FILED 1 SAN MATEO poUNTY 2 DEC -· 4 2020

3 etarkof�Coull 4 � r--\AA) - By D K 5

I 6 I SUPERIOR COURT OF THE STATE OF 7 COUNTY 0� SAN MATEO 8 9 RE , INC. i 10 SECURITIESIN LITIGATION : Lead Case No. 19-CIV-05089 / (Consolidated with Case Nos. }9-CIV-05217, 11 1 l 9-CIV-05417, and 19-CIV-05865)

12 CLASS ACTION I ORDER GRANTING DEFE�DANTS� 13 MOTION TO DISMISS BASED UPON FORUM NON CONVENIENS 14

15 Assigned for All Purposes to: Dept.: 4 16 Judge: Honorable Nancy L. Fineman Trial Date: Not Yet Set I 17 This Document Relates To: Date Action Filed: August 30, 2019

18 ALL ACTIONS Hearing Date: October 15, 20�0 19

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28 ORDER GRANTING DEFENDANTS' MOTION TO D1Stv1ISS CaseNo. 19-CIV-05089 1 I. INTRODUCTION 2 The Dropbox Defendants (Dropbox, Inc. land the officer and director defendants) have 3 brought a motion to ·dismiss for forum non convlniens based primarily on the ariment that a Salzberg! v. Sciabacucchi I I 4 recent ruling by the Delaware Supreme Court in I (Del. 2020)) 227 A.3d ("Salzberg"), 5 102 which upheld a federalforum se)ection clause, should be followed by this Court 6 in dismissing Plaintiff's action. The motion was �oined by the Underwriter Defeddants and the. I 7 Sequoia Capital Defendants. Plaintiffsoppose the motion. / 8 There has been substantial briefing on th

12 October 15, 2020. Then the parties submitted suggested: revisions to the Court's tlntativeI ruling 1 13 and objections to the other sides' suggested revisions. 2 14 The Court appreciates the briefing and oral argument by all parties. Unless stated : 15 otherwise, referenceto arguments made by Defendants include the argumentsmade by the arnicus 16 supporting their position, and references to argu�ents made by Plaintiffs includeI the arguments J 17 made by the amicus supporting their position. / / 18 After reviewing all the briefing, listening to oral argument, and conducting its own legal 19 research and analysis, the Court issues the followingI order: 20 21 22

23 ' I 24 1 This Court notes that the Dropbox DefendaritsRestoration state Robotics. that Plaintiffs in this casJ are represented 25 by the sameRestoration plaintiffs' Robotics counsel as in Dropbox Defendlnts Submission Regarding Dismissal Or�er filedRestoration October Robotics, 1, 2020. Whilee.g., /there is overlap 26 between the counsel, not all plaintiffs counsel in Gotchett,See Pitre Gregg & I I v.McCarthy Superior LLP, Court are counsel for Plaintiffsin this base. Further, such overlap is irrel6vant. 27 p8. 2 (1987) 194 Cal.App.3d 134, / 28 The Court notes that Plaintiffs have cited unpublishedI Californiacases. The CourtI does not rely ORDERon any unpublishedGRANTING DEFENDANTS' Californiacases MOTION in reaching TO DISMISS its decision. CaliforniaRule of CT'.ourt8.l l 15(a).-1- Case No. 19-CIV-05089 I II. , FACTUALBACKGROUND 1

2 This case involves four class actions! coordinated before this Cou�. There is no

3 consolidated complaint, pursuant to the agreemeAtt of the parties. There areno matbial differences

I 4 between the substantive allegations of the complaints. 5· Dropbox is incorporated in Delaware w�th its principal place of business in California. 6 Plaintiffs bring putative class actions on behal� of themselves and all persons rho purchased 7 certain Dropbox stock pursuant to a March 23, 2018 Registration Statement issuea in connection 8 with Drop box's . The coJplaints allege a claim for violatiJn of Section 11 9 of the Securities Act of 1933 ("Securities Act"), �5 U.S.C. § 77k, against all defenbantsexcept the 10 Sequoia Capital Defendants and a claim forviolJtion i of�ection 15 of the SecuritielI Act, 15 U.S.C. 11 § 77k, against the Sequoia Capital Defendants. There are no allegations in any of the complaints

12 about the citizenship or residency of any of the Jamedi Plaintiffsor the putative cliss.I 13 In 2018, before Dropbox became a phblic company, Dropbox's BoJd of Directors 14 amended the company's bylaws to include a pro}sion that designatedfederal dis1ct courts as the 15 "exclusive forum" for Securities Act claims. Tliis Federal Forum Provision ("FRP") provides in I 16 relevant part:

17 Unless the corporation consents in writing' to the selection of an alternative forum, the I federaldistrict courts of the United State's of America shall be the exclusi�e forum for the 18 resolution of any complaint asserting a cause; of actionarising W1der the 8iecurities Act of 19 20 Decl�:��f Nina F. Locker in Support of Dripbox Defendants' Motion to DiLiss for Forum 21 Non Conveniens filed May 11, 2020, Ex. 2, p. 2{ The provision is part of a 23 paJe Amended and 22 Restated Bylaws, which amended bylaws were altached as an exhibit to the Registrltion Statement. 23 The Registration Statement also set forth in bol� font the FFP in its entirety in a section entitled 24 "Risks Related to Ownership of [Dropbox' s] Cl�ss A Common Stock" and stated/ that any person 25 who purchased or acquired Dropbox stock "shJl be deemed to have notice and c6nsented" to the 1 26 provision. Locker Deel., Ex. 1, p. 38, 43-44. 27 It appears undisputed that corporation� started inserting these types of federal forum Inc. v. Beaver I 28 provisions in light of the decision of the UnitJd States Supreme Court in CyaJ,I ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -2- Case No. 19-CIV-05089 I •

� 1 CountyEmployees Retirement Fund (2018) 138 .Ct 1061 ("Cyan"),which rea�ed that state 2 courts have concurrent jurisdiction forclaims brohght under the Securities Act, i.e., the claims that I· 3 Plaintiffs bring in this lawsuit. No party subdiittedl any evidence to quantify the number of . I · � 4 corpora tions msertmg· · this prov1s1on,· · b ut th ey appFar to agree th at corporations· o ften msert a 1orurn 5 selection provision. 6 In Salzberg, the Delaware Supreme Court upheld a federal forumprovision in a company's 7 charter finding that the provision was faciallyvalid under the Delaware statute govkrningcontents 1 8 of certification of incorporation, 8 Del. Code § 161 et seq. The court emphasized Jhat it was only . 9 addressing the "facialchallenge" of the federalfoh.m I provision under Delaware co�orate law and 10 not its substantive application. Salzberg, 227 A.3d at 113. 11 The Dropbox Defendants argue this Couft should uphold theFFP following Salzberg and 12 Judge Weiner's decision in Restoration Roboticl.3I Plaintiffs arguethat the provislon is not valid

13 in this Californiastate court for a myriad of reas¢ms.1· 14 Ill. PROCEDURE FOR ENFORCINGA FORUM SELECTION CLAUSE I 15 Defendants properly bring a motion to/ dismiss based upon forum non conveniens to 16 enforce a forum selection clause. Berg v. MTC lectronics Technologies (1998) 61 Cal.App.4th 4 I 1 17 349, 358. This Court uses its discretion to determine whether it should decline to exercise its . r · 18 JUns· · d 1ctlon· over a cause o act10n t h at 1t· b e1· 1e;ves !I may b e more appropnate· 1 y anI d Just· 1 y tne· d 19 elsewhere. Bushanskyv. Soon-Shiong (2018) 23 Cal.App.5thI 1000, 1005, n.2. "[T]heI · test is simply 20 whether application of the clause is unfair or up.reasonable[; if not,] the clause is usually given 21 effect. Claims that the previously chosen forumJis unfair or inconvenient are genirally rejected." 22 23 3 Restoration Robotics is not precedent. California Rule of Court 8.ll15(a). However, that decision appears to be the first decision outside! of Delaware to have decided thi� issue, and this 24 Court appreciates and respects Judge Weiner's analysis.

25 4 Even thoughthe Court uses its discretion in iaetermining whether to granta motion to dismiss 26 or stay for foruin non conveniens,.-that discretibn is limited. "Although not eve� a 'mandatory' forum selection clause can completely eliminat� a court's discretion to make apJropriate rulings

27 regarding choice of forum, the modem trend {sI to enforce mandatory forum sblection! clauses unless they are unfair or unreasonable." Berg,i 61 Cal.App.4th at 358; see alsJ Drulias v. 1st 28 Century Bancshares, Inc. (2018) 30 Cal.App.5�h· 696, 703, 709, review denied (Mar.I 20, 2019); Bushansky,ORDER GRANTING 23 Cal.App.5th DEFENDANTS' at 1011. MOTION TO D�SMISS -3- Case No. 19-CIV-05089 1 Berg, 61 Cal.App.4th at 358. "Ordinarily, the P,arty seeking to avoid enforcement of a forum 2 selection clause bears the burden of establishing that [its] enforcement ... would bJ unreasonable. 3 That burden, however, is reversed when the claiJs at issue are based on unwaivabli rightscreated 4 by California statutes. In that situation, the partt seeking to enforce the forum sl1ectionI clause 5 bears the burden to show litigating the claims in the contractually-designated. forumI will not 6 diminish in any way the substantive rights afforde<:lI under Californialaw." Drulias, BO Cal.App.5th 7 at 703 ( citations and internalquotations and somb gramm�romitted). 8 IV. ANALYSIS

9 A. This Court Reaches the Same Conclusion Under Both Californiaand Delaware Ilaw 10 The parties dispute whether Californiala y, which Plaintiffs say controls, o Delaware law, 11 f which Defendants say controls, applies in this totion. If Delaware law applies, hen this Court 12 ! must followSalzberg in determining whether the tFP is valid. See 9 Witkin, Califo ia Procedure, 13 r 5th Appeal § 504 (2020) ("When a question aris�s in the courts of this state as to the construction 14 or effect of a statute of another state, our courtJ will follow the interpretation pliced upon such 15 : I statute by the court oflast resort of the enacting �tate."! (citations omitted)). This Oourt would still 16 determine whether the clause is unfairor unreasnable. 17 Under both California and Delaware, if the issue involves the internal. affairs ofDropbox, 18 ! I Lidow V. Superior Court (2012) Vaughn V. LJ Delaware law applies. / 206 Cal.App.4th 351, 35 19 r Internat., Inc. (2009) 174 Cal.App.4th 213, 223. In Salzberg, the Delaware Supreme Court 20 explained that the scope of Delaware'� enablin1 statute permitsDelaware corpJations to adopt 21 i I charter provisions that involve subject matters 1 beyond internal affairs claims that are "neither 22 'external'nor 'internalaffairs' claims" but inste�d involve subject matters that "ate in-between in 23 what might be called Section 102(b)(l)'s 'Ou�er Band,' ..." Salzberg, 227 A[3d at 130. The 24 Delaware Supreme Court furtherexplained thatithe subjectmatter ofFFPs-that is, claims under 25 the Securities Act of 1933-are intra-corporate claims that fall within the "Outer Band." Id. No 26 1 Californiaappellate court has analyzedan "Out� Band" provision. 27 This Court analyzesthe motion under Californiaand applicable federal law to see whether 28 ! I , Salzberg a conflictoflaws issue arises. The Court concludes that it does not need to decide WhetherI ORDER GRANTINGDEFENDANTS' MOTION TO DISMISS -4- Case No. 19-CIV-05089 . I I I t 1 should control its decision because it grants the motion under California and / 2 Supreme Court authority. 3 B. A Shareholder May Waive the Right to Litigate Securities Act Claims in a Califdrnia State Court I 4 Plaintiffs claim that they have an absolut� rightto bring these actions in a California state 5 Cy an court und�r the holding of and the anti-wai�er provisions of the Securities +t, 15 U.S. C. § 6 77n. Defendants claim. that shareholders can agrde to litigate their Securities Act claims in fe deral 7 court. i I 8 The United States Supreme Court in Cy ah was unequivocal in reaffirminglhat federal and 9 state courts have concurrent jurisdiction over seJurities Act claims. But no precedbntial authority 10 Cyan has decided the precise issue presented in this •tion. lhe court did not addjess the issue of 11 whether the anti-waiver statute of 15 U.S.C. § 77,nwas waivable by private parties pre-litigation.

12 I Defendants rely on an arbitration case !ecided by the United States su!reme Court in 13 Rodriguez de Quijas v. Shearson!American Exp.J Inc. (1989) 490 U.S. 477. Defentnts argue that 14 this decision squarely addressed the issue presedted here. The Court findsRod riJez controlling, 15 but disagrees that the decision squarely addressJs the issue. The Rodriguez Courtj determined the

16 I issue of waiver in the arbitration context rather th� between state and federalcourt[ The Rodriguez 17 I Court held that stockholders could waive the rig}itto bring Securities Act claims inl court and agree

18 i to arbitrate their claims. In �o holding, the UnitJa States Supreme Court express}�J found that the 19 Securities Act's provision conferring concurrent state court jurisdiction without the possibility of 20 removal was a procedural provision that was ndt critical to protect the complaindnt's substantive 21 rights and, therefore, did not implicate the anti-tver provision: 22 Once the outmoded presumption of disfavoring arbitration proceedings is set to one side, 23 it becomes clear that the right to select the judicial forum and the wider hhoice of courts are not such essential features of the Securities Act that [the Securities 4ct 's antiwaiver 24 provision] is properly construed to bar: any waiver of these provisions. iNor are they so 25 critical that they cannot be waived unde� the rationale that the Securities s4-ct was intended Wilko v. wan to place buyers of securities on an equal footing with sellers. [ 1 (1953) 346 26 U.S. 427] identified two different kind� of provisions in the Securities Act that would advance this objective. Some are substdntive, such as the provision placing on the seller 27 the burden of proving lack of scienter �hen a buyer alleges fraud. Othed are procedural. The specific procedural improvements h¥ghlighted in Wilko are ... the grcint of concurrent 28 jurisdiction in the state andfederal cou;ts without the possibility of remotaz. I ORDER GRANTING DEFENDANTS' MOTION TO DISMISS . ! -5- Case No. 19-CIV-05089 I Thereis no sound basis for construing th� prohibition in [the Securities Act's anti-waiver 2 provision] on waiving "compliance with hny provision" of the Securities �ct to app ly to 3 these procedural provisions. [ I Rodriguez, i ' 4 · 490 U.S. at 481-82 (emphasis added)J I

I 5 The analysis in Rodriguez compels a condlusion in this context that a party may waive the 6 right to have an ·action decided in state court land instead may agree to have cases decided 7 exclusively in federal court. The analysis in Rodriguez regarding arbitration appli:es to this FFP. 8 The federal forum will allow the same substan�ive claims and remedies as the ktate court and

9 federal courts have expertiseR in d handling securijes matters; for some claims, fedjral courts have a· . r c...... : . r . . . 10 exc1 us1ve Juns 1ct1on. A s m o nguez, th ere 1s no soun dbas1s h ere 1or construmg tjh e proh 1 b1t10ns 11 and the anti-waiver provision of the Securities )ct to apply to the procedural seldction of a state I I 12 versus federal forum. I 13 Plaintiffsattempt to limit Rodriguez to arBitration cases and argue that Rodriguez overruled Wilko "only to the extent that the Federal ArbitrJtion Act ("FAA") conflicts with J 14 of the 1933 14 o/ 15 Act in the context of internationalagree ments." �laintiffs Opposition filedJune 1 2020 at 21 : 14- 16 16. Plaintiffsalso argue that any holding beyond re specific holding is dicta. Id. at� 1: 10-14. Firs� 17 this Court does not read Rodriguez to be as limi�ing as Plaintiffs contend. Second,!even if dicta, a ' � 1 g. conclusion with which the Court disagrees, "di�ta are often followed" and "may I evertheless be 19 considered highlypersuasive ..." 9 Witkin, CaliforniaProcedure, Appeal § 511 (�th ed. 2020).5 20 Plaintiffs contend that Wi lko is still good law and is cited by California cdurts. The Court

i 21 disagrees.First, Rodriguez reversed Wilko. "We! now conclude that Wilko was inclrrectli y decided : / 22 5 At the hearing on this motion, Plaintiffs' coimsel stated that Rodriguez involfed a "bilateral" 23 agreement and argued that distinguishes Rodrigqez fromthis case. However, the ai'bitration clause in Rodriguez was neither bilateral nor freelyneg'oti ated; it was contained in a non�negotiated form 24 , ' I brokerage agreement, i.e., a contract of adhesi01;1. Rodriguez, 490 U.S. at 478 (petitioners "signed 25 a standard customer agreementwith the broker'.'); seeJ. also Daniel J. Morrissey, �ill Arbitration End Securities Litigation?, 40 No. 2 Sec. Reg.1 L. Art. 2 (Summer 2012) (noting that the 26 provisions at issue in Rodriguez "were presented to [customers] in a take-it-or-leavb contract which , I they had to signto open accounts with their stockbroker."). Californialaw does nbt require forum 27 selection clauses to be freely negotiated. See Drulias, 30 Cal.App.5th at 1q7-70� ("neither 28 California nor Delaware law requires forum :'selection clauses to be freely riegotiated to be enforceable") ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -6- Case No. 19-CIV-05089 I 1 and is inconsistent with the prevailing uniform JonstructionI of other federal statutesI governing 2 arbitration agreements in the setting of busine s transactions." Rodriguez, 490 U.S. at 484; t j L.P. 3 Verdugo v. Alliantgroup, (2015) 237 Cal.App1 .4th 141, 155, n. 4. Further, PlaintiffI s' argument 1 4 is contrary to the principle that "[ w ]here there is JI conflict between opinions of the same court on V. l 5 a given principle oflaw the latest thereof should e givenpreference." Jones Jors (1960) 182 6 r Cal.App.2d 80, 83. Lastly, none of the cases relied upon by Plaintiffs involve the waiver of a 7 Securities Act claim, and some of their cases are pot citable. v. 8 One of Plaintiffs' cases, Ve rdugo Allian(group, 237 Cal.App.4th at 154 (a wage and hour v. / 9 case) relies on Hall Superior Court (1983) 1�0 Cal.App.3d 411, 418 which relied on Wilko. 10 Ve rdugo, 237 Cal.App.4th at 155. The Court tinJs Hall instructive. Hall involved in issue of first 11 impression of whether a choice of forum provisiop.in a private Californiasecurities agreementwas 12 enforceable. Id. at 413. The Hall case did not inv�lvej an arbitration clause. NevertJ;ieI less, the Hall 13 court, in resolving the securities question, referrbd: to Wi lko as holding that "a siniilarI nonwaiver 14 provision, section 14 of the federal Securities .A.cti ·(15 U.S.C. § 77n) prohibits �nI forcement of 15 agreements to arbitrate contained in securities tr�nsactions." Hall, 150 Cal.App.3ki at 418 (citing 16 Wi lko, 346 U.S. at 435-36). The Hall court hel� the forumpr ovision unenforce+ble. Since that 17 decision, Rodriquez has overruled Wilko and is ithe precedential authority. The ciourt finds Hall

18 analogous to the issues raised in Defendants' kotion.; As Hall followed and a!pliedI Wi lko to 19 determine/ the enforceability of a choice. of forumliprovision, this Court applies Rodn'iguez and holds . i 20 that a party can waive a forumselection clause i a Securities Act case. f / 21 The Court's conclusion is supported by 9alifomia law upholding forum Sflection clauses 22 (albeit not involving Securities Act claims). f Korman Princess C uise Lines, 23 Defendants cite, but Plaintiffs do not ever mention, v. r Ltd. I 24 (2019) 32 Cal.App.5th 206. Korman involved an'injuryon a cruise ship.Id. at 210.jBoth the federal 25 and state court had jurisdiction over the cla�s, which involved maritime l�w. Id. at 215. 26 Defendants sought to enforce a forum selectiod! clause that required the lawsuit JoI be litigated in 27 the United States District Court forthe Central Districtof California.Id. at 210. Bdth the trial court

28 and appellate court upheld the forum selection clause and rejected the plaintiff's 1gument that the ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -7- CaseNo. 19-CIV�05089 ' I Id. 1 forum selection clause unfair! y deprives Califomi� state courts fromhearing the mafter. at 221- 2 222. I 3 While it is.true that the parties may not d6prive courts of their jurisdiction pver causes by 4 private agreerp.ent,it is readily apparent th�t courts possess discretion to decFne to exercise jurisdiction in recognition of the parties' nee and voluntary choice of a different forum. 5 The forum selection clause does not depri�e the Los Angeles Superior Court bfjurisdiction. Instead, the ofsuperior court exercised its �iscretion to decline to exercise jurisdiction in 6 recognition the forum selection clause �ontained in the passage contract.

7 Id. at 221-22 (citations and quotations omitted).6 ! f 8 The Court of Appeal in Bushansky also upheld a forumselection provision. In Bushansky, � 9 shareholders brought a derivative action against !aI corporation's directors and offiI ers for breach\ 10 of fiduciary duty. Defendants broughta motion t dismiss based on forumnon con eniens arguing 1 i / 11 that a forum selection clause gave the Delaware Chancery Court exclusive jurisdictionI over 12 derivative suits. The trial court granted the mot:ion and the Court of Appeal affirmed.I As with 13 Korman, the Court of Appeal found that "the enforcement: of forumselection clausesI stems from ' 14 courts' discretion to decline to exercisejurisdictiqn' in recognitionof the parties' fre,e and voluntary 15 choice of a different forum. Here, we say mdrely� that a court properly declines to exercise

.16 jurisdiction based on a contractual forum selectio� clause like this one when conse11-t to jurisdiction 17 in the alternateforum is provided within a reaso�able period ohime." 23 Cal.ApJ.5th at 1010-11 I I 18 (citation and internalquotation omitted). Simila ly, the Court of Appeal upheld a elaware forum �I f 19 . selection clause in Drttlias, 30 Cal.App.5th at 696.i While the case involved the!I internal affairs 20 doctrine, so that Delaware law applied to the �alysis, the case is instructive. The Court rejected ! . ' 21 the plaintiffs' argumentthat Corporations CodeI! § 2116 gave California sharehollers) the rightto

22 sue directors of foreigncorporations for miscon�uct in California.Id. at 706-07. 23 24 25 l I 6 Notably, the forum selection provision that jas enforced in Korman was found in a cruise ship 26 passage contract, i.e., a non-negotiated contract of adhesion. Id. at 210, 217 (citing Carnival Cruise Lines, (1991) 499 U.S. 5?5, 593-9;5). In addition, t�e chosen forum l in was 27 Inc. v. Shute Korman far more limiting than that chosen in Drop box's FFP; the Korman provision required that all claims 28 be brought in the Central Districtof California,�hereas Dropbox's FFP selects anp suitable federal court for.Securities Act claims. I ORDER GRANTINGDEFENDA NTS' MOTION TO DJSMISS I -8- Case No. 19-CIV-05089 ;, ( 1 Plaintiffs rightfully point out that both prulias and Bushansky involve iftemal affairs

2 governed by Delaware law. The Court takes thaiI distinction into account in its r�I liance on the 3 cases. These cases though demonstrate a Califopiia policy towards upholding p;rovisions that gum 4 regulate where shareholders can bring suit. None/of these cases accept Plaintiffs' t ents that 5 the cases should be adjudicated in a Californiastate court. 6 In Pong v. American Capital Holdings, Jnb. (E.D. Cal. Feb. 28, 2007, No. CIV. S-06-2527 7 LKK/DAD) 2007 WL 657790, which is not bidingI on this Court, but persuatve,I the Hon. 8 Lawrence K. Karlton, analyzed whether the pl1tiffs could waive the "anti-waiier" s1atutes in 9 California Corporations Code § 25701, which i applies to offers to sell or buy securities in 10 California. Finding no state authority on point, Jrge Karlton performed a survey�f cases under

i I l 1 the federal anti-waiver language in the SecuritiesJAct! of 1933 and the Securities Exchange: Act of 12 1934 before concluding: "Together, these cases reflectI a trend: Federal courts hayeI increasingly 13 enforcedprivate stipulations in securities fraud li gation, despite the antiwaiver p) visions of the r r 14 federalsecurities laws." Id. at *6-7 (internal citations,! quotations and some grammar.j omitted). 15 Plaintiffsalso rely on Cy an to establish their rightto remain in state court. However, Cy an

I 16 did not address the issue of whether a shareholdet could waive that rightat the tim1I it entered into 17 the relationship with the corporation. The opinion only addressed whether a coUJoration could 18 remove a Securities Act case to federal court onJ a shareholder had filedin state cburt. That issue 19 is different from the one presented here on wh�ther the corporation can insist aj a condition of 20 purchasing stock that the shareholder agreeto littgate in a federal forum. / 21 At the hearing, Plaintiffs explained tht they were not arguing that pfes to a fully gn 22 negotiated,bilateral agreementcould not agreeto a forum selection provision desi ating federal 23 courts for Securities Act claims. Rather, Plaini; iffs argue that the Securities A!'sI antiremoval 24 provision is so ''unusual" that it necessarily rfflects congressional intent to p+hibit potential in 25 defendants in Securities Act cases fromunilateially requiring claims to proceed federal court. 26 No party has provided the Court withany case 1Jwi , legislative history, or other evi�ence regarding i 27 28 ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -9- CaseNo. 19-CIV-05089 'rlf 1 the legislative intent of the antiremoval provision the Securities Act.7 Thus, this lC ourt does not 2 have the benefit of any legislative intent to guide its analysis. Plaintiffs provide no authority 3 requiring this Court to analyze this statute ani diff�rently than any other statlte. Rodriguez 4 provides the proper analytical frameworkhere. I 5 During the hearing, Plaintiffs identified tro decisions to support their argument that the . 6 FFP violates federai' law. The Court does not fitjd these decisions instructive becLse they were

7 decided before the United States Supreme cof ·s decision in (),an and be� the Delaware 8 Supreme Court's decision in Salzberg and are factually different. luso v. Snap, Inc. (C.D. Cal. 9 Nov. 21, 2018, No. 17-cv-7176-VAP-RAO) 201t WL 10410800, was premised obI a finding that ' ' I id. 10 no Delaware authority supported the validity of FFPs. See at *4. In light of Salzberg, Juso 11 provides no assistance to this Court for the res�lution of the question now pending before this ay /n c. 12 Court. Toe second decision, Cl ton v. Tintri, (N.D. Cal. OcL 30, 2017, Ni 17-cv-05683- 13 YGR) 2017 WL 4876517 involved no meaningf41discussion or analysis of theFFP at issue. It did 14 not, for example, consider Rodriguez or its prol�ny, or the increasing trend of elforcing forum

15 selection provisions. Id. at *3-4. Clayton's lac�! of meaningful analysis makes JenseI given the 16 procedural posture of that action. There, the defendants had improperly removed the Securities 17 Act claims to federal court rather than seeking t�: enforce the FFP through the priperI procedure, 18 i. e., a forum non conveniens motion in Califomia state court. Id. at *I, 5. Therefore, the federal 19 court did not need to give serious consideratio� to the validity of the FFP in OF/der to properly / I 20 remand the action under the Securities Act's antiremovalt provision. 21

22 ry 7 The only argument regarding legislative histo in the parties' papers is a single footnote in the 23 amicus Seebrief submitted on Plaintiffs' behalf, which cites to a 1981 academic arti61e by Professor I 24 Hazen. Amicus Brief of Former SEC Chainhan HarveyL. Pitt and Twenty Liw Professors In Support of Opposition to Motion to Dismiss for;Forum Non Conveniens ("Plaintiffs' Amicus") at 25 12 n.4 (citing Thomas Lee Hazen, Allocation of Jurisdiction B enveen the State and Federal Courts l = For Private Remedies Under the Federal Secukiities'Laws, 60 N.C. L. Rev. 707,1 741-42 (1981), 26 https://scholarship.law.unc.edu/cgi/viewcontent cgi?article 2852&context=nclr)./ However, Professor ryHazen's article does not support Plaintiffs'arguments regarding congressionalintent; to 27 the contra , he concludes that "[t]here is no evidence in the legislative history as tb what Congress 28 had in mind when it drafted [the Securities Act'i antiremoval provision]." Hazen, 60 N.C. L. Rev. 707 at 741. ! ORDERGRANTING DEFENDANTS' MOTION TO DISMISS -10- Case No. 19�CIV-05089 I I I t J 1 Accordingly, this Court concludes that Plaintiffs in this case may waive their right to have . . . . . 2 th etr S ecuntles Act cases ad' JU d"1ca t e d m. state court.[ That cone1 us10n d oes not end tli / e mqmry.. Th e 3 Court must next determine whether "application jf the clause is unfair or unreasonlble." Berg, 61 4 fill Cal.App.4th at 35 8. If there is unwaivable riJt,Def endants inust show that th� contractually­ 5 designated forum will not diminish Plaintiffs' rigtlts under Californialaw. Drulias, 3 0 Cal.App.5th 6 at 703.

I • 7 C. Plaintiffs Do Not Meet Their Bu�den to Demonstrate .that the FFP Is Unfair or 8 Unreasonable 9 Since the Court findsthat Plaintiffs may iraivehaving their Securities Act claims heard. in 10 I I this California state court, they have the burden to demonstrate that the FFiP is unfair or

11 unreasonable. The case does not involve any caiiforniaJ laws; the actions are broubtI exclusively 12 under federallaw. BothDrulias, 30 Cal.App.5th �t 696 and Ve rdugo, 237 Cal.App)4th at 144 hold

13 that the unwaivable right must be declared by th�l CaliforniaLegisla ture in Califorbaj statu tes. In 14 this case, there is no California statute at issue. !Accordingly, there is no unwaivable right under , 15 Californialaw that the Court must consider. Eveh if the Court were to find that nJfendantI has the 16 burden, as discussed below, there are no factsto/ demonstrate that the federal couds will diminish 17 Plaintiffs ' substantive rights. 18 D. By Purchasing the 8Stock, Plaintiffs Agreed to the FFP In the Bylaws . 19 I Plaintiffs claim that the Dropbox Defe:qdants must prove assent (the amicus . discuss all 20 elements of contract formation).9 Plaintiffs stat�: ''No ordinary investor had any Jeason to expect 21 I 22 ) 8 In re Sonim Technologies, Inc. Securities Litigation, 23 In Lead Case No. 19CIV05564, where the parties have deferred to the arguments ma�e in this case, the federal forurri provision is in 24 Sonim's charter. This Court finds the same law I/ip plies to a charter as to a bylaw./I

25 9 The arnicus who support Plaintiffs' posi�ion presume that all Plaintiffs/ are California stockholders. Amicus Brief in Support of Oppo$ition at 18: 15 ("Where Californiaresidents ..."); 26 . ' I 19:21-22 ("They arise fromsecur ities purchase� in California... "). These actiohs, however, are 27 brought on behalf of all Dropbox shareholders aµd there has not been, and probably cannot be, any showing that all shareholders are California res�dents. 28 ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -11- Case No. 19-CIV-05089 1 to be bound by a Grundfest [FFP] clause." oJposition at 17:14 (brackets added). Plaintiffs' 2 argument appears to focus on each individual s�areholder's assent. None of the �ases cited by 3 Plaintiffs on assent pertains to shareholders purdhasing on a national exchange. The fact that a 4 forum selection clause is not negotiable does not/mean that it is unreasonable and �tis Plaintiffs' . 5 burden to demonstrate that the provision was ou de their reasonable expectatio s. Korman, 32 t / 6 Cal.App.5th at 216-17; Drulias, 30 Cal.App.5th at 707-08.10 The Amended Bylaws and 7 Registration inform shareholders of this provisiln. Plaintiffs introduce no evidelce, as is their 8 burden, to demonstrate that this clause is unexpedtedl or unreasonable. Thus, they flit to meet their 9 burden. . I 10 Defendants rely on the language in t e R�gistration Statement that veryone who f r 11 purchased Dropbox stock shall be deemed to hai}e notice and consented to the provision (Locker l 12 Deel., Ex. 1, p. 43) and the law that Bylaws are b_inding on shareholders. 13 This Court concludes that when Plaintiffs acquired their shares, their purchases were 14 subject to the Dropbox Bylaws and they assented)to the FFP. See Edgar v. MITE cbrp. (1982) 457 McFadden v. Board of Los Anget s CountySup 'rs Drulias, 15 U.S. 624, 645; f (1888) 7 4 Cal. f 1; 30 . 16 Cal.App.5th at 708; State Farm Mutual Auto1110bile In s. Co. v. Superior Court (2003) 114 17 Cal.App.4th 434, 444; Tu-Vu Drive-In Corp. v. A�hkins (1964) 61 Cal.2d283, 288; kupreme Lodge 18 of FraternalBrotherhood v. Price (1915) 27 Calf App. 607, 616; 9 Witkin, Summa�j of California 19 Law, Corporations § 163 (11th ed. 2020). Any o�her; conclusion wouldI mean that I court in a class 20 action might have to apply up to 50 different stdte laws in deciding any shareholder's case. Such l 21 a requirement would be impractical, contrary to �he efficientoperation of national exchanges, and 22 preclude class action treatment of these cases. Siate Fa rm, 114 Cal.App.4th at 443 . 23 ,24 25 26 27 10 In Smith, Va lentino & Smith, Inc. v. Sup¢rior Court (1976) 17 Cal.3d 491, the California Supreme Court held that a contractual forum selection clause was enforceable wlien negotiated at 28 arm 's length between two corporations. Court of Appeal cases following Smith hate e�panded. that r ORDERholding GRANTING to agreements DEFENDANT where theS' provision MOTION TO has DISMISS not been negotiated. -12- Case No. 19-CIV-05089 E. 1 The Clause Is Not Unlawful or Gnenforceable under Californialaw I 2 Plaintiffs claim that the FFP is unlawfulJnder California law. Their arguJ , ent is that the

3 I FFP directly contradicts the antiwaiver provisioAs in the Securities Act. The coJrtI has already 4 rejected that argument. For the same reasons, th� FFP is not unenforceable and this Court may 5 it decline to exercise jurisdiction. f 6 F. Enforcement of the FFP Is Not {iJnconscionable 7 Since Plaintiffs separately, in their/ written submissions, raise Ithe issue of 8 yz unconscionability, the Court, althoughit does not/ findit necessary to rule on this mbtion, anal es 9 tJ whether the prov1s10n is unconscionable. i Plaintiff has the burden demonstrate 10 unconscionability. Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th �51, 972. 11 : Unconscionability has both a procedural �d substantive element, and botJI must be found 12 in order for a court to exercise its discretion to :l refuse to enforce a contract or clauseI based on 13 unconscionability. Armendariz v. Foundation H�alth Psychcare Services, Inc. (2000) 24 Cal.4th 14 I 83. Procedural unconscionability looks at the process surrounding the contract formation, and ! 15 Id. focuses on "oppression" or "surprise" due to miequal bargaining power. at 124. Substantive 16 unconscionability applies such that even if a con�act or provision is consistent wiJ the reasonable 17 expectations of the parties, the contractor proviLon will not be enforced if it is "dverly harsh"or 18 Id. has "one-sided" results. Although both procJdural and substantive unconscioJabilityl must be 19 found, they need not be present in the same degr�e.Id: Unconscionability turnsno t only on a one­ 20 sided result, but also on an absence of justification for it. Stirlen v. Supercuts, Inc. (1997) 51 21 Cal.App.4th 1519, 1532 (cited by Arm�ndariz, �4 Cal.4th at 118). The Court uses a sliding scale 22 analysis to determine unconscionability. "The ptevailing view is that [procedural and substantive 23 unconscionability] must both be present in order for a court to exercise its discretion to refuseto 24 enforce a con�t or clause under the doctrine if unconscionability. But they nef not be present 25 in the same degree. Essentially a sliding scale is invoked which disregards the regularity of the

