Preview
10/13/2020
1 MATTHEW W. CLOSE (S.B. #188570)
mclose@omm.com
2 O’MELVENY & MYERS LLP
400 South Hope Street, 18th Floor
3 Los Angeles, California 90071-2899
Telephone: +1 213 430 6000
4 Facsimile: +1 213 430 6407
5 WILLIAM J. SUSHON (pro hac vice)
wsushon@omm.com
6 O’MELVENY & MYERS LLP
7 Times Square
7 New York, New York 10036
Telephone: +1 212 326 2000
8 Facsimile: +1 212 326 2061
9 Attorneys for Specially Appearing Defendant
CREDIT SUISSE SECURITIES (USA) LLC and
10 GOLDMAN SACHS (ASIA) L.L.C.
11 SUPERIOR COURT OF THE STATE OF CALIFORNIA
12 COUNTY OF SAN MATEO
13
14 Lead Case No. 18-CIV-04256
15 SUPPLEMENTAL MEMORANDUM OF
POINTS AND AUTHORITIES OF
16 SPECIALLY APPEARING
17 IN RE PINDUODUO SECURITIES DEFENDANTS CREDIT SUISSE
LITIGATION SECURITIES (USA) LLC AND
18 GOLDMAN SACHS (ASIA) L.L.C. IN
SUPPORT OF SPECIALLY
19 APPEARING DEFENDANT
PINDUODUO INC.’S MOTION TO
20 QUASH SERVICE OF SUMMONS FOR
21 LACK OF PERSONAL JURISDICTION
OR, IN THE ALTERNATIVE, TO
22 DISMISS OR STAY ON THE GROUND
OF INCONVENIENT FORUM
23
Date: November 2, 2020
24 Time: 10:00 a.m.
Department: 2
25 Judge: Hon. Marie S. Weiner
26 TELEPHONIC APPEARANCE PER
CMO #4
27
28
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 TABLE OF CONTENTS
2 Page
3 A. The Court Lacks Personal Jurisdiction over the Underwriters. .......................................... 1
4 B. The Forum Selection Clause’s Plain Language Requires a Stay of Plaintiffs’
Claims Against the Underwriters. ....................................................................................... 3
5
C. The Underwriter Defendants Have Standing to Enforce the Forum Selection
6 Clause. ................................................................................................................................. 4
7 i. The Underwriter Defendants Have a “Defined and Intertwining Business
Relationship” with Pinduoduo. ............................................................................... 5
8
ii. The Underwriter Defendants May Enforce the Forum Selection Clause as
9 Third-Party Beneficiaries. ...................................................................................... 6
10 iii. Wong v. Restoration Robotics Does Not Dictate the Outcome Here. ..................... 7
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SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 TABLE OF AUTHORITIES
Page
2 CASES
3 Brinton v. Bankers Pension Servs., Inc.,
76 Cal. App. 4th 550 (1999) ...................................................................................................... 6
4
Bugna v. Fike,
5 80 Cal. App. 4th 229 (2000) .............................................................................................. 5, 6, 8
Drulias v. 1st Century Bancshares, Inc.,
6 30 Cal. App. 5th 696 (2018) ...................................................................................................... 5
7 Garratt v. Baker,
5 Cal. 2d 745 (1936) .................................................................................................................. 7
8
Holland Am. Line Inc. v. Wartsila N. Am., Inc.,
9 485 F.3d 450 (9th Cir. 2007)...................................................................................................... 5
Hot Rods, LLC v. Northrop Grumman Sys. Corp.,
10 242 Cal. App. 4th 1166 (2015) .................................................................................................. 4
11 In re Fannie Mae 2008 Sec. Litig.,
891 F. Supp. 2d 458 (S.D.N.Y. 2012) ........................................................................................ 2
12
Intershop Commc’ns v. Superior Court,
13 104 Cal. App. 4th 191 (2002) ................................................................................................ 3, 4
Lu v. Dryclean-U.S.A. of Cal., Inc.,
14 11 Cal. App. 4th 1490 (1992) ............................................................................................ 5, 6, 8
15 Manetti-Farrow, Inc. v. Gucci Am., Inc.,
858 F.2d 509 (9th Cir. 1988)...................................................................................................... 5
16
Rebolledo v. Tilly’s, Inc.,
17 228 Cal. App. 4th 900 (2014) .................................................................................................... 4
Smith, Valentino & Smith v. Superior Court,
18 17 Cal. 3d 491 (1976) ................................................................................................................ 3
19 Spinks v. Equity Residential Briarwood Apartments,
171 Cal. App. 4th 1004 (2009) .................................................................................................. 7
20
Walden v. Fiore,
21 571 U.S. 277, 284 (2014) ........................................................................................................... 2
Wong v. Restoration Robotics,
22 No. 18-Civ-02609 (Sup. Ct. Cal. Sept. 1, 2020) .................................................................... 7, 8
23 STATUTES
24 Cal. Civ. Code § 1641 (West 2020) ................................................................................................. 4
Cal. Civ. Proc. Code § 410.30.......................................................................................................... 1
25
Cal. Civ. Proc. Code § 418.10.......................................................................................................... 1
26
OTHER AUTHORITIES
27 Cornerstone Research, Securities Class Action Settlements (2018) ................................................ 7
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ii
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 Specially Appearing Defendants Credit Suisse1 and Goldman Sachs hereby join in
2 Specially Appearing Defendant Pinduoduo’s Supplemental Memorandum and adopt and
3 incorporate by reference the arguments in the points and authorities set forth therein.
4 As set forth in the Specially Appearing Defendants’ prior Motion Papers and Pinduoduo’s
5 Supplemental Memorandum, the Court should quash service for lack of jurisdiction over the
6 Underwriters because the Underwriters do not have constitutionally sufficient contacts with the
7 State of California. In the alternative, the Court should stay this action because (i) Plaintiffs
8 agreed to litigate any disputes concerning the Pinduoduo ADSs in New York and (ii) traditional
9 forum non-conveniens considerations mandate a stay because New York provides a suitable
10 alternative forum. To avoid repetition, the Underwriters will not repeat here the law and
11 arguments in Pinduoduo’s briefing that demonstrate why the Complaint should be dismissed or
12 stayed under California Code of Civil Procedure sections 410.30 and 418.10.
13 A. The Court Lacks Personal Jurisdiction over the Underwriters.
14 As the Underwriters showed in their original motion papers, their paltry contacts with
15
1
For purposes of this Supplemental Memorandum, (i) the term “Underwriters” refers collectively
16 to Specially Appearing Defendants Credit Suisse Securities (USA) LLC (“Credit Suisse”) and
17 Goldman Sachs (Asia) L.L.C. (“Goldman Sachs”); (ii) “Pinduoduo” means Specially Appearing
Defendant Pinduoduo Inc.; (iii) “IPO” means the July 26, 2018 initial public offering of
18 Pinduoduo American Depositary Shares (“ADSs”); (iv) “Pinduoduo Motion” means Pinduoduo’s
Motion to Quash Service of Summons for Lack of Personal Jurisdiction or, in the Alternative, to
19 Dismiss or Stay on the Ground of Inconvenient Forum; (v) “Milstead Decl.” means the
Declaration of Virginia F. Milstead filed in support of the Pinduoduo Motion; (vi) “Lam Decl.”
20 means the December 19, 2018 Declaration of Lam Sai Wai Alain filed in this action; (vii) “Shan
21 Decl.” means the December 19, 2018 Declaration of Su Shan filed in this action; (viii) “Byun
Decl.” means the December 20, 2018 Declaration of Edward Byun filed in this action; (ix) “Mot.”
22 refers to the Underwriters’ Motion to Quash Service of Summons for Lack of Personal
Jurisdiction or in the Alternative to Dismiss or Stay on the Grounds of Inconvenient Forum and
23 “Reply” refers to the Underwriters’ Reply in Further Support of Motion to Quash Service of
Summons for Lack of Personal Jurisdiction or in the Alternative to Dismiss or Stay on the
24 Grounds of Inconvenient Forum (collective, the “Motion Papers”); (x) “Pinduoduo Mot.” and
25 “Pinduoduo Reply” refer to Pinduoduo’s Motion to Quash Service of Summons for Lack of
Personal Jurisdiction or, in the Alternative, to Dismiss or Stay on the Ground of Inconvenient
26 Forum and the Reply in Further Support thereof; and (xi) “Pinduoduo’s Supp. Mem.” refers to the
Supplemental Brief in Further Support of Specially Appearing Defendant Pinduoduo Inc.’s
27 Motion to Quash Service of Summons for Lack of Personal Jurisdiction or, in the Alternative, to
Dismiss or Stay on the Ground of Inconvenient Forum. Unless otherwise noted, all emphasis is
28
added and all internal citations and quotations are omitted.
1
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 California are insufficient to subject them to personal jurisdiction in this Court. This is because
2 Plaintiffs cannot show that (i) either Underwriter purposefully directed its activities toward
3 California and availed itself of forum benefits; (ii) Plaintiffs’ claims arose from the Underwriters’
4 California contacts; or (iii) exercising personal jurisdiction over the Underwriters would comport
5 with fair play and substantial justice. Mot. 12–16.2
6 First, numerous courts have held that a nationwide securities offering like the one here
7 does not constitute “purposeful availment” of the California market. Mot. 12–13 (collecting
8 cases). Plaintiffs do not—and cannot—distinguish these cases. Reply 9–11.
9 Second, neither of the Underwriters engaged in any conduct in California related to
10 Plaintiffs’ claims. Mot. 14–15; Reply 11–12; Lam Decl. ¶¶ 5, 8; Shan Decl. ¶ 5; Byun Decl. ¶ 5.
11 None of the work on the IPO occurred in California. The registration statement’s drafting, due
12 diligence, pricing discussion, and roadshow presentations all occurred outside of California. Id.;
13 Lam Decl. ¶ 9; Shan Decl. ¶ 6. In view of these undisputed facts, Plaintiffs’ unfounded
14 “assumption” that “a sizable portion of the ADSs were sold in California” (Opp. 12–13) cannot
15 supply a basis for personal jurisdiction over the Underwriters because the Underwriters did not
16 participate in those transactions. Pinduoduo Supp. Mem. 5–6; Pinduoduo Reply 6–7; see, e.g.,
17 Walden v. Fiore, 571 U.S. 277, 284 (2014). Likewise, the speculation that some unidentified
18 California investors may have participated in telephonic “testing the waters” teleconference calls
19 does not suffice because those calls have no connection to Plaintiffs’ claims. See Pinduoduo
20 Reply 6–7; In re Fannie Mae 2008 Sec. Litig., 891 F. Supp. 2d 458, 482 (S.D.N.Y. 2012)
21 (holding that “occasional participation on nationwide conference calls” with investors not
22 purposeful availment of Texas).
23 Third, exercising jurisdiction over the Underwriters would not comport with traditional
24 notions of fair play and substantial justice because (i) the Underwriters are not headquartered or
25 incorporated in California; (ii) the Underwriters did not engage in any relevant conduct in
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2
Plaintiffs do not contend that the Underwriters are subject to general jurisdiction in California.
27 See Mot. 11–12; Reply 6 n.2. Instead, Plaintiffs rely on Section 22 of the Securities Act to try to
evade their obligation to show specific jurisdiction. But Section 22 permits nationwide service of
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process only for actions brought in Federal district courts and has no bearing here. Reply 6–7.
2
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 California; (iii) none of the relevant documents or witnesses are located in California; (iv) none of
2 the Plaintiffs reside in this County; and (v) a nearly identical putative class action in S.D.N.Y.
3 adjudicated Plaintiffs’ interests. Mot. 15–16; Reply 12–13.
4 As Pinduoduo explains in its Supplemental Memorandum, cases decided since the Court’s
5 June 18, 2019 Order granting the motion for a stay only reinforce the conclusion that the
6 Underwriters are not subject to personal jurisdiction here. Pinduoduo Supp. Mem. 5–8. The
7 Underwriters adopt and incorporate by reference the arguments in Pinduoduo’s Supplemental
8 Memorandum.
9 B. The Forum Selection Clause’s Plain Language Requires a Stay of Plaintiffs’ Claims
Against the Underwriters.3
10
11 The forum selection clause in the deposit agreement for the ADSs provides:
12 Holders and Beneficial Owners each irrevocably agree that any legal suit, action
or proceeding against or involving the Company or the Depositary, arising out of
13 or based upon the Deposit Agreement, American Depositary Shares, Receipts or
the transactions contemplated hereby or thereby or by virtue of ownership thereof,
14 may only be instituted in a state or federal court in New York, New York, and by
holding an American Depositary Share or an interest therein each irrevocably
15 waives any objection which it may now or hereafter have to the laying of venue of
any such proceeding and irrevocably submits to the exclusive jurisdiction of such
16 courts in any such suit, action or proceeding.
17 Milstead Decl. Ex. 5 at § 7.6. Plaintiffs have not disputed that this clause applies to the
18 Underwriters’ claims. Opp. 16. Nor could they, because the forum selection clause’s plain
19 language does not distinguish among the parties who may enforce it. Rather it applies to “any
20 legal suit, action or proceeding . . . arising out of or based upon the Deposit Agreement or
21 [ADSs]” and “by virtue of ownership thereof.” Milstead Decl. Ex. 5 at § 7.6; see also Intershop
22 Commc’ns v. Superior Court, 104 Cal. App. 4th 191, 198 (2002) (analyzing the effect of forum-
23 selection clause “based upon the plain language of the contract”). Indeed, the clause does not
24 even require that Pinduoduo or the Depositary be a party to the action for the clause to apply.
25 3
While the Underwriters recognize that the Court denied the Defendants’ motion to dismiss
26 based on forum non conveniens, the Underwriters note that it is within the Court’s discretion to
dismiss rather than stay the action because the basis for dismissal is contractual. See Smith,
27 Valentino & Smith v. Superior Court, 17 Cal. 3d 491, 495 (1976) (holding that the state’s policy
in favor of providing a forum for residents is satisfied when the resident has contracted for
28
another forum).
3
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 Rather, the clause applies so long as the action “involv[es]” Pinduoduo or the Depositary. Id.
2 Under well-established rules of contract interpretation, the phrase “or involving the Company”
3 must be interpreted to cover actions other than those “against” the Company; otherwise the phrase
4 would impermissibly be rendered surplusage. See Rebolledo v. Tilly’s, Inc., 228 Cal. App. 4th
5 900, 923 (2014) (holding that “[t]he word ‘or’ is a conjunction commonly used to connect clauses
6 representing alternatives” and each clause must be read as having its own independent meaning
7 because “it is well settled contracts are construed to avoid rendering terms surplusage”); Hot
8 Rods, LLC v. Northrop Grumman Sys. Corp., 242 Cal. App. 4th 1166, 1181–82 (2015) (holding
9 courts must interpret contracts to avoid surplusage); see also Cal. Civ. Code § 1641 (West 2020)
10 (each clause of a contract must be given independent effect). Thus, the forum selection clause
11 covers claims against parties other than Pinduoduo and the Depositary that “involve[s]” either of
12 them, like Plaintiffs’ claims against the Underwriters here.
13 This entire action therefore falls within the forum selection clause because it is “based
14 upon” and “aris[es] out of” Plaintiffs’ purchase of ADSs. The action is also “against” and
15 “involving” Pinduoduo. Thus, by its unambiguous terms, the forum selection clause encompasses
16 the entire “legal suit, action or proceeding”—including the claims against both Pinduoduo and the
17 Underwriters—and, as a result, the Court should stay this entire “suit, action or proceeding” to
18 enforce the forum selection clause.4
19 C. The Underwriter Defendants Have Standing to Enforce the Forum Selection Clause.
20 While the Underwriter Defendants are not signatories to the Depository Agreement,
21 California courts routinely enforce forum selection clauses in favor of non-signatories where, as
22 here, there is a close relationship between the non-signatory and the contract. For example, in Lu
23 v. Dryclean-U.S.A. of California, Inc., the court allowed a non-signatory defendant to enforce a
24 contract’s forum selection clause because “to hold otherwise would be to permit a plaintiff to
25 sidestep a valid forum selection clause simply by naming” as a defendant “a closely related party
26
4
27 The forum selection clause is mandatory and there is no basis to conclude that the clause is
unfair or unreasonable. See Pinduoduo Mot. 11–12; Pinduoduo Reply 7–9; Pinduoduo Supp.
28 Mem. 8–9.
4
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 who did not sign the clause.” 11 Cal. App. 4th 1490, 1494 (1992); see also Drulias v. 1st Century
2 Bancshares, Inc., 30 Cal. App. 5th 696, 700-02 (2018) (extending forum provision to investment
3 bank that advised corporation in connection with a merger, even though provision’s terms applied
4 only to corporation’s officers, directors, employees, and shareholders). Likewise, the Ninth
5 Circuit Court of Appeals has held that “non-parties, should benefit from and be subject to forum
6 selection clauses . . . . [where] the alleged conduct of the non-parties is so closely related to the
7 contractual relationship that the forum selection clause applies to all defendants.” Manetti-
8 Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 n.5 (9th Cir. 1988); Holland Am. Line Inc. v.
9 Wartsila N. Am., Inc., 485 F.3d 450, 456 (9th Cir. 2007) (enforcing forum selection clause
10 because the alleged tortious conduct of the non-parties was related to the contract).
11 As the California Court of Appeal explained in Bugna v. Fike, “[t]he key to the closely
12 related test is whether the non-signatories were close to the contractual relationship . . . . [t]his
13 makes sense because the forum selection clause is part of the underlying contract, and it is the
14 contractual relationship gone awry that presumably spawns litigation.” 80 Cal. App. 4th 229, 235
15 (2000). A nonsignatory is “entitled to enforce [a] forum selection clause” if any of the following
16 three bases applies: (i) the nonsignatory “agreed to be bound by the terms of the [] agreement,”
17 (ii) “there was sufficient evidence of a defined and intertwining business relationship with a
18 contracting party,” or (iii) “the contracting parties intended [the nonsignatory] to benefit from the
19 [] agreement.” Id. at 233. Here, both the second and third Bugna grounds apply, and thus they
20 provide independent bases for the Underwriter Defendants to enforce the forum selection clause.
21 i. The Underwriter Defendants Have a “Defined and Intertwining Business
Relationship” with Pinduoduo.
22
23 The allegations against the Underwriters here clearly satisfy the second prong in that
24 standard. Plaintiffs allege that the Underwriter Defendants were intimately involved in the initial
25 public offering and participated in drafting the critical offering documents. Compl. ¶¶ 36–37,
26 75(c). These allegations leave no doubt that the Underwriters had a “defined and intertwining
27 business relationship with” Pinduoduo. See Bugna, 80 Cal. App. 4th at 233. Moreover, the
28 claims against the Underwriters stem from their alleged role in preparing and disseminating the
5
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 Registration Statement, to which the Depository Agreement containing the forum selection clause
2 was attached. Compl. ¶¶ 28–29, 33, 36–37, 75(d). Under similar circumstances in Lu, the
3 California Court of Appeal held that a non-signatory may enforce a forum selection clause where,
4 as here, the complaint contains allegations that the non-party “participated in the fraudulent
5 representations which induced plaintiffs to enter into the Agreement.” 11 Cal. App. 4th at 1494;
6 see Compl. ¶¶ 5, 28–29. Likewise, as was the case in Bugna, the Underwriters were allegedly
7 “the deal makers who negotiated, evaluated and otherwise put together the very [] transactions
8 that [Plaintiffs] now attack.” Compare Bugna, 80 Cal. App. 4th at 235, with Compl. ¶¶ 36–37,
9 75. There can thus be no question that the “alleged conduct of [the non-party] [here] is closely
10 related to the contractual relationship.” Lu, 11 Cal. App. 4th at 1494.
11 Furthermore, because the claims against the Underwriters and Pinduoduo rest on the same
12 core allegations, allowing the Underwriters to enforce the forum selection clause would promote
13 judicial economy. As one appellate court observed, extending the right to invoke a forum
14 selection clause under these circumstances “honors general principles of judicial economy by
15 making all parties closely allied to the contractual relationship accountable in the same forum,
16 thereby abating a proliferation of actions and inconsistent rulings.” Bugna, 80 Cal. App. 4th at
17 235; Lu, 11 Cal. App. 4th at 1492 (same).
18 ii. The Underwriter Defendants May Enforce the Forum Selection Clause as
Third-Party Beneficiaries.
19
20 The forum selection clause’s broad language also demonstrates an intent to make the
21 Underwriters third-party beneficiaries of the clause, satisfying the Bugna standard’s third prong.
22 The decision to include not just suits against the Company but also “any legal suit, action or
23 proceeding . . . involving the Company,” in the scope of the forum selection clause is strong
24 evidence that Pinduoduo intended the clause also to apply to suits “against” the Underwriters.
25 See, e.g., Brinton v. Bankers Pension Servs., Inc., 76 Cal. App. 4th 550, 559 (1999) (settlement
26 agreement containing far-reaching “any and all” language sufficient to show intent to cover third
27 parties).
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SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 The parties’ decision to draft the forum selection clause to include claims against the
2 Underwriters is no accident. Underwriters are commonly named as defendants in actions
3 concerning public offerings,5 and as the Complaint itself alleges, Pinduoduo agreed to indemnify
4 the Underwriter Defendants. Compl. ¶ 75(b). This provided a strong incentive to ensure that
5 claims against the Underwriters would be litigated in the same court as those against Pinduoduo,
6 saving time and money and avoiding the risk of inconsistent adjudications. Under these
7 circumstances, there can be little doubt that the Underwriters must have been among “the class of
8 persons” intended to benefit from the forum selection clauses’ reference to “any action . . .
9 involving the Company.” See Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App.
10 4th 1004, 1023 (2009) (“A third party may enforce a contract where he shows that he is a member
11 of a class of persons for whose benefit it was made.”); Garratt v. Baker, 5 Cal. 2d 745, 748
12 (1936).
13 iii. Wong v. Restoration Robotics Does Not Dictate the Outcome Here.
14 This Court’s recent decision in Wong v. Restoration Robotics does not compel a different
15 conclusion. As a threshold matter, the underwriters in Wong “did not file any substantive motion
16 and presented no legal authorities” supporting the application of the federal forum provision to
17 the underwriters. No. 18-Civ-02609 at 2, 44 (Sup. Ct. Cal. Sept. 1, 2020). As a result, this Court
18 declined to dismiss the claims against the underwriters absent briefing on that issue. Id. But the
19 Court subsequently allowed the underwriters to renew their motion to dismiss for inconvenient
20 forum and a hearing on that motion is scheduled for November 4, 2020. See Wong, 18-Civ.
21 02609 (Sup. Ct. Cal. Sept. 1, 2020). This Court’s decision with respect to the underwriters in
22 Wong does not dictate a particular outcome here.
23 While the underwriters in Wong should have standing to enforce the federal forum
24 provision there, the reasons to allow the Underwriters to invoke the Deposit Agreement’s forum
25 selection clause are even stronger here. The Deposit Agreement clause broadly applies to “any
26 5
See Cornerstone Research, Securities Class Action Settlements 8 (2018) (“Since 2009, 85
27 percent of settled cases with only ‘33 Act claims had a named underwriter defendant.”), available
at https://www.cornerstone.com/Publications/Reports/Securities-Class-Action-Settlements-2018-
28 Review-and-Analysis.pdf.
7
SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 . . . action . . . involving the Company . . . arising out of or based upon the . . . American
2 Depositary Shares,” Milstead Decl. Ex. 5 at § 7.6, not just a particular class of statutory claims.
3 No. 18-Civ-02609 at 29 (Sup. Ct. Cal. Sept. 1, 2020) (“[T]he federal district courts of the United
4 States of America shall be the exclusive forum for the resolution of any complaint asserting a
5 cause of action arising under the Securities Act of 1933, as amended.”).
6 Further, the Depository Agreement at issue here was (i) part and parcel of the Registration
7 Statement giving rise to Plaintiffs’ alleged claims against the Underwriters and (ii) an
8 indispensable part of the IPO itself. Thus, the connection between the claims and the forum
9 selection clause here is even stronger than that in Wong, where the claims themselves do not arise
10 directly from the company’s certificate of incorporation. See also Bugna, 80 Cal. App. 4th at
11 235; Lu, 11 Cal. App. 4th at 494. And the forum selection clause here is an ordinary contractual
12 selection clause that preserves the potential for state-court jurisdiction over Securities Act claims,
13 whereas the Wong exclusive forum provision poses fundamentally different issues because it
14 allows Securities Act claims to be filed only in federal court. No. 18-Civ-02609 at 3, 9, 13, 15–
15 16 (Sup. Ct. Cal. Sept. 1, 2020) (evaluating whether the clause in Wong was “legal and
16 enforceable under California law and/or under Federal law” because, by depriving all state courts
17 of jurisdiction, the clause ran “directly contrary to the explicit provisions of the Securities Act of
18 1933” and could be construed as “circumvent[ing] the Supreme Court and its Cyan decision and
19 circumvent[ing] Congress”).
20 Thus, the Court should enforce the mandatory forum selection clause here because the
21 clause’s plain language applies to any suit or action arising out of the ADSs and does not
22 distinguish among the parties who may enforce it. As a result, the entire suit—including the
23 claims against the Underwriters—must be stayed on the ground of inconvenient forum or
24 dismissed for lack of personal jurisdiction.
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SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
1 Dated: October 13, 2020
2 MATTHEW W. CLOSE
O’MELVENY & MYERS LLP
3
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By: /s/ Matthew W. Close
5 Matthew W. Close
Attorneys for Specially Appearing Defendants
6 CREDIT SUISSE SECURITIES (USA) LLC
and GOLDMAN SACHS (ASIA) L.L.C.
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SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH
OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM
Preview
10/13/2020 1 MATTHEW W. CLOSE (S.B. #188570) mclose@omm.com 2 O’MELVENY & MYERS LLP 400 South Hope Street, 18th Floor 3 Los Angeles, California 90071-2899 Telephone: +1 213 430 6000 4 Facsimile: +1 213 430 6407 5 WILLIAM J. SUSHON (pro hac vice) wsushon@omm.com 6 O’MELVENY & MYERS LLP 7 Times Square 7 New York, New York 10036 Telephone: +1 212 326 2000 8 Facsimile: +1 212 326 2061 9 Attorneys for Specially Appearing Defendant CREDIT SUISSE SECURITIES (USA) LLC and 10 GOLDMAN SACHS (ASIA) L.L.C. 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 COUNTY OF SAN MATEO 13 14 Lead Case No. 18-CIV-04256 15 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES OF 16 SPECIALLY APPEARING 17 IN RE PINDUODUO SECURITIES DEFENDANTS CREDIT SUISSE LITIGATION SECURITIES (USA) LLC AND 18 GOLDMAN SACHS (ASIA) L.L.C. IN SUPPORT OF SPECIALLY 19 APPEARING DEFENDANT PINDUODUO INC.’S MOTION TO 20 QUASH SERVICE OF SUMMONS FOR 21 LACK OF PERSONAL JURISDICTION OR, IN THE ALTERNATIVE, TO 22 DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 23 Date: November 2, 2020 24 Time: 10:00 a.m. Department: 2 25 Judge: Hon. Marie S. Weiner 26 TELEPHONIC APPEARANCE PER CMO #4 27 28 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 TABLE OF CONTENTS 2 Page 3 A. The Court Lacks Personal Jurisdiction over the Underwriters. .......................................... 1 4 B. The Forum Selection Clause’s Plain Language Requires a Stay of Plaintiffs’ Claims Against the Underwriters. ....................................................................................... 3 5 C. The Underwriter Defendants Have Standing to Enforce the Forum Selection 6 Clause. ................................................................................................................................. 4 7 i. The Underwriter Defendants Have a “Defined and Intertwining Business Relationship” with Pinduoduo. ............................................................................... 5 8 ii. The Underwriter Defendants May Enforce the Forum Selection Clause as 9 Third-Party Beneficiaries. ...................................................................................... 6 10 iii. Wong v. Restoration Robotics Does Not Dictate the Outcome Here. ..................... 7 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 TABLE OF AUTHORITIES Page 2 CASES 3 Brinton v. Bankers Pension Servs., Inc., 76 Cal. App. 4th 550 (1999) ...................................................................................................... 6 4 Bugna v. Fike, 5 80 Cal. App. 4th 229 (2000) .............................................................................................. 5, 6, 8 Drulias v. 1st Century Bancshares, Inc., 6 30 Cal. App. 5th 696 (2018) ...................................................................................................... 5 7 Garratt v. Baker, 5 Cal. 2d 745 (1936) .................................................................................................................. 7 8 Holland Am. Line Inc. v. Wartsila N. Am., Inc., 9 485 F.3d 450 (9th Cir. 2007)...................................................................................................... 5 Hot Rods, LLC v. Northrop Grumman Sys. Corp., 10 242 Cal. App. 4th 1166 (2015) .................................................................................................. 4 11 In re Fannie Mae 2008 Sec. Litig., 891 F. Supp. 2d 458 (S.D.N.Y. 2012) ........................................................................................ 2 12 Intershop Commc’ns v. Superior Court, 13 104 Cal. App. 4th 191 (2002) ................................................................................................ 3, 4 Lu v. Dryclean-U.S.A. of Cal., Inc., 14 11 Cal. App. 4th 1490 (1992) ............................................................................................ 5, 6, 8 15 Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509 (9th Cir. 1988)...................................................................................................... 5 16 Rebolledo v. Tilly’s, Inc., 17 228 Cal. App. 4th 900 (2014) .................................................................................................... 4 Smith, Valentino & Smith v. Superior Court, 18 17 Cal. 3d 491 (1976) ................................................................................................................ 3 19 Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 4th 1004 (2009) .................................................................................................. 7 20 Walden v. Fiore, 21 571 U.S. 277, 284 (2014) ........................................................................................................... 2 Wong v. Restoration Robotics, 22 No. 18-Civ-02609 (Sup. Ct. Cal. Sept. 1, 2020) .................................................................... 7, 8 23 STATUTES 24 Cal. Civ. Code § 1641 (West 2020) ................................................................................................. 4 Cal. Civ. Proc. Code § 410.30.......................................................................................................... 1 25 Cal. Civ. Proc. Code § 418.10.......................................................................................................... 1 26 OTHER AUTHORITIES 27 Cornerstone Research, Securities Class Action Settlements (2018) ................................................ 7 28 ii SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 Specially Appearing Defendants Credit Suisse1 and Goldman Sachs hereby join in 2 Specially Appearing Defendant Pinduoduo’s Supplemental Memorandum and adopt and 3 incorporate by reference the arguments in the points and authorities set forth therein. 4 As set forth in the Specially Appearing Defendants’ prior Motion Papers and Pinduoduo’s 5 Supplemental Memorandum, the Court should quash service for lack of jurisdiction over the 6 Underwriters because the Underwriters do not have constitutionally sufficient contacts with the 7 State of California. In the alternative, the Court should stay this action because (i) Plaintiffs 8 agreed to litigate any disputes concerning the Pinduoduo ADSs in New York and (ii) traditional 9 forum non-conveniens considerations mandate a stay because New York provides a suitable 10 alternative forum. To avoid repetition, the Underwriters will not repeat here the law and 11 arguments in Pinduoduo’s briefing that demonstrate why the Complaint should be dismissed or 12 stayed under California Code of Civil Procedure sections 410.30 and 418.10. 13 A. The Court Lacks Personal Jurisdiction over the Underwriters. 14 As the Underwriters showed in their original motion papers, their paltry contacts with 15 1 For purposes of this Supplemental Memorandum, (i) the term “Underwriters” refers collectively 16 to Specially Appearing Defendants Credit Suisse Securities (USA) LLC (“Credit Suisse”) and 17 Goldman Sachs (Asia) L.L.C. (“Goldman Sachs”); (ii) “Pinduoduo” means Specially Appearing Defendant Pinduoduo Inc.; (iii) “IPO” means the July 26, 2018 initial public offering of 18 Pinduoduo American Depositary Shares (“ADSs”); (iv) “Pinduoduo Motion” means Pinduoduo’s Motion to Quash Service of Summons for Lack of Personal Jurisdiction or, in the Alternative, to 19 Dismiss or Stay on the Ground of Inconvenient Forum; (v) “Milstead Decl.” means the Declaration of Virginia F. Milstead filed in support of the Pinduoduo Motion; (vi) “Lam Decl.” 20 means the December 19, 2018 Declaration of Lam Sai Wai Alain filed in this action; (vii) “Shan 21 Decl.” means the December 19, 2018 Declaration of Su Shan filed in this action; (viii) “Byun Decl.” means the December 20, 2018 Declaration of Edward Byun filed in this action; (ix) “Mot.” 22 refers to the Underwriters’ Motion to Quash Service of Summons for Lack of Personal Jurisdiction or in the Alternative to Dismiss or Stay on the Grounds of Inconvenient Forum and 23 “Reply” refers to the Underwriters’ Reply in Further Support of Motion to Quash Service of Summons for Lack of Personal Jurisdiction or in the Alternative to Dismiss or Stay on the 24 Grounds of Inconvenient Forum (collective, the “Motion Papers”); (x) “Pinduoduo Mot.” and 25 “Pinduoduo Reply” refer to Pinduoduo’s Motion to Quash Service of Summons for Lack of Personal Jurisdiction or, in the Alternative, to Dismiss or Stay on the Ground of Inconvenient 26 Forum and the Reply in Further Support thereof; and (xi) “Pinduoduo’s Supp. Mem.” refers to the Supplemental Brief in Further Support of Specially Appearing Defendant Pinduoduo Inc.’s 27 Motion to Quash Service of Summons for Lack of Personal Jurisdiction or, in the Alternative, to Dismiss or Stay on the Ground of Inconvenient Forum. Unless otherwise noted, all emphasis is 28 added and all internal citations and quotations are omitted. 1 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 California are insufficient to subject them to personal jurisdiction in this Court. This is because 2 Plaintiffs cannot show that (i) either Underwriter purposefully directed its activities toward 3 California and availed itself of forum benefits; (ii) Plaintiffs’ claims arose from the Underwriters’ 4 California contacts; or (iii) exercising personal jurisdiction over the Underwriters would comport 5 with fair play and substantial justice. Mot. 12–16.2 6 First, numerous courts have held that a nationwide securities offering like the one here 7 does not constitute “purposeful availment” of the California market. Mot. 12–13 (collecting 8 cases). Plaintiffs do not—and cannot—distinguish these cases. Reply 9–11. 9 Second, neither of the Underwriters engaged in any conduct in California related to 10 Plaintiffs’ claims. Mot. 14–15; Reply 11–12; Lam Decl. ¶¶ 5, 8; Shan Decl. ¶ 5; Byun Decl. ¶ 5. 11 None of the work on the IPO occurred in California. The registration statement’s drafting, due 12 diligence, pricing discussion, and roadshow presentations all occurred outside of California. Id.; 13 Lam Decl. ¶ 9; Shan Decl. ¶ 6. In view of these undisputed facts, Plaintiffs’ unfounded 14 “assumption” that “a sizable portion of the ADSs were sold in California” (Opp. 12–13) cannot 15 supply a basis for personal jurisdiction over the Underwriters because the Underwriters did not 16 participate in those transactions. Pinduoduo Supp. Mem. 5–6; Pinduoduo Reply 6–7; see, e.g., 17 Walden v. Fiore, 571 U.S. 277, 284 (2014). Likewise, the speculation that some unidentified 18 California investors may have participated in telephonic “testing the waters” teleconference calls 19 does not suffice because those calls have no connection to Plaintiffs’ claims. See Pinduoduo 20 Reply 6–7; In re Fannie Mae 2008 Sec. Litig., 891 F. Supp. 2d 458, 482 (S.D.N.Y. 2012) 21 (holding that “occasional participation on nationwide conference calls” with investors not 22 purposeful availment of Texas). 23 Third, exercising jurisdiction over the Underwriters would not comport with traditional 24 notions of fair play and substantial justice because (i) the Underwriters are not headquartered or 25 incorporated in California; (ii) the Underwriters did not engage in any relevant conduct in 26 2 Plaintiffs do not contend that the Underwriters are subject to general jurisdiction in California. 27 See Mot. 11–12; Reply 6 n.2. Instead, Plaintiffs rely on Section 22 of the Securities Act to try to evade their obligation to show specific jurisdiction. But Section 22 permits nationwide service of 28 process only for actions brought in Federal district courts and has no bearing here. Reply 6–7. 2 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 California; (iii) none of the relevant documents or witnesses are located in California; (iv) none of 2 the Plaintiffs reside in this County; and (v) a nearly identical putative class action in S.D.N.Y. 3 adjudicated Plaintiffs’ interests. Mot. 15–16; Reply 12–13. 4 As Pinduoduo explains in its Supplemental Memorandum, cases decided since the Court’s 5 June 18, 2019 Order granting the motion for a stay only reinforce the conclusion that the 6 Underwriters are not subject to personal jurisdiction here. Pinduoduo Supp. Mem. 5–8. The 7 Underwriters adopt and incorporate by reference the arguments in Pinduoduo’s Supplemental 8 Memorandum. 9 B. The Forum Selection Clause’s Plain Language Requires a Stay of Plaintiffs’ Claims Against the Underwriters.3 10 11 The forum selection clause in the deposit agreement for the ADSs provides: 12 Holders and Beneficial Owners each irrevocably agree that any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of 13 or based upon the Deposit Agreement, American Depositary Shares, Receipts or the transactions contemplated hereby or thereby or by virtue of ownership thereof, 14 may only be instituted in a state or federal court in New York, New York, and by holding an American Depositary Share or an interest therein each irrevocably 15 waives any objection which it may now or hereafter have to the laying of venue of any such proceeding and irrevocably submits to the exclusive jurisdiction of such 16 courts in any such suit, action or proceeding. 17 Milstead Decl. Ex. 5 at § 7.6. Plaintiffs have not disputed that this clause applies to the 18 Underwriters’ claims. Opp. 16. Nor could they, because the forum selection clause’s plain 19 language does not distinguish among the parties who may enforce it. Rather it applies to “any 20 legal suit, action or proceeding . . . arising out of or based upon the Deposit Agreement or 21 [ADSs]” and “by virtue of ownership thereof.” Milstead Decl. Ex. 5 at § 7.6; see also Intershop 22 Commc’ns v. Superior Court, 104 Cal. App. 4th 191, 198 (2002) (analyzing the effect of forum- 23 selection clause “based upon the plain language of the contract”). Indeed, the clause does not 24 even require that Pinduoduo or the Depositary be a party to the action for the clause to apply. 