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Yan v. ReWalk Robotics Ltd.

United States District Court, D. Massachusetts

February 23, 2018

WANG YAN, individually and on behalf of all other similarly situated parties, Plaintiff,
v.
REWALK ROBOTICS LTD., LARRY JASINSKI, KEVIN HERSHBERGER, AMI KRAFT, AMIT GOFFER, JEFF DYKAN, HADAR RON, ASAF SHINAR, WAYNE B. WEISMAN, YASUSHI ICHIKI, ARYEH DAN, GLENN MUIR, BARCLAYS CAPITAL INC., JEFFERIES LLC, and CANACCORD GENUITY INC., Defendants.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS FOR INSUFFICIENT SERVICE OF PROCESS

          F. DENNIS SAYLOR IV UNITED STATES DISTRICT JUDGE.

         This is a putative class action alleging violations of the Securities Act of 1933 and Exchange Act of 1934. Plaintiffs purchased common stock of ReWalk Robotics, Ltd. between September 12, 2014 (the date of its initial public offering (“IPO”)) and February 29, 2016. The consolidated amended complaint alleges that ReWalk, its officers and directors, and the IPO underwriters concealed material information leading up to the IPO about ReWalk's failure to comply with FDA regulations. It also alleges that after the IPO, ReWalk and certain officers continued to make material false statements.

         Defendants have moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(5) for failure to complete service of process and Fed.R.Civ.P. 12(b)(6) for failure to state a claim. For the reasons stated below, the Court finds that lead plaintiff has shown good cause why service was not completed within 90 days under Rule 4(m), and defendants' motion to dismiss pursuant to Rule 12(b)(5) will accordingly be denied. A memorandum and order addressing the motion to dismiss for failure to state a claim will be issued at a later date.

         I. Relevant Procedural Background

         This lawsuit was filed on January 31, 2017. The original plaintiffs were Qian Dian, David Hershlikovitz, Jackie888, Inc., Michael Kemmerling, Narbeh Nathan, and Paul Sislin (collectively, the “Investor Group”). