JLI Invest S.A. et al v. Computershare Trust Company, N.A. et al

Filing 59

Judge Allison D. Burroughs: MEMORANDUM AND ORDER entered. For the foregoing reasons, Defendants Motion to Stay [ECF No. 35] is hereby DENIED, without prejudice to renew after the close of discovery.(Folan, Karen)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
JLI INVEST S.A., and LIN INVEST S.A.,
Plaintiffs,
v.
COMPUTERSHARE TRUST COMPANY,
N.A., et al.
Defendants.

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Civil Action No. 15-cv-11474-ADB

MEMORANDUM AND ORDER ON DEFENDANTS’ MOTION TO STAY
Plaintiffs, who were former shareholders of a biotechnology company, allege that the
Defendants wrongfully escheated their shares to the state of Delaware, on the erroneous
assumption that Plaintiffs’ shares had been abandoned. Before the Court is Defendants’ Motion
to Stay this action, pending the resolution of a related litigation filed in the state of Delaware.
[ECF No. 35]. Defendants urge the Court to stay this case based on the abstention doctrines set
forth in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976);
Burford v. Sun Oil Co., 319 U.S. 315 (1943); and/or Railroad Commission of Texas v. Pullman
Co., 312 U.S. 496 (1941). For the reasons set forth in this Memorandum and Order, Defendants’
Motion is DENIED without prejudice to renew after the close of discovery.
I.

FACTUAL AND PROCEDURAL BACKGROUND
A. Facts Alleged in the Complaint
Plaintiffs JLI Invest S.A. (“JLI”) and LIN Invest S.A. (“LIN”) (together, “Plaintiffs”) are

Belgian entities with principal places of business in Brussels. JLI is 99.99% owned by Dr. Gilles
Gosselin and 0.01% by Dr. Jean Louis Imbach. LIN is 99.99% owned by Dr. Imbach, and 0.01%
by Dr. Gosselin.
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In 1997, Dr. Gosselin and Dr. Imbach headed a research team that synthesized a new
Hepatitis B drug. The following year, Dr. Imbach, Dr. Gosselin, and others founded a
biopharmaceutical company called Idenix Pharmaceuticals, Inc. (“Idenix”), to develop the drug
in collaboration with Novartis Pharma AG and other entities. Plaintiffs allege that Drs. Gosselin
and Imbach were key participants in Idenix’s business and were well known to Idenix senior
management, including top executives and directors.
Idenix was organized as a Delaware corporation, with a principal place of business in
Cambridge, Massachusetts. LIN owned 320,000 shares of Idenix, and JLI owned 240,000 shares.
Plaintiffs allege, upon information and belief, that they were among the largest Idenix
shareholders, and that Idenix was aware that Dr. Gosselin and Dr. Imbach had created JLI and
LIN to hold their shares in the company. Plaintiffs contend that at all relevant times, they had
physical possession of their stock certificates.
Beginning in 2005, Defendant Computershare 1 acted as Idenix’s stock transfer agent. In
addition to providing transfer agent services, Computershare also agreed to provide services
related to the escheatment of Idenix’s abandoned or unclaimed securities. Those services
included, for example, locating lost shareholders, communicating with shareholders to prevent
escheatment of shares, and determining whether any Idenix shares had been abandoned.
Plaintiffs contend that, as shareholders of Idenix, they were the third party beneficiaries of
Computershare’s agreement with Idenix.
Plaintiffs further allege that at all relevant times, both Computershare and Idenix had
written records of Plaintiffs’ mailing addresses in Brussels. They also contend that Idenix

1

The Complaint names Computershare Trust Company, N.A., Computershare Inc., and
Computershare Investor Services, LLC as Defendants. The Court will refer to these entities
collectively as “Computershare.”
2

