Mark Stoyas v. Toshiba Corporation et al

Filing 146

ORDER DENYING PLAINTIFFS MOTION FOR CLASS CERTIFICATION, 108 by Judge Dean D. Pregerson: The court DENIES Plaintiffs Motion for Class Certification regarding the Exchange Act claims. The court further DENIES Plaintiffs Motion for Class Certification regarding the JFIEA claims, without prejudice. IT IS SO ORDERED. See order for more information. (shb)

Case 2:15-cv-04194-DDP-JC Document 146 Filed 01/07/22 Page 1 of 14 Page ID #:5138

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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MARK STOYAS, NEW ENGLAND
TEAMSTERS & TRUCKING INDUSTRY
PENSION FUND, and AUTOMOTIVE
INDUSTRIES PENSION TRUST FUND,
individually and on behalf of all others
similarly situated, a Japanese
Corporation

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Plaintiffs,

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v.

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TOSHIBA CORPORATION, a Japanese
Corporation,

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Defendants.

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Case No. 2:15-cv-04194 DDP-JC
ORDER DENYING PLAINTIFFS’
MOTION FOR CLASS
CERTIFICATION
[Dkt. 108]

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Presently before the court is Plaintiffs’ Motion for Class Certification. (Dkt. 108.)

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Having considered the parties’ submissions and heard oral argument, the court DENIES

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the Motion and adopts the following Order.

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I. BACKGROUND
As described in the court’s prior Order, (Dkt. 88.), named Plaintiffs Automotive
Industries Pension Trust Fund (“AIPTF”) and New England Teamsters & Trucking
Industry Pension Fund (“NETTPF”) are pension funds formed for the benefit of auto
industry and trucking workers. (Dkt. 75, Second Amended Complaint (“SAC”) ¶¶ 20,
23.) Toshiba Corporation (“Defendant”) is a “worldwide enterprise that engages in the

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research development, manufacture, construction, and sale of a wide variety of electronic

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and energy products and services,” headquartered in Tokyo, Japan. (Id. ¶ 25.) On June

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4, 2016, Plaintiffs filed a putative securities class action against Defendant, (Dkt. 1),

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alleging violations of the U.S. Securities Exchange Act of 1934 (“Exchange Act”) and the

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Financial Instruments & Exchange Act of Japan (“JFIEA”) in connection with allegations

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of accounting fraud and misrepresentations.

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Plaintiffs allege that on March 23, 2015, AIPTF purchased 36,000 shares of

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unsponsored Toshiba American Depositary Receipts (“AD Rs”) 1 “through transactions

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on the OTC Market 2 in the United States . . . thereby acquiring an ownership interest in

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As relevant in this action, Plaintiffs’ Exchange Act claims concern the purchase of
unsponsored ADRs. In contrast to sponsored ADRs, where a foreign company enters
into an agreement with a U.S. Depositary bank to sell its shares in U.S. markets,
unsponsored ADRs are implemented by a depositary bank without the cooperation of
the issuing foreign company. See Sec. & Exch. Comm’n, Office of Inv’r Education and
Advocacy, “Investor Bulletin: American Depositary Receipts” at 1-2. As such, because
unsponsored ADRs are not sanctioned by the issuing company, broker-dealers typically
initiate unsponsored ADRs when they wish to establish a domestic trading market for
securities not ordinarily sold in the United States.
2 The “over-the-counter” (“OTC”) market refers to the mechanism by which securities are
traded via a broker-dealer network as opposed to on a centralized exchange. Whereas
sponsored ADRs trade on either a national stock exchange or on the OTC market,
unsponsored ADRs only trade on the OTC market. Sec. & Exch. Comm’n, Office of Inv’r
Education and Advocacy, “Investor Bulletin: American Depositary Receipts” at 2.
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216,000 shares of common stock issued and authorized for sale by Toshiba.” (SAC ¶ 20,
56.) Plaintiff further asserts that between April 1, 2015 and October 27, 2015, NETTIPF
purchased 343,000 shares of Toshiba’s common stock. (See Dkt. 34, Ex. B.) According to
Plaintiffs, both AIPTF and NETTIPF “utilized the services of professional investment
managers to direct the purchase and sale of Toshiba securities on [their] behalf.” (Dkt.
109, Mot. at 5.)
In their motion for class certification, Plaintiffs indicate that AIPTF accessed the

