Joe Fasano, Altimeo Optimum Fund, Altimeo Asset Management, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants v. Guoqing Li, Peggy Yu Yu, Dangdang Holding Company, Ltd., E-Commerce China Dangdang Inc., Kewen Holding Co. Ltd., Science & Culture Ltd., First Profit Management, Ltd., Danqian Yao, Lijun Chen, and Min Kan, Defendants-Appellees Ruby Rong Lu, Ke Zhang, and Xiaolong Li, Defendants*
Appeal from an August 2020 judgment of the United States District Court for the Southern District of New York, Katherine Polk Failla, Judge, dismissing, on the ground of forum non conveniens, plaintiffs’ amended complaint alleging negligent misrepresentation, breach of fiduciary duty, and violations of §§10(b), 13(e), and 20(a) of the Securities Exchange Act of 1934, and rules promulgated thereunder, in connection with a 2016 “going-private” merger involving defendant E-Commerce China Dangdang Inc. (“Dangdang”) and the purchase by Dangdang’s controlling shareholders of its outstanding publicly-traded shares, listed as American Depositary Shares (“ADSs”) on the New York Stock Exchange. The present dismissal follows proceedings on remand from this Court, which vacated a 2017 forum-non-conveniens dismissal of the original complaint, for reconsideration in light of a forum selection clause governing Dangdang ADSs and calling for securities law claims to be litigated in a Manhattan, New York, court, see Fasano v. Yu, 921 F.3d 333 (2d Cir. 2019). On remand, the district court, noting that the newly filed amended complaint alleged essentially the same facts as the original complaint but added two federal securities claims to which it sought to link the original common-law claims, found the forum selection clause valid and enforceable against only five of the 13 defendants, and applicable to only a narrow subset of plaintiffs’ claims, to wit, their federal securities claims. The court again dismissed the action on forum non conveniens grounds, concluding that a forum selection clause that is applicable to so few claims and defendants did not warrant retention of an action that is almost entirely between foreign parties and that arose from a merger executed in a foreign jurisdiction. The court denied as moot an alternative motion by defendants pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the amended complaint for failure to state a claim. See Fasano v. Li, 482 F.Supp.3d 158 (S.D.N.Y. 2020). On appeal, plaintiffs argue principally that the district court erred in concluding that the forum selection clause was not applicable to all of the defendants and to all of plaintiffs’ claims and in according unwarranted weight to public-interest factors pointing toward dismissal. They also urge, if the case is reinstated, that we rule that defendants had waived their right to move for a Rule 12(b)(6) dismissal of the amended complaint. We conclude that the district court principally misinterpreted the scope of the forum selection clause, thereby undercounting the number of defendants covered by that clause; and that the court attributed undue weight to a Cayman Islands interest in deciding plaintiffs’ claims, given that the controlling contract requires all common-law claims to be submitted to arbitration in New York, and given that the only claims that could be adjudicated in the Cayman Islands would be United States federal securities claims as to which the law is unsettled. We reject plaintiffs’ contention that defendants’ right to seek dismissal of the amended complaint for failure to state a claim has been waived; we vacate the judgment and remand for consideration of defendants’ Rule 12(b)(6) motion to dismiss. Vacated and remanded. AMALYA KEARSE, C.J. Plaintiffs Joe Fasano, Altimeo Optimum Fund, and Altimeo Asset Management, suing individually and on behalf of others similarly situated, appeal from an August 2020 judgment of the United States District Court for the Southern District of New York, Katherine Polk Failla, Judge, dismissing, on the ground of forum non conveniens, their amended complaint against defendants E-Commerce China Dangdang Inc. (“Dangdang”), its controlling shareholders, and others, alleging negligent misrepresentation, breach of fiduciary duty, and violations of §§10(b), 13(e), and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and rules promulgated thereunder, in connection with Dangdang’s 2016 “going-private” merger and the purchase by its controlling shareholders of its outstanding publicly-traded shares, listed as American Depositary Shares (or “ADSs”) on the New York Stock Exchange (or “NYSE”). The present dismissal follows proceedings on remand from this Court, which vacated a 2017 forum-non-conveniens dismissal of the original complaint, for reconsideration