Preview
FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019
NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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MARK CONVERY, Individually and on Behalf : Index No. 656021/2019
of All Others Similarly Situated, :
: Commercial Division
Plaintiff,
:
v. :
: Honorable Andrea Masley
JUMIA TECHNOLOGIES AG, JEREMY
HODARA, SACHA POIGNONNEC, ANTOINE : Part 48
MAILLET-MEZERAY, DONALD J. PUGLISI, :
: Motion Sequence No. 001
GILLES BOGAERT, ANDRE T. IGUODALA,
BLAISE JUDJA-SATO, JONATHAN D. KLEIN, :
ANGELA KAYA MWANZA, ALIOUNE :
ORAL ARGUMENT REQUESTED
NDIAYE, MATTHEW ODGERS, JOHN H. :
RITTENHOUSE, MORGAN STANLEY & CO. :
LLC, CITIGROUP GLOBAL MARKETS INC., :
BERENBERG CAPITAL MARKETS, LLC, :
RBC CAPITAL MARKETS, LLC, STIFEL, :
NICOLAUS & COMPANY, INCORPORATED, :
RAYMOND JAMES & ASSOCIATES, INC., :
WILLIAM BLAIR & COMPANY, L.L.C., and :
ERNST & YOUNG, SOCIÉTÉ ANONYME, :
:
Defendants. :
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REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT
OF DEFENDANTS’ MOTION TO STAY ALL PROCEEDINGS
PENDING ADJUDICATION OF PARALLEL FEDERAL ACTION
David M.J. Rein Jonathan Rosenberg
Julia A. Malkina William J. Sushon
SULLIVAN & CROMWELL LLP O’MELVENY & MYERS LLP
125 Broad Street 7 Times Square
New York, New York 10004 New York, New York 10036
Telephone: (212) 558-4000 Telephone: (212) 326-2000
Facsimile: (212) 558-3588 Facsimile: (212) 326-2061
reind@sullcrom.com jrosenberg@omm.com
malkinaj@sullcrom.com wsushon@omm.com
Counsel for Defendants Jumia Technologies AG, Counsel for the Underwriter Defendants
Jeremy Hodara, Sacha Poignonnec, and Antoine
Maillet-Mezeray
February 6, 2020
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT ................................................................................................. 1
ARGUMENT ................................................................................................................................. 3
I. PLAINTIFF MISAPPLIES THE STAY FACTORS, EACH OF WHICH
STRONGLY SUPPORTS A STAY OF THIS ACTION .............................................. 3
A. Plaintiff Cannot Dispute That the Federal Action Was First-Filed and Has
Progressed Further .................................................................................................. 3
B. Plaintiff Does Not Deny That the Federal Action Substantially Subsumes
the State Action ....................................................................................................... 5
C. Plaintiff Cannot Escape That a Stay Will Provide for a More Complete
Disposition Because Only the Federal Court Can Adjudicate the Exchange
Act Claims .............................................................................................................. 8
D. Plaintiff Ignores the Waste, Prejudice, and Potential Inconsistency That
Would Result from Duplicative Litigation in Two Separate Courts ...................... 9
E. Plaintiff’s Speculative Prejudice Theory Should Be Rejected ............................. 10
F. Plaintiff Cannot Avoid That the Federal Court Has Greater Familiarity
with Federal Securities Claims ............................................................................. 11
CONCLUSION ........................................................................................................................... 12
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TABLE OF AUTHORITIES
Page(s)
Cases
2005 Tomchin Family Charitable Trust v. Tremont Partners, Inc.,
No. 600332/2009, 2009 WL 10635640, 2009 N.Y. Misc. LEXIS 6906
(N.Y. Sup. Ct., N.Y. Cty. 2009) .......................................................................................10, 11
Abeley v. Aeterna Zentaris, Inc.,
No. 12-cv-4711, 2013 WL 2399869 (S.D.N.Y. May 23, 2019) ..............................................11
Asher v. Abbott Laboratories,
763 N.Y.S.2d 555 (1st Dep’t 2003) .......................................................................................6, 9
Barron v. Bluhdorn,
414 N.Y.S.2d 15 (1st Dep’t 1979) .............................................................................................9
Belopolsky v. Renew Data Corp.,
41 A.D.3d 322 (1st Dep’t 2007) ................................................................................................6
Burrowes v. Combs,
No. 104225/2004, 2005 WL 5643840
(N.Y. Sup. Ct., N.Y. Cty. Feb. 18, 2005) ................................................................................10
City of Edinburgh Council v. Vodafone Group Public Co.,
No. 07-cv-9921, 2008 WL 5062669 (S.D.N.Y. Nov. 24, 2008)..............................................11
City of Omaha v. CBS Corp.,
No. 08-cv-10816, 2011 WL 2119734 (S.D.N.Y. May 24, 2011) ............................................11
City of Sterling Heights Police & Fire Retirement Systems v.
Vodafone Group Public Ltd.,
655 F. Supp. 2d 262 (S.D.N.Y. 2009)......................................................................................11
Gordon v. Gridsum Holding, Inc.,
No. 653342/2018, 2019 WL 1593484
(N.Y. Sup. Ct., N.Y. Cty. Apr. 10, 2019) ............................................................................5, 11
Hope’s Windows v. Albro Metal Products Corp.,
93 A.D.2d 711 (1st Dep’t 1983) ...............................................................................................6
In re Bank of America Corp. Securities, Derivative, & ERISA Litigation,
757 F. Supp. 2d 260 (S.D.N.Y. 2010) .....................................................................................11
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In re Dentsply Sirona, Inc. Shareholders Litigation,
No. 155393/2018, 2019 WL 3526142, 2019 N.Y. Misc. LEXIS 4260
(N.Y. Sup. Ct., N.Y. Cty. Aug. 2, 2019)................................................................................6, 7
In re GreenSky, Inc. Securities Litigation,
No. 655626/2018, 2019 WL 6310525, 2019 N.Y. Misc. LEXIS 6315
(N.Y. Sup. Ct., N.Y. Cty. Nov. 25, 2019)..............................................................................3, 4
In re Morgan Stanley Information Fund Securities Litigation,
592 F.3d 347 (2d Cir. 2010).......................................................................................................7
In re NIO Inc. Securities Litigation,
slip op., No. 653422/2019
(N.Y. Sup. Ct., N.Y. Cty. Dec. 13, 2019) (Br. Ex. 6) (NYSCEF 28) ....................................5, 9
In re NYSE Euronext/ICE Litigation,
39 Misc. 3d 619 (N.Y. Sup. Ct., N.Y. Cty. 2013) .....................................................................5
In re PPDAI Group Securities Litigation,
No. 654482/2018, 2019 WL 2751278 (Table), 2019 N.Y. Misc. LEXIS 3481
(N.Y. Sup. Ct., N.Y. Cty. July 1, 2019) .............................................................................4, 6, 7
In re Qudian Securities Litigation,
No. 651804/2018, 2018 WL 6067209, 2018 N.Y. Misc. LEXIS 5447
(N.Y. Sup. Ct., N.Y. Cty. Nov. 14, 2018)..................................................................................5
In re Sanofi Securities Litigation,
155 F. Supp. 3d 386 (S.D.N.Y. 2016)......................................................................................11
In re SunEdison Securities Litigation,
300 F. Supp. 3d 444 (S.D.N.Y. 2018)......................................................................................11
In re SunEdison Securities Litigation,
329 F.R.D. 124 (S.D.N.Y. 2019) ...............................................................................................3
Mahar v. General Electric Co.,
112 N.Y.S.3d 879 (N.Y. Sup. Ct., N.Y. Cty. 2019)......................................................... passim
Pennsylvania Avenue Funds v. Inyx, Inc.,
No. 08-cv-6857, 2010 WL 743562 (S.D.N.Y. Mar. 1, 2010) ..................................................11
PK Restaurant, LLC v. Lifshutz,
138 A.D.3d 434 (1st Dep’t 2016) ......................................................................................1, 3, 6
Reaves v. Kessler,
No. 654485/2015, 2017 WL 2482948, 2017 N.Y. Misc. LEXIS 2257
(N.Y. Sup. Ct., N.Y. Cty. June 8, 2017) .......................................................................... passim
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Shah v. RBC Capital Markets LLC,
115 A.D.3d 444 (1st Dep’t 2014) ..............................................................................................3
Syncora Guarantee Inc. v. JP Morgan Securities, LLC,
110 A.D.3d 87 (1st Dep’t 2016) ....................................................................................3, 4, 5, 6
Uptown Healthcare Management, Inc. v Rivkin Radler, LLP,
985 N.Y.S.2d 17 (1st Dep’t 2014) .......................................................................................6, 11
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PRELIMINARY STATEMENT
Consistent with the practice of every New York court to have considered a similar
request to stay a Securities Act case pending adjudication of a first-filed federal case, this action
(“State Action”) should be stayed. The State Action was filed more than five months after In re
Jumia Technologies AG Securities Litigation, No. 19-cv-4397 (S.D.N.Y.) (Castel, J.) (“Federal
Action”), and Plaintiff has not identified a single case in which a New York court in comparable
circumstances did not stay the later-filed state action.
