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Path to Riches, LLC v. Cardiolync, Inc.

United States District Court, D. Delaware

February 21, 2018

PATH TO RICHES, LLC, directly and derivatively on behalf of M.M.T. DIAGNOSTICS 2014, LTD., Plaintiff,
v.
CARDIOLYNC, INC., GAMLIEL KAGAN a/k/a/ GAM KAGAN, and DR. JACOB LEVY, Defendants, and M.M.T. DIAGNOSTICS 2014, LTD. a/k/a GAM KAGAN, and DR. JACOB LEVY, Nominal Defendant.

          MEMORANDUM

          Gerald Austin McHugh United States District Judge.

         This is a dispute over whether one Israel-based company improperly obtained confidential and proprietary information from another. Plaintiff Path to Riches purports to bring direct and derivative claims on behalf of MMT, an Israeli company in which it holds a majority share, against Defendants CardioLync and its owners. Defendants now move to dismiss based on lack of personal jurisdiction, lack of subject matter jurisdiction, and forum non conveniens. Without deciding either jurisdictional issue, I find that Israel is an adequate alternative forum for this dispute, and that the deference owed to Plaintiff's choice of forum is outweighed by the substantial private and public interests in holding this proceeding in Israel. Specifically, all of the parties and essential non-party witnesses are either Israeli residents or have significant ties to Israel; two of the three companies are based there; and Israeli law likely governs most of Plaintiff's claims. Accordingly, Defendants' motion to dismiss will be granted on FNC grounds.

         I. Background

         This case arises from Plaintiff Path to Riches, LLC's (PTR's) allegation that Defendants Gamliel Kagan (Gam) and Jacob Levy (Dr. Levy), through their company, Defendant CardioLync, misappropriated proprietary information belonging to M.M.T. Diagnostics (2014), Ltd., by inducing MMT's CEO to breach his contractual and fiduciary duties. Because I ultimately decide this motion on FNC grounds, the location of and relationship among the parties and witnesses are of primary importance.

         PTR is a limited liability company organized under the laws of Delaware and based in New York state. It is wholly owned by Dr. and Ms. Minkowitz, non-parties whose primary residence is in New York. The Minkowitzes have a second home in Israel, where they visit each year for extended periods and where their children attend school. Their neighbor in Israel is Jeremy Kagan, an Israeli who is not a party but around whom this dispute centers. Jeremy's brother is Defendant Gam, who also resides in Israel.

         In 2013, Jeremy and Dr. Minkowitz entered into a telemedicine business venture, which the pair would eventually incorporate under the laws of Israel as MMT. (MMT is named as both a plaintiff and a nominal defendant in this action.) MMT initially focused on pathology, but according to PTR, hoped to expand into other fields, including cardiology. Jeremy owns 40 percent of MMT, and PTR (the Minkowitzes' company) owns the remaining 60 percent. Although MMT's incorporation documents provide for a five-member board of directors-three to be appointed by Dr. Minkowitz and two by Jeremy-Jeremy is the sole board member. Schreiber Decl. ¶ 22, ECF No. 14. In 2014, Jeremy also became the CEO of MMT via an employment agreement created under the laws of Israel. He remained in that post through 2015.

         Although MMT is based in Israel, PTR alleges that Jeremy and Dr. Minkowitz agreed in August 2015 to hire two people to work on MMT's product in New York. Jeremy allegedly refused to cooperate with these employees or speak with them by phone, and “never traveled to the United States to visit” them. Compl. ¶ 44. PTR alleges that in November 2015, “as a result of Gam's funding, ” a cease and desist letter was served upon Dr. Minkowitz and the New York employees claiming they were misappropriating MMT's confidential information. Then, on January 26, 2016, Jeremy filed a lawsuit individually and on behalf of MMT in New York state court alleging that Dr. Minkowitz had formed a new company and was misappropriating MMT's intellectual property.