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OTC market through AIPTF’s investment manager, ClearBridge Advisors LLC

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(“ClearBridge”). (Id.) On March 20, 2015, Clearbridge placed a buy order for

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unsponsored ADRs in New York, through its broker, Barclays Capital LE (“Barclays”),

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also located in New York. (SAC ¶ 22 (a)-(b); see also Dkt. 114-8.) Barclays thereafter

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“purchased [the ADRs] for AITPF on the OTC Market using the OTC Link trading

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platform.” (SAC ¶ 22(c).) On March 26, 2015, AIPTF paid for the ADRs by transferring

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$922,057.20 to Barclays from its custodian bank in New York. (Dkt. 128-3, Collier

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Deposition (“Depo.”) at 28:19-30:3.)
Plaintiffs now bring a motion to certify a class of securities purchasers under

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Federal Rule of Civil Procedure 23(b)(3), defined as:
All persons who purchased securities listed under the ticker symbols TOSYY
or TOSBF [between May 8, 2012 and November 12, 2015] using the facilities
of the OTC Market (“American Securities Purchasers”); and
All citizens and residents of the United States who purchased shares of
Toshiba 6502 common stock [between May 8, 2012 and November 12, 2015]
(“6502 Purchasers”). 3

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“Excluded from the [c]lass are defendant Toshiba, all subsidiaries, business units,
and consolidated entities of Toshiba, and any person who was an officer or director
of Toshiba or any of its subsidiaries, business units, or consolidated entities at any
time from 2008 to 2019 (collectively, ‘Excluded Person(s)’). Also excluded from the
[c]lass are the members of the immediate families of any Excluded Person, as
defined in 17 C.F.R. § 229.404, Instructions (1)(a)(iii) and (1)(b)(ii).” (Dkt. 108, Mot.
at 1.
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(Dkt. 108, Mot. at 1.) AIPTF and NETTPF bring JFIEA claims on behalf of all
proposed class members. AIPTF also brings claims under the Exchange Act on
behalf of the American Securities Purchasers.
II. LEGAL STANDARD
The party seeking class certification bears the burden of showing that each of the
four requirements of Rule 23(a) and at least one of the requirements of Rule 23(b) are
met. See Hanon v. Dataprods. Corp., 976 F.2d 508-09 (9th Cir. 1992). Rule 23(b)(3) requires
that “questions of law or fact common to class members predominate over individual
questions . . ., and that class action is superior over individual questions . . . for fairly and
efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b). Rule 23(a) sets forth four
prerequisites for class certification:
(1) the class is so numerous that joinder of all members is impracticable, (2)
there are questions of law or fact common to the class, (3) the claims or
defenses of the representative parties are typical of the claims or defenses of
the class, and (4) the representative parties will fairly and adequately protect
the interests of the class.
Fed. R. Civ. P. 23(a); see also Hanon, 976 F.2d at 508. These requirements are often referred
to as numerosity, commonality, typicality, and adequacy. See Gen. Tel. Co. v. Falcon, 457
U.S. 147, 156 (1982).
In determining the propriety of a class action, the question is not whether the
plaintiff has stated a cause of action or will prevail on the merits, but rather whether the
requirements of Rule 23 are met. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974).
This Court, therefore, considers the merits of the underlying claim to the extent that the
merits overlap with the Rule 23(a) requirements, but will not conduct a “mini-trial” or
determine at this stage whether Plaintiffs could actually prevail. Ellis v. Costco Wholesale
Corp., 657 F.3d 970, 981, 983 n.8 (9th Cir. 2011). Nevertheless, the court must conduct a
“rigorous analysis” of the Rule 23 factors. Id. at 980. Because the merits of the claims are
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“intimately involved” with many class certification questions, the court’s rigorous Rule
23 analysis must overlap with merits issues to some extent. Id. (citing Wal-Mart Stores,
Inc. v. Dukes, 564 U.S. 338 (2011).
III. DISCUSSION
A. The Exchange Act Claims