Just last week—after Defendants filed their motion to stay—Plaintiff filed an
amended complaint (“State Amended Complaint” (NYSCEF 32)) adding parties and claims with
inconsequential variations from the Federal Action, in an unavailing calculated effort to undermine
Defendants’ stay motion. The newly-manufactured differences on which Plaintiff relies heavily
in his Opposition are not material to the question before the Court. New York courts routinely
grant stays where there is merely “‘a substantial identity of parties,’ and ‘both actions arose out of
the same subject matter or series of alleged wrongs.’” Mahar v. Gen. Elec. Co., No. 653648/2018,
112 N.Y.S.3d 879, 887 (N.Y. Sup. Ct., N.Y. Cty. 2019) (quoting PK Rest., LLC v. Lifshutz, 138
A.D.3d 434, 436 (1st Dep’t 2016)) (emphasis added). In other words, it is irrelevant that there is
not complete identity between the parties and claims because, as Plaintiff does not dispute, there
is more than substantial overlap between the Federal and State Actions. Both actions assert claims
under the Securities Act of 1933 (“Securities Act”), and both seek damages on behalf of the same
putative shareholder class against Jumia Technologies AG (“Jumia”), its Management and
Supervisory Boards, and the underwriters of its initial public offering (“IPO”) based on the same
core allegations that statements in the IPO offering materials concerning certain order-related
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metrics were wrong.1 (See Br. 2-5 (NYSCEF 21).) As before, only the Federal Action asserts
securities fraud claims based on those allegations under the Securities Exchange Act of 1934
(“Exchange Act”)—claims which may only be heard in the federal court.
Thus, even considering the State Amended Complaint, all of the stay factors
considered by Commercial Division courts when deciding stay motions continue to weigh strongly
in support of a stay here. First, the Federal Action was the first-filed action, regardless of when
later amendments added different claims or parties to each action. Second, the Federal Action
substantially subsumes the State Action, irrespective of cosmetic differences in parties and claims.
Third, a more complete disposition of all claims arising from Jumia’s IPO can be obtained in
federal court because that is the only court with jurisdiction over the Exchange Act claims. Fourth,
a stay will avoid the significant waste of judicial and party resources necessitated by litigating the
same issues in two courts, the risk of inconsistent rulings, and prejudice to Defendants. Fifth,
Plaintiff cannot show any prejudice that is not purely speculative. Sixth, although this Court is
perfectly capable of adjudicating the issues in the State Action, the federal court has greater
familiarity with federal securities claims.
1
Jumia’s Management Board is composed of Defendants Jeremy Hodara, Sacha
Poignonnec, and Antoine Maillet-Mezeray (“Management Board Defendants”). Jumia’s
Supervisory Board is composed of Defendants Gilles Bogaert, Andre T. Iguodala, Blaise Judja-
Sato, Jonathan D. Klein, Angela Kaya Mwanza, Alioune Ndiaye, Matthew Odgers, and John H.
Rittenhouse (“Supervisory Board Defendants”). Defendants Morgan Stanley & Co. LLC,
Citigroup Global Markets Inc., Berenberg Capital Markets, LLC, RBC Capital Markets, LLC,
Stifel, Nicolaus & Company, Incorporated, Raymond James & Associates, Inc., and William Blair
& Company, L.L.C. underwrote Jumia’s IPO (“Underwriter Defendants”).
The undersigned Defendants seek a stay of the State Action against all parties, including the
defendants newly named in the State Amended Complaint, as to whom issues of service and
representation are currently being resolved.
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ARGUMENT
I. PLAINTIFF MISAPPLIES THE STAY FACTORS, EACH OF WHICH STRONGLY
SUPPORTS A STAY OF THIS ACTION.
A. Plaintiff Cannot Dispute That the Federal Action Was First-Filed and Has
Progressed Further.
Plaintiff does not challenge that “New York courts generally follow the [ ] ‘first[-
]in-time’ rule.” Gen. Elec., 112 N.Y.S.3d at 887-88. Nor does Plaintiff dispute that every New
York court asked to stay a state Securities Act action in favor of a first-filed federal action has
granted a stay. (See Br. 6 (NYSCEF 21).) Rather, Plaintiff tries to characterize the Federal Action
as not first-filed because it “did not first assert Securities Act claims.” (Opp. 7 (NYSCEF 34).)
Plaintiff cites no authority for that novel proposition. And there is none. Indeed, New York courts
have held the opposite: in determining whether an action is first-filed, “it is inconsequential that
different legal theories or claims are set forth in the two actions.” Gen. Elec., 112 N.Y.S.3d at 888
(quoting Shah v. RBC Capital Mkts. LLC, 115 A.D.3d 444, 444-45 (1st Dep’t 2014)); see also,
e.g., Syncora Guar. Inc. v. JP Morgan Sec., LLC, 110 A.D.3d 87, 96 (1st Dep’t 2016) (reversing
denial of dismissal where “federal action consisted of breach of contract claims while [state] action
consists of fraudulent inducement and tortious interference claims” because “[i]t is not necessary
that the ‘precise legal theories presented in the first action also be presented in the second action’”);
PK Rest., 138 A.D.3d at 436 (affirming dismissal where later-filed action included additional
claims).2
2
Plaintiff purports to quote In re SunEdison Securities Litigation, 329 F.R.D. 124, 133
(S.D.N.Y. 2019) (Opp. 7 (NYSCEF 34)), for the proposition that “the Federal Action is not the
‘first filed’ because the Federal Action did not first assert Securities Act claims, which are ‘distinct
claims’ from Exchange Act claims that ‘are governed by different legal standards.’” But the term
“first filed” that Plaintiff places in quotation marks does not appear in SunEdison. In fact, that
case did not discuss the first-filed rule or even consider a stay motion and so is wholly irrelevant.
Plaintiff also invokes In re Greensky, Inc., Securities Litigation to argue that “‘if a plaintiff chooses
to bring a [Securities] Act suit in state court, the defendant generally cannot change the forum.’”
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Plaintiff’s exact argument was rejected only a few months ago by a Commercial
Division Court. In General Electric, a federal action asserting only Exchange Act claims “was
filed over eight months before” a state action asserting only Securities Act claims. Gen. Elec., 112
N.Y.S.3d at 882, 887. Justice Borrok concluded that the federal action was “earlier-filed” and
stayed the state action in favor of the earlier-filed federal action, despite “the fact that [the state]
action involve[d] claims under the 1933 [Securities] Act and the Federal Action involve[d] claims
under the 1934 [Exchange] Act.” Id. at 887-88. The court explained that the “hallmark for a stay
under First Department law” is not whether both actions assert identical claims (which is
“inconsequential”), but instead whether “both actions seek to ‘recover for the same alleged harm
based on the same underlying events.’” Id. (quoting Syncora, 110 A.D.3d at 96). That standard
is readily met here. (See Br. 10-12 (NYSCEF 21); infra pp. 5-8.) Thus, because the Federal Action
was filed more than five months before the State Action, the Federal Action is unquestionably the
first-filed action regardless of when it added Securities Act claims.
