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In re Fisker Automotive Holdings, Inc. Shareholder Litigation

United States District Court, D. Delaware

June 12, 2017

IN RE FISKER AUTOMOTIVE HOLDINGS, INC. SHAREHOLDER LITIGATION

          MEMORANDUM ORDER

          Sherry R. Fallon United States Magistrate Judge

         At Wilmington this 12th day of June, 2017, the court having considered the request for a protective order (D.I. 374), filed by defendants Richard Li Tzar Kai ("Mr. Li") and Ace Strength Ltd. ("Ace") (collectively, "Defendants"), IT IS HEREBY ORDERED that Defendants' request is granted-in-part and denied-in-part, for the reasons set forth below.

         1. Background.

         Plaintiff Atlas Capital Management, L.P. ("Atlas Mangement") filed suit on December 27, 2013 against Henrik Fisker, Bernhard Koehler, Joe DaMour, Peter McDonnell, Kleiner Perkins Caufield & Byers LLC, Ray Lane, Keith Daubenspeck, Mr. Li, and Ace. (D.I. 1) On July 23, 2014, Plaintiffs Atlas Allocation Fund, L.P. ("Atlas Fund") and Atlas Management, CK Investments LLC, David W. Raisbeck, Hunse Investments, L.P., Southwell Partners, L.P., Sandor Master Capital Fund, John S. Lemak, Pinnacle Family Office Investments, L.P., Dane Andreeff, SAML Partners, Kenneth & Kimberly Roebbelen Revocable Trust of 2001, Brian Smith, PEAK 6 Opportunities Fund L.L.C., 888 Investments GmbH, MCP Fisker L.L.C., 12BF Global Investments, Ltd., and ASC Fisker L.L.C. (collectively, "Plaintiffs") filed an Amended Complaint.[1](D.I. 24) Defendants[2] moved to dismiss the Amended Complaint. (D.I. 29, 31, 33, 36, 38, 43) On September 9, 2015 the court granted-in-part and denied-in-part Defendants' motions to dismiss the Amended Complaint.[3] (D.I. 69) On May 16, 2016, Plaintiffs filed a Second Amended Complaint. (D.I. 145) On June 15, 2016, Defendants moved to dismiss the Second Amended Complaint. (D.I. 158) On February 7, 2017, the court denied Defendants' motion. (D.I. 283) On May 12, 2017, Plaintiffs filed a motion for leave to file a Third Consolidated Amended Complaint. (D.I. 353) As of the filing of this motion, briefing is not fully complete. (D.I. 358) Plaintiffs allege violations of the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act") and common-law fraud in connection with the sale of Fisker Automotive ("Fisker") securities. (D.I. 145 at ¶ 1)

         2. Atlas Fund and Atlas Management are both based in Texas. (D.I. 145 at ¶ 15) Mr. Li was a member of Fisker's Board of Directors until his resignation as a director on July 15, 2011. (Id. at ¶ 33) Ace was an investment vehicle through which Mr. Li invested in Fisker. (Id. at ¶ 32) Non-party Fisker is a Delaware Corporation which had its principal place of business in Anaheim, California. (Id. at ¶ 26) On November 22, 2013, Fisker filed for bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. (Id.)

         3. Relevant procedural history.

         On September 26, 2014, Mr. Li and Ace filed a motion to dismiss for lack of personal jurisdiction. (D.I. 38) On September 9, 2015, the court stayed the motion to dismiss pending the completion of jurisdictional discovery.[4] (D.I. 69) On December 17, 2015, the court denied Mr. Li and Ace's motion to dismiss, without prejudice. (D.I. 108) The court stated that Mr. Li and Ace could renew the motion and supplement the record once jurisdictional discovery was completed. (Id.) On May 15, 2016, Mr. Li and Ace filed a motion to dismiss the consolidated Second Amended Complaint for lack of personal jurisdiction. (D.I. 160) On February 7, 2017, the court denied the motion to dismiss (the "Order"). (D.I. 283)

         4. On December 21, 2016, the case was referred to the undersigned magistrate judge for all disputes related to fact discovery. (D.I. 253) On June 8, 2017, the court held a discovery dispute teleconference concerning Defendants' motion for a protective order prohibiting Plaintiffs from taking the depositions of Mr. Li and Ace. (D.I. 374) The parties disagree over whether depositions are appropriate at this stage in the litigation, and if permitted, disagree whether the subject matter should include "merits" testimony. (D.I. 374; 376) Plaintiffs argue that the jurisdictional inquiry is now over, due to the Order denying Defendants' motion to dismiss. (D.I. 376 at 2) Whereas, Defendants argue that personal jurisdiction is still an open issue. (D.I. 374) Additionally, the parties disagree over the location and timing of the depositions, if they should occur. (D.I. 374; 376)

         5. Standard of Review.

         Pursuant to Rule 26(c):

A party or any person from whom discovery is sought may move for a protective order in the court where the action is pending-or as an alternative on matters relating to a deposition, in the court for the district where the depositions will be taken. The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action. The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:
(B) specifying terms, including time and place or the allocation of expenses, for the disclosure of discovery;
(D) forbidding inquiry into certain matters, or limiting the scope of disclosure or ...

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