Jackson Cnty. Employees' Ret. Sys. v. Ghosn

Citation510 F.Supp.3d 583
Decision Date29 December 2020
Docket NumberNO. 3:18-cv-01368,3:18-cv-01368
Parties JACKSON COUNTY EMPLOYEES’ RETIREMENT SYSTEM, et al., Plaintiffs, v. Carlos GHOSN, et al., Defendants.
CourtUnited States District Courts. 6th Circuit. United States District Court of Middle District of Tennessee

510 F.Supp.3d 583

JACKSON COUNTY EMPLOYEES’ RETIREMENT SYSTEM, et al., Plaintiffs,
v.
Carlos GHOSN, et al., Defendants.

NO. 3:18-cv-01368

United States District Court, M.D. Tennessee, Nashville Division.

Filed December 29, 2020


510 F.Supp.3d 594

Christopher Hamp Lyons, Christopher M. Wood, Robbins Geller Rudman & Dowd LLP, Jerry E. Martin, Barrett Johnston Martin & Garrison, LLC, Nashville, TN, Darren J. Robbins, Debashish Bakshi, Mary K. Blasy, Robbins Geller Rudman & Dowd LLP, San Diego, CA, Samuel H. Rudman, Robbins Geller Rudman & Dowd LLP, Melville, NY, for Plaintiff Jackson County Employees' Retirement System.

Christopher Hamp Lyons, Christopher M. Wood, Robbins Geller Rudman & Dowd LLP, Nashville, TN, Debashish Bakshi, Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Plaintiff Providence Employees Retirement System.

Ameya S. Ananth, Audra J. Soloway, Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison, New York, NY, Elizabeth O. Gonser, Riley, Warnock & Jacobson, Nashville, TN, Alexia D. Korberg, Jacobus J. Schutte, Michael E. Gertzman, for Defendant Carlos Ghosn.

Aubrey B. Harwell, III, Aubrey B. Harwell, Jr., Marie T. Scott, Mozianio S. Reliford, III, Nathan C. Sanders, Neal & Harwell, PLC, John W. Peterson, Michael A. Malone, Rachel H. Berg, Polsinelli P.C., Nashville, TN, Elizabeth J. Lo Presti, James D. Wareham, Fried, Frank, Harris, Shriver & Jacobson, Washington, DC, Israel David, Fried, Frank, Harris, Shriver & Jacobson, New York, NY, for Defendant Greg Kelly

Christopher S. Turner, Latham & Watkins LLP, Washington, DC, Joseph B. Crace, Jr., Overton Thompson, III, Bass, Berry & Sims, Nashville, TN, Peter A. Wald, Latham & Watkins, San Francisco, CA, for Defendants Nissan Motor Co., Ltd., Hiroto Saikawa, Hiroshi Karube, Joseph G. Peter.

MEMORANDUM

WILLIAM L. CAMPBELL, JR., UNITED STATES DISTRICT JUDGE

Pending before the Court are Motions to Dismiss filed by Defendant Greg Kelly ("Kelly") (Doc. No. 63), Defendants Nissan Motor Co., Ltd. ("Nissan"), Hiroto Saikawa ("Saikawa"), Hiroshi Karube ("Karube"), and Joseph G. Peter ("Peter") (Doc. No. 68), and Defendant Carlos Ghosn ("Ghosn") (Doc. No. 77). Plaintiffs filed a Response in Opposition (Doc. No. 86), and Defendants filed Replies (Doc. Nos. 104, 105, 108).

Ghosn filed a Notice and Supplemental Declaration of Audra J. Soloway in support of his Motion to Dismiss. (Doc. Nos. 112, 113). Plaintiffs filed a Response. (Doc. Nos. 117, 118). Ghosn and Nissan filed Replies to Plaintiffs’ Response. (Doc. Nos. 123, 124, 128). Plaintiffs filed a Notice of Supplemental Authority in Support of their Omnibus Opposition to Defendants’ Motions

510 F.Supp.3d 595

to Dismiss (Doc. No. 119), to which Nissan filed a Response (Doc. No. 125). Nissan filed a Notice of Relevant Development (Doc. Nos. 129, 130). Plaintiffs filed a Response (Doc. Nos. 131, 132) and Nissan filed a Reply (Doc. Nos. 133, 134, 135).

For the reasons set forth more fully below, the Motions to Dismiss filed by Ghosn and Kelly (Doc. Nos. 63, 77) will be DENIED , and the Motion to Dismiss filed by Nissan, Saikawa, Karube, and Peter (Doc. No. 68) will be GRANTED , in part, and DENIED in part.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY

Lead plaintiff, Jackson County Employees’ Retirement System ("Jackson County"), and named plaintiff, Providence Employees Retirement System ("Providence"), (collectively "Plaintiffs") filed this class action on behalf of purchasers of Nissan securities between May 11, 2014 and November 16, 2018 (the proposed class period ("Class Period")), against Nissan, Carlos Ghosn, former Chairman of the Board of Directors (the "Board"), Representative Director, Chief Executive Officer, and President; Greg Kelly, former Representative Director and Executive Vice President; Hiroto Saikawa, former Representative Director and Chief Executive Officer; Hiroshi Karube, current Chief Financial Officer; and Joseph G. Peter, former Chief Financial Officer, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "1934 Act" or the "Exchange Act"), 15 U.S.C. §§ 78j(b), 78t(a), Securities and Exchange Commission (SEC) Rule 10b–5, 17 CFR § 240.10b–5, and the Financial Instruments and Exchange Act of Japan ("FIEA"). (Doc. No. 58).