periodically communicated with and sent correspondence to Plaintiffs regarding their shares, and
that no such correspondence sent to Plaintiffs was ever returned to Idenix or Computershare as
undeliverable.
Under Delaware’s state escheat statute, holders of unclaimed or abandoned property
subject to Delaware’s jurisdiction are required to report and remit such property to the State of
Delaware. See 12 Del. C. §§ 1199, 1201. Plaintiffs allege that in November 2008,
Computershare, acting as Idenix’s agent, erroneously reported to the State of Delaware that
Plaintiffs’ 560,000 shares of Idenix had been “abandoned” and constituted “unclaimed property.”
On January 2, 2009, Computershare escheated Plaintiffs’ shares to the State of Delaware. Neither
Computershare nor Idenix attempted to contact Plaintiffs prior to escheating their shares, despite
the fact that Idenix and Computershare had been in regular contact with Plaintiffs on other
matters. Nor did the State of Delaware contact Plaintiffs to inform them that their shares were
about to be, or had been, escheated.
Plaintiffs did not learn that their shares had been escheated until March 30, 2011, after
Plaintiffs made inquiries to Computershare about their stock. According to Plaintiffs,
Computershare and Idenix attempted to justify the escheat by pointing to a June 30, 2008
amendment to the Delaware Escheats Law, see 12 Del. C. § 1198(9), which changed the rules
governing the report and escheat of unclaimed property. Plaintiffs argue that Computershare and
Indenix’s interpretation of these amendments is incorrect, and that their escheat of Plaintiffs’
shares was done unlawfully and in bad faith. They allege that neither Computershare nor Idenix
ever contacted Plaintiffs to alert them of a change in Delaware’s unclaimed property laws that
would result in the automatic escheat of shares unless immediate action were taken. In fact,
Plaintiffs allege that Computershare sent periodic securities account statements to them and other

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shareholders, which affirmatively stated that “No action on your part is required, unless you wish
to deposit your existing certificates, sell or request a certificate, or transfer your book-entry
shares.” See Complaint [ECF No. 10] (“Compl.”) ¶ 53. Plaintiffs also allege, on information and
belief, that Computershare did not begin including any type of disclosure to shareholders
regarding the potential escheat of shares until 2014, long after Plaintiffs’ shares had been
escheated.
Plaintiffs also contend that when Computershare finally informed them, in March of
2011, that their shares had been escheated, the information Computershare communicated was
incorrect. Specifically, Computershare erroneously reported that Plaintiffs’ shares had been
escheated to the Commonwealth of Massachusetts. As a result of this misinformation, Plaintiffs
expended substantial time, effort, and expense in trying to determine the whereabouts of their
shares.
After Plaintiffs learned that their shares had actually been escheated to the State of
Delaware, they filed a claim with the Delaware Office of Unclaimed Property (“DOUP”) in
September 2012. The DOUP requested documentation from Plaintiffs, which they provided in
October and December of 2012.
Around the same time period, Plaintiffs requested documentation from Computershare
and Idenix, including proof that their shares had been escheated. Computershare and Idenix did
not immediately respond to Plaintiffs’ requests, and were delinquent in providing the requested
assistance. As a result, Plaintiffs were not able to obtain proof that their shares had been
escheated to Delaware until May 2014.
In October 2014, Plaintiffs further learned that the State of Delaware had liquidated their
shares. Delaware reported that it had sold the shares in a series of transactions between March

