18-100-cv Fasano v. Li

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term 2018

(Argued: March 12, 2019 Decided: April 12, 2019)

Docket No. 18‐100‐cv

JOE FASANO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, ALTIMEO OPTIMUM FUND, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, ALTIMEO ASSET MANAGEMENT, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,

Plaintiffs‐Appellants,

‐ against ‐

PEGGY YU YU, DANGDANG HOLDING COMPANY LIMITED, E‐COMMERCE CHINA DANGDANG, INC., KEWEN HOLDING COMPANY LIMITED, SCIENCE & CULTURE INTERNATIONAL LIMITED, FIRST PROFIT MANAGEMENT LIMITED, DANQIAN YAO, LIJUN CHEN, MIN KAN,

Defendants‐Appellees,

GUOQING LI, RUBY RONG LU, KE ZHANG, XIAOLONG LI,

Defendants.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK Before:

WESLEY, CHIN, and SULLIVAN, Circuit Judges.

Appeal from a judgment of the United States District Court for the

Southern District of New York (Failla, J.), dismissing plaintiffs‐appellantsʹ

complaint on the ground of forum non conveniens. We conclude that the district

court abused its discretion by failing to consider the forum selection clause

contained in the relevant documents and its impact on the forum non conveniens

analysis.

VACATED and REMANDED.

SAMUEL J. LIEBERMAN (Ben Hutman, on the brief), Sadis & Goldberg, LLP, New York, New York, for Plaintiffs‐Appellants.

ABBY F. RUDZIN (Asher L. Rivner and Seth Aronson, on the brief), O’Melveny & Myers LLP, New York, New York, and Los Angeles, California, for Defendants‐Appellees.

PER CURIAM:

Plaintiffs‐appellants Altimeo Asset Management, Altimeo Optimum

Fund, and Joe Fasano (collectively, ʺPlaintiffsʺ) appeal from a judgment of the

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district court entered January 2, 2018, dismissing their complaint against

defendants‐appellees E‐Commerce China Dangdang, Inc. (ʺDangdangʺ) and its

directors, executives, controlling shareholders, and affiliated companies

(collectively, ʺDefendantsʺ). Suing on behalf of a putative class, Plaintiffs

asserted claims for damages under federal and state law in connection with a

ʺgoing private mergerʺ by which certain controlling defendants purchased

American Depositary Shares (ʺADSsʺ) from Dangdangʹs minority shareholders.

Plaintiffs contend that the consideration paid by Defendants was below market

and grossly unfair. By opinion and order entered December 29, 2017, the district

court granted Defendantsʹ motion to dismiss on the ground of forum non

conveniens, holding that the Cayman Islands provided an adequate alternative

forum. We assume the partiesʹ familiarity with the underlying facts, procedural

history, and issues on appeal.

We review dismissals of a complaint for forum non conveniens for

abuse of discretion. Martinez v. Bloomberg LP,

(2d Cir. 2014);

Norex Petroleum Ltd. v. Access Indus., Inc.,

, 153 (2d Cir. 2005). Factual

findings are reviewed for clear error and legal conclusions de novo. See Martinez,

; Asoma Corp. v. SK Shipping Co.,

(2d Cir. 2006).

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ʺA district court abuses its discretion in dismissing on the ground of forum non

conveniens when its decision ʹ(1) rests either on an error of law or on a clearly

erroneous finding of fact, or (2) cannot be located within the range of permissible

decisions, or (3) fails to consider all the relevant factors or unreasonably balances

those factors.ʹʺ Aguas Lenders Recovery Grp. v. Suez, S.A.,

, 699‐700 (2d

Cir. 2009) (quoting Pollux Holding Ltd. v. Chase Manhattan Bank,

(2d Cir. 2003)).

In general, we have recognized that when a defendant moves to

dismiss on the ground of forum non conveniens, courts assess: (1) the deference to

be accorded the plaintiffʹs choice of forum; (2) the adequacy of the alternative

forum proposed by the defendants; and (3) the balance between the private and

public interests implicated in the choice of forum. Norex Petroleum, 416 F.3d at

153. Where the parties have contractually selected a forum, however, the forum

selection clause ʺsubstantial[ly] modifi[es]ʺ the forum non conveniens doctrine and

the ʺusual tilt in favor of the plaintiffʹs choice of forum gives way to a

presumption in favor of the contractually selected forum.ʺ Martinez,

(citing M/S Bremen v. Zapata Off‐Shore Co.,

(1972)).

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Nevertheless, the presumption of enforceability is not automatic.

Instead, a district court must consider three factors in determining whether the

presumption of enforceability applies to a forum selection clause: whether (1) the

clause was reasonably communicated to the party resisting its enforcement; (2)

the clause is mandatory or permissive; and (3) the claims and parties to the

dispute are subject to the clause. Magi, 714 F.3d at 721 (citing Phillips v. Audio

Active Ltd.,

, 383‐84 (2d Cir. 2007)). If the district court concludes that

the presumption applies, it must then consider a fourth factor ‐‐ whether the

presumption of enforceability has been properly rebutted by ʺa sufficiently

strong showing that ʹenforcement would be unreasonable or unjust, or that the

clause was invalid for such reasons as fraud or overreaching.ʹʺ

(quoting

Phillips,

).