Implicitly conceding that the Federal Action was first-filed, Plaintiff also argues
that the Court should not apply the first-filed rule “‘mechanically irrespective of other
considerations.’” (Opp. 8 (NYSCEF 34).) Although the first-filed rule is not absolute, “being first
to file is still ‘significant,’” In re PPDAI Grp. Sec. Litig., No. 654482/2018, 2019 WL 2751278
(Table), at *5, 2019 N.Y. Misc. LEXIS 3481, at *11 (N.Y. Sup. Ct., N.Y. Cty. July 1, 2019);
generally, “it is a violation of the rules of comity to interfere” with “the court which has first taken
jurisdiction,” Syncora, 110 A.D.3d at 95. Here, “[n]o special circumstances exist to support
(Opp. 8 (NYSCEF 34) (quoting Greensky, 2019 WL 6310525, at *2, 2019 N.Y. Misc. LEXIS
6315, at *2 (N.Y. Sup. Ct., N.Y. Cty. Nov. 25, 2019).) But Plaintiff omits that in Greensky, unlike
here, the state action was filed first. Greensky, 2019 WL 6310525, at *1, 2019 N.Y. Misc. LEXIS
6315, at *1. Because the Federal Action here was the “first choice of forum,” Greensky supports
a stay of the State Action. Id.
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departure from the usual first-filed rule.” In re Qudian Sec. Litig., No. 651804/2018, 2018 WL
6067209, at *1, 2018 N.Y. Misc. LEXIS 5447, at *2 (N.Y. Sup. Ct., N.Y. Cty. Nov. 14, 2018)
(“The federal case is neither ‘vexatious, oppressive or instituted to obtain some unjust or
inequitable advantage’ nor forum shopping.”).3 In fact, Plaintiff does not even try to identify any
special circumstance, which is unsurprising given that every other stay factor also supports a stay
of the State Action.4
B. Plaintiff Does Not Deny That the Federal Action Substantially Subsumes the
State Action.
Instead of challenging the Federal Action’s significant overlap with the State
Action, Plaintiff points to the marginal differences he recently manufactured in the State Amended
Complaint, arguing that there is not a “‘complete identity of parties, causes of action and judgment
sought.’” (Opp. 12 (NYSCEF 34).) Plaintiff relies on the outdated “complete identity” standard
3
To try to avoid operation of the first-filed rule, Plaintiff also argues that “many courts hold
that the first-filed rule is a nullity where . . . the competing cases were filed reasonably closely in
time.” (Opp. 8 (NYSCEF 34) (citing In re NYSE Euronext/ICE Litig., 39 Misc. 3d 619, 623-24
(N.Y. Sup. Ct., N.Y. Cty. 2013).) But in the sole case Plaintiff cites, the first-filed action was
“commenced one day earlier,” and the court reasoned that in such circumstances “enforcing a strict
‘first to file’ rule is tantamount to sanctioning ‘procedural gamesmanship.’” 39 Misc. 3d at 624.
Here, there is no such concern because the Federal Action was filed more than five months before
the State Action. Indeed, New York courts have not hesitated to stay state Securities Act cases
that were brought more quickly following a first-filed federal action. See In re NIO Inc. Sec. Litig.,
No. 653422/2019, slip op., NYSCEF 86 (N.Y. Sup. Ct., N.Y. Cty. Dec. 13, 2019) (Br. Ex. 6)
(NYSCEF 28) (staying state action filed three months after federal action); Gordon v. Gridsum
Holding, Inc., No. 653342/2018, 2019 WL 1593484, at *1 (N.Y. Sup. Ct., N.Y. Cty. Apr. 10, 2019)
(same).
4
Plaintiff tries to distinguish this case from the cases uniformly staying state Securities Act
actions in favor of first-filed federal actions based on other factors considered by the courts in
those cases. (Opp. 8-10 (NYSCEF 34).) To be sure, the first-filed rule was not the only factor
evaluated in each case; that is inherent in the multi-factor analysis New York courts employ to
determine whether to grant a stay. But Plaintiff cannot dispute that “whether the federal action
was commenced first” was an important consideration in each case. Reaves v. Kessler, No.
654485/2015, 2017 WL 2482948, at *3 n.2, 2017 N.Y. Misc. LEXIS 2257, at *7 n.2 (N.Y. Sup.
Ct., N.Y. Cty. June 8, 2017); see also Br. 6-8 (NYSCEF 21).
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that was articulated in cases from nearly forty years ago, such as Hope’s Windows v. Albro Metal
Products Corp., 93 A.D.2d 711 (1st Dep’t 1983). In recent years, however, the First Department
has repeatedly “held that a stay may be warranted when there is substantial identity between state
and federal actions.” Asher v. Abbott Labs., 763 N.Y.S.2d 555, 556 (1st Dep’t 2003); see also,
e.g., Gen. Elec., 112 N.Y.S.3d at 887 (“Contrary to the plaintiffs’ argument in opposition to the
stay, the First Department has held that the two actions need not be identical.”); Syncora, 110
A.D.3d at 96 (“When considering whether to dismiss a later filed action . . . substantial, not
complete, identity of parties is all that is required.”); Uptown Healthcare Mgmt., Inc. v. Rivkin
Radler LLP, 985 N.Y.S.2d 17, 18 (1st Dep’t 2014) (staying action where “there [wa]s not complete
identity of parties and claims” because there “[wa]s a common question of law and fact”);
Belopolsky v. Renew Data Corp., 41 A.D.3d 322, 322 (1st Dep’t 2007) (same). Thus, “a stay is
warranted where there is ‘a substantial identity of parties,’ and ‘both actions arose out of the same
subject matter or series of alleged wrongs.’” Gen. Elec., 112 N.Y.S.3d at 887 (quoting PK Rest.,
138 A.D.3d at 436) (emphasis added). The “substantial identity” standard makes perfect sense
because otherwise plaintiffs could always avoid a stay simply by making minor amendments to
their complaint, as Plaintiff tried to do here.5
5
PPDAI and In re Dentsply Sirona, Inc. do not save Plaintiff’s argument. Importantly,
unlike here, the federal actions in PPDAI and Dentsply were not first filed. PPDAI, 2019 WL
2751278 (Table), at *3, 2019 N.Y. Misc. LEXIS 3481, at *7; In re Dentsply Sirona, Inc. S’holders
Litig., No. 155393/2018, 2019 WL 3526142, at *3-4, 2019 N.Y. Misc. LEXIS 4260, at *8-9 (N.Y.
Sup. Ct., N.Y. Cty. Aug. 2, 2019). In both cases, Justice Scarpulla noted that a number of
defendants in the first-filed state actions were not included in the federal actions—four of fifteen
in PPDAI and six of nineteen in Dentsply (a much higher proportion than here)—and, without
citing any authority, concluded that this “weighs in favor of proceeding” in the state court. 2019
WL 2751278 (Table), at *4, 2019 N.Y. Misc. LEXIS 3481, at *9; 2019 WL 3526142, at *6, 2019
N.Y. Misc. LEXIS 4260, at *11-12. In reaching that determination, Justice Scarpulla did not apply
the “substantial identity” standard required under First Department law. In any event, differences
in the defendants was only one of multiple factors that Justice Scarpulla considered.