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24, 2009, and April 6, 2009, shortly after the shares were escheated. JLI’s shares were sold for
$726,792.00, and LIN’s shares were sold for $969,059.75. 2
Plaintiffs allege that these amounts do not reflect, and are in fact substantially lower than,
the true value of Plaintiffs’ shares, because at the time the shares were liquidated, very few
investors were buying or selling Idenix stock. As proof that their shares were undervalued at the
time of liquidation, Plaintiffs note that in June 2014, Idenix entered into an agreement with
Defendant Merck & Co., Inc. (“Merck”), under which Merck would acquire Idenix for $24.50
per share in cash. Plaintiffs allege that had their shares not been wrongfully escheated, they
would have been eligible to participate in—and would have participated in—this tender offer.
The tender offer was completed on August 4, 2014, at which time all existing Idenix shares were
cancelled and converted into the right to receive cash, equal to the $24.50 per share offer.
Plaintiffs contend that if their shares had not been escheated, LIN would have received
$7,840,000 for its 320,000 shares and JLI would have been entitled to receive $5,880,000 for its
240,000 shares pursuant to the Merck tender offer.
B. Plaintiffs’ Administrative Appeal before the Delaware Tax Appeal Board
Since learning that their shares had been escheated to Delaware, Plaintiffs have been
pursuing a claim before the DOUP. In March 2015, Plaintiffs submitted a completed claim form,
which requested that the DOUP provide Plaintiffs with their 560,000 shares of Idenix stock, or
the current fair market value thereof, which—based on the Merck tender offer—is $13,720,000.
On March 31, 2015, the DOUP informed Plaintiffs that while it would not pay them the
requested $13,720,000, it would refund Plaintiffs in the amount of $1,695,851.75, which
represented the actual proceeds earned through the 2009 sale of Plaintiffs’ Idenix stock. Plaintiffs
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Based on the Court’s calculations, the shares would have been liquidated at a price of
approximately $3.03 per share.
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accepted a check under protest, and the State of Delaware agreed that Plaintiffs’ acceptance of
these funds would not prejudice their rights to pursue their claims for the remainder.
Under Delaware law, a property owner dissatisfied with the determination of its claim by
the Delaware State Escheator may appeal that determination to the Delaware Tax Appeal Board
(the “TAB”). See 12 Del. C. § 1146(b). Accordingly, on July 28, 2015, Plaintiffs filed a Petition
with the TAB, challenging the Delaware State Escheator’s determination that Plaintiffs were
only entitled to the $1,695,851.75 in proceeds from the 2009 sale of their stock. See Declaration
of Savvas A. Foukas [ECF No. 37] (“Foukas Decl.”), Ex. C. The Petition, which names only the
Delaware State Escheator as a defendant, asserts eleven claims for relief, including that the
Escheator violated the Delaware Escheats Law; the federal common law; Plaintiffs’ due process
rights under the United States Constitution and the Delaware state constitution; the Takings
Clauses of both constitutions; the federal Commerce Clause; and the Friendship, Establishment
and Navigation Treaty between the United States and Belgium (the “FEN Treaty”). See id. The
Petition further alleges that the State Escheator is liable for negligence and conversion. In
addition to damages, Plaintiffs request injunctive and declaratory relief.
At the present time, discovery in the TAB proceeding appears to be complete, and the
parties are currently briefing the matter. See Joint Status Report [ECF No. 58]. Briefing will be
complete on October 28, 2016, and the TAB is expected to issue a decision sometime thereafter.
See id. After the TAB renders a decision, either party may appeal that decision to the Delaware
Court of Chancery. See 12 Del. C. § 1146(c).
C. The Delaware Chancery Lawsuit
Separate and apart from their claim before the TAB, Plaintiffs filed an additional lawsuit
in the Delaware Court of Chancery on July 9, 2015. See Foukas Decl., Ex. A (the “Chancery

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action”). The defendants in the Chancery action are several Delaware state officials in their
individual and official capacities. See id.
Count I of Plaintiffs’ complaint alleges that the Defendants violated the Delaware
Escheats law because, inter alia, (1) Plaintiffs’ shares were not “lost or abandoned”; (2) the law
does not permit the escheat of foreign-owned shares; (3) defendants retroactively applied the
2008 amendment to the Escheat Law to Plaintiffs; (4) defendants were not acting in good faith
when they liquidated Plaintiffs’ shares; (5) defendants failed to publish the fact that Plaintiffs’
shares had been escheated, and failed to pay Plaintiffs fair market value for their property; and
(6) defendants unduly delayed in processing Plaintiffs’ claims with respect to their shares, and
provided Plaintiffs with false or incorrect information.
In Count II, Plaintiffs allege that the escheat of their shares violated the federal common
law, which prevents the escheat of foreign-owned property.
In Count III, Plaintiffs allege that the defendants violated Plaintiffs’ due process rights
under the United States and Delaware state constitutions by, inter alia, (1) escheating Plaintiffs’
shares without notice, (2) failing to require Computershare and/or Idenix to notify Plaintiffs of
the same; (3) wrongfully escheating Plaintiffs’ shares in violation of federal and Delaware state
law; (4) failing to attempt to return Plaintiffs’ shares to them prior to liquidation; (5) causing
undue delay in the processing of Plaintiffs’ claims; and (6) retroactively applying the 2008
amendments to the Delaware Escheats Law. Plaintiffs also contend that the Delaware Escheats
Law itself violates Plaintiffs’ due process rights, because it merely requires notice to owners of
escheated property via annual publication in a daily newspaper.
In Count IV, Plaintiffs allege that the escheat of their shares violates the Takings Clauses
of the United States and Delaware constitutions. Count V alleges that the defendants’ actions