in light of a forum selection clause governing Dangdang ADSs and calling for United States securities law claims to be litigated in a Manhattan, New York, court, see Fasano v. Yu, 921 F.3d 333 (2d Cir. 2019). On remand, the district court, noting that the newly filed amended complaint alleged essentially the same facts as the original complaint but added two federal securities claims to which it sought to link the original common-law claims, held that the forum selection clause was valid and enforceable against only five of the 13 named defendants and was applicable to only a narrow subset of plaintiffs’ claims, to wit, their federal securities claims. The court again dismissed the action for forum non conveniens, concluding that a forum selection clause that is applicable to so few claims and so few defendants did not warrant retention of an action that is almost entirely between foreign parties and that arose from a merger executed in a foreign jurisdiction. The court denied as moot an alternative motion by defendants pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the amended complaint for failure to state a claim. See Fasano v. Li, 482 F.Supp.3d 158 (S.D.N.Y. 2020). On appeal, plaintiffs argue principally that the district court erred in concluding that the forum selection clause was not applicable to all of the defendants and to all of plaintiffs’ claims, and in according unwarranted weight to public-interest factors pointing toward dismissal. They also urge us, if the case is reinstated, to rule that defendants had waived their right to move for a Rule 12(b)(6) dismissal of the amended complaint. For the reasons below, we conclude that the district court principally misinterpreted the scope of the forum selection clause, thereby undercounting the number of defendants covered by that clause; and that it attributed undue weight to a Cayman Islands interest in deciding plaintiffs’ claims, given that the controlling contract requires all common-law claims to be submitted to arbitration in New York, and that the only claims that could be adjudicated in the Cayman Islands would be United States federal securities claims as to which the law is unsettled. We thus reverse the dismissal for forum non conveniens. We reject plaintiffs’ contention that defendants’ right to seek dismissal of the amended complaint for failure to state a claim was waived for failure to so move with their original forum-non-conveniens motion. We vacate the judgment and remand for consideration of defendants’ Rule 12(b)(6) motion to dismiss. I. BACKGROUND The basic factual allegations of the original complaint and the amended complaint, which superseded the original complaint but contains essentially the same factual assertions, have been described in prior opinions of the district court and this Court, familiarity with which is assumed. See Fasano v. Li, 2017 WL 6764692, *1-*3 (S.D.N.Y Dec. 29, 2017) (“Fasano I”), vacated and remanded sub nom. Fasano v. Yu, 921 F.3d 333, 337 (2d Cir. 2019) (“Fasano II”); and Fasano v. Li, 482 F.Supp.3d 158, 162-64 (S.D.N.Y. 2020) (“Fasano III”). Briefly, the amended complaint and the affidavits submitted with respect to the forum-non-conveniens motions indicated the following. A. The Parties Dangdang is an e-commerce company incorporated in the Cayman Islands and headquartered in Beijing, China. “It is commonly known as the Amazon.com of China.” (Amended Complaint (or “A.C.”) 40). It is currently a wholly-owned subsidiary of defendant Dangdang Holding Company, Ltd. (“DHC”), a company also incorporated in the Cayman Islands and headquartered in Beijing. Dangdang was founded in 2000 by defendant Guoqing Li (“Li” or “Guoqing Li”), who was its Chief Executive Officer and one of its controlling shareholders, and his wife, defendant Peggy Yu Yu (“Yu”), who was a shareholder and Dangdang’s Executive Chairwoman. The other individual defendants include Danqian Yao (“Yao”), Lijun Chen (“Chen”), and Min Kan (“Kan”), who were officers or directors of Dangdang at the time of the going-private merger. These individual served defendants are all nationals of China. Defendants Kewen Holding Co. Ltd. (“Kewen”) and Science & Culture Ltd. (“S&C”) are limited companies incorporated in the British Virgin Islands; they are principally investment holding vehicles controlled by Li. Li is the sole owner of Kewen and a 60 percent owner of S&C. Defendant First Profit Management, Ltd. (“First Profit”), incorporated in the British Virgin Islands, is principally an investment holding vehicle owned by Yao. The above five individuals, along with Dangdang’s parent company DHC and the three British Virgin Island entities, are alleged to have been Dangdang’s “Controlling Group” (see A.C.