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The State Amended Complaint does not alter the substantial overlap between the
Federal and State Actions. Plaintiff’s contrived differences are merely: (i) the addition of Donald
Puglisi and Ernst & Young, Société Anonyme to the nineteen overlapping defendants (SAC ¶¶ 35,
60 (NYSCEF 32)); (ii) the addition of a Securities Act Section 12 claim that has almost the same
elements as the overlapping Section 11 claim and is based on the same theories (id. ¶¶ 122-32)6;
(iii) the addition of further alleged misstatements concerning similar subject matter (id. ¶¶ 62-83);
and (iv) the removal of all references to Citron Research’s “reports.”
The State and Federal Actions continue to include nearly all of the same claims,
parties, issues, and relief, based on substantially the same allegations, but the Federal Action also
asserts claims under the Exchange Act. Both actions: (i) assert Securities Act Section 11 and 15
claims; (ii) against Jumia, the Management Board Defendants, the Supervisory Board Defendants,
and the Underwriter Defendants; (iii) “on behalf of purchasers of the ADSs of Jumia pursuant
and/or traceable to the Registration Statement . . . issued in connection with” Jumia’s IPO; (iv)
based on allegations that Jumia’s Registration Statement misstated order-related financial metrics;
and (iv) seeking damages for the putative class, reasonable costs and expenses, and other equitable
relief. (Br. 2-5 (NYSCEF 21).) Thus, there continues to be “‘a substantial identity of parties,’”
and both actions continue to “‘ar[i]se out of the same subject matter or series of alleged wrongs.’”
Gen. Elec., 112 N.Y.S.3d at 887.7
6
See, e.g., In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 359 (2d Cir. 2010)
(“Claims under sections 11 and 12(a)(2) are therefore Securities Act siblings with roughly parallel
elements.”).
7
Plaintiff also argues that, because the Securities Act claims in the Federal Action rely on
Citron Research’s “reports,” they “‘sound in fraud’” and “will likely be subject to a heightened
pleading standard.” (Opp. 11-12 (NYSCEF 34).) Conversely, according to Plaintiff, “fraud is not
alleged” in the State Amended Complaint (id. at 13), because Plaintiff deleted references to Citron
Research’s “reports” on which the original complaint “relie[d]” (id. at 12-13; State Compl. ¶¶ 35,
37 (NYSCEF 1)), and “notice pleading” thus “applies” (Opp. 13 (NYSCEF 34)). That is improper
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C. Plaintiff Cannot Escape That a Stay Will Provide for a More Complete
Disposition Because Only the Federal Court Can Adjudicate the Exchange
Act Claims.
Plaintiff concedes that New York courts consider where “a more complete
disposition of issues may be obtained.” Reaves, 2017 WL 2482948, at *3 n.2, *4, 2017 N.Y. Misc.
LEXIS 2257, at *7 n.2, *9-10. But Plaintiff tries to narrow the inquiry by arguing that the “State
Action offers a more complete disposition of the Securities Act claims” because the State Amended
Complaint adds two defendants to the nineteen overlapping defendants. (Opp. 11-12 (NYSCEF
34) (emphasis added).) That entirely ignores the Exchange Act claims brought in the Federal
Action, which can be adjudicated only in the federal court. (See Br. 12-13 (NYSCEF 21).)
Further, neither Plaintiff’s addition of two defendants nor any of Plaintiff’s other
manufactured changes to the State Amended Complaint moves the needle because the question is
where “a more complete disposition of issues may be obtained,” not whether a complete
disposition may be obtained in the Federal Action. Reaves, 2017 WL 2482948, at *3 n.2, *4, 2017
N.Y. Misc. LEXIS 2257, at *7 n.2, *9-10 (emphasis added).
Indeed, here too, Plaintiff’s argument already has been rejected by a Commercial
Division court. In In re NIO, slip op. (Br. Ex. 6) (NYSCEF 28), plaintiffs argued that the federal
court could not provide a more complete disposition because the federal Securities Act and
Exchange Act litigation did not include five defendants named in the state Securities Act action
and “omit[ted] two key claims”—“Section 12(a)(2) claims” and claims based on additional
allegations of “quality and design problems.” (Mem. in Opp. Mot. Stay, No. 653422/2019, at 12
speculation on the standard the federal court and this Court would use in ruling on a motion to
dismiss, see infra p. 10; but, in any event, Plaintiff’s amendments simply deleting references to
Citron Research as the source of Plaintiff’s allegations (as admitted in its prior complaint) do not
transform the pleading. Nor does Plaintiff cite a single case in which a New York court denied a
stay in favor of a first-filed federal action based on different pleading standards potentially
applying to identical claims.
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(NYSCEF 68) (N.Y. Sup. Ct., N.Y. Cty. Nov. 13, 2019) (Ex. 1) (NYSCEF 37).) Justice Ostrager
stayed the state action over plaintiffs’ argument. In re NIO, slip op. at 1-2 (Br. Ex. 6) (NYSCEF
28). The court reasoned that “[w]hile the [state] action” included defendants, “not all of whom are
presently named in the federal action,” the “federal action has the potential to resolve not just the
1933 Securities Act claims that are pending before this Court, but also 1934 [Exchange] Act
claims,” and thus could provide a more complete disposition. Id.; see also, e.g., Asher, 763
N.Y.S.2d at 556 (granting stay where state and federal complaints advanced different antitrust
claims because “the federal action will result in a more complete disposition of the basic antitrust
issues alleged”).
D. Plaintiff Ignores the Waste, Prejudice, and Potential Inconsistency That
Would Result from Duplicative Litigation in Two Separate Courts.
In arguing that Defendants will not be prejudiced in the absence of a stay (Opp. 15-
16 (NYSCEF 34)), Plaintiff ignores the common-sense consequences of maintaining duplicative
parallel actions on the courts and parties. Setting aside the “obvious” prejudice to Defendants of
litigating each issue in two different courts, Barron v. Bluhdorn, 414 N.Y.S.2d 15, 16 (1st Dep’t
1979), maintaining duplicative parallel actions “would manifestly be a waste of judicial
resources,” In re NIO, slip op. at 1 (Br. Ex. 6) (NYSCEF 28), and “risk [] inconsistent rulings” at
every stage of litigation, Reaves, 2017 WL 2482948, at *2-3 n.2, *5, 2017 N.Y. Misc. LEXIS
2257, at *6-7 n.2, *12. (See Br. 13-14 (NYSCEF 21).) Simply put, there is no doubt that
“[c]omity, orderly procedure and judicial economy are all well served by a stay of the instant action
as certain rulings in the Federal Action are likely to resolve (or at least streamline) the issues in
this case.” Gen. Elec., 112 N.Y.S.3d at 888.
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E. Plaintiff’s Speculative Prejudice Theory Should Be Rejected.
Plaintiff’s only argument for why he will be prejudiced by a stay is that “Section
11 damages may be curtailed [in the Federal Action] based on the filing date of the Federal Action.”
(Opp. 13 (NYSCEF 34) (emphasis added).) Plaintiff cites no authority suggesting that this Court
should engage in conjecture on the merits of the Federal Action as part of the stay analysis. Rather,
New York courts hold that speculation on the relative “merits of each action” is improper on a stay
motion. Reaves, 2017 WL 2482948, at *5, 2017 N.Y. Misc. LEXIS 2257, at *12 (“As there is no
case law stating this Court must weigh the relative merits of the federal action and the state action
as a factor in determining whether to impose a stay, this court will not deny a stay based upon the
substantive merits of each action.”); see also, e.g., Burrowes v. Combs, 2005 WL 5643840, at *1
(N.Y. Sup. Ct., N.Y. Cty. Feb. 18, 2005) (“Although plaintiff’s evaluation of his appeal may be
correct, the court does not find it a reason to deny defendants’ motion.”).
