b'omissions artificially inflated the value of its commonform of ownership interest from title holder of stock, harming purchaser class members when theToshiba common stock to beneficial owner through fraudulent accounting was revealed.unsponsored ADRs does not qualify as a purchase The district court dismissed the first amended complaintand that because the ADRs were issued by Citibank, with prejudice on May 20, 2016. Applying Morrison v.the court could infer that plaintiffs actually first Natl Australia Bank Ltd. (561 U.S. 247 (2010)), the districtpurchased Toshiba stock in a foreign transaction court found that the over-the-counter market whereand then deposited those shares with Citibank in a class members purchased Toshiba ADRs was not asecond transaction in exchange for the ADRs. The stock exchange within the meaning of the Exchangecourt rejected Toshibas contention on the basis that, Act, which Morrison defined as a domestic exchange.at the pleading stage, it could not accept Defendants The district court further held that the first amendedproposed inference of no domestic transaction based complaint had failed to adequately allege Toshibassolely on the allegation that [the ADRs] were issued involvement in the alleged securities transactions,by Citibank, as doing so would necessarily disregard making Section 10(b) inapplicable. The district courtPlaintiffs numerous allegations explaining the nature subsequently dismissed the Japanese law claims on theof the ADR transaction that occurred here including basis of comity and forum non conveniens. the placement of the ADR buy order, the payment of the purchase price, the transfer of the securities title, Plaintiffs appealed to the U.S. Court of Appeals for thethe direction of the purchase by outside investment Ninth Circuit. In a July 17, 2018 opinion, the three-judgemanagers, the use of the OTC trading platform, the use panel reversed the district courts dismissal, findingof Citibank, and the recording of title, all of which had that it had misapplied Morrison. While the Ninth Circuitbeen alleged to have occurred in the United States. agreed that [t]he over-the-counter market on whichThe court noted that [w]hile the court agrees that Toshiba ADRs trade is simply not an exchange underthe location of the broker alone does not necessarily the Exchange Act, it found that the Toshiba ADRs diddemonstrate irrevocable liability, the allegations, fall under the category of domestic transactions intaken together, provide sufficient indicia and that other securities covered by Section 10(b). Adoptingdiscovery would ultimately reveal the nature of the the Second Circuits irrevocable liability test, the Ninthoriginal transaction.Circuit held that the presence of a domestic transactionThe court also found that plaintiffs had sufficiently is sufficient to meet the standard set by Morrison,alleged Toshibas involvement in the establishment rejecting Second Circuit precedent that a domesticof the ADRs by showing Toshibas plausible consent transaction was necessary, but not sufficient, to bringto the sale of its stock in the United States as ADRs. a securities transaction under Section 10(b). The NinthMoreover, the court held plaintiffs had sufficiently Circuit concluded that while plaintiffs first amendedalleged that Toshibas fraudulent conduct concealed complaint did not, as pled, sufficiently allege a domesticthe true condition of the company and risks associated violation of the Exchange Act, allowing leave towith its stock as it related to purported omissions amend would not be futile. It therefore reversed andregarding the value of the ADRs and the concealment remanded to permit plaintiffs to amend their complaint. of the improper accounting methods in its various Toshiba petitioned the Supreme Court for certiorari andfinancial reports. Addressing Toshibas comity was denied, after which plaintiffs filed a second amendedargument, the district court concluded that comity complaint on August 8, 2019 which Toshiba againand forum non conveniens do not compel dismissal of moved to dismiss, arguing plaintiffs had failed to allegePlaintiffs JFIEA claim because plaintiffs had sufficiently a domestic transaction under the Exchange Act andalleged conduct in connection with a domestic failed to allege that its conduct was in connection withtransaction and because plaintiffs and the identified [plaintiffs] purchase of ADRs. Toshiba also argued thatclass were U.S. nationals. The district court accordingly comity and forum non conveniens compelled dismissal. denied Toshibas motion to dismiss on January 28, The district court denied the motion to dismiss the2020. Toshiba filed its answer on February 11, 2020 second amended complaint, holding that plaintiffsand plaintiffs filed for class certification on February 29, plausibly alleged that they had irrevocable liability2020 which is set for hearing on August 2, 2021. Close to purchase Toshibas ADRs in the United States,of fact discovery is set for September 23, 2021 and satisfying the Ninth Circuits standard. Defendantsclose of expert discovery is set for January 19, 2022. argued that plaintiffs could not allege a domesticDispositive motions are due February 17, 2022 and trial transaction because Plaintiffs conversion of theiris set for September 27, 2022.12'