From PLI S Course Handbook s8

From PLI’s Course Handbook Managing Complex Litigation 2008: Legal Strategies and Best Practices in “High-Stakes” Cases #14204

CLASS ACTION LAWSUITS INVOLVING FOREIGN CLAIMANTS

Jonathan K. Youngwood Simpson Thacher & Bartlett LLP

A. Procedural Rules for Federal Class Actions – The class action certification process is governed by Rule 23 of the Federal Rules of Civil Procedure. Rule 23 establishes a two-step process for the certification of a class action.

1. Class Must Satisfy All Four Rule 23(a) Prerequisites – First, a party moving to certify a class must show that the four prerequisites set forth in Rule 23(a) are satisfied:

a. Numerosity – the proposed class must be so numerous that joinder of all class members is impracticable;

b. Commonality – the proposed class must share common questions of law or fact;

c. Typicality – the claims or defenses of the class representative must be typical of the claims or defenses of the proposed class; and

d. Adequacy – the class representative must be able to fairly and adequately protect the interests of the proposed class.

2. Action Must Fall Within One of Three Rule 23(b) Categories – Second, a party moving to certify a class must establish that the proposed class falls under one of the three types of class actions enumerated in Rule 23(b):

a. 23(b)(1) Failure to Certify Would Cause Inconsistent Judgments – Failure to certify the proposed class would create a risk of (i) inconsistent judicial decisions that would establish incompatible standards of conduct for the defendant(s) or (ii) judicial decisions that would effectively be dispositive of or substantially impair the non-party class members’ ability to prosecute their claims in subsequent suits;

b. 23(b)(2) Injunctive Relief for a Class – The defendant has acted or refused to act on grounds that apply generally to the proposed class such that final injunctive relief or corresponding declaratory relief is appropriate respecting the proposed class as a whole; or

c. 23(b)(3) Class Action Resolves Common Questions and Is Superior to Other Methods of Adjudication – The court finds that questions common to the class as a whole predominate over questions affecting only individual members and that the class action mechanism is superior to other available methods for fairly and efficiently adjudicating the alleged claims. Rule 23(b)(3) lists the following considerations in this analysis: “(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.”

Page 2 (1) Predominance of Common Questions – Common questions relating to a defendant’s liability are generally sufficient to satisfy the requirement that questions common to the class predominate, even if damages cannot be calculated on a class-wide basis. The Supreme Court has noted that “[p]redominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997). For example, in the antitrust context, the existence of a conspiracy is a common question that predominates over any individual questions of damages. In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir. 2008). However, mass tort cases may present “significant questions, not only of damages but of liability and defenses of liability affecting the individuals in different ways.” Amchem, 521 U.S. at 625.

(2) Superiority of Class Action Mechanism – Courts consider whether the class action method is a superior method of adjudicating the alleged claims in conjunction with the issue of whether common questions predominate. Once it is shown that common questions predominate, courts consider whether a class action ensures more consistent results and/or more efficient adjudication. For example, the fact that “individual suits would yield only a small amount of damages” can weigh in favor of holding that a class action would be superior to individual suits. See, e.g., Beattie v. CenturyTel, Inc., 511 F.3d 554, 567 (6th Cir. 2007). However, in rare instances, questions of superiority may independently invalidate a class. In Gregory v. Finova Capital Corp., 442 F.3d 188, 191-92 (4th Cir. 2006), for example, an ongoing bankruptcy court adversary proceeding that would have made the class “more or less whole” was deemed sufficient to invalidate a class action because it did not satisfy the superiority requirement.

B. Rule 23 Does Not Directly Address Certification of Proposed Class that Includes Foreign Claimants – The text of the rule does not address the issue of when a proposed class that includes foreign claimants should be certified, nor has the Supreme Court considered the question.