         In this lawsuit, PTR alleges the opposite. On the same day that Jeremy sued Dr. Minkowitz, Gam and Dr. Levy (a cardiologist who is Jeremy's brother-in-law), incorporated CardioLync in Delaware-Gam and Dr. Levy are its shareholders and directors. CardioLync is a cardiology telemedicine company based in Israel, and PTR alleges that it targets the same market as MMT. PTR claims that Gam and Dr. Levy, through CardioLync, misappropriated MMT's proprietary information by inducing Jeremy to breach his fiduciary duties and employment agreement with MMT. PTR brings one federal and nine state claims “directly and derivatively” on behalf of MMT.[1]

         Defendants now move to dismiss for lack of subject-matter jurisdiction, lack of personal jurisdiction over Gam and Dr. Levy, and on the basis of FNC, arguing that Israel is the more appropriate forum. Central to Defendants' subject matter jurisdiction argument is their claim that PTR lacks standing because it has not complied with Israeli requirements for bringing a shareholder's derivative action on behalf of MMT. The parties have provided dueling affidavits as to what Israeli law requires and whether PTR should be exempted from Israel's pre-suit demand requirement. Schreiber Decl. ECF No. 14; Stein Decl. ECF No. 22.

         II. Standard

         Although Defendants raise multiple grounds for dismissal, this case calls for resolution of only one: forum non conveniens (FNC). The FNC doctrine empowers federal courts to dismiss an action when “a foreign tribunal is plainly the more suitable arbiter of the merits of the case.” Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 425 (2007). When deciding a motion to dismiss that is based on FNC and other grounds, courts have “discretion to respond at once to a defendant's [FNC] plea, and need not take up first any other threshold objection.” Id. Thus, where “considerations of convenience, fairness, and judicial economy so warrant, ” courts may exercise their discretion to dismiss on FNC grounds without deciding any jurisdictional questions. Id. In this case, FNC considerations “weigh heavily in favor of dismissal”-as explained below-and the existence of subject-matter and personal jurisdiction is “difficult to determine.”[2]See Sinochem, 549 U.S. at 436. I therefore “take the less burdensome course” and dismiss on FNC grounds alone. See id.

         FNC is a discretionary tool that empowers a district court “to dismiss an action on the ground that a court abroad is the more appropriate and convenient forum for adjudicating the controversy.” Id. at 425. The doctrine arises from a concern that plaintiffs sometimes attempt to force a trial at a “most inconvenient place for an adversary, even at some inconvenience to [the plaintiff], ” in order to inflict upon an adversary “expense or trouble not necessary to [the plaintiff's] own right to pursue his remedy.” Lony v. E.I. Du Pont de Nemours & Co., 935 F.2d 604, 615 (3d Cir. 1991) (citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507 (1947)).

         To decide whether FNC is appropriate, district courts engage in a three-step analysis. First, the court must determine “whether an adequate alternate forum” exists to entertain the case. Eurofins Pharma U.S. Holdings v. BioAlliance Pharma SA, 623 F.3d 147, 160 (3d Cir. 2010). If so, the court must next determine “the appropriate amount of deference to be given the plaintiff's choice of forum.” Id. Finally, the court must weigh “the relevant public and private interest factors”-discussed below-to determine whether, on balance, “trial in the chosen forum would result in oppression or vexation to the defendant out of all proportion to the plaintiff's convenience.” Id. If so, or if the chosen forum is “inappropriate” in light of the court's own “administrative and legal problems, ” the court “may, in its discretion, ” dismiss the case.[3] Windt v. Qwest Commc'ns Int'l, Inc., 529 F.3d 183, 189 (3d Cir. 2008) (citing Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947)).

         As defendants seeking dismissal on the basis of FNC, Gam, Dr. Levy, and CardioLync bear the burden of persuasion as to all elements of the FNC analysis, see Lacey v. Cessna Aircraft Co., 862 F.2d 38, 43-44 (3d Cir. 1988) (Lacey I), and there is generally a “strong presumption” in favor of the plaintiff's choice of forum, ” Piper, 454 U.S. at 255. That presumption, however, “applies with less force when the plaintiff or real parties in interest are foreign.” Id.