26 , procedural process of the contract formati�n, tbat1 creates the terms, in proportiJn to the greater 27 I harshness or unreasonableness of the substanvve terms themselves. In other ords, the more 28 r substantively oppressive the contractterm, thei less evidence of procedural unconscionability is ORDER GRANTING DEFENDANTS' MOTION TO D�SMISS: I -13- Case No. 19-CIV-05089 i ' 1 required to come to the conclusion that the term i�:unenforceable,and vice versa." Armendariz, 24 2 Cal.4th at 114 (bracketed material in original; cit4tions and internalquotations omihed). 3 The fact that a contract is one of adhesio� does not automatically_ lead to lfihe conclusion 4 that the contract is unconscionable, but �oes establish some �egree procedural 5 unconscionability. Sanchez v. Valencia Holding!/c o., LLC (2015) 61 Cal.4th 899[I 915; see also. 6 Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1245. The Court findsthat the FFP contams 7 some procedural unconscionability. It was drafteb by Dropbox, presented on a-taile-it-or--leaveit 8 basis, and only applies to Securities Act claims. the provision, however, is in boJ the Bylaws (a 9 23-page document) and Under the Risks Rel�ted to Ownership section, witJ the provision 10 highlighted. Locker Deel., Ex. 1 at 43; Ex. 2 at p/ 23. 11 The Court then turnsto substantive uncodscionability. As discussed above, Plaintiffshave l 12 failed to meet their burden that the fact that �e/ clause was not negotiated makesI it unfair or Korman, Drulias, 13 unreasonable. 32 Cal.App.5th. at 216-1:,''. ; 30 Cal.App.5th at 708.j Plaintiffs fail 14 to introduce any evidence that the FFP was outsi�e their reasonable expectations. '91eyfail to show 15 that it is unusual or surprising that a federal Securities Act claim would be litigated in federal court. 16 They also fail to show that they did not have! a meaningful choice of a reasohablyI available 17 alternative . See Morris v. Redwood!Empire Bancorp (2005) 128 Cal.App.4th 1305,

18 1320 (upholding arbitration agreement when plLntiffI failed to show he did not hlve meaningful 19 choice of reasonably available sources of employment). 20 The Court does not findthe FPP substantively unconscionable. While the provision is one­ 21 sided, only dealing with Securities Acts claim , this Court believes that the prf vision must be !

22 analyzed in context. Federal courts are courts ofI limited jurisdiction and the part�es cannot agree 23 to federal jurisdictionwhere none exists. Jana�s v. U.S. Postal Service (9th Cir. 1985) 768 F .2d

I I 24 1091, 1095 ("parties cannot by stipulation orI waiver grant or deny federalI subject matter

25 jurisdiction. (Citations).") Federal courts have j

I 4 broader than the provision in Korman, 32 Cal.Ap�.Sth at 206, which limited venuJI to the Central

5 District of Califo�a. Unlike arbitration clauses, t�I e FFP does not take away the ri�: t to discovery,

6 jury trial or appeal. There cannot be any doubt t?at federal courts have the expertise,l ability and 7 excellent judges, such as the Hon. Beth Freeman,lformerly of this Court, who is presiding over the 8 federalDropbox cases. While Plaintiffs point out 1ifferences between federaland stlte courts, they 9 cannot seriously be arguing that federal courts ckuot fairly and efficiently handlj these cases or 10 that they cannot obtain justice in a fe deral couf. The federal court can provide /efficiencies of 11 coordination throughthe Panel on MultidistrictLi tigation, which are not possible if cases are filed 12 in state court.11 Plaintiffs have failedto demonstJate and could not demonstrate thJt they will lose 13 substantive. rights if these federalclaims are litig�tedI in federal court. : 14 Thus, weighingon a sliding scale all the factorsI regarding unconscionability and applying 15 them to the facts of this case, the Court concludds that the FFP is not unconscionable.

16 G. Plaintiffs Have Failed to Prove !a Constitutional , Violation I

17 . ' Plaintiffs also attack the FFP on constitutional grounds, i.e., on the bas�s1 that the FFP 18 violates the Commerce Clause and Supremacy flause. Plaintiffs only attack the rFP, which are 19 I always adopted by private parties. For the sarp.e, reasons that the Court found I that Rodriguez 20 allowed the FFP and Cyan did not forbidit, Plaip.tiffs' constitutional arguments fail because there 21 is no conflict between the FFP and federal law. 22 ! V. ORDER 23 l For these reasons, the Court GRANTS t1e Dropbox Defendants'mqtion to dismiss. At the 24 r hearing, both parties stated that if the Court grantedthe Dropbox Defendants' motion,I they wanted 25 the Court to dismiss, rather than stay, the actioJ. The Court therefore dismisses is action. 26 T 11 1 27 This Court does endorse cooperation b�tween state and federal cases Jnder the proper 28 circumstances. Here, since there appears to be complete overlap with the federalbase and no state law claims, this Court believes that parallel actibns would be inefficientand unhicessary. ORDER GRANTING _DEFENDANTS' MOTION TO DISMISS I -15- Case 19-CIV-05089 No. I I . . I 1 The Court does not reach the substantiv� arguments of the Defendants wro joined this i 2 motion. Instead, using its discretion afteranalyzin! all the facts, the Court also dismi ses the action 3 on the groundsof economy and efficiency. 4

5 IT IS SO ORDERED. 6

7 Dated: December 4, 2020 N 8 9 10 11 12 13 14 15

16 17 18 19 20 21 22 23

24 25 26

27 28 ORDER GRANTING DEFENDANTS' MOTION TO DISMISS -16- CaseNo. 19-CIV-05089