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violated the Commerce Clause of the United States Constitution. Count VI alleges that the
defendants violated the FEN Treaty between the U.S. and Belgium.
Counts VII and VIII allege that the defendants are liable for negligence and conversion.
Finally, Count IX alleges that certain individual defendants are liable under 42 U.S.C. § 1983 by
depriving Plaintiffs of their federal and constitutional rights under the color of state law.
Plaintiffs seek more than $12,000,000 in damages, plus declaratory and injunctive relief.
All parties to the Chancery action agreed that the action should be stayed pending
resolution of Plaintiffs’ petition before the TAB. See Stipulation to Stay Proceedings [ECF No.
55-1]. The Delaware Chancery Court granted the parties’ motion to stay in November 2015. Id.
Thus, the Chancery action has not advanced past the pleadings stage and remains stayed at the
present time.
D. This Lawsuit
Plaintiffs filed the instant lawsuit on March 30, 2015, several months before filing either
the TAB appeal or the Chancery action. Plaintiffs, however, did not serve any defendant with
process until July 24, 2015, after they had filed and effected service of the complaint in the
Chancery action.
The operative Complaint [ECF No. 10] names six defendants: the three Computershare
entities; Idenix; Merck; and Imperial Blue Corporation, which is another wholly-owned
subsidiary of Merck. See Compl. ¶¶ 3–8. 3 Unlike the TAB appeal or the Chancery action, no
Delaware officials are named as defendants in this case.

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Although this issue is not immediately relevant to the Motion to Stay, Defendants contend that
Imperial Blue no longer exists pursuant to its August 2014 merger into Idenix. See Foukas Decl.,
Ex. B.
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Count I asserts a negligence claim against all Defendants, on the grounds that
Computershare and Idenix breached their duties of care to Plaintiff shareholders by, inter alia:
(1) wrongfully escheating Plaintiffs’ shares; (2) failing to conduct due diligence prior to the
escheat, in violation of state and federal law, including 17 C.F.R. § 240.17Ad-17; (3) failing to
contact Plaintiffs before escheating their shares, even though Defendants knew how to contact
Plaintiffs; (4) in Computershare’s case, failing to inquire with Idenix regarding Plaintiffs’ contact
information and their relationship with Idenix, and in Idenix’s case, failing to inform
Computershare of such contact information and relationships; (5) failing to provide sufficient
information to the State of Delaware to enable Delaware to return Plaintiffs’ shares to them; (6)
failing to notify Plaintiffs that their shares would be or had been escheated; (7) misrepresenting
to Plaintiffs that their shares had been escheated to Massachusetts, which caused a lengthy delay
in Plaintiffs’ efforts to recover their shares; and (8) failing to disclose to Plaintiffs in any written
document that their shares could be subject to escheat under certain circumstances, that the
relevant state law on such issues had changed, or that such amendments would result in the
automatic escheat of Plaintiffs’ shares unless immediate action was taken. Plaintiffs further
contend that Merck, as successor in interest to Idenix, is liable for Idenix’s negligent acts and
omissions. Plaintiffs allege that as a result of the Defendants’ negligence, Plaintiffs lost over
$12,000,000.
Count II alleges that Defendants violated Mass. Gen. Laws ch. 93A, § 2 by willingly,
knowingly, and recklessly engaging in unfair and/or deceptive acts or practices. The factual
allegations supporting the Chapter 93A claim in Count II are similar to those alleged in Count I.
Count III alleges that all Defendants are liable for conversion. In Count IV, Plaintiffs
assert a claim for breach of contract, on the grounds that they were the third-party beneficiaries

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of the contract between Computershare and Idenix, including any indemnity provisions therein.
Plaintiffs contend that both parties breached their respective obligations under the contract, and
that Plaintiffs were damaged as a result. Similarly, Count V alleges that the Defendants breached
the implied covenant of good faith and fair dealing associated with that contract, in an effort to
deprive Plaintiffs of the benefit of that contract.
Count VI alleges that Idenix and Merck breached their fiduciary duties to the Plaintiffs,
to safeguard and protect their shares, to maintain accurate books and records, to avoid making
untrue statements of material fact or material omissions, and to refrain from engaging in any
practice or course of business that would operate as a deceit. Plaintiffs contend that Idenix knew
or should have known that Plaintiffs had not, in fact, abandoned their shares, based on its regular
contacts with the Plaintiffs. They also contend that Idenix and its officers failed to inform
Plaintiffs of material, non-public information that the company was on the brink of an
acquisition, and unfairly profited from the sale and liquidation of Plaintiffs’ shares prior to the
Merck tender offer.
Count VII alleges that all Defendants violated the Securities Act of 1933, 15 U.S.C. §§
77a–77bb, and the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78a–78hh. Specifically,
Plaintiffs contend that the improper escheat of Plaintiffs’ shares without notice or due process
violated the federal securities laws. Plaintiffs also assert that the Defendants violated Section
10(b) of the Exchange Act and Rule 10b-5 thereunder by employing devices, schemes, and
artifices to wrongfully deprive Plaintiffs of their shares, and by making false statements of
material fact and material omissions regarding Plaintiffs’ shares.
In Count VIII, Plaintiffs allege that the Defendants violated their statutory duties under
Massachusetts and Delaware state securities laws, to ensure that securities were not wrongly