Moreover, if developments in the Federal Action later demonstrate actual and
substantial prejudice to Plaintiff on this issue, Plaintiff is free to return to this Court and request
that the stay be lifted. See, e.g., 2005 Tomchin Family Charitable Trust v. Tremont Partners, Inc.,
2009 WL 10635640, at *3, 2009 N.Y. Misc. LEXIS 6906, at *8-9 (N.Y. Sup. Ct., N.Y. Cty. 2009)
(staying state action despite argument that plaintiffs may be prejudiced by standing issue in federal
action because the issue “should be addressed
Preview
FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------- x MARK CONVERY, Individually and on Behalf : Index No. 656021/2019 of All Others Similarly Situated, : : Commercial Division Plaintiff, : v. : : Honorable Andrea Masley JUMIA TECHNOLOGIES AG, JEREMY HODARA, SACHA POIGNONNEC, ANTOINE : Part 48 MAILLET-MEZERAY, DONALD J. PUGLISI, : : Motion Sequence No. 001 GILLES BOGAERT, ANDRE T. IGUODALA, BLAISE JUDJA-SATO, JONATHAN D. KLEIN, : ANGELA KAYA MWANZA, ALIOUNE : ORAL ARGUMENT REQUESTED NDIAYE, MATTHEW ODGERS, JOHN H. : RITTENHOUSE, MORGAN STANLEY & CO. : LLC, CITIGROUP GLOBAL MARKETS INC., : BERENBERG CAPITAL MARKETS, LLC, : RBC CAPITAL MARKETS, LLC, STIFEL, : NICOLAUS & COMPANY, INCORPORATED, : RAYMOND JAMES & ASSOCIATES, INC., : WILLIAM BLAIR & COMPANY, L.L.C., and : ERNST & YOUNG, SOCIÉTÉ ANONYME, : : Defendants. : ------------------------------------------------------------- x REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS’ MOTION TO STAY ALL PROCEEDINGS PENDING ADJUDICATION OF PARALLEL FEDERAL ACTION David M.J. Rein Jonathan Rosenberg Julia A. Malkina William J. Sushon SULLIVAN & CROMWELL LLP O’MELVENY & MYERS LLP 125 Broad Street 7 Times Square New York, New York 10004 New York, New York 10036 Telephone: (212) 558-4000 Telephone: (212) 326-2000 Facsimile: (212) 558-3588 Facsimile: (212) 326-2061 reind@sullcrom.com jrosenberg@omm.com malkinaj@sullcrom.com wsushon@omm.com Counsel for Defendants Jumia Technologies AG, Counsel for the Underwriter Defendants Jeremy Hodara, Sacha Poignonnec, and Antoine Maillet-Mezeray February 6, 2020 1 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 TABLE OF CONTENTS Page PRELIMINARY STATEMENT ................................................................................................. 1 ARGUMENT ................................................................................................................................. 3 I. PLAINTIFF MISAPPLIES THE STAY FACTORS, EACH OF WHICH STRONGLY SUPPORTS A STAY OF THIS ACTION .............................................. 3 A. Plaintiff Cannot Dispute That the Federal Action Was First-Filed and Has Progressed Further .................................................................................................. 3 B. Plaintiff Does Not Deny That the Federal Action Substantially Subsumes the State Action ....................................................................................................... 5 C. Plaintiff Cannot Escape That a Stay Will Provide for a More Complete Disposition Because Only the Federal Court Can Adjudicate the Exchange Act Claims .............................................................................................................. 8 D. Plaintiff Ignores the Waste, Prejudice, and Potential Inconsistency That Would Result from Duplicative Litigation in Two Separate Courts ...................... 9 E. Plaintiff’s Speculative Prejudice Theory Should Be Rejected ............................. 10 F. Plaintiff Cannot Avoid That the Federal Court Has Greater Familiarity with Federal Securities Claims ............................................................................. 11 CONCLUSION ........................................................................................................................... 12 -i- 2 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 TABLE OF AUTHORITIES Page(s) Cases 2005 Tomchin Family Charitable Trust v. Tremont Partners, Inc., No. 600332/2009, 2009 WL 10635640, 2009 N.Y. Misc. LEXIS 6906 (N.Y. Sup. Ct., N.Y. Cty. 2009) .......................................................................................10, 11 Abeley v. Aeterna Zentaris, Inc., No. 12-cv-4711, 2013 WL 2399869 (S.D.N.Y. May 23, 2019) ..............................................11 Asher v. Abbott Laboratories, 763 N.Y.S.2d 555 (1st Dep’t 2003) .......................................................................................6, 9 Barron v. Bluhdorn, 414 N.Y.S.2d 15 (1st Dep’t 1979) .............................................................................................9 Belopolsky v. Renew Data Corp., 41 A.D.3d 322 (1st Dep’t 2007) ................................................................................................6 Burrowes v. Combs, No. 104225/2004, 2005 WL 5643840 (N.Y. Sup. Ct., N.Y. Cty. Feb. 18, 2005) ................................................................................10 City of Edinburgh Council v. Vodafone Group Public Co., No. 07-cv-9921, 2008 WL 5062669 (S.D.N.Y. Nov. 24, 2008)..............................................11 City of Omaha v. CBS Corp., No. 08-cv-10816, 2011 WL 2119734 (S.D.N.Y. May 24, 2011) ............................................11 City of Sterling Heights Police & Fire Retirement Systems v. Vodafone Group Public Ltd., 655 F. Supp. 2d 262 (S.D.N.Y. 2009)......................................................................................11 Gordon v. Gridsum Holding, Inc., No. 653342/2018, 2019 WL 1593484 (N.Y. Sup. Ct., N.Y. Cty. Apr. 10, 2019) ............................................................................5, 11 Hope’s Windows v. Albro Metal Products Corp., 93 A.D.2d 711 (1st Dep’t 1983) ...............................................................................................6 In re Bank of America Corp. Securities, Derivative, & ERISA Litigation, 757 F. Supp. 2d 260 (S.D.N.Y. 2010) .....................................................................................11 -ii- 3 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 In re Dentsply Sirona, Inc. Shareholders Litigation, No. 155393/2018, 2019 WL 3526142, 2019 N.Y. Misc. LEXIS 4260 (N.Y. Sup. Ct., N.Y. Cty. Aug. 2, 2019)................................................................................6, 7 In re GreenSky, Inc. Securities Litigation, No. 655626/2018, 2019 WL 6310525, 2019 N.Y. Misc. LEXIS 6315 (N.Y. Sup. Ct., N.Y. Cty. Nov. 25, 2019)..............................................................................3, 4 In re Morgan Stanley Information Fund Securities Litigation, 592 F.3d 347 (2d Cir. 2010).......................................................................................................7 In re NIO Inc. Securities Litigation, slip op., No. 653422/2019 (N.Y. Sup. Ct., N.Y. Cty. Dec. 13, 2019) (Br. Ex. 6) (NYSCEF 28) ....................................5, 9 In re NYSE Euronext/ICE Litigation, 39 Misc. 3d 619 (N.Y. Sup. Ct., N.Y. Cty. 2013) .....................................................................5 In re PPDAI Group Securities Litigation, No. 654482/2018, 2019 WL 2751278 (Table), 2019 N.Y. Misc. LEXIS 3481 (N.Y. Sup. Ct., N.Y. Cty. July 1, 2019) .............................................................................4, 6, 7 In re Qudian Securities Litigation, No. 651804/2018, 2018 WL 6067209, 2018 N.Y. Misc. LEXIS 5447 (N.Y. Sup. Ct., N.Y. Cty. Nov. 14, 2018)..................................................................................5 In re Sanofi Securities Litigation, 155 F. Supp. 3d 386 (S.D.N.Y. 2016)......................................................................................11 In re SunEdison Securities Litigation, 300 F. Supp. 3d 444 (S.D.N.Y. 2018)......................................................................................11 In re SunEdison Securities Litigation, 329 F.R.D. 124 (S.D.N.Y. 2019) ...............................................................................................3 Mahar v. General Electric Co., 112 N.Y.S.3d 879 (N.Y. Sup. Ct., N.Y. Cty. 2019)......................................................... passim