dates are allotted approximately one year after the plaintiffs apply for a trial date, Kirkham Aff. P 6, whereas in the District of New Jersey cases proceed to trial on an average of 23 months. Kultur, 860 F. Supp. at 1068. As plaintiffs point out, however, trials in the Supreme Court of British Columbia are frequently "overbooked" and cases are often bumped to a later trial date. Locke Aff. P 33. Furthermore, although the parties may request a trial date one year from application, due to scheduling problems and the time required for pre-trial proceedings, they may not receive it. Locke Aff. P 33. Consequently, the court congestion factor does not favor either forum.
The second factor that the court must consider is the local interest in having the controversy settled at home. This factor overwhelmingly favors the plaintiffs. The plaintiffs seek redress for alleged violations of the United States securities laws. In general, "public policy favors providing a forum in which United States citizens may seek to redress an alleged wrong." American Home Assurance Co. v. Insurance Co, of Ireland Ltd., 603 F. Supp. 636, 642 (S.D.N.Y. 1984).
The fraud predominately impacted individuals trading on the NASDAQ. Nesmont stock also traded on the Vancouver Stock Exchange ("VSE"), however, total daily volume of trading on NASDAQ was more than 350% of the total daily volume on the VSE during the portion of the class period that the stock was trading on both markets. Lavallee Decl. Exh. C.
The United States has a strong public policy of protecting the integrity of its securities markets. See e.g., SEC v. Banca Della Svizzera Italiana, 92 F.R.D. 111 (S.D.N.Y. 1981) ("the strength of the United States' interest in enforcing its securities laws to ensure the integrity of its financial markets cannot seriously be doubted"). The Securities and Exchange Act itself indicates that "transactions in securities as commonly conducted upon the securities exchanges and over-the-counter markets are affected with a national public interest." 15 U.S.C. § 78b.
Coopers correctly argues that Canada has an interest in regulating the conduct of its corporate entities and in supervising the work of its chartered auditors. As the Trafton court noted, however, "while Canada admittedly has an interest in regulating the conduct of its corporate entities . . . .. the United States' interest in securities regulation to protect the 'integrity of both domestic investor decision and market mechanisms' is overriding." Trafton, 1994 WL 746199 at *13 (citations omitted).
This case concerns an alleged fraud perpetrated on a U.S. securities market (NASDAQ) and involves allegedly fraudulent disclosures in documents filed with the SEC and disseminated to investors who relied on the integrity of the U.S. market system. Consequently, the public as a whole has a strong interest in the plaintiffs pursuing-redress in the United States.
The third factor that the court must consider is the "avoidance of unnecessary problems in conflict of laws, or the application of foreign law." Piper, 454 U.S. at 241. This factor also favors plaintiffs. This action is brought under the United States securities laws and those laws, not Canadian securities laws, will apply. In fact, Coopers has stipulated that United States law, specifically the fraud on the market theory embodied in Basic Inc. v. Levinson, 485 U.S. 224, 99 L. Ed. 2d 194, 108 S. Ct. 978 (1988), would apply if the action were brought in Canada. Thus, the Canadian court would be applying foreign law. Although Coopers argues that this court must evaluate whether Coopers' conduct is in accordance with Canadian Generally Accepted Auditing Standards ("GAAS"), the core of this litigation is the United States securities laws. Consequently, this factor favors the New Jersey forum.
The final factor that the court must consider is whether it is unfair to burden citizens of this forum with jury duty. Given the strong public interest in maintaining the integrity of the securities markets, the court concludes that the nexus between the forum and the lawsuit is not so attenuated that it would be unfair to impose jury duty on New Jersey residents.
In addition to the public interest factors enumerated in Piper, Coopers raises three new factors in its reply brief: (1) Coopers would be unable to implead other parties; (2) plaintiffs would be forced to collect a judgment in Canada; and (3) Coopers is subject to duplicative litigation and inconsistent judgments. As an initial matter, the court notes that Coopers did not include these arguments in its moving brief and has provided no excuse for its failure to do so. It is inappropriate for Coopers to raise these additional arguments in its reply. Nevertheless, the court has considered these arguments, and concludes that they do not outweigh the public interest factors favoring plaintiffs.
Coopers' first argument is that it will be unable to implead other parties because they are not subject to the court's jurisdiction. Assuming that Coopers' argument is correct, it would still be able to pursue actions for contribution or indemnification in Canada. Although this factor weighs in favor of dismissal, it does not outweigh the other public interest factors.
Coopers also argues that the plaintiffs would be forced to collect any judgment in Canada. This is more properly characterized as a private interest factor affecting the individual litigants than a public interest factor. Despite this limitation on their ability to collect a judgment, the plaintiffs have chosen New Jersey as their forum. Consequently, this factor does not favor either forum.
Third, Coopers argues that it will be subject to duplicative litigation and inconsistent judgments if Canadian residents pursue a class action in Canada. This argument does not favor dismissal. Canadian residents are in a materially different position with respect to securities violations than United States citizens because Canada does not recognize the fraud-on-the-market theory of reliance. Under Canadian law, investors would have to demonstrate individual reliance. An action by Canadian citizens trading on the VSE is substantially different from this suit and thus, the litigation is not duplicative.
