Motion to Dismiss Shareholder Class Action on Forum Non Conveniens Grounds

June 6, 2014

Cleary Gottlieb successfully moved to dismiss a putative shareholder class action in the Central District of California pursuant to forum non conveniens, arising out of the $1 billion purchase by its clients, ABB, of Power-One, a California energy company, in the Summer of 2013.

Prior to the filing of the federal complaint, which solely asserted claims arising under Delaware law and with jurisdiction premised on diversity, other former Power-One shareholders filed putative shareholder class actions in Delaware Chancery Court and in the Superior Court of Ventura County, California. In June 2013, the Ventura County Superior Court stayed the action pending in California state court on the basis of forum non conveniens, finding that the public and private forum non conveniens factors favored adjudication of claims arising out of the merger in Delaware Chancery Court. The Delaware lead plaintiffs stipulated in December 2013 to a dismissal without prejudice of their action, conceding that, as a result of changes made to the proxy statement after their complaint was filed, the disclosure claims there asserted were moot, and that there was no other valid basis for pursuing the action, and agreeing that the Court of Chancery would retain jurisdiction to hear any fee application that might be made.

In dismissing the federal action on the basis of forum non conveniens, Judge Wu of the Central District of California cited the Supreme Court’s recent decision in Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for W. Dist. of Tex., 134 S.Ct. 568, 580 (2013), for the proposition that in “cases calling for a nonfederal forum . . . the residual doctrine of forum non conveniens has continuing application in federal courts.” Accordingly, the Court dismissed in favor of the Delaware forum, citing as salient factors “Power-One’s status as a Delaware corporation, the at-least predominant application of Delaware law anticipated in this case, and the fact that Defendants have admitted that all Defendants will be subject to personal jurisdiction in Delaware.”

The case reaffirms the federal courts’ power to dismiss in favor of state courts pursuant to forum non conveniens, even in the absence of a forum selection clause pointing to a state forum.