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transferred from one person to another. See Mass. Gen. Laws ch. 106, §§ 8-404, 8-405; 6 Del. C.
§§ 8-404, 8-405.
Count IX alleges that all Defendants violated 42 U.S.C. § 1983, insofar as Computershare
and Idenix “had a symbiotic and intertwined relationship with Delaware,” such that Delaware,
Computershare, and Idenix “jointly participated in the escheat” of Plaintiffs’ shares. See Compl.
¶¶ 144–59. Accordingly, Plaintiffs contend that Defendants’ wrongful acts were taken under
“color of state law,” subjecting them to liability under 42 U.S.C. § 1983.
Finally, Count X alleges that Defendants are liable for negligent misrepresentations,
based on Computershare’s erroneous statement that Plaintiffs’ shares had been escheated to
Massachusetts. Plaintiffs also allege that Computershare negligently and recklessly concealed
material facts which they were under a legal duty to communicate. Plaintiffs contend that they
relied on these misstatements and omissions to their detriment, and that Defendants are liable for
the resulting $12,000,000 in damages.
As relief, Plaintiffs request compensatory, multiple, and punitive damages, attorneys’
fees, costs, and pre and post-judgment interest.
E. Defendants’ Motion to Stay
On September 11, 2015, all Defendants filed a joint Motion to Stay this case pending the
resolution of the Delaware state court proceedings. [ECF No. 35]. Defendants argue that where
the outcome of this case “turns significantly” on the application of Delaware’s Escheats Law,
which is presently being litigated before the Delaware TAB and the Chancery Court, this Court
should abstain from exercising its jurisdiction until the Delaware courts have adjudicated these
threshold issues. Plaintiffs filed an Opposition to the Motion [ECF No. 42], and each party filed
an additional reply brief [ECF Nos. 50, 54].

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II.

LEGAL STANDARD
The federal courts’ obligation to exercise jurisdiction is “virtually unflagging[,]”

Colorado River, 424 U.S. at 817, and “[a]bstention from the exercise of federal jurisdiction is the
exception, not the rule.” Id. at 813. Notably, “the pendency of an action in state court is not a per
se bar to related federal court proceedings.” Casiano-Montanez v. State Ins. Fund Corp., 707
F.3d 124, 128 (1st Cir. 2013). “Abdication of the obligation to decide cases can be justified . . .
only in the exceptional circumstances where the order to the parties to repair to the state court
would clearly serve an important countervailing interest.” Colorado River, 424 U.S. at 813
(quoting Allegheny Cty. v. Frank Mashuda Co., 360 U.S. 185, 188–89 (1959)).
Although the Supreme Court has outlined numerous abstention doctrines, see
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716–17 (1996), “the various types of abstention
are not rigid pigeonholes into which federal courts must try to fit cases,” Pennzoil Co. v. Texaco,
Inc., 481 U.S. 1, 12 n.9 (1987). “Rather, they reflect a complex of considerations designed to
soften the tensions inherent in a system that contemplates parallel judicial processes.” Id.
Here, Defendants argue that three different abstention doctrines justify staying this
federal action in deference to the lawsuits pending in the TAB and the Delaware Chancery Court.
First, the Supreme Court has held that abstention may be appropriate “in cases presenting a
federal constitutional issue which might be mooted or presented in a different posture by a state
court determination of pertinent state law.” Colorado River, 424 U.S. at 814 (quoting Allegheny,
360 U.S. at 189). This is commonly referred to as “Pullman abstention,” after the case of
Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941).
Second, even if no constitutional issue is presented, abstention may be warranted if the
case presents “difficult questions of state law bearing on policy problems of substantial public
import whose importance transcends the result in the case then at bar.” Colorado River, 424 U.S.
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at 814. This type of abstention is known as Burford abstention, in reference to Burford v. Sun Oil
Co., 319 U.S. 315 (1943).
Finally, in Colorado River, the Supreme Court articulated an additional ground to stay or
dismiss a pending federal suit in favor of a state court proceeding, one which rests
not on considerations of state-federal comity or on avoidance of
constitutional decisions, as does abstention, but on “considerations
of [w]ise judicial administration, giving regard to conservation of
judicial resources and comprehensive disposition of litigation.”
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 14–15 (1983) (alteration in
original) (quoting Colorado River, 424 U.S. at 817) (further internal quotation marks and citation
omitted). “The crevice in federal jurisdiction that Colorado River carved,” however, “is a narrow
one.” Jimenez v. Rodriguez-Pagan, 597 F.3d 18, 27 (1st Cir. 2010). “Of all the abstention
doctrines, it is to be approached with the most caution, with ‘[o]nly the clearest of justifications’
warranting dismissal.” Id. (quoting Colorado River, 424 U.S. at 819).
In Moses H. Cone, the Supreme Court noted that “[w]hen a district court decides to
dismiss or stay under Colorado River, it presumably concludes that the parallel state-court
litigation will be an adequate vehicle for the complete and prompt resolution of the issues
between the parties.” 460 U.S. at 28. It further held that “[i]f there is any substantial doubt as to
this, it would be a serious abuse of discretion to grant the stay or dismissal at all.” Id. The Court
also emphasized that staying or dismissing a case under the Colorado River doctrine requires
“exceptional circumstances.” Id. at 19. When deciding whether such circumstances exist, the
district court may consider a non-exclusive list of factors including:
(1) whether either court has assumed jurisdiction over a res; (2) the
[geographical] inconvenience of the federal forum; (3) the
desirability of avoiding piecemeal litigation; (4) the order in which
the forums obtained jurisdiction; (5) whether state or federal law
controls; (6) the adequacy of the state forum to protect the parties’
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interests; (7) the vexatious or contrived nature of the federal claim;
and (8) respect for the principles underlying removal jurisdiction.
Jimenez, 597 F.3d at 27–28 (alteration in original) (quoting Rio Grande Cmty. Ctr. v. Rullan,
397 F.3d 56, 71–72 (1st Cir. 2005)).
III.