Although some private interest factors favor the Canadian forum, the public interest factors overwhelmingly favor this forum. Even if Canada were an adequate alternative forum, the court concludes that the balance of public and private interest factors favors this forum. Consequently, Coopers' motion to dismiss for forum non conveniens is DENIED.
C. Failure to State a Claim
Rule 12(b)(6) allows a party to move for a dismissal based upon the pleader's "failure to state a claim upon which relief can be granted." As the long-established federal policy of civil litigation is to decide cases on the proofs, Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965), the district courts generally disfavor Rule 12(b)(6) motions. Panek v. Bogucz, 718 F. Supp. 1228, 1229 (D.N.J. 1989).
In deciding a motion to dismiss for failure to state a claim, all allegations in the pleadings must be accepted as true, and the plaintiff must be given the benefit of every favorable inference that can be drawn from those allegations. See Conley v. Gibson, 355 U.S. 41, 48, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 n.1 (3d Cir. 1987). "All the rules require is a short and plain statement of the claim that gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests." Conley, 355 U.S. at 47.
The rule, however, does require that the pleader "state a claim upon which relief can be granted." Having accepted the facts in the pleadings as true, and giving them all reasonable inferences, the Court may dismiss under Rule 12(b)(6) where the pleadings lack any cognizable basis in the law. The United States Supreme Court explained as follows:
Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law. This procedure, operating on the assumption that the factual allegations in the complaint are true, streamlines litigation by dispensing with needless discovery and factfinding. Nothing in Rule 12(b)(6) confines its sweep to claims of law that are obviously insupportable. On the contrary, if as a matter of law "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations," a claim must be dismissed, without regard to whether it is based on an outlandish legal theory or a close but ultimately unavailing one. What Rule 12(b)(6) does not countenance are dismissals based on a judge's disbelief of a complaint's factual allegations. District court judges looking to dismiss claims on such grounds must look elsewhere for legal support.
Neitzke v. Williams, 490 U.S. 319, 326-27, 104 L. Ed. 2d 338, 109 S. Ct. 1827 (1989) (citations omitted); see also California ex rel. Van de Kamp v. Reilly, 750 F. Supp. 433, 435 (E.D. Cal. 1990) (dismissal under 12(b)(6) appropriate when complaint lacks cognizable legal basis).
Pursuant to Rule 12(b)(6), a plaintiff's complaint must be dismissed for failure to state a claim if a defendant demonstrates "beyond a doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. at 45-46; Craftmatic Securities Litigation v. Kraftsow, 890 F.2d 628, 634 (3d Cir. 1989); Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980). "Although the Federal Rules of Civil Procedure do not require a claimant to set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give the defendant notice of what the plaintiff's claim is and the grounds upon which it rests." Conley, 355 U.S. at 47.
In order to maintain a claim under § 20(a) of the Exchange Act, the plaintiffs must establish not only that Campney and Koch are control persons, but also that they were "in some meaningful sense culpable participants in the fraud perpetrated by controlled persons." Rochez Brothers, Inc. v. Rhoades, 527 F.2d 880, 885 (3d Cir. 1975), cert. denied, 425 U.S. 993, 48 L. Ed. 2d 817, 96 S. Ct. 2205 (1976) (citation omitted).
Federal Rule of Civil Procedure 9(b) requires plaintiffs to plead allegations of fraud with particularity. Nevertheless, there is "an overwhelming trend in this circuit to allow section 20(a) actions to withstand rule 9(b) motions based on a simple pleading of control." Easton & Co. v. Mutual Benefit Life Ins. Co., [1991-92 Transfer Binder] Fed. Sec. L. Rep. (CCH) P 96,595 (D.N.J. 1992). The plaintiff "need only plead circumstances establishing control because: (1) the facts establishing culpable participation can only be expected to emerge after discovery; and (2) virtually all of the remaining evidence, should it exist, is usually within the defendants' control." Id. at 92,808. See also In re Midatlantic Corp. Shareholder Lit., 758 F. Supp. 226, 236-37 (D.N.J. 1990) ("prior to discovery in any meaningful sense, plaintiff can hardly be able to plead the precise culpable conduct of each defendant"); Cammer v. Bloom, 711 F. Supp. 1264, 1295 (D.N.J. 1989), appeal dismissed, 993 F.2d 875 (3d Cir. 1993).
For the purposes of this motion, defendants do not dispute that plaintiffs have alleged control. They argue, however, that plaintiffs have failed to allege culpable participation with the specificity required by Rule 9(b). Plaintiffs allege that as Nesmont directors and members of the Audit Committee, Campney and Koch reviewed and approved the misleading financial statements and public disclosures, including reports filed with the SEC. Amended and Consolidated Class Action Complaint P 102, 103. Plaintiffs also allege that the defendants had access to adverse non-public information. P 28. At this stage in the litigation, plaintiffs' allegations are sufficient to survive a motion to dismiss.
D. Personal Jurisdiction
The personal jurisdiction of a federal district court extends to non-residents of the state in which the court sits to the extent authorized by that state's laws. Fed.R.Civ.Pro. 4(e); see Provident Nat'l Bank v. California Fed. Sav. & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987). Under Section 27 of the Securities and Exchange Act of 1934, United States courts may exercise personal jurisdiction over non-residents to the full extent permitted by the due process clause. Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1339 (2d Cir. 1972); Perez-Rubio v. Wyckoff, 718 F. Supp. 217, 227 (S.D.N.Y. 1989).
Federal due process requires
that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'