         In performing this FNC analysis, the court “generally becomes entangled in the merits” to the extent required to “scrutinize the substance of the dispute.” Van Cauwenberghe v. Biard, 486 U.S. 517, 528 (1988). However, this “does not call for a detailed development of the entire case” or “require extensive investigation”-instead, the court may rely on the parties' affidavits. Lony, 935 F.2d at 614 (citations omitted). In fact, motions to dismiss based on FNC should be decided “at an early stage in the litigation, so that the parties will not waste resources on discovery and trial preparation in a forum that will later decline to exercise its jurisdiction over the case.” See Lony, 935 F.2d at 614. Accordingly, Defendants' motion is appropriately decided now, before discovery has taken place and when relatively limited resources have been spent.

         III. Analysis

         Through several rounds of briefing containing undisputed facts and numerous affidavits, Defendants have satisfied their burden to show that an adequate alternative forum exists, and that the relevant private and public interests outweigh the deference owed to PTR's forum choice.

         A. Adequate Alternative Forum

         Defendants have met their burden to show that an adequate alternative forum exists because all of them are or soon will be Israeli residents and, moreover, have consented to personal jurisdiction there. In Piper, the Supreme Court explained that “[o]rdinarily, [the alternative forum] requirement will be satisfied when the defendant is amenable to process in the other jurisdiction.” 454 U.S. at 255 n.22. Here, Gam's residence and CardioLync's principal place of business is Israel. Compl. ¶¶ 6-7, Defs.' MTD 20. (MMT-not a party but a nominal defendant and the real party in interest to Plaintiff-is also an Israeli company incorporated and based there.) Dr. Levy currently resides in the state of Georgia but plans to relocate to Israel permanently to join his family there within the month.[4] Levy Suppl. Decl. 1, ECF No. 36. Moreover, all of the Defendants “would consent to the exercise of in personam jurisdiction over them by Israeli courts as a condition for dismissal of this proceeding under FNC.” Defs.' Reply 3, ECF No. 25. The parties' undisputed residence in and consent to jurisdiction in Israel satisfies their duty to show that an alternative forum exists. See Eurofins, 623 F.3d at 154 n.9. (affirming that France was an adequate alternative forum where “each of the defendants [was] amenable to service of process . . . [and] none of the defendants [would] contest personal jurisdiction there”); Dahl v. United Techs. Corp., 632 F.2d 1027, 1029 (3d Cir. 1980) (affirming FNC dismissal where defendant had consented to personal jurisdiction in Norway, despite plaintiffs' objection that defendant was “not really present there”); see also Kisano Trade & Invest Ltd. v. Lemster, 737 F.3d 869, 873 n.1 (3d Cir. 2013) (stating in dicta that Israel was an adequate alternative forum, despite plaintiff's contention that defendants would not be amenable to suit there, where defendants consented to Israeli jurisdiction).

         But PTR argues that Defendants must do more to meet their burden. Plaintiff asserts that Defendants, in order to show that an adequate alternative forum exists, must prove not only that they are amenable to process in Israel, but also that there is an adequate cause of action under Israeli law that provides redress for Plaintiff's injury. Pl.'s Resp. 23; Pl.'s Sur-Reply 6-7, ECF No. 30. It is possible, albeit rare, for a plaintiff to show that an alternative forum is inadequate, despite defendants' amenability to service there-but there is nothing in the record to suggest that is the case here. In Piper's often-cited footnote 22, the Supreme Court explained that in “rare circumstances . . . where the remedy offered by the other forum is clearly unsatisfactory, the other forum may not be an adequate alternative.” 454 U.S. at 254 n.22. This burden is not a light one. For example, the fact that the alternative forum provides for only limited discovery relative to that available in United States is not by itself ...


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