25 3 While the Underwriters recognize that the Court denied the Defendants’ motion to dismiss 26 based on forum non conveniens, the Underwriters note that it is within the Court’s discretion to dismiss rather than stay the action because the basis for dismissal is contractual. See Smith, 27 Valentino & Smith v. Superior Court, 17 Cal. 3d 491, 495 (1976) (holding that the state’s policy in favor of providing a forum for residents is satisfied when the resident has contracted for 28 another forum). 3 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 Rather, the clause applies so long as the action “involv[es]” Pinduoduo or the Depositary. Id. 2 Under well-established rules of contract interpretation, the phrase “or involving the Company” 3 must be interpreted to cover actions other than those “against” the Company; otherwise the phrase 4 would impermissibly be rendered surplusage. See Rebolledo v. Tilly’s, Inc., 228 Cal. App. 4th 5 900, 923 (2014) (holding that “[t]he word ‘or’ is a conjunction commonly used to connect clauses 6 representing alternatives” and each clause must be read as having its own independent meaning 7 because “it is well settled contracts are construed to avoid rendering terms surplusage”); Hot 8 Rods, LLC v. Northrop Grumman Sys. Corp., 242 Cal. App. 4th 1166, 1181–82 (2015) (holding 9 courts must interpret contracts to avoid surplusage); see also Cal. Civ. Code § 1641 (West 2020) 10 (each clause of a contract must be given independent effect). Thus, the forum selection clause 11 covers claims against parties other than Pinduoduo and the Depositary that “involve[s]” either of 12 them, like Plaintiffs’ claims against the Underwriters here. 13 This entire action therefore falls within the forum selection clause because it is “based 14 upon” and “aris[es] out of” Plaintiffs’ purchase of ADSs. The action is also “against” and 15 “involving” Pinduoduo. Thus, by its unambiguous terms, the forum selection clause encompasses 16 the entire “legal suit, action or proceeding”—including the claims against both Pinduoduo and the 17 Underwriters—and, as a result, the Court should stay this entire “suit, action or proceeding” to 18 enforce the forum selection clause.4 19 C. The Underwriter Defendants Have Standing to Enforce the Forum Selection Clause. 20 While the Underwriter Defendants are not signatories to the Depository Agreement, 21 California courts routinely enforce forum selection clauses in favor of non-signatories where, as 22 here, there is a close relationship between the non-signatory and the contract. For example, in Lu 23 v. Dryclean-U.S.A. of California, Inc., the court allowed a non-signatory defendant to enforce a 24 contract’s forum selection clause because “to hold otherwise would be to permit a plaintiff to 25 sidestep a valid forum selection clause simply by naming” as a defendant “a closely related party 26 4 27 The forum selection clause is mandatory and there is no basis to conclude that the clause is unfair or unreasonable. See Pinduoduo Mot. 11–12; Pinduoduo Reply 7–9; Pinduoduo Supp. 28 Mem. 8–9. 4 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 who did not sign the clause.” 11 Cal. App. 4th 1490, 1494 (1992); see also Drulias v. 1st Century 2 Bancshares, Inc., 30 Cal. App. 5th 696, 700-02 (2018) (extending forum provision to investment 3 bank that advised corporation in connection with a merger, even though provision’s terms applied 4 only to corporation’s officers, directors, employees, and shareholders). Likewise, the Ninth 5 Circuit Court of Appeals has held that “non-parties, should benefit from and be subject to forum 6 selection clauses . . . . [where] the alleged conduct of the non-parties is so closely related to the 7 contractual relationship that the forum selection clause applies to all defendants.” Manetti- 8 Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 n.5 (9th Cir. 1988); Holland Am. Line Inc. v. 9 Wartsila N. Am., Inc., 485 F.3d 450, 456 (9th Cir. 2007) (enforcing forum selection clause 10 because the alleged tortious conduct of the non-parties was related to the contract). 11 As the California Court of Appeal explained in Bugna v. Fike, “[t]he key to the closely 12 related test is whether the non-signatories were close to the contractual relationship . . . . [t]his 13 makes sense because the forum selection clause is part of the underlying contract, and it is the 14 contractual relationship gone awry that presumably spawns litigation.” 80 Cal. App. 4th 229, 235 15 (2000). A nonsignatory is “entitled to enforce [a] forum selection clause” if any of the following 16 three bases applies: (i) the nonsignatory “agreed to be bound by the terms of the [] agreement,” 17 (ii) “there was sufficient evidence of a defined and intertwining business relationship with a 18 contracting party,” or (iii) “the contracting parties intended [the nonsignatory] to benefit from the 19 [] agreement.” Id. at 233. Here, both the second and third Bugna grounds apply, and thus they 20 provide independent bases for the Underwriter Defendants to enforce the forum selection clause. 21 i. The Underwriter Defendants Have a “Defined and Intertwining Business Relationship” with Pinduoduo. 22 23 The allegations against the Underwriters here clearly satisfy the second prong in that 24 standard. Plaintiffs allege that the Underwriter Defendants were intimately involved in the initial 25 public offering and participated in drafting the critical offering documents. Compl. ¶¶ 36–37, 26 75(c). These allegations leave no doubt that the Underwriters had a “defined and intertwining 27 business relationship with” Pinduoduo. See Bugna, 80 Cal. App. 4th at 233. Moreover, the 28 claims against the Underwriters stem from their alleged role in preparing and disseminating the 5 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 Registration Statement, to which the Depository Agreement containing the forum selection clause 2 was attached. Compl. ¶¶ 28–29, 33, 36–37, 75(d). Under similar circumstances in Lu, the 3 California Court of Appeal held that a non-signatory may enforce a forum selection clause where, 4 as here, the complaint contains allegations that the non-party “participated in the fraudulent 5 representations which induced plaintiffs to enter into the Agreement.” 11 Cal. App. 4th at 1494; 6 see Compl. ¶¶ 5, 28–29. Likewise, as was the case in Bugna, the Underwriters were allegedly 7 “the deal makers who negotiated, evaluated and otherwise put together the very [] transactions 8 that [Plaintiffs] now attack.” Compare Bugna, 80 Cal. App. 4th at 235, with Compl. ¶¶ 36–37, 9 75. There can thus be no question that the “alleged conduct of [the non-party] [here] is closely 10 related to the contractual relationship.” Lu, 11 Cal. App. 4th at 1494. 