II. THE THRESHOLD ISSUE OF SUBJECT MATTER JURISDICTION OVER THE CLAIMS OF FOREIGN CLASS MEMBERS

A. Policy Considerations Specific to Foreign Claimants Affect the Determination of Subject Matter Jurisdiction

1. Whether Congress Intended Resources to Be Used for Adjudicating Foreign Claims – A court may exclude foreign claimants from a class action for lack of subject matter jurisdiction based on an assessment of “whether Congress would have wished the precious resources of the United States courts and law enforcement agencies to be devoted to [adjudicating predominantly foreign claims] rather than leav[ing] the problem to foreign countries.” Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 985 (2d Cir. 1975); see also SEC v. Berger, 322 F.3d 187, 192 (2d Cir. 2003) (“To provide guidance on this topic, we have stated that, where ‘a court is confronted with transactions that on any view are predominantly foreign, it must seek to determine whether Congress would have wished

Page 3 the precious resources of United States courts and law enforcement agencies to be devoted to them rather than [to] leave the problem to foreign countries.”); Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 32 (D.C. Cir. 1987) (“Courts have also been concerned to preserve American judicial resources for the adjudication of domestic disputes and the enforcement of domestic law. It is far from clear that these resources would be well spent on all the potential disputes in which domestic conduct makes a relatively small contribution to securities fraud that occurs elsewhere.” (citation omitted)); MCG, Inc. v. Great Western Energy Corp., 896 F.2d 170 (5th Cir. 1990) (quoting Bersch, 519 F.2d at 985); Allen v. Lloyd’s of London, 94 F.3d 923, 929 (4th Cir. 1996) (same).

2. Presumption Against Extraterritorial Application of U.S. Laws or Application of U.S. Laws in a Manner That Conflicts With Foreign Law – In holding that it lacked subject matter jurisdiction over claims brought by foreign plaintiffs, the Fifth Circuit stressed that “[f]ederal courts are courts of limited jurisdiction” and that there is a “presumption against extraterritorial application” of U.S. laws. Robinson v. TCI/US W. Commc’ns, Inc., 117 F.3d 900, 906 (5th Cir. 1997). Similarly, the Supreme Court has noted that courts should apply a presumption that “legislators take account of the legitimate sovereign interests of other nations when they write American laws,” such that laws should be construed as to avoid unreasonable interference with the sovereign authority of other nations. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 164 (2004).

3. Aim of Deterring Defendants’ Misconduct With Respect to U.S. and Non- U.S. Claimants – In reversing the dismissal of a foreign plaintiff’s claims, the Ninth Circuit emphasized that the exercise of jurisdiction would serve the purpose of deterrence, both with respect to U.S. and non-U.S. residents. GrunenthalGmbH v. Hotz, 712 F.2d 421, 424-26 (9th Cir. 1983).

4. Relative Importance of Claims of Foreign and Domestic Plaintiffs – In determining whether or not to certify a class, courts weigh the relative significance of the claims of foreign plaintiffs and U.S. plaintiffs. Courts have stressed that this threshold inquiry must be conducted very carefully where a representative moves to certify a class that includes foreign plaintiffs because, as the Southern District of New York has observed, “in a class action involving both foreign and domestic plaintiffs . . . the danger exists that a ‘very small tail’ may be ‘wagging an elephant.’” In re Australia Bank, No. 03 Civ. 6537, 2006 WL 3844465, at *4 (S.D.N.Y. Oct. 25, 2006); see also Bersch, 519 F.2d at 986-87 (noting the “relatively few Americans who had purchased . . . shares but . . . the many thousands of foreign purchasers whom plaintiff sought to represent” and assuming, for purposes of the analysis, that there were no American purchasers).