Pennsylvania Avenue Funds v. Inyx, Inc., No. 08-cv-6857, 2010 WL 743562 (S.D.N.Y. Mar. 1, 2010) ..................................................11 PK Restaurant, LLC v. Lifshutz, 138 A.D.3d 434 (1st Dep’t 2016) ......................................................................................1, 3, 6 Reaves v. Kessler, No. 654485/2015, 2017 WL 2482948, 2017 N.Y. Misc. LEXIS 2257 (N.Y. Sup. Ct., N.Y. Cty. June 8, 2017) .......................................................................... passim -iii- 4 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 Shah v. RBC Capital Markets LLC, 115 A.D.3d 444 (1st Dep’t 2014) ..............................................................................................3 Syncora Guarantee Inc. v. JP Morgan Securities, LLC, 110 A.D.3d 87 (1st Dep’t 2016) ....................................................................................3, 4, 5, 6 Uptown Healthcare Management, Inc. v Rivkin Radler, LLP, 985 N.Y.S.2d 17 (1st Dep’t 2014) .......................................................................................6, 11 -iv- 5 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 PRELIMINARY STATEMENT Consistent with the practice of every New York court to have considered a similar request to stay a Securities Act case pending adjudication of a first-filed federal case, this action (“State Action”) should be stayed. The State Action was filed more than five months after In re Jumia Technologies AG Securities Litigation, No. 19-cv-4397 (S.D.N.Y.) (Castel, J.) (“Federal Action”), and Plaintiff has not identified a single case in which a New York court in comparable circumstances did not stay the later-filed state action. Just last week—after Defendants filed their motion to stay—Plaintiff filed an amended complaint (“State Amended Complaint” (NYSCEF 32)) adding parties and claims with inconsequential variations from the Federal Action, in an unavailing calculated effort to undermine Defendants’ stay motion. The newly-manufactured differences on which Plaintiff relies heavily in his Opposition are not material to the question before the Court. New York courts routinely grant stays where there is merely “‘a substantial identity of parties,’ and ‘both actions arose out of the same subject matter or series of alleged wrongs.’” Mahar v. Gen. Elec. Co., No. 653648/2018, 112 N.Y.S.3d 879, 887 (N.Y. Sup. Ct., N.Y. Cty. 2019) (quoting PK Rest., LLC v. Lifshutz, 138 A.D.3d 434, 436 (1st Dep’t 2016)) (emphasis added). In other words, it is irrelevant that there is not complete identity between the parties and claims because, as Plaintiff does not dispute, there is more than substantial overlap between the Federal and State Actions. Both actions assert claims under the Securities Act of 1933 (“Securities Act”), and both seek damages on behalf of the same putative shareholder class against Jumia Technologies AG (“Jumia”), its Management and Supervisory Boards, and the underwriters of its initial public offering (“IPO”) based on the same core allegations that statements in the IPO offering materials concerning certain order-related 6 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 metrics were wrong.1 (See Br. 2-5 (NYSCEF 21).) As before, only the Federal Action asserts securities fraud claims based on those allegations under the Securities Exchange Act of 1934 (“Exchange Act”)—claims which may only be heard in the federal court. Thus, even considering the State Amended Complaint, all of the stay factors considered by Commercial Division courts when deciding stay motions continue to weigh strongly in support of a stay here. First, the Federal Action was the first-filed action, regardless of when later amendments added different claims or parties to each action. Second, the Federal Action substantially subsumes the State Action, irrespective of cosmetic differences in parties and claims. Third, a more complete disposition of all claims arising from Jumia’s IPO can be obtained in federal court because that is the only court with jurisdiction over the Exchange Act claims. Fourth, a stay will avoid the significant waste of judicial and party resources necessitated by litigating the same issues in two courts, the risk of inconsistent rulings, and prejudice to Defendants. Fifth, Plaintiff cannot show any prejudice that is not purely speculative. Sixth, although this Court is perfectly capable of adjudicating the issues in the State Action, the federal court has greater familiarity with federal securities claims. 1 Jumia’s Management Board is composed of Defendants Jeremy Hodara, Sacha Poignonnec, and Antoine Maillet-Mezeray (“Management Board Defendants”). Jumia’s Supervisory Board is composed of Defendants Gilles Bogaert, Andre T. Iguodala, Blaise Judja- Sato, Jonathan D. Klein, Angela Kaya Mwanza, Alioune Ndiaye, Matthew Odgers, and John H. Rittenhouse (“Supervisory Board Defendants”). Defendants Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Berenberg Capital Markets, LLC, RBC Capital Markets, LLC, Stifel, Nicolaus & Company, Incorporated, Raymond James & Associates, Inc., and William Blair & Company, L.L.C. underwrote Jumia’s IPO (“Underwriter Defendants”). The undersigned Defendants seek a stay of the State Action against all parties, including the defendants newly named in the State Amended Complaint, as to whom issues of service and representation are currently being resolved. -2- 7 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 ARGUMENT I. PLAINTIFF MISAPPLIES THE STAY FACTORS, EACH OF WHICH STRONGLY SUPPORTS A STAY OF THIS ACTION. A. Plaintiff Cannot Dispute That the Federal Action Was First-Filed and Has Progressed Further. Plaintiff does not challenge that “New York courts generally follow the [ ] ‘first[- ]in-time’ rule.” Gen. Elec., 112 N.Y.S.3d at 887-88. Nor does Plaintiff dispute that every New York court asked to stay a state Securities Act action in favor of a first-filed federal action has granted a stay. (See Br. 6 (NYSCEF 21).) Rather, Plaintiff tries to characterize the Federal Action as not first-filed because it “did not first assert Securities Act claims.” (Opp. 7 (NYSCEF 34).) Plaintiff cites no authority for that novel proposition. And there is none. Indeed, New York courts have held the opposite: in determining whether an action is first-filed, “it is inconsequential that different legal theories or claims are set forth in the two actions.” Gen. Elec., 112 N.Y.S.3d at 888 (quoting Shah v. RBC Capital Mkts. LLC, 115 A.D.3d 444, 444-45 (1st Dep’t 2014)); see also, e.g., Syncora Guar. Inc. v. JP Morgan Sec., LLC, 110 A.D.3d 87, 96 (1st Dep’t 2016) (reversing denial of dismissal where “federal action consisted of breach of contract claims while [state] action consists of fraudulent inducement and tortious interference claims” because “[i]t is not necessary that the ‘precise legal theories presented in the first action also be presented in the second action’”); PK Rest., 138 A.D.3d at 436 (affirming dismissal where later-filed action included additional claims).2 2 Plaintiff purports to quote In re SunEdison Securities Litigation, 329 F.R.D. 124, 133 (S.D.N.Y. 2019) (Opp. 7 (NYSCEF 34)), for the proposition that “the Federal Action is not the ‘first filed’ because the Federal Action did not first assert Securities Act claims, which are ‘distinct claims’ from Exchange Act claims that ‘are governed by different legal standards.’” But the term “first filed” that Plaintiff places in quotation marks does not appear in SunEdison. In fact, that case did not discuss the first-filed rule or even consider a stay motion and so is wholly irrelevant. Plaintiff also invokes In re Greensky, Inc., Securities Litigation to argue that “‘if a plaintiff chooses to bring a [Securities] Act suit in state court, the defendant generally cannot change the forum.’” -3- 8 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 Plaintiff’s exact argument was rejected only a few months ago by a Commercial Division Court. In General Electric, a federal action asserting only Exchange Act claims “was filed