The Amended Complaint, filed on May 6, 2019, alleges that, since at least 2010, Nissan's then-CEO and Chairman, Carlos Ghosn, engaged in an unlawful scheme to increase his own pay by approving billions of yen in deferred compensation, which Nissan would be obligated to pay him at later dates. Defendants allegedly made false and misleading statements regarding executive compensation in Nissan's annual financial reports, resulting in an understatement of Nissan's compensation expenses and a concomitant overstatement of Nissan's operating income throughout the Class Period. At the same time, Defendants also made false and misleading statements regarding Nissan's corporate governance and internal controls, compliance with applicable laws and regulations, and commitment to ethical conduct in Nissan's other mandatory disclosure documents. Nissan's annual financial reports and other mandatory disclosure documents containing the alleged misstatements were translated into English and published on Nissan's investor relations website throughout the Class Period.

On August 5, 2019, Ghosn, Saikawa, and Karube moved to dismiss the Exchange Act claims and Nissan moved to dismiss the FIEA claim pursuant to Rule 12(b)(2) for lack of personal jurisdiction. (See Doc. Nos. 77, 68). Nissan also moved to dismiss the FIEA claim on the basis of forum non conveniens. (See Doc. No. 68).1 Additionally, all the defendants moved to dismiss the Exchange Act claims pursuant to Rule

510 F.Supp.3d 596

12(b)(6) for failure to state a claim. (Doc. Nos. 63, 68, 77).

A. The Defendants

Nissan is a multinational automobile manufacturer with its international headquarters in Japan. (Doc. No. 58 ¶ 16). Nissan's common stock is traded in Japan on the Tokyo Stock Exchange and its American Depository Receipts ("ADRs") trade on the over-the-counter ("OTC") market in the United States. (See Doc. No. 58 ¶¶ 139, 140).2

Ghosn was Nissan's President, CEO, a Representative Director, and Chairman of Nissan's Board of Directors during the Class Period, stepping down as CEO and President in April of 2017. (Doc. No. 58 ¶ 32; SCIG Report, Doc. No. 73-5 at PageID # 951-53). Ghosn made many of the false or misleading statements when presenting on behalf of Nissan at shareholders’ meetings, (Doc. No. 58 ¶¶ 59, 65-66, 73, 79, 85), and press conferences, (Doc. No. 58 ¶¶ 58, 64, 72), by endorsing and providing introductory letters to Annual Reports 2014, 2015, 2016, 2017 (Doc. No. 58 ¶¶ 94, 96, 103) and Sustainability Reports 2014, 2015, 2016 (Doc. No. 58 ¶ 96), and by signing "Confirmation Notes" accompanying Financial Reports 2014, 2015, 2016 (Doc. No. 58 ¶¶ 60, 68, 74).

Kelly joined Nissan's Board of Directors in June of 2012 as a Representative Director. (SCIG Report, Doc. No. 73-5 at PageID # 952-53, 956; Doc. No. 58 ¶¶ 3, 18). From 2009 to 2015, Kelly was Nissan's Senior Vice President. (SCIG Report, Doc. No. 73-5 at PageID # 952-53, 956; Doc. No. 58 ¶ 18). As Senior Vice President, Kelly was responsible for Nissan's Global Human Resources and oversaw Nissan's CEO Office, Alliance's CEO Office, Nissan's Secretariat's Office, and Nissan's Legal Department. (SCIG Report, Doc. No. 73-5 at PageID # 956). He also served as the liaison officer of the management side toward Statutory Auditors. (SCIG Report, Doc. No. 73-5 at PageID # 956). Kelly was known to Nissan insiders as the " ‘CEO whisperer’ " and Nissan's internal investigation revealed that he was " ‘the mastermind of [the scheme], together with Carlos Ghosn.’ " (Doc. No. 58 ¶ 3). Kelly made many of the false or misleading statements by preparing and publishing the Annual Reports 2014, 2015, 2015, 2016, 2017, and 2018 under his name. (Doc. No. 58 ¶¶ 18, 94, 96, 103, 108).

Saikawa became a member of Nissan's Board and Executive Vice President in 2005. (Doc. No. 58 ¶ 19). In 2007, Saikawa was promoted to head Nissan's U.S. operations and served in that position when Nissan relocated its U.S. headquarters from California to Franklin, Tennessee. (Doc. No. 58 ¶ 19). Saikawa became a Representative Director in 2011 and served as Chief Competitive Officer – second in command to Ghosn – from January 2014 until his appointment as co-CEO from October 2016 until March 31, 2017. (Doc. No. 58 ¶ 19). Saikawa served as CEO of Nissan starting on April 1, 2017. (Doc. No. 58 ¶ 19). Saikawa made many of the false or misleading statements when presenting on behalf of Nissan at shareholders’ meetings, (Doc. No. 58 ¶ 85), and press conferences, (Doc. No. 58 ¶¶ 78, 84), by endorsing and providing introductory letters to Annual Reports 2017, 2018, (Doc. No. 58 ¶¶ 103, 108), and Sustainability Reports 2017, 2018, (Doc. No. 58 ¶¶ 96, 105, 106, 108), and by signing "Confirmation Notes" accompanying Financial Reports 2017 and 2018 (Doc. No. 58 ¶¶ 80, 86). (Doc. No. 58 ¶ 19).

510 F.Supp.3d 597

Peter served as the CFO of Nissan between...

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