B. Tests for Determining Subject Matter Jurisdiction Over Claims Brought by Foreign Plaintiffs

5. The “Conduct” and “Effects” Tests in the Securities Context – In the securities context, courts generally apply two tests – the “conduct” and “effects” tests – when determining whether they have subject matter jurisdiction over the claims of foreign investors and will exercise jurisdiction if either of these tests is satisfied. See, e.g.,

Page 4 Robinson, 117 F.3d at 905; E.ON AG v. Acciona, S.A., 468 F. Supp.2d 537, 547 (S.D.N.Y. 2006); In re Royal Dutch/Shell Transp. Sec. Litig., 380 F. Supp. 2d 509, 540 (D.N.J. 2005).

a. “Conduct” and “Effects” Tests May Be Applied Together – In some instances, courts have applied the “conduct” and “effects” test together when determining whether they have subject matter jurisdiction over the claims of foreign investors. See Itoba Limited v. LEP Group PLC, 54 F.3d 118, 123-24 (2d Cir. 1995) (holding that subject matter jurisdiction existed over foreign investors’ claims given that (i) the issuance of misleading SEC filings satisfied the “conduct” test because “[i]t is beyond dispute that SEC filings and press releases are the types of information on which an investor relies in making his or her investment decisions”; and (ii) the “effects” test was satisfied because the fraud “impacted detrimentally upon thousands of United States shareholders in the defrauded company, i.e., over $100 million lost in the shareholders’ corporate equity”); Euro Trade & Forfaiting, Inc. v. Vowell, No. 00 Civ. 8431 (LAP), 2002 WL 500672, at *6 (S.D.N.Y. Mar. 29, 2002) (“[The ‘conduct’ and ‘effects’] tests need not be applied separately, for an ‘an admixture or combination of the two often gives a better picture of whether there is sufficient United States involvement to justify the exercise of jurisdiction by an American court.’” (quoting Itoba, 54 F.3d at 122)).

6. The Foreign Trade Antitrust Improvements Act in the Antitrust Context – In the antitrust context, the Foreign Trade Antitrust Improvements Act (“FTAIA), 15 U.S.C. § 6a , governs the issue of subject matter jurisdiction over claims brought by foreign plaintiffs. The FTAIA provides that the Sherman Act does not apply to conduct involving trade with foreign nations unless the conduct has a “direct, substantial, and reasonably foreseeable effect” on domestic trade or commerce or on U.S. export commerce, and “such effect gives rise to a claim under the [Sherman Act].” Id.

a. Foreign Harm Must be Proximately Caused by U.S. Effects – The Supreme Court has held that the under the FTAIA, a person harmed by overseas conduct (other than conduct involving imports into the United States) may not bring a Sherman Act claim based solely on harm to the plaintiff that is independent of U.S. effects. Empagran, 542 U.S. at 159. On remand of the same case, the D.C. Circuit clarified that there is subject matter jurisdiction over foreign plaintiffs’ claims regarding foreign anticompetitive conduct only where the foreign conduct caused effects in the U.S. that in turn proximately caused the plaintiffs’ foreign harm. Empagran S.A. v. F. Hoffmann-LaRoche Ltd., 417 F.3d 1267, 1271 (D.C. Cir. 2005) (holding that a worldwide conspiracy to fix vitamin prices, in which it was necessary to fix U.S. prices in order to maintain supracompetitive prices in the worldwide market, was insufficient to confer subject matter jurisdiction over claims of foreign vitamin purchasers who suffered foreign harm).

7. Jurisdiction in Other Areas of Law – In most other areas of law, such as consumer protection, products liability, and mass torts, federal courts may have subject matter jurisdiction based on the diversity of parties. However, even where subject matter jursidiction exists, courts may decline jurisdiction over claims of foreign plaintiffs under the doctrine of forum non conveniens.

Page 5 a. Balancing of Public and Private Interests – A court may dismiss a claim under forum non conveniens after balancing the public and private interests in doing so. These interests include: ease of access to sources of proof, including evidence and witnesses; ability to implead third parties; the need to apply foreign law; and the interests of each forum in the litigation. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-61 (1981).

b. Presumption in Favor of Plaintiff’s Choice of Forum – Courts apply a presumption in favor of a plaintiff’s choice of forum, but this presumption applies with less force when the plaintiff is foreign. Id. at 255.