over eight months before” a state action asserting only Securities Act claims. Gen. Elec., 112 N.Y.S.3d at 882, 887. Justice Borrok concluded that the federal action was “earlier-filed” and stayed the state action in favor of the earlier-filed federal action, despite “the fact that [the state] action involve[d] claims under the 1933 [Securities] Act and the Federal Action involve[d] claims under the 1934 [Exchange] Act.” Id. at 887-88. The court explained that the “hallmark for a stay under First Department law” is not whether both actions assert identical claims (which is “inconsequential”), but instead whether “both actions seek to ‘recover for the same alleged harm based on the same underlying events.’” Id. (quoting Syncora, 110 A.D.3d at 96). That standard is readily met here. (See Br. 10-12 (NYSCEF 21); infra pp. 5-8.) Thus, because the Federal Action was filed more than five months before the State Action, the Federal Action is unquestionably the first-filed action regardless of when it added Securities Act claims. Implicitly conceding that the Federal Action was first-filed, Plaintiff also argues that the Court should not apply the first-filed rule “‘mechanically irrespective of other considerations.’” (Opp. 8 (NYSCEF 34).) Although the first-filed rule is not absolute, “being first to file is still ‘significant,’” In re PPDAI Grp. Sec. Litig., No. 654482/2018, 2019 WL 2751278 (Table), at *5, 2019 N.Y. Misc. LEXIS 3481, at *11 (N.Y. Sup. Ct., N.Y. Cty. July 1, 2019); generally, “it is a violation of the rules of comity to interfere” with “the court which has first taken jurisdiction,” Syncora, 110 A.D.3d at 95. Here, “[n]o special circumstances exist to support (Opp. 8 (NYSCEF 34) (quoting Greensky, 2019 WL 6310525, at *2, 2019 N.Y. Misc. LEXIS 6315, at *2 (N.Y. Sup. Ct., N.Y. Cty. Nov. 25, 2019).) But Plaintiff omits that in Greensky, unlike here, the state action was filed first. Greensky, 2019 WL 6310525, at *1, 2019 N.Y. Misc. LEXIS 6315, at *1. Because the Federal Action here was the “first choice of forum,” Greensky supports a stay of the State Action. Id. -4- 9 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 departure from the usual first-filed rule.” In re Qudian Sec. Litig., No. 651804/2018, 2018 WL 6067209, at *1, 2018 N.Y. Misc. LEXIS 5447, at *2 (N.Y. Sup. Ct., N.Y. Cty. Nov. 14, 2018) (“The federal case is neither ‘vexatious, oppressive or instituted to obtain some unjust or inequitable advantage’ nor forum shopping.”).3 In fact, Plaintiff does not even try to identify any special circumstance, which is unsurprising given that every other stay factor also supports a stay of the State Action.4 B. Plaintiff Does Not Deny That the Federal Action Substantially Subsumes the State Action. Instead of challenging the Federal Action’s significant overlap with the State Action, Plaintiff points to the marginal differences he recently manufactured in the State Amended Complaint, arguing that there is not a “‘complete identity of parties, causes of action and judgment sought.’” (Opp. 12 (NYSCEF 34).) Plaintiff relies on the outdated “complete identity” standard 3 To try to avoid operation of the first-filed rule, Plaintiff also argues that “many courts hold that the first-filed rule is a nullity where . . . the competing cases were filed reasonably closely in time.” (Opp. 8 (NYSCEF 34) (citing In re NYSE Euronext/ICE Litig., 39 Misc. 3d 619, 623-24 (N.Y. Sup. Ct., N.Y. Cty. 2013).) But in the sole case Plaintiff cites, the first-filed action was “commenced one day earlier,” and the court reasoned that in such circumstances “enforcing a strict ‘first to file’ rule is tantamount to sanctioning ‘procedural gamesmanship.’” 39 Misc. 3d at 624. Here, there is no such concern because the Federal Action was filed more than five months before the State Action. Indeed, New York courts have not hesitated to stay state Securities Act cases that were brought more quickly following a first-filed federal action. See In re NIO Inc. Sec. Litig., No. 653422/2019, slip op., NYSCEF 86 (N.Y. Sup. Ct., N.Y. Cty. Dec. 13, 2019) (Br. Ex. 6) (NYSCEF 28) (staying state action filed three months after federal action); Gordon v. Gridsum Holding, Inc., No. 653342/2018, 2019 WL 1593484, at *1 (N.Y. Sup. Ct., N.Y. Cty. Apr. 10, 2019) (same). 4 Plaintiff tries to distinguish this case from the cases uniformly staying state Securities Act actions in favor of first-filed federal actions based on other factors considered by the courts in those cases. (Opp. 8-10 (NYSCEF 34).) To be sure, the first-filed rule was not the only factor evaluated in each case; that is inherent in the multi-factor analysis New York courts employ to determine whether to grant a stay. But Plaintiff cannot dispute that “whether the federal action was commenced first” was an important consideration in each case. Reaves v. Kessler, No. 654485/2015, 2017 WL 2482948, at *3 n.2, 2017 N.Y. Misc. LEXIS 2257, at *7 n.2 (N.Y. Sup. Ct., N.Y. Cty. June 8, 2017); see also Br. 6-8 (NYSCEF 21). -5- 10 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 that was articulated in cases from nearly forty years ago, such as Hope’s Windows v. Albro Metal Products Corp., 93 A.D.2d 711 (1st Dep’t 1983). In recent years, however, the First Department has repeatedly “held that a stay may be warranted when there is substantial identity between state and federal actions.” Asher v. Abbott Labs., 763 N.Y.S.2d 555, 556 (1st Dep’t 2003); see also, e.g., Gen. Elec., 112 N.Y.S.3d at 887 (“Contrary to the plaintiffs’ argument in opposition to the stay, the First Department has held that the two actions need not be identical.”); Syncora, 110 A.D.3d at 96 (“When considering whether to dismiss a later filed action . . . substantial, not complete, identity of parties is all that is required.”); Uptown Healthcare Mgmt., Inc. v. Rivkin Radler LLP, 985 N.Y.S.2d 17, 18 (1st Dep’t 2014) (staying action where “there [wa]s not complete identity of parties and claims” because there “[wa]s a common question of law and fact”); Belopolsky v. Renew Data Corp., 41 A.D.3d 322, 322 (1st Dep’t 2007) (same). Thus, “a stay is warranted where there is ‘a substantial identity of parties,’ and ‘both actions arose out of the same subject matter or series of alleged wrongs.’” Gen. Elec., 112 N.Y.S.3d at 887 (quoting PK Rest., 138 A.D.3d at 436) (emphasis added). The “substantial identity” standard makes perfect sense because otherwise plaintiffs could always avoid a stay simply by making minor amendments to their complaint, as Plaintiff tried to do here.5 5 PPDAI and In re Dentsply Sirona, Inc. do not save Plaintiff’s argument. Importantly, unlike here, the federal actions in PPDAI and Dentsply were not first filed. PPDAI, 2019 WL 2751278 (Table), at *3, 2019 N.Y. Misc. LEXIS 3481, at *7; In re Dentsply Sirona, Inc. S’holders Litig., No. 155393/2018, 2019 WL 3526142, at *3-4, 2019 N.Y. Misc. LEXIS 4260, at *8-9 (N.Y. Sup. Ct., N.Y. Cty. Aug. 2, 2019). In both cases, Justice Scarpulla noted that a number of defendants in the first-filed state actions were not included in the federal actions—four of fifteen in PPDAI and six of nineteen in Dentsply (a much higher proportion than here)—and, without citing any authority, concluded that this “weighs in favor of proceeding” in the state court. 