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 CALIFORNIA 7 COUNTY 0� SAN MATEO 8 9 RE DROPBOX, 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 20 21 22 23 24 25 26 27 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<r motion, including briefs by amici curiae, one 9 supporting Defendant and one supporting Plainti+ and supplemental briefing after/mycolleague, W,ong v. Restoration Robotics, Inc., 10 the Hon. Marie S. Weiner, issued a ruling in I I San Mateo 1 11 Superior Court Master File No. 18CIV02609 (Se�t. 1, 2020). The Court heard ordl argument on 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 initial public offering. 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.