III. CERTIFICATION OF SECURITIES, ANTITRUST AND CONSUMER CLASS ACTIONS THAT INCLUDE FOREIGN CLAIMANTS

A. Exclusion of Foreign Plaintiffs From a Class Due to Lack of Jurisdiction – Defendants have often succeeded in excluding foreign plaintiffs from proposed classes on the grounds that the court lacked subject matter jurisdiction over the foreign plaintiffs’ claims or under the doctrine of forum non conveniens.

1. Securities – In re Australia Bank, 2006 WL 3844465, at *5-*8 (excluding proposed lead foreign plaintiffs from class because the court lacked subject matter jurisdiction over their claims); In re Royal Dutch/Shell Transp. Sec. Litig., 522 F. Supp. 2d 712, 723-24 (D.N.J. 2007) (dismissing the claims of non-U.S. purchasers in a purported class action because the court lacked jurisdiction under the “conduct” test).

2. Antitrust – Empagran, 542 U.S. at 159 (hearing appeal by parties whom district court had dismissed in an order dismissing only foreign plaintiffs from purported class action); In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. 06-15636, 2008 WL 3522419, at *4 (9th Cir. Aug. 14, 2008) (affirming dismissal of class action (including purported domestic class members) brought by British computer manufacturer because the domestic effect of the alleged price fixing conspiracy did not proximately cause the lead plaintiff’s alleged foreign injury).

3. Other – Delgado v. Shell Oil Co., 890 F. Supp. 1324, 1372 (S.D. Tex. 1995) (dismissing products liability class action filed by residents of several foreign nations on forum non conveniens grounds); In re Union Carbide Corp. Gas Plant Disaster at Bhopal, India in Dec. 1984, 634 F. Supp. 842 (S.D.N.Y 1986), aff’d, 809 F.2d 195, 202 (2d Cir. 1987) (dismissing consolidated mass tort class action filed by residents of India on forum non conveniens grounds).

B. Rule 23(a) Prerequisites – The requirements of Rule 23(a)—numerosity, commonality, typicality, and adequacy—often do not depend on whether purported class members are domestic or foreign. Where choice of law principles dictate that foreign law applies to foreign class members, however, the class will likely fail the commonality and typicality requirements. This concern generally does not apply in the securities and antitrust contexts because the claims are usually brought under U.S. federal law.

Page 6 C. Class Actions Under Rule 23(b)(3) – Most class actions are brought under Rule 23(b)(3), which requires the class representative to establish that questions of law or fact common to the proposed class predominate and that the class action mechanism is superior to other available methods for efficiently and fairly adjudicating the claims. Thomas E. Willging et al., Empirical Study of Class Actions in Four Federal District Courts: Final Report to Advisory Committee on Civil Rules 13, at 22 (1996) (“The largest number of certified class—eighty-four (61%)— were in the (b)(3) category.”).

4. Predominance of Questions of Law or Fact Common to the Proposed Class – The first criterion of Rule 23(b)(3)—the predominance of questions of law or fact common the proposed class—often does not depend on whether the plaintiff is domestic or foreign. See, e.g., In re Vivendi Universal, S.A., Sec. Litig., 242 F.R.D. 76, 90 (S.D.N.Y. 2007) (“All plaintiffs [in this putative securities class action] will rely on the same or substantially similar documents, statements, and legal theories to prove the defendants’ liability.”); In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir. 2008) (“[E]ven where there are individual variations in damages, the requirements of Rule 23(b)(3) are satisfied if the plaintiffs can establish that the defendants conspired to interfere with the free-market pricing structure.”); Daffin v. Ford Motor Co., 458 F.3d 549, 554 (6th Cir. 2006) (“This is a case in which, assuming the throttle body is the same in every car, class members all have the same express warranty claim.”).