DISCUSSION
A. Colorado River Abstention
As a threshold matter, it is not clear that the Colorado River doctrine is applicable here,

as the Court has substantial doubts about whether the Delaware Chancery action and the TAB
appeal will be “an adequate vehicle for the complete and prompt resolution of the issues between
the parties.” Moses H. Cone, 460 U.S. at 28.
First and foremost, the defendants in each action are entirely different. In the Delaware
Chancery action and TAB appeal, only Delaware state officials are named as defendants. In this
action, the only defendants are the Computershare entities, Merck, and Idenix. Furthermore,
although Plaintiffs assert some similar causes of action in each lawsuit—e.g., negligence,
conversion, violation of Delaware Escheats Law—those claims are based on conduct that varies
with each defendant. Additionally, some of Plaintiffs’ claims in this case, such as breach of
contract, violations of Chapter 93A, and breach of fiduciary duty, are not alleged at all in the
Delaware proceedings. Thus, the resolution of the Delaware actions may not entirely resolve
Plaintiffs’ claims against Idenix, Computershare, and Merck in this case. Regardless of the
outcome of the dispute between Plaintiffs and the Delaware defendants, Plaintiffs may still have
viable claims against Computershare, Idenix, and/or Merck based upon those defendants’ pre and
post-escheat conduct. Although the First Circuit has held that a “perfect identity of issues is not a
prerequisite” to Colorado River abstention, Currie v. Grp. Ins. Comm’n, 290 F.3d 1, 12 (1st Cir.
2002) (quoting Villa Marina Yacht Sales, Inc. v. Hatteras Yachts, 947 F.2d 529, 533 (1st Cir.
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1991)), it seems clear that at least some of Plaintiffs’ claims in this case are entirely independent
of the Delaware Chancery action and TAB appeal. As a result, Colorado River abstention may
not be appropriate here.
Furthermore, even assuming that the Court could stay this case under Colorado River, the
requisite “exceptional circumstances” do not exist at this point in time.
The first factor (whether either court has assumed jurisdiction over a res) does not weigh
in favor of abstaining from jurisdiction, as there is no physical property in dispute. Plaintiffs’
shares were liquidated over seven years ago, and it would therefore be impossible for a court to
order that the shares be returned to Plaintiffs. Instead, Plaintiffs seek damages to recoup the
difference between the sale price and what they believe was the fair market value of their shares.
Nor does the second Colorado River factor favor a stay, because no party has argued that
this federal forum is geographically inconvenient. Plaintiffs chose to file suit in the District of
Massachusetts, the Computershare Defendants have principal places of business in this District,
and neither Merck nor Idenix has argued that Massachusetts would be an inconvenient place for
them to litigate. Accordingly, this factor does not favor abstention.
The fourth factor (the order in which the forums obtained jurisdiction) does not weigh
heavily in favor of a stay, because the state court proceedings are not significantly more
advanced than this lawsuit. In fact, the Delaware Chancery action is currently stayed pending a
decision in the TAB appeal, which will not occur prior to the fall of 2016. As a result, neither
this case nor the Chancery action has proceeded past the pleadings stage. Although the TAB
appeal is undoubtedly more advanced, and the TAB is expected to rule on certain issues
pertaining to the Delaware Escheats Law, the TAB is an administrative body, and its decision
will almost certainly be appealed to the Chancery Court. In sum, a final judicial decision on the