With respect to the deference afforded to Plaintiffsʹ choice of forum,

Defendants acknowledge that the receipts for the ADSs contained a mandatory

forum selection clause, which provides that certain controversies, claims, or

causes of action arising out of the ADSs ʺshall be litigated in the Federal and state

courts in the Borough of Manhattan, The City of New York.ʺ J. Appʹx 389.1 If the

1 The forum selection clause appears as part of the arbitration provisions in Dangdangʹs receipts, which provide that claims ʺrelating to or based upon the provisions of the Federal securities law of the 5

presumption of enforceability applies, Plaintiffsʹ choice of forum controls unless

Defendants can show that the forum selection clause is unreasonable, unjust,

fraudulent, or an overreach. Cf. Magi, 714 F.3d at 720‐21 (ʺ[F]orum selection

clauses are prima facie valid and should be enforced unless enforcement is shown

by the resisting party to be unreasonable under the circumstances . . . or unless

the forum selection clause ʹwas invalid for such reasons as fraud or

overreachingʹʺ (citation omitted)); Carey v. Bayerische Hypo‐Und Vereinsbank AG,

(2d Cir. 2004) (holding that the forum non conveniens doctrine is

a ʺdiscretionary deviceʺ that permits dismissal ʺwhen an alternative forum has

jurisdiction to hear [a] case, and when trial in the chosen forum would establish

. . . oppressiveness and vexation to a defendant . . . out of all proportion to

plaintiffʹs convenience.ʺ (internal quotation marks omitted)). However, the

district court did not address or even mention the forum selection clause and did

not consider whether enforcement of the clause would be unreasonable or

unjust. Instead, it engaged in the traditional forum non conveniens analysis,

United States or the rules and regulations promulgated thereunder shall be submitted to arbitration . . . but only if, so elected by the claimant.ʺ

We do not address the arbitration clause at this time because none of the parties have moved to arbitrate yet. 6

without any consideration of the forum selection clause. This was an abuse of

discretion. See Aguas Lenders,

.

On appeal, Defendants make two arguments with respect to the

forum selection clause. First, they claim that Plaintiffs waived their reliance on

the forum selection clause by failing to raise the issue in the district court.

Second, they argue that even if Plaintiffs did not waive their reliance on the

forum selection clause, the scope of the clause does not cover the key defendants

and claims here. The first argument fails, and the second argument is better

considered by the district court in the first instance.

With respect to the argument that Plaintiffs failed to raise the forum

selection clause below, the record is clearly to the contrary. In their

memorandum in opposition to the motion to dismiss below, Plaintiffs expressly

stated:

Such a clause ʺamounts to a mandatory forum selection clause at least where the plaintiff chooses the designated forumʺ for purposes of forum non conveniens. Aguas Lenders Recovery Grp. v. Suez, S.A.,

(2d Cir. 2009). It is an abuse discretion for a district court not to consider such a forum clause on a forum non conveniens motion.

. In Aguas Lenders, the Court held that such a forum selection clause was not just a factor in favor of a New York forum, but could be binding on a ʺsuccessor in interestʺ or a ʺthird‐party

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beneficiaryʺ of such a clause. (Id.) Aguas Lenders should govern here.

Pls.ʹ Opp. to Mot. to Dismiss, D. Ct. Dkt. No. 48 at 14. Accordingly, it cannot be

seriously argued that Plaintiffs waived their reliance on the forum selection

clause. See United States v. Harrell,

(2d Cir. 2001) (holding that

an issue is reviewable ʺwhen it fairly appears in the record as having been raised

or decidedʺ). And, as discussed above, a forum selection clause modifies, and

therefore should be a part of, the forum non conveniens analysis. See Starkey, 796

F.3d at 196; Martinez,

. Consequently, the issue was preserved for

appellate review.

Second, as to the scope and enforceability of the forum selection

clause, remand to the district court is appropriate. See United States v. Gomez,

(2d Cir. 2017) (ʺIn general, a federal appellate court does not consider

an issue not passed upon below.ʺ (internal quotation marks omitted)). As part of

the presumption of enforceability analysis, courts must consider whether ʺthe

claims and parties involved in the suit are subject to the forum selection clause.ʺ

Phillips, 494 F.3d at 383‐84. In certain circumstances, the presumption of

enforceability may apply to non‐signatories. See Aguas Lenders,

.

Thus, on remand, the district court must consider whether the presumption of

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enforceability applies to the forum selection clause; whether the presumption of

enforceability covers the non‐signatories here; and if it applies, whether the

presumption of enforceability is or has been rebutted as unreasonable, unjust, or

the product of fraud or overreaching.

* * *

We conclude that the district court abused its discretion in not

considering the forum selection clause and its impact, if any, on the forum non

conveniens analysis. Accordingly, the judgment of the district court is

VACATED, and the case is REMANDED for further proceedings consistent

with this decision.

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