5. Superiority of the Class Action Mechanism – Consequently, the certification of class actions with respect to foreign claimants often turns on whether the representative can establish that the class action mechanism is superior to other available methods for efficiently and fairly adjudicating the controversy.

a. Balancing of Fairness and Efficiency Against Alternative Methods of Adjudication – As a Southern District of New York court recently noted: “The superiority requirement asks courts to balance, in terms of fairness and efficiency, the advantages of a class action against those of alternative available methods of adjudication.” In re Universal, S.A., Sec. Litig., 242 F.R.D. at 90; see also Fed. R. Civ. P. 23 Advisory Committee Notes, 1966 Amendment, 28 U.S.C.A. Rule 23, at 385 (“Subdivision (b)(3) encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.”).

b. Factors In Determining Superiority – Rule 23(b)(3) identifies several factors courts should consider when determining whether a class action is in fact “superior to other available methods for the fair and efficient adjudication of the controversy”: (1) the interest of members of the class in individually controlling the prosecution or defense of separate claims; (2) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (3) the desirability or undesirability of concentrating the litigation in the particular forum; and (4) the difficulties likely to be encountered in the management of a class action.

Page 7 c. Determination of Superiority is Purpose-Driven – This list of pertinent factors is non-exhaustive and thus “the purposes of Rule 23 should weigh heavily in this [superiority] determination.” Fed. R. Civ. 23 Advisory Committee Notes, 28 U.S.C.A. Rule 23, at 386 (1992). d. For Foreign Claimants, the Last Two Factors (Rule 23(B)(3)(C) and Rule 23(B)(3)(D)) Are Often Dispositive – In the context of class actions that include foreign claimants, the issue of class certification turns in many instances on whether the class representative can establish that it is desirable to concentrate the litigation in the U.S. court (Rule 23(B)(3)(C)) and the court will face minimal difficulties in managing the class action (Rule 23(B)(3)(D)).

(1) Foreign Courts Might Not Give Res Judicata Effect to a Judgment Entered in a U.S. Class Action – In determining whether to certify putative class actions that include foreign claimants, courts often must decide whether to exclude such claimants because foreign courts are unlikely to give res judicata effect to any dismissal, judgment or settlement entered in the class action.

i. Foreign Opposition to the Rule 23 Opt-Out Procedure – A number of foreign courts will not recognize any settlement or final judgment entered in a U.S. class action because they are opposed to Rule 23’s opt-out procedure, which binds an absent class member to a settlement or final judgment unless he affirmatively opts out of the action after receiving notice. Bersch, 519 F.2d at 996-97 (“Here the record contains uncontradicted affidavits that England, the Federal Republic of Germany, Switzerland, Italy, and France would not recognize a United States judgment in favor of the defendant as a bar to an action by their own citizens, even assuming that the citizens had in fact received notice that they would be bound unless they affirmatively opted out of the plaintiff class . . . .”); In re Assicurazioi Generali S.p.A. Holocaust Ins. Litig., 228 F. Supp.2d 348, 364 (S.D.N.Y. 2002) (noting that “most European courts do not recognize the class action as binding against unnamed plaintiffs”).

ii. Courts Disagree Over What Evidence of Non- Recognition of U.S. Judgments Is Needed to Exclude Foreign Claimants from a Class – In the securities context, courts have developed three tests to determine when the likelihood that foreign courts will not recognize a U.S. judgment or settlement requires the exclusion of foreign claimants from a proposed class. However, the same arguments are to some degree applicable in a Rule 23 inquiry outside the securities context.

(i) The “Near Certainty” of Non-Recognition Test – Under the “near certainty” test, a court should certify a class that includes foreign claimants unless it is nearly certain that foreign courts will not recognize the judgment or settlement entered in the U.S. class action. See, e.g., Bersch, 519 F.2d at 996-97 (indicating that courts should refrain from certifying classes that include foreign investor plaintiffs where there is a “near certainty” that a foreign court will not recognize or enforce a judgment

Page 8 in the case, and observing that “while an American court need not abstain from entering judgment simply because of a possibility that a foreign court may not recognize or enforce it, the case stands differently when this is a near certainty”); see also Cromer v. Fin. Ltd. v. Berger, 205 F.R.D. 113, 134-35 (S.D.N.Y. 2001) (“There is a distinction . . . between those circumstances in which there is a ‘possibility’ that a foreign court may not recognize a judgment, and those in which there is ‘near certainty’ that it will not be recognized.”).