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relevant state law issues is not imminent. Thus, the Court finds that the order in which the courts
obtained jurisdiction does not significantly favor a stay at this point in time.
The seventh and eighth factors are not applicable here, because there is no evidence that
Plaintiffs filed their federal suit for any vexatious or contrived purpose. Similarly, this action was
not removed to federal court, and thus there is no need to consider the principles underlying
removal jurisdiction.
The third, fifth, and sixth factors—the desirability of avoiding piecemeal litigation;
whether state or federal law controls; and the adequacy of the state forum to protect the parties’
interests—are much more relevant, but point in different directions. Many of Plaintiffs’ claims in
this action depend, at least in part, on the interpretation of the Delaware Escheat Law. For
example, Plaintiffs’ negligence and conversion claims against Idenix, Computershare, and Merck
are based in part on the Defendants’ allegedly wrongful escheat of Plaintiffs’ shares. When
adjudicating these claims, this Court will likely be called upon to interpret and apply Delaware
statutes, some of which have been recently amended. If those decisions were to conflict with the
Delaware state courts’ decision on the same issue, this Court’s opinion would become merely
advisory, which is “an outcome we seek to avoid in any case.” See Currie, 290 F.3d at 11. On the
other hand, the Delaware courts’ final decision will not resolve all of the disputes between
Plaintiffs and Defendants in this lawsuit. Thus, this case will likely proceed in some form,
regardless of the outcome in the Chancery action.
After weighing these competing considerations, and given the Court’s interest in moving
this action along to the extent reasonably possible, the case will not be stayed at this point in
time. The Court finds that it would be a more productive and efficient use of judicial resources to
allow discovery in this case and in the Chancery action to proceed approximately in tandem. This

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will provide all parties with an opportunity to explore the relevant facts, narrow down their
claims and defenses, and position this case for dispositive motions. After the close of discovery,
the Court will convene a status conference to discuss the progress of the Delaware state court
proceedings. If appropriate, the Defendants may renew their motion to stay at that time. If
dispositive motions are likely to involve controlling issues of state law that are still pending
before the Delaware Chancery Court, this Court may be more amenable to ordering a stay at that
point in time.
B. Pullman Abstention
For similar reasons, the Court declines to abstain from jurisdiction based on Pullman
principles at this time, although Defendants may also renew their motion on Pullman grounds
after the close of discovery.
“Under Pullman, federal courts should abstain when ‘(1) substantial uncertainty exists
over the meaning of the state law in question, and (2) settling the question of state law will or
may well obviate the need to resolve a significant federal constitutional question.’” CasianoMontanez, 707 F.3d at 128–29 (quoting Batterman v. Leahy, 544 F.3d 370, 373 (1st Cir. 2008)).
In this case, Plaintiffs assert claims against the Defendants under 42 U.S.C. § 1983, on
the grounds that Computershare and Idenix acted under “color of state law” when they
wrongfully escheated Plaintiffs’ shares to the State of Delaware, thereby depriving Plaintiffs of
their due process rights under the Fourteenth Amendment.
Further, Defendants have identified at least one unsettled question of state law that will
be resolved in the Chancery action, and which may obviate the need for the Court to reach
Plaintiffs’ constitutional claims in this case. Specifically, the Delaware Escheats Law establishes
“periods of dormancy” for different types of property. If a property owner has failed to exercise