11 Furthermore, because the claims against the Underwriters and Pinduoduo rest on the same 12 core allegations, allowing the Underwriters to enforce the forum selection clause would promote 13 judicial economy. As one appellate court observed, extending the right to invoke a forum 14 selection clause under these circumstances “honors general principles of judicial economy by 15 making all parties closely allied to the contractual relationship accountable in the same forum, 16 thereby abating a proliferation of actions and inconsistent rulings.” Bugna, 80 Cal. App. 4th at 17 235; Lu, 11 Cal. App. 4th at 1492 (same). 18 ii. The Underwriter Defendants May Enforce the Forum Selection Clause as Third-Party Beneficiaries. 19 20 The forum selection clause’s broad language also demonstrates an intent to make the 21 Underwriters third-party beneficiaries of the clause, satisfying the Bugna standard’s third prong. 22 The decision to include not just suits against the Company but also “any legal suit, action or 23 proceeding . . . involving the Company,” in the scope of the forum selection clause is strong 24 evidence that Pinduoduo intended the clause also to apply to suits “against” the Underwriters. 25 See, e.g., Brinton v. Bankers Pension Servs., Inc., 76 Cal. App. 4th 550, 559 (1999) (settlement 26 agreement containing far-reaching “any and all” language sufficient to show intent to cover third 27 parties). 28 6 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 The parties’ decision to draft the forum selection clause to include claims against the 2 Underwriters is no accident. Underwriters are commonly named as defendants in actions 3 concerning public offerings,5 and as the Complaint itself alleges, Pinduoduo agreed to indemnify 4 the Underwriter Defendants. Compl. ¶ 75(b). This provided a strong incentive to ensure that 5 claims against the Underwriters would be litigated in the same court as those against Pinduoduo, 6 saving time and money and avoiding the risk of inconsistent adjudications. Under these 7 circumstances, there can be little doubt that the Underwriters must have been among “the class of 8 persons” intended to benefit from the forum selection clauses’ reference to “any action . . . 9 involving the Company.” See Spinks v. Equity Residential Briarwood Apartments, 171 Cal. App. 10 4th 1004, 1023 (2009) (“A third party may enforce a contract where he shows that he is a member 11 of a class of persons for whose benefit it was made.”); Garratt v. Baker, 5 Cal. 2d 745, 748 12 (1936). 13 iii. Wong v. Restoration Robotics Does Not Dictate the Outcome Here. 14 This Court’s recent decision in Wong v. Restoration Robotics does not compel a different 15 conclusion. As a threshold matter, the underwriters in Wong “did not file any substantive motion 16 and presented no legal authorities” supporting the application of the federal forum provision to 17 the underwriters. No. 18-Civ-02609 at 2, 44 (Sup. Ct. Cal. Sept. 1, 2020). As a result, this Court 18 declined to dismiss the claims against the underwriters absent briefing on that issue. Id. But the 19 Court subsequently allowed the underwriters to renew their motion to dismiss for inconvenient 20 forum and a hearing on that motion is scheduled for November 4, 2020. See Wong, 18-Civ. 21 02609 (Sup. Ct. Cal. Sept. 1, 2020). This Court’s decision with respect to the underwriters in 22 Wong does not dictate a particular outcome here. 23 While the underwriters in Wong should have standing to enforce the federal forum 24 provision there, the reasons to allow the Underwriters to invoke the Deposit Agreement’s forum 25 selection clause are even stronger here. The Deposit Agreement clause broadly applies to “any 26 5 See Cornerstone Research, Securities Class Action Settlements 8 (2018) (“Since 2009, 85 27 percent of settled cases with only ‘33 Act claims had a named underwriter defendant.”), available at https://www.cornerstone.com/Publications/Reports/Securities-Class-Action-Settlements-2018- 28 Review-and-Analysis.pdf. 7 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 . . . action . . . involving the Company . . . arising out of or based upon the . . . American 2 Depositary Shares,” Milstead Decl. Ex. 5 at § 7.6, not just a particular class of statutory claims. 3 No. 18-Civ-02609 at 29 (Sup. Ct. Cal. Sept. 1, 2020) (“[T]he federal district courts of the United 4 States of America shall be the exclusive forum for the resolution of any complaint asserting a 5 cause of action arising under the Securities Act of 1933, as amended.”). 6 Further, the Depository Agreement at issue here was (i) part and parcel of the Registration 7 Statement giving rise to Plaintiffs’ alleged claims against the Underwriters and (ii) an 8 indispensable part of the IPO itself. Thus, the connection between the claims and the forum 9 selection clause here is even stronger than that in Wong, where the claims themselves do not arise 10 directly from the company’s certificate of incorporation. See also Bugna, 80 Cal. App. 4th at 11 235; Lu, 11 Cal. App. 4th at 494. And the forum selection clause here is an ordinary contractual 12 selection clause that preserves the potential for state-court jurisdiction over Securities Act claims, 13 whereas the Wong exclusive forum provision poses fundamentally different issues because it 14 allows Securities Act claims to be filed only in federal court. No. 18-Civ-02609 at 3, 9, 13, 15– 15 16 (Sup. Ct. Cal. Sept. 1, 2020) (evaluating whether the clause in Wong was “legal and 16 enforceable under California law and/or under Federal law” because, by depriving all state courts 17 of jurisdiction, the clause ran “directly contrary to the explicit provisions of the Securities Act of 18 1933” and could be construed as “circumvent[ing] the Supreme Court and its Cyan decision and 19 circumvent[ing] Congress”). 20 Thus, the Court should enforce the mandatory forum selection clause here because the 21 clause’s plain language applies to any suit or action arising out of the ADSs and does not 22 distinguish among the parties who may enforce it. As a result, the entire suit—including the 23 claims against the Underwriters—must be stayed on the ground of inconvenient forum or 24 dismissed for lack of personal jurisdiction. 25 26 27 28 8 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM 1 Dated: October 13, 2020 2 MATTHEW W. CLOSE O’MELVENY & MYERS LLP 3 4 By: /s/ Matthew W. Close 5 Matthew W. Close Attorneys for Specially Appearing Defendants 6 CREDIT SUISSE SECURITIES (USA) LLC and GOLDMAN SACHS (ASIA) L.L.C. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 SUPPLEMENTAL MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO QUASH OR, IN THE ALTERNATIVE, TO DISMISS OR STAY ON THE GROUND OF INCONVENIENT FORUM