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Defendant argues that AIPTF has not satisfied the typicality requirement under

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Rule 23(a). To satisfy the typicality requirement, “the claims or defenses of the

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representative parties” must be “typical of the claims or defenses of the class.” Fed. R.

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Civ. P. 23(a)(3). “The purpose of the typicality requirement is to assure that the interest

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of the named representative aligns with the interests of the class. Typicality refers to the

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nature of the claim or defense of the class representative, and not to the specific facts

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from which it arose or the relief sought. The test of typicality is whether other members

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have the same or similar injury, whether the action is based on conduct which is not

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unique to the named plaintiffs, and whether other class members have been injured by

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the same course of conduct.” Hanon, 976 F.2d at 508 (internal citations and quotations

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omitted).
Defendant argues that Plaintiffs cannot satisfy the typicality requirement with

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respect to the American Securities Purchasers’ Exchange Act claims, because, unlike the

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members of the proposed class, AIPTF did not acquire “Toshiba securities” in the United

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States. (See Opp. at 4.) 4 As the Supreme Court articulated in Morrison v. Nat’l Australia

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Bank Ltd., 561 U.S. 247 (2010), to state a fraud claim under the Exchange Act, fraudulent

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statements or omissions must be made in connection with the purchase or sale of (i) “a

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security listed on an American stock exchange” or (ii) “the purchase or sale of any other

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The typicality issue only applies to AIPTF, the named plaintiff for the American
Securities Purchasers’ Exchange Act claims. NITPFF, as well as the 6502 Purchasers, seek
relief solely under the JFIEA.
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security in the United States.” Id. at 273. Given that unsponsored ADRs trade on the
OTC market, and not on a domestic exchange, the “domestic transaction” inquiry is
critical to Plaintiffs’ assertion that AIPTF’s Exchange Act claims are typical of the
American Securities Purchasers’ claims. See Stoyas v. Toshiba Corp., 896 F.3d 933, 945 (9th
Cir. 2018) (“The over-the-counter market on which Toshiba ADRs trade is simply not an

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‘exchange’ under the Exchange Act.”). Defendant argues, however, that AIPTF acquired

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its Toshiba shares as 6502 common stock in Japan, and thus the relevant purchase was a

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foreign transaction outside the purview of the Exchange Act. (Opp. at 4; Supp. Opp. at

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12.)

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The Ninth Circuit in Stoyas previously addressed the domesticity issue in this case

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on appeal from Defendant’s first motion to dismiss. 896 F.3d at 947-50. Applying the

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“irrevocability test” originally set forth in Absolute Activist Value Master Fund Ltd. v. Ficeto,

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677 F.3d 60, 67 (2d Cir. 2012), the court examined whether Plaintiffs alleged sufficient

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facts to support an inference that AIPTF purchased the unsponsored ADRs in a domestic

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transaction. Id. at 948-49. The test focuses squarely on “where [the] purchaser incurred

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irrevocable liability to take and pay for the securities.” 896 F.3d at 948-49 (italics added);

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see also id. (“The point at which the parties become irrevocably bound . . . can be used to

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determine the locus of a securities purchase or sale.”). In the classic contractual sense,

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“irrevocable liability” attaches once the transaction is fully executed and the parties have

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committed to perform their obligations under the agreement. Giunta v. Dingman, 893

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F.3d 73, 79 (2d Cir. 2018) (citation and quotation marks omitted); c.f. Gray v. Fedex

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Corporate Servs., Inc., No. CV 14-9131 DMG (JEMx), 2016 WL 5920127, at *17 (C.D. Cal.

