Alfandary v. Nikko Asset Management Co., Ltd.

Background

The plaintiffs are former senior executives of Nikko Asset Management Co., Ltd., its New York-based wholly owned subsidiary, or its European operating subsidiary. They contend that Nikko intentionally undervalued their stock acquisition rights. The specific motions addressed in this order concern Mr. Reidenbach, his April 2015 separation agreement, and a later lawsuit Nikko filed against him in Tokyo.

On December 14, 2020, Nikko sued Mr. Reidenbach in Tokyo District Court. The separation agreement designates that court as the exclusive forum for claims arising from the agreement. It also includes confidentiality obligations, a release of claims against Nikko, and a representation that Mr. Reidenbach had not filed and would not become involved in legal action against Nikko. Nikko alleged that he breached the agreement by disclosing confidential information to the plaintiffs and joining this lawsuit.

The protective order in this case provided that confidential information produced or disclosed in the litigation could be used only in this litigation and not in another lawsuit or for another purpose. Nikko sought permission to use some confidential discovery material in the Tokyo case, asserting that doing so would promote efficiency and avoid duplicative discovery. The plaintiffs sought broader restrictions barring the use of any discovery material from this case outside this litigation. They also requested an anti-suit injunction, which is an order preventing a party from pursuing a case in another court.

Protective-order issue and order to show cause

The court explained that protective orders may be modified, but when parties have reasonably relied on one, modification generally requires a showing that the order was improvidently granted or that an extraordinary circumstance or compelling need exists.

The court found that the timing and substance of the Tokyo lawsuit supported a fair inference that Nikko had used confidential discovery from this case. Nikko had known about the alleged conduct since 2015 and had been reminded of it when this case began in 2017, but waited until discovery in this case had concluded before filing the Tokyo lawsuit. It filed the Tokyo case only days after deposing nine plaintiffs about topics relevant to that lawsuit, including their interactions with Mr. Reidenbach and their efforts to challenge Nikko’s alleged conduct.

The court therefore ordered Nikko to show cause—meaning to explain why the court should not impose sanctions—for using information obtained in discovery in this case in violation of the protective order. The court did not impose sanctions in this order. It reserved decision on both parties’ competing motions to modify the protective order until after resolving the order-to-show-cause issue.

Anti-suit injunction

The court applied the required two-part threshold test for an anti-suit injunction involving a foreign case. The parties were sufficiently similar in both proceedings, satisfying the first requirement. The second requirement was not met because resolving this case would not dispose of the Tokyo lawsuit.

This case concerns whether Nikko breached the allotment agreement and the terms and conditions of its stock-option plans in connection with valuing and extinguishing the plaintiffs’ stock acquisition rights. The Tokyo case concerns whether Mr. Reidenbach breached his separation agreement through alleged disclosure of confidential information and by agreeing not to sue. Because the proceedings involve different contracts, issues, arguments, and evidence, a decision in this case would have little effect on the Tokyo case.

The court also stated that, even if the threshold requirements had been met, the discretionary factors weighed against an injunction. The Tokyo lawsuit did not threaten this court’s jurisdiction because Nikko was pursuing claims in the forum designated by the separation agreement. The court also found no substantial frustration of public policy from allowing a different lawsuit to proceed there. Although the court acknowledged the plaintiffs’ concerns that the Tokyo lawsuit might silence or punish Mr. Reidenbach for whistleblowing, it concluded that concerns about vexatiousness alone did not justify an injunction, particularly in light of international comity and the policy favoring parallel proceedings.

Disposition

The court ordered Nikko to show cause why it should not be sanctioned for using discovery information in the Tokyo lawsuit in violation of the protective order. The court reserved decision on the cross motions to modify the protective order pending resolution of that issue. The plaintiffs’ separate motion for an anti-suit injunction was DENIED, and the clerk was directed to close the open motion.