the instant
action - objected to the merger. (Dangdang Decl. ¶ 18).
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. (Def. Br. 4). That petition is pending before
the Grand Court. (Id.).
November 10, 2016, Fasano, AOF, and AAM filed a complaint
individually and on behalf of other similarly situated
minority shareholders who were cashed out in the merger.
(Compl.). They asserted that the consideration paid by the
Controlling Group for the Dangdang ADS shares was
below-market and “grossly unfair” (id.
at ¶ 1); that the Special Committee failed to protect
the public shareholders' interests when they acceded to
the Controlling Group's demands (id. at ¶
2); and that the public shareholders were misled when they
were told that the Special Committee had obtained independent
legal counsel, when in fact Maples was conflicted because it
also served as Dangdang's counsel (id.).
Plaintiffs 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. at ¶ 1).
Dangdang, DHC, Kewen, SCI, and First Profit were served with
copies of the summons and complaint. (Lieberman Decl. ¶
15). At the time the instant motion was filed, none of the
individual Defendants had been personally served. Indeed, at
the time their opposition brief was filed, Plaintiffs'
counsel recited that it “ha[d] spent over five months
trying to serve these … individual defendants, but
they have refused to accept service.” (Pl. Opp. 25). In
an effort to effectuate service of process consistent with
the Hague Convention, Plaintiff's counsel had the summons
and complaint translated into Chinese and delivered to the
Chinese Ministry of Justice's International Legal
Cooperation Center for processing. (Lieberman Decl. ¶
20; see also Id. at ¶¶ 21-24
(discussing follow-up communications)). On December 20, 2017,
Plaintiffs' counsel informed the Court that service was
effectuated on four individual Defendants - Yu, Yao, Chen,
and Kan.- “in accordance with the Hague Service
Convention … by the Chinese Ministry of Justice
delivering the documents to Dangdang's legal counsel, You
Qianqian.” (Dkt. #55).
January 30, 2017, Plaintiffs Fasano, AAM, and AOF filed a
motion to be appointed Co-Lead Plaintiffs, pursuant to
Securities Exchange Act of 1934 (“Exchange Act”)
§ 21D(a)(3)(B), as amended by the Private Securities
Litigation Reform Act of 1995 (“PSLRA”) and Rule
42 of the Federal Rules of Civil Procedure. (Dkt. #22).
Plaintiffs also moved to approve their selection of Sadis
& Goldberg LLP as Lead Counsel. (Id.). In their
motion, Plaintiffs argued that Fasano, AOF, and AAM have the
largest financial interests in the outcome of the case, their
claims are typical of the claims of the class, and they would
fairly and adequately represent the interests of the class.
(Id.). On March 8, 2017, the Court issued an Order
appointing Fasano, AOF, and AAM as Co-Lead Plaintiffs in this
action and Sadis & Goldberg LLP as Lead Counsel. (Dkt.
March 15, 2017, Defendants filed the motion to dismiss for
forum non conveniens that is presently before the
Court. (Dkt. #38-45). On April 28, 2017, Plaintiffs filed
their opposition materials. (Dkt. #48-49). On May 17, 2017,
Defendants filed their reply papers. (Dkt. #52-53).
Motions to Dismiss Based on Forum Non
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 Technologies 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).
Second Circuit has established a three-part test to assess
such a motion. In the first step, the district court must
determine the “degree of deference properly accorded
the plaintiff's choice of forum.” Norex
Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146, 153
(2d Cir. 2005). Next, the district court “considers
whether the alternative forum proposed by the defendants is
adequate to adjudicate the parties' dispute.”
Id. Finally, the district court must
“balance the private and public interests implicated
in the choice of forum.” Id.
Step One: Deference to Plaintiffs' Choice of
there generally is a “strong presumption in favor of
the plaintiff's choice of forum, ” Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 255 (1981), the
degree of deference accorded “varies with the
circumstances, ” Iragorri, 274 F.3d at 71. The
Second Circuit has identified at least three instances where
the plaintiff's choice of forum merits diminished
where the plaintiff's choice of forum is “motivated
by tactical advantage” rather than “by legitimate
reasons, ” courts must give less deference.
Iragorri, 274 F.3d at 73. Accordingly, “the
greater the plaintiff's or the lawsuit's bona fide
connection to the United States and to the forum of choice
and the more it appears that considerations of convenience
favor the conduct of the lawsuit in the United States, the
more difficult it will be for the defendant to gain dismissal
for forum non conveniens.” Id. at 72
where the plaintiff is a foreign person, her choice of forum
is accorded less weight. See, e.g.,
Iragorri, 274 F.3d at 71 (finding that a
plaintiff's choice of forum is entitled to greater
deference when the plaintiff has sued in her home forum than
when a foreign plaintiff chooses the United States as a
forum). This is so because the “central purpose of any
forum non conveniens inquiry is to ensure that the
trial is convenient.” Piper Aircraft, 454 U.S.
at 256. “[W]hen a foreign plaintiff chooses a U.S.
forum, it is much less reasonable to presume that the choice
was made for convenience.” Iragorri, 274 F.3d
at 71 (citation omitted).
where a plaintiff sues in a representative capacity, her
choice of forum merits less deference. DiRienzo v. Philip
Services Corp., 294 F.3d 21, 28 (2d Cir. 2002) (noting
that representative plaintiffs' ...