A Securities Act class action alleging violations under Sections 11, 12, and 15 was filed in state court in October 2016, followed by a consolidated action in November. The defendants moved to stay the state case in favor of parallel federal multidistrict litigation proceedings. The court initially denied the stay request because the federal litigation had not advanced significantly and the state case was filed first.
After the defendants renewed their stay motion, citing developments in the federal proceedings, the court reversed course and granted the stay. The federal litigation had expanded to include multiple cases involving the same parties and raising identical issues. A motion to dismiss pending before the federal judge raised substantially the same arguments as the state court motion to dismiss, which the state court had not yet decided. A petition to the United States Supreme Court concerning subject matter jurisdiction had been granted, with arguments heard in late November. The court concluded that proceeding in parallel state and federal forums would waste judicial and litigation resources, particularly given the broader scope of the federal action and the uncertain impact of the state court decision on federal proceedings. The parties were directed to file a status report by March 1, 2018, or earlier if the case resolved.
The full text of the opinion follows below. Slip opinions are subject to formal revision; the official version is published in the official reports.
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIV. NO. 16-3336- BLS 2
(Consol. with 16-3670-BLS 2)
IN RE REWALK ROBOTICS LTD.
STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANTS’ RENEWED REQUEST TO STAY
This is a putative class action brought pursuant to Sections 11, 12 and 15 of the Securities Act of 1933. The lead case was filed October 31, 2016 and the second on November 30, 2106, with the two actions consolidated in January 2017. In April this year, the defendants moved to stay this case because of pending parallel federal multi-district litigation proceedings. This Court (Salinger, J.) denied that request because nothing had taken place of note in the federal litigation and because this case was filed first.
Defendants then moved to dismiss the case pursuant to Rule 12(b)(6), Mass.R.Civ. P. One (but not the only) basis for that motion was that this Court does not have subject matter jurisdiction — an issue over which federal courts have split and which was central to a case which was the subject of a then pending petition for writ of certiorari before the United States Supreme Court. A hearing on the Motion to Dismiss was held on October 18, 2017 and the matter taken under advisement. Shortly thereafter, four of the individual defendants who resided overseas moved to dismiss for lack of service of process; the plaintiffs responded by asking for more time. At a hearing on this latest motion, defense counsel again renewed their request to stay based on developments since Judge Salinger ruled. This Court now agrees that this action should be stayed in favor of the pending federal proceedings.
Since the original motion to stay was filed, the pending federal litigation in Massachusetts has been expanded to include a case that had been originally filed in California. There is therefore not just one but two federal cases here that raises the same issues and involves the same parties. Requiring the parties to litigate in two separate forums — particularly where the federal action is broader and thus will likely proceed regardless of what this Court does – is not a wise use of judicial or litigation resources. The petition to the United States Supreme Court has been granted, and arguments on that case were heard on November 28, 2017. If the Supreme Court concludes that this Court does not have jurisdiction, then this case will have to be dismissed. Most important, defendants have filed a motion to dismiss in the federal litigation that makes similar (if not entirely identical) arguments as were asserted in the motion that this Court heard on October 18. A hearing on that motion is scheduled before Judge Saylor on January 18, 2018. Although this Court has not yet decided the 12(b) (6) motion filed in this case, it sees good reason not to do so: it is not entirely clear what impact this Court’s decision would have on the federal action but certainly it would muddy the waters if Judge Saylor were to view defendants’ arguments differently. Finally, plaintiffs have not even completed service on all defendants in the instant action. In short, this Court now concludes that the defendants’ Motion to Stay Pending Parallel Federal Multidistrict Litigation Proceedings should be ALLOWED. The parties shall file a status report in this Court by March 1, 2018 if the case is not earlier resolved.
_____________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 13, 2017