(ii) The “Some Possibility” of Non-Recognition Test – Under the “some possibility” of non-recognition test, “if there is some possibility that a class action judgment would be enforceable – or at least have some substantial effect – in the foreign jurisdiction at issue, then class certification is proper.” In re Turkcell Iletisim Hizmetler, A.S. Sec. Litig., 209 F.R.D. 353, 360 (S.D.N.Y. 2002) (holding that certification of the proposed class was proper because the evidence did not show “that a Turkish court would give no weight to judgment of this court,” thereby leaving “some possibility that a class action judgment would be enforceable – or at least have some substantial effect – in the foreign jurisdiction at issue”).

(iii) The “Continuum” of Non-Recognition Test – Under the “continuum” of non-recognition test, a court should “evaluate the risk of nonrecognition along a continuum” and in conjunction with other factors. In re Vivendi Universal, S.A. Sec. Litig., 242 F.R.D. at 95 (“With regard to an evaluation of the risk of nonrecognition, the Court does not find the ‘near certainty’ standard to be a particularly useful analytical tool. . . . It seems more appropriate, instead, to evaluate the risk of nonrecognition along a continuum. Where plaintiffs are able to establish a probability that a foreign court will recognize the res judicata effect of a U.S. class action judgment, plaintiffs will have established this aspect of the superiority requirement. Where plaintiffs are unable to show that foreign court recognition is more likely than not, this factor weighs against a finding of superiority and, taken in consideration with other factors, may lead to the exclusion of foreign claimants from the class. The closer the likelihood of non-recognition is to being a ‘near certainty,’ the more appropriate it is for the Court to deny certification of foreign claimants.”). The Vivendi court ultimately certified a class that included investors from European countries who bought stock on foreign exchanges where the courts of their respective countries were more likely than not to grant preclusive effect to a judgment issued by U.S. courts; the court excluded from the class investors from Germany and Austria because of the likelihood that these countries would refuse to recognize a U.S. decision. Id. at 103-05.

(2) The Manageability Of Class Actions That Include Foreign Plaintiffs

Page 9 i. Rule 23(c)(2)(B) Notice Requirements – In assessing the manageability of a class action that includes foreign claimants, courts often consider the burden of complying with Rule 23(c)(2)(B)’s notice requirements. To ensure that absent class members are afforded the opportunity to opt out or appear, Rule 23(c)(2)(B) provides that “[f]or any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must clearly and concisely state in plain, easily understood language” certain information concerning the action.

(i) Plaintiffs Can Satisfy the Notice Requirement as to Foreign Plaintiffs Through Diligence and Best Efforts – In In re Vivendi Universal, S.A., the Southern District of New of York held that “the issue of foreign notice is not sufficiently grave to defeat class certification” because the plaintiffs’ affidavits showed that they “intend to provide individual notice to those class members whose names and addresses are ascertainable, and that plaintiffs’ proposed form of publication notice, while complex, will prove both manageable and the best means practicable of providing notice.” 242 F.R.D. at 108 (citation omitted). Similarly, in In re Silicone Gel Breast Implant Products Liability Litig., No. CV 92-P-10000-S, 1994 WL 578353 (N.D. Ala. Sept. 1, 1994), the court held that notice to foreign class members was sufficient where the settlement package was mailed to every class member on a list of 80,000 putative class members available from defendants, plaintiffs, and non-parties, including health-care providers. The package was translated into 10 foreign languages and additional dialects; press conferences and press releases were directed to worldwide media; and letters sent to national health ministries and associations.