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Feb. 29, 2016). Thus, the question before this Court is whether AIPTF incurred

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irrevocable liability to take and pay for the ADRs in the United States or in Japan.

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Plaintiffs argue that AIPTF incurred irrevocable liability in the United States, and

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thus acquired the ADRs in a domestic transaction, “when Barclays executed its ADR

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order.” (Supp. Opening Br. at 10.) Specifically, Plaintiffs contend that AIPTF could no

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longer cancel the transaction when Clearbridge agreed to the terms of the buy order—
namely, the foreign conversion rate, commission equivalent, and price of the ADRs. (See
Dkt. 114-12, Ex. K at BARC_000088; Reply at 5-6.) According to Plaintiffs’ summation of
the evidence, on March 20, 2015, ClearBridge’s trader placed a market order 5 for 71,000
Toshiba ADRs (36,000 of which were for AIPTF) with ClearBridge’s broker, Barclays.

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(Reply at 6:5-8; see Dkt. 114-8, Ex. G.) On March 23, 2015, “Barclays’ employees in New

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York contacted the ClearBridge trader (also in New York), who placed the order to notify

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her of the price for the ADRs and ask[ed] if she agreed. ClearBridge’s trader agreed, at

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which point there was ‘no other information that Barclays would need in order to execute

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on the trade of the ADRs.’” (Supp. Br. at 11:16-20; see also Dkt. 114-12, Ex. K at

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BARC_000088.) Plaintiffs contend that “final execution” of the ADR trade “occurred on

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Monday, the 23rd, at which point ClearBridge could no longer cancel the order.’” (Supp.

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Br. at 12:6-11; see Dkt. 128-3 at 72:15-22.) Moreover, Plaintiffs contend that because all

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communications between Barclays and Clearbridge took place in New York, AIPTF

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incurred irrevocable liability in the United States. (Supp. Br. at 12:13-18.)
Plaintiffs’ approach ascribes little importance to the first step in the ADR

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conversion process: the purchase of Toshiba common stock. Plaintiffs’ argument glosses

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over the fact that AIPTF’s ability to acquire ADRs was contingent upon the purchase of

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underlying shares of common stock that could be converted into ADRs. The evidence

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indicates that Barclays traders in New York and Japan executed the purchase of common

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stock for conversion, on behalf of their client, ClearBridge (i.e., AIPTF). (See Dkt. 114-14,

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Ex. M.) At the time the ClearBridge trader confirmed that she approved of the price,

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foreign exchange rate, and commission, Barclays traders in New York and Japan had

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“A market order is an order to buy or sell a stock at the best available price. Generally,
this type of order will be executed immediately.” Sec. & Exch. Comm’n, Office of Inv’r
Education and Advocacy, “Investor Bulletin: Understanding Order Types” (July 12,
2017).
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already executed the purchase of common stock “[f]or ADR settlement” on behalf of
ClearBridge.6 (Id.; see also Dkt. 114-12, Ex. K at BARC_000088.)
Once Barclays fully executed the purchase of common stock on the Tokyo Stock

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Exchange, AIPTF was bound to take and pay for the ADRs, once converted. (See Dkt.
128-3, Ex. 2 at 72:15-22; Dkt. 114-14, Ex. M.) As Defendant notes, “if [AIPTF] for any

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reason had elected to cancel the ADR order before Barclays obtained the [ ] common stock

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in Japan needed to create the ADRs, then AIPTF could not have been liable ‘to take and

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pay for’ non-existent ADRs.” (Supp. Opp. at 10:1-4.) The moment Barclays completed

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the transaction for Toshiba common stock on the Tokyo Stock Exchange, however, AIPTF

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became logically and legally bound to perform its contractual obligations. See Stackhouse

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v. Toyota Motor Co., No. CV 10-0922 DSF (AJWx), 2010 WL 3377409 at * 1 (C.D. Cal. July

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16, 2016) (“Because the actual transaction takes place on the foreign exchange, the

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purchaser or seller has figuratively traveled to that foreign exchange—presumably via a

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foreign broker—to complete the transaction.”).
Plaintiff attempts to refute this logic by arguing that Barclays was not acting on

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ClearBridge’s behalf when it acquired the underlying common stock, but instead as a

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“riskless principal.” (See Reply at 8; Supp. Br. at 15.) A broker-dealer acts in a “riskless

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principal” capacity when he or she purchases securities in the marketplace for purposes

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of selling them back to another purchaser as a counterparty 7, at the same price. Sec. &

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Exch. Comm’n, Office of Inv’r Education and Advocacy, “Investor Bulletin: How to Read

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The deposition testimony of the ClearBridge trader indicates that Barclays was not
required to communicate the details of the trade to ClearBridge, thus suggesting that
Barclays did not need Clearbridge’s permission to execute the purchase of ordinary
shares in Japan. (See Dkt. 128-3, Ex. 2 at 39:6-9.) The ClearBridge trader testified that
Barclays communicated the details of the trade to ClearBridge “as a courtesy[.]” (Id. at
39:13-21.)
7 A “counterparty” is the person or entity on the opposite side of a financial transaction.
A counterparty may be the person or entity purchasing or selling the stock.
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Confirmation Statements” at 1-2 (Sept. 2012). To Plaintiff, this means that Barclays
acquired the 71,000 ADRs (and underlying common stock) for Barclay’s own account, as
a principal and counterparty, and thereafter sold the ADRs to AIPTF in a separate
transaction. (See Reply at 8.) Thus, to Plaintiff, because Barclays was not acting as either
Clearbridge’s or AIPTF’s agent at the time it acquired the underlying common stock or

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ADRs, liability could not have attached until the ADRs were sold in the separate

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transaction, post-conversion. (Id. at 9.) Plaintiffs’ argument is unavailing. Contrary to

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Plaintiffs’ position, a common understanding in the financial world is that a “riskless

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principal” transaction may substantively function as an agency transaction. See, e.g.,

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Joseph I. Goldstein & L. Delane Cox, Penny Stock Markups and Markdowns, 85 Nw. U.L.

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Rev. 676, 684 (1990) (“If the brokerage firm receives the customer’s order prior to

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purchasing the security from a dealer, then the transaction is called a ‘riskless principal’

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transaction because the firm does not incur any risks of ownership, such as price

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fluctuations or liquidity problems. Thus, even though the firm is acting as a principal in

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the transaction, its function is analogous to that of an agent.”). 8 Indeed, when a broker

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acts in a “riskless principal” capacity, the broker-dealer enters the marketplace already

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knowing that when it purchases the security, “it can sell it to [the purchaser] at a certain

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price.” Sec. & Exch. Comm’n, Office of Inv’r Education and Advocacy, “Investor

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Bulletin: How to Read Confirmation Statements” at 1-2 (Sept. 2012). Therefore, it

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logically follows that a purchaser may become legally bound to purchase the securities

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C.f. Pamela E F. LeCren, Advisory Opinion, FDIC Law, Regulations, Related Acts,
“Subsidiary Requirements for Broker-Dealer Subsidiary Engaged in Riskless Principal
Transactions in U.S. Government Securities, Municipal Bonds and Revenue Bons” (Mar.
28, 1988) (“The Securities and Exchange Commission has characterized riskless principal
transactions as being in many respects equivalent to transactions effected on an agency
basis and further has said such transactions are, in economic substance, agency
transactions.”).
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once the broker fully executes the customer’s order, regardless of whether the broker acts
as a riskless principal or agent.
In this case, the fact that Barclays acted in a “riskless principal” capacity only

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further supports the proposition that AIPTF incurred liability in Japan. The evidence
indicates that Barclays executed the purchase of ordinary stock in Japan on behalf of its

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client, ClearBridge. (See Dkt. 114-14, Ex. M.) Barclays did not assume any risk of loss for

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purchasing the underlying shares because it already knew that ClearBridge would

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purchase the converted ADRs at market price. Because ClearBridge was ready and

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willing to purchase the ADRs, it was bound to complete the ADR trade, beginning with

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the trade of underlying Toshiba common stock. Thus, the triggering event that caused

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ClearBridge (and by extension, AIPTF) to incur irrevocable liability occurred in Japan

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when Barclays acquired the shares of Toshiba common stock on the Tokyo Stock

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Exchange. 9

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For these reasons, the court concludes that AIPTF purchased the ADRs in a

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foreign transaction. Because Plaintiffs cannot establish that AIPTF purchased the ADRs

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As discussed above, the Ninth Circuit in Stoyas held that a purchaser of unsponsored
ADRs may maintain a cause of action under the Exchange Act so long as the purchaser
incurred irrevocable liability in the United States. 896 F.3d at 949. Thereafter, this Court,
on remand, found that Plaintiffs had cured the deficiencies in the first amended
complaint by pleading facts sufficient to support the inference that AIPTF incurred
irrevocable liability in the United States with respect to the ADR transaction. Stoyas v.
Toshiba, 424 F. Supp. 3d 821, 827 (C.D. Cal. 2020). Moreover, the court observed there
were no allegations that AIPTF first purchased the underlying shares of Toshiba common
stock in a foreign transaction prior to conversion into ADRs. Id. at 826. Although Stoyas
appears to provide for the possibility that a purchaser might acquire unsponsored ADRs
in a domestic transaction, the undisputed evidence here demonstrates that the
underlying shares of Toshiba common stock were purchased in Japan, on the Tokyo
Stock Exchange, prior to conversion. Notably, moreover, Plaintiffs have not identified a
single case where the purchase or sale of unsponsored ADRs constituted or qualified as a
domestic transaction.
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in a domestic transaction, Plaintiffs also cannot satisfy the typicality requirement.
Accordingly, Plaintiffs’ Motion for Class Certification as to their Exchange Act claims is
DENIED.
B. The JFIEA Claims
Defendant further argues that Plaintiffs have failed to satisfy Rule 23(a)’s

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typicality and adequacy requirements with respect to their JFIEA claims. First,

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Defendant argues that neither AIPTF nor NETTIPF has statutory standing under Article

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21-2 of the JFEIA, thus extinguishing any legal interest they would have to pursue JFIEA

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claims on behalf of the 6502 Purchasers. (Opp. at 37:15-18.) Defendant posits that only

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“direct owners” of Toshiba common stock may pursue claims under the JFIEA statute.

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(Id. at 36:15-19.) Defendant contends that institutional investors such as Plaintiffs are not

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the “direct owners” of shares acquired on the secondary market (the Tokyo Stock

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Exchange); rather, they are “beneficial owners” who indirectly acquire an ownership

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interest in Toshiba securities through their agents/trustees or securities custodians. (See

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id. at 36:18-26.) Thus, by Defendant’s logic, only agents/trustees or securities custodians

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who purchase the foreign securities on the institutional investors’ behalf may pursue

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claims under the JFIEA. (See id.; Dkt. 114-25; Iida Decl. ¶ 3.)

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Defendant also posits that Plaintiffs are not direct owners of Toshiba common

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stock because they are not listed as registered shareholders within Toshiba’s Book-entry

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Transfer Institution in Japan. (See Opp. at 36:26-37:1; Dkts. 114-27, 114-28.) According to

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Defendant, “[d]irect owners of shares of listed companies [e.g., Defendant] are only those

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persons who have ‘received a record of an increase in shares of the Company in his/her

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book-entry account registry’ held by a ‘Book-entry Transfer Institution’ in Japan.” (Id.)

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In other words, to be treated as the direct owner of shares, the owner must maintain a

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book-entry account and consent to a recorded increase of shares to effectuate the transfer

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of shares from the listed company’s account to the direct owner’s account. (See Dkt. 114-

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25, Iida Decl. ¶ 4.) Per Defendant’s logic, only Plaintiffs’ agents or securities custodians,

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as “direct owners” of the shares, could be named on the account. (See id.) (“Even though
the book-entry account is under the name of a trustee on behalf of a beneficiary, the
trustee owns the shares, and under Japanese Corporate Law the trustee who is named on
the book-entry account will be treated as the share owner.”).
Plaintiffs do not dispute that they are beneficial owners of Toshiba common stock.

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Instead, they contend that claimants under JFIEA are those who have “sustain[ed] losses’

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. . . without reference to whether the shares were nominally held via a broker or other

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financial institution.” (Reply at 38:7-10 (inner quotation marks and citations omitted).)

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Further, Plaintiffs do not dispute that Toshiba’s securities trade via Japan’s book-transfer

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system; instead, they disagree with Defendant’s position that beneficial owners must be

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named on Toshiba’s shareholder registry to pursue claims under the JFIEA. (Id. at 38:2-

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39:5.) According to Plaintiffs, other individual investors “are pursuing litigation in Japan

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against Toshiba” and “have been awarded damages in other JFIEA matters.” (Id. at 39:1-

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5.) Thus, it is Plaintiffs’ position that the question of whether Plaintiffs are listed as

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named shareholders of Toshiba common stock in Toshiba’s book-entry transfer

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institution is irrelevant, because investors “continue to exercise their legal rights as

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investors and shareholders.” (See Dkt. 128-12, Pardieck Decl. ¶ 46.)

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Next, and in addition to its arguments about Plaintiffs’ standing, Defendant

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argues that Plaintiffs’ interests conflict with those of the 6502 Purchasers because

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Plaintiffs have not set forth all methods for calculating damages under the JFIEA. (Opp.

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at 37:27-38:4.) According to Plaintiffs, all proposed class members’ damages can be

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calculated by one of two methodologies: (1) “the difference between the purchase price

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and either the sale price or, if the shares were not sold, the market value at the time of

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suit”, or (2) “the difference between the average market value of the shares during the

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month prior to and the month after the date on which the existence of the false

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information is disclosed, regardless of the purchase price.” (Mot. at 26:9-20.) However,

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Defendant argues that a third measure of damages is necessary to properly ascertain

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class members’ damages with respect to their JFIEA claims—the investor’s entire
acquisition price of the securities. Unlike Plaintiffs’ two proposed methodologies, which
are based on claims that, but for Defendant’s misrepresentation, Plaintiffs would not
have purchased the securities at an inflated price, this third measure of damages is based
on claims that, but for the misrepresentation, a plaintiff would not or could not have

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purchased the securities at all. (Opp. at 39:3-4.) Thus, according to Defendant, Plaintiffs

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“have jettisoned potentially valuable rights of putative class members by excluding this

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third damages methodology from potential class claims,” thereby compromising certain

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putative class members’ interests. (Id. at 39:18-22.) In response, Plaintiffs argue that this

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third method of damages “involve[s] rare situations,” and that “Japanese Courts

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routinely reject plaintiffs’ attempts to seek damages due to the acquisition of shares

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itself.” Thus, Plaintiffs dispute whether this methodology is pertinent to the JFIEA

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claims asserted in this case. (Reply at 40:2-9.)
These potentially dispositive questions of law are more appropriate to a motion

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for summary judgment rather than a class certification motion. Plaintiffs’ Motion is

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therefore denied, without prejudice, with respect to the JFIEA claims. 10

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The court shall issue a separate order setting a briefing schedule on these issues of law.
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IV. CONCLUSION
For the reasons stated above, the court DENIES Plaintiffs’ Motion for Class
Certification regarding the Exchange Act claims. The court further DENIES Plaintiffs’
Motion for Class Certification regarding the JFIEA claims, without prejudice.
IT IS SO ORDERED.

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Dated: January 7, 2022

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___________________________________

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DEAN D. PREGERSON

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UNITED STATES DISTRICT JUDGE

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