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dominion or control over his or her property during the applicable period of dormancy, the
holder of that property is obligated to make a report to the State Escheator, and eventually
escheat the property to the State. See 12 Del. C. § 1198(9). Prior to June 30, 2008, the period of
dormancy for stocks was five years. In June 2008, the Delaware legislature amended the law by,
inter alia, reducing the period of dormancy for stocks from five years to three years. A.W. Fin.
Servs., S.A. v. Empire Res., Inc., 981 A.2d 1114, 1119 (Del. 2009); see 12 Del. C. § 1198(9). In
A.W. Financial Services, the Supreme Court of Delaware held that the new definition of “period
of dormancy” did not apply retroactively to civil cases in which the stock had been escheated
prior to June 30, 2008. Id. at 1119–20. Although Plaintiffs argue that there is no “unsettled”
question of state law, because A.W. Financial Services held that the amendment did not apply
retroactively, Defendants note that the court in A.W. Financial Services did not address whether
the 2008 amendment applies retroactively to stocks that were escheated after the effective date of
the amendment, but whose dormancy period began before the amendment went into effect. They
argue that this is one of the issues that the Delaware Chancery Court will address at Plaintiffs’
request.
After considering the holding in A.W. Financial Services, the Court agrees that the facts
alleged in this action are slightly different, and that the holding in A.W. Financial Services is not
necessarily controlling. Further, no Delaware state court has addressed the specific retroactivity
issue raised here—namely, how the 2008 amendment to the Escheat Law affected dormancy
periods in progress. It would be preferable for the Delaware state courts to address this issue in
the first instance, and the resolution of this question may avoid the need to reach Plaintiffs’
constitutional claim in this action.

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The Court, however, remains concerned about the efficient management of judicial
resources and the preservation of relevant evidence. As previously noted, some of the claims in
this case will likely proceed, regardless of the outcome in the Delaware Chancery action, which
may be many months or even years away. Accordingly, the Court will permit the parties to take
discovery in this action, but will, if requested, revisit the Pullman abstention issue at the close of
discovery and prior to briefing on dispositive motions. Defendants may renew their motion to
stay at that time.
C. Burford Abstention
The underlying purpose of Burford abstention is to “prevent federal courts from
bypassing a state administrative scheme and resolving issues of state law and policy that are
committed in the first instance to expert administrative resolution.” Chico Serv. Station, Inc. v.
Sol Puerto Rico Ltd., 633 F.3d 20, 29 (1st Cir. 2011) (quoting Pub. Serv. Co. of N.H v. Patch,
167 F.3d 15, 24 (1st Cir. 1998)). In determining whether to stay or dismiss an action based on
Burford, the court must consider: “(1) the availability of timely and adequate state-court review,
(2) the potential that federal court jurisdiction over the suit will interfere with state administrative
policymaking, and (3) whether conflict with state proceedings can be avoided by careful
management of the federal case.” Id. at 32.
Although Burford’s deference to administrative bodies “could be interpreted expansively,
requiring that federal courts ‘abstain from hearing any case involving state regulatory policies,’”
id. at 29–30 (quoting Vaqueria Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464, 473 (1st Cir. 2009)),
the First Circuit has “declined to give it so broad a reading.” Id. at 30. Instead, Burford
abstention should apply only in “unusual circumstances” when “federal review risks having the

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district court become the regulatory decision-making center.” Id. (further internal quotation
marks and citation omitted).
Here, Plaintiffs have a pending administrative claim before the DOUP and the TAB,
which gives them an opportunity to litigate, before the responsible administrative bodies, their
primary claim that the Delaware defendants wrongfully escheated their shares under the
Delaware Escheat Law, and that they are entitled to the fair market value of their liquidated
shares. For reasons described above, however, the Plaintiffs’ claims in this case are substantially
broader than the claims presented in the TAB appeal, and involve entirely different defendants.
Therefore, the state administrative remedy may not be entirely adequate. See Nat’l Ass’n of
Gov’t Employees v. Mulligan, 849 F. Supp. 2d 167, 175 (D. Mass. 2012). Further, although the
Court is not inclined to wrest a state law question of first impression away from the Delaware
courts, allowing discovery to proceed in this matter poses no threat to state administrative
policymaking, particularly where the Court is willing to revisit the issue after the close of
discovery, and prior to making a dispositive legal ruling. If appropriate, Defendants may renew
their Burford arguments at that time.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ Motion to Stay [ECF No. 35] is hereby DENIED,

without prejudice to renew after the close of discovery. The Court will convene a Rule 16
Scheduling Conference in the next thirty days.
SO ORDERED.
Dated: September 13, 2016
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE

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