(ii) Practical Difficulties of Providing Notice to Foreign Claimants Can Be Grounds for Excluding Them From the Class – In In re DaimlerChrysler AG Sec. Litig., 216 F.R.D. 291, 301 (D. Del. 2003), the District of Delaware excluded all foreign claimants from the proposed class because there were “practical difficulties posed by geographic and linguistic diversity of the potential class” in terms of giving them the proper notice and keeping them apprised of the litigation. ii. Burden on the Court from Foreign Class Members – In addition to Rule 23(c)(2)(B)’s notice requirements, courts consider the burden that will be imposed upon them when considering whether to certify a class action that includes foreign claimants. For example, the Second Circuit excluded the foreign claimants from the proposed class in Bersch because “[t]he management of a class action with many thousands of class members imposes tremendous burdens on overtaxed district courts, even when the class members are mostly in the United States and still more so when they are abroad.” Id. at 996. The question of court burden is also often tied up with the forum non

Page 10 conveniens issue. The relative ease of access to evidence and plaintiffs, as well as other considerations of efficiency and cost may weigh for or against dismissal. See, e.g., Delgado, 890 F. Supp. at 1366-68. In addition, difficulties in resolving conflicts of law or applying foreign law may weigh for or against dismissal. See Piper Aircraft, 454 U.S. at 241 n.6; Union Carbide, 634 F. Supp. at 866 (“[I]t is likely that Indian law will emerge as the operative law. An Indian court, therefore, would be better able to apply the controlling law than would this United States Court, or a jury working with it.”).

IV. THE FOREIGN CLAIMANT AS LEAD PLAINTIFF

D. Foreign Lead Plaintiffs May Be More Susceptible to Jurisdictional Challenge – Courts have, in some instances, declined to appoint foreign claimants as lead plaintiffs because they are more susceptible to a subject matter jurisdiction challenge than other class members.

1. Examples of Courts Declining to Appoint A Foreign Lead Plaintiff – Borochoff v. Glaxosmithkline, PLC, 246 F.R.D. 201, 202 (S.D.N.Y. 2007) (declining to appoint as lead plaintiff a group of German investors who purchased the issuer’s securities on foreign exchanges, reasoning that that there was a possibility that German courts would not give preclusive effect to any decisions against the German investors); id. (noting that the presumption that the plaintiff with the highest financial interest should be lead plaintiff can be rebutted where the plaintiff “is subject to unique defenses that render such plaintiff incapable of adequately representing the class”); In re Australia Bank, 2006 WL 3844465, at *5-*8 (excluding proposed lead foreign plaintiffs from class because the court lacked subject matter jurisdiction over their claims); In re Royal Ahold N.V. Sec. & ERISA Litig, 219 F.R.D. at 351-52 (declining to appoint the plaintiff with the largest financial interest as lead plaintiff because the plaintiff was a foreign investor that purchased a foreign corporation’s shares on a foreign exchange and would need to devote substantial time and resources to litigating the issue of subject matter jurisdiction); In re Royal Dutch/Shell Transportation Sec. Litig., No. 04-374 (JWB) (D.N.J. June 30, 2004), available at http://securities.stanford.edu/1029/RD04-01/2004630_f09x_0400374.pdf (declining to appoint the proposed foreign lead plaintiff because the plaintiff faced subject matter jurisdiction defenses that could become a material distraction).

2. Courts Will Appoint Foreign Lead Plaintiffs Where Jurisdictional Defenses Are Less of a Concern – If the likelihood of foreign class members being excluded due to jurisdictional defenses is low (for example in securities cases where the securities are traded in the U.S.), courts may be more willing to appoint foreign claimants as the lead plaintiffs. See, e.g., In re Lernout & Hauspie Sec. Litig., 138 F. Supp. 2d 39, 42-46 (D. Mass. 2001) (appointing group of foreign investors as lead plaintiffs for class of domestic and foreign purchasers of stock of a Belgian corporation traded on NASDAQ); In re Vivendi Universal, S.A. Sec. Litig., 242 F.R.D. at 86 (certifying a class that included foreign investors who held shares traded in France during the relevant period, along with class representatives who were residents of France and who held shares traded in France; Vivendi was a French corporation with ordinary shares and American Depository Shares); Takeda v. Turbodyne Techs., Inc., 67 F. Supp. 2d 1129, 1137 (C.D. Cal. 1999) (appointing as lead plaintiff group containing foreign investors that purchased shares of a domestic company on EASDAQ).

Page 11 Page 12