2019 WL 2751278 (Table), at *4, 2019 N.Y. Misc. LEXIS 3481, at *9; 2019 WL 3526142, at *6, 2019 N.Y. Misc. LEXIS 4260, at *11-12. In reaching that determination, Justice Scarpulla did not apply the “substantial identity” standard required under First Department law. In any event, differences in the defendants was only one of multiple factors that Justice Scarpulla considered. -6- 11 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 The State Amended Complaint does not alter the substantial overlap between the Federal and State Actions. Plaintiff’s contrived differences are merely: (i) the addition of Donald Puglisi and Ernst & Young, Société Anonyme to the nineteen overlapping defendants (SAC ¶¶ 35, 60 (NYSCEF 32)); (ii) the addition of a Securities Act Section 12 claim that has almost the same elements as the overlapping Section 11 claim and is based on the same theories (id. ¶¶ 122-32)6; (iii) the addition of further alleged misstatements concerning similar subject matter (id. ¶¶ 62-83); and (iv) the removal of all references to Citron Research’s “reports.” The State and Federal Actions continue to include nearly all of the same claims, parties, issues, and relief, based on substantially the same allegations, but the Federal Action also asserts claims under the Exchange Act. Both actions: (i) assert Securities Act Section 11 and 15 claims; (ii) against Jumia, the Management Board Defendants, the Supervisory Board Defendants, and the Underwriter Defendants; (iii) “on behalf of purchasers of the ADSs of Jumia pursuant and/or traceable to the Registration Statement . . . issued in connection with” Jumia’s IPO; (iv) based on allegations that Jumia’s Registration Statement misstated order-related financial metrics; and (iv) seeking damages for the putative class, reasonable costs and expenses, and other equitable relief. (Br. 2-5 (NYSCEF 21).) Thus, there continues to be “‘a substantial identity of parties,’” and both actions continue to “‘ar[i]se out of the same subject matter or series of alleged wrongs.’” Gen. Elec., 112 N.Y.S.3d at 887.7 6 See, e.g., In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 359 (2d Cir. 2010) (“Claims under sections 11 and 12(a)(2) are therefore Securities Act siblings with roughly parallel elements.”). 7 Plaintiff also argues that, because the Securities Act claims in the Federal Action rely on Citron Research’s “reports,” they “‘sound in fraud’” and “will likely be subject to a heightened pleading standard.” (Opp. 11-12 (NYSCEF 34).) Conversely, according to Plaintiff, “fraud is not alleged” in the State Amended Complaint (id. at 13), because Plaintiff deleted references to Citron Research’s “reports” on which the original complaint “relie[d]” (id. at 12-13; State Compl. ¶¶ 35, 37 (NYSCEF 1)), and “notice pleading” thus “applies” (Opp. 13 (NYSCEF 34)). That is improper -7- 12 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 C. Plaintiff Cannot Escape That a Stay Will Provide for a More Complete Disposition Because Only the Federal Court Can Adjudicate the Exchange Act Claims. Plaintiff concedes that New York courts consider where “a more complete disposition of issues may be obtained.” Reaves, 2017 WL 2482948, at *3 n.2, *4, 2017 N.Y. Misc. LEXIS 2257, at *7 n.2, *9-10. But Plaintiff tries to narrow the inquiry by arguing that the “State Action offers a more complete disposition of the Securities Act claims” because the State Amended Complaint adds two defendants to the nineteen overlapping defendants. (Opp. 11-12 (NYSCEF 34) (emphasis added).) That entirely ignores the Exchange Act claims brought in the Federal Action, which can be adjudicated only in the federal court. (See Br. 12-13 (NYSCEF 21).) Further, neither Plaintiff’s addition of two defendants nor any of Plaintiff’s other manufactured changes to the State Amended Complaint moves the needle because the question is where “a more complete disposition of issues may be obtained,” not whether a complete disposition may be obtained in the Federal Action. Reaves, 2017 WL 2482948, at *3 n.2, *4, 2017 N.Y. Misc. LEXIS 2257, at *7 n.2, *9-10 (emphasis added). Indeed, here too, Plaintiff’s argument already has been rejected by a Commercial Division court. In In re NIO, slip op. (Br. Ex. 6) (NYSCEF 28), plaintiffs argued that the federal court could not provide a more complete disposition because the federal Securities Act and Exchange Act litigation did not include five defendants named in the state Securities Act action and “omit[ted] two key claims”—“Section 12(a)(2) claims” and claims based on additional allegations of “quality and design problems.” (Mem. in Opp. Mot. Stay, No. 653422/2019, at 12 speculation on the standard the federal court and this Court would use in ruling on a motion to dismiss, see infra p. 10; but, in any event, Plaintiff’s amendments simply deleting references to Citron Research as the source of Plaintiff’s allegations (as admitted in its prior complaint) do not transform the pleading. Nor does Plaintiff cite a single case in which a New York court denied a stay in favor of a first-filed federal action based on different pleading standards potentially applying to identical claims. -8- 13 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 (NYSCEF 68) (N.Y. Sup. Ct., N.Y. Cty. Nov. 13, 2019) (Ex. 1) (NYSCEF 37).) Justice Ostrager stayed the state action over plaintiffs’ argument. In re NIO, slip op. at 1-2 (Br. Ex. 6) (NYSCEF 28). The court reasoned that “[w]hile the [state] action” included defendants, “not all of whom are presently named in the federal action,” the “federal action has the potential to resolve not just the 1933 Securities Act claims that are pending before this Court, but also 1934 [Exchange] Act claims,” and thus could provide a more complete disposition. Id.; see also, e.g., Asher, 763 N.Y.S.2d at 556 (granting stay where state and federal complaints advanced different antitrust claims because “the federal action will result in a more complete disposition of the basic antitrust issues alleged”). D. Plaintiff Ignores the Waste, Prejudice, and Potential Inconsistency That Would Result from Duplicative Litigation in Two Separate Courts. In arguing that Defendants will not be prejudiced in the absence of a stay (Opp. 15- 16 (NYSCEF 34)), Plaintiff ignores the common-sense consequences of maintaining duplicative parallel actions on the courts and parties. Setting aside the “obvious” prejudice to Defendants of litigating each issue in two different courts, Barron v. Bluhdorn, 414 N.Y.S.2d 15, 16 (1st Dep’t 1979), maintaining duplicative parallel actions “would manifestly be a waste of judicial resources,” In re NIO, slip op. at 1 (Br. Ex. 6) (NYSCEF 28), and “risk [] inconsistent rulings” at every stage of litigation, Reaves, 2017 WL 2482948, at *2-3 n.2, *5, 2017 N.Y. Misc. LEXIS 2257, at *6-7 n.2, *12. (See Br. 13-14 (NYSCEF 21).) Simply put, there is no doubt that “[c]omity, orderly procedure and judicial economy are all well served by a stay of the instant action as certain rulings in the Federal Action are likely to resolve (or at least streamline) the issues in this case.” Gen. Elec., 112 N.Y.S.3d at 888. -9- 14 of 18 FILED: NEW YORK COUNTY CLERK 02/06/2020 07:47 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 35 RECEIVED NYSCEF: 02/06/2020 E. Plaintiff’s Speculative Prejudice Theory Should Be Rejected. Plaintiff’s only argument for why he will be prejudiced by a stay is that “Section 11 damages may be curtailed [in the Federal Action] based on the filing date of the Federal Action.” (Opp. 13 (NYSCEF 34) (emphasis added).) Plaintiff cites no authority suggesting that this Court should engage in conjecture on the merits of the Federal Action as part of the stay analysis. Rather, New York courts hold that speculation on the relative “merits of each action” is improper on a stay motion. Reaves, 2017 WL 2482948, at *5, 2017 N.Y. Misc. LEXIS 2257, at *12 (“As there is no case law stating this Court must weigh the relative merits of the federal action and the state action as a factor in determining whether to impose a stay, this court will not deny a stay based upon the substantive merits of each action.”); see also, e.g., Burrowes v. Combs, 2005 WL 5643840, at *1 (N.Y. Sup. Ct., N.Y. Cty. Feb. 18, 2005) (“Although plaintiff’s evaluation of his appeal may be correct, the court does not find it a reason to deny defendants’ motion.”). Moreover, if developments in the Federal Action later demonstrate actual and substantial prejudice to Plaintiff on this issue, Plaintiff is free to return to this Court and request that the stay be lifted. See, e.g., 2005 Tomchin Family Charitable Trust v. Tremont Partners, Inc., 2009 WL 10635640, at *3, 2009 N.Y. Misc. LEXIS 6906, at *8-9 (N.Y. Sup. Ct., N.Y. Cty. 2009) (staying state action despite argument that plaintiffs may be prejudiced by standing issue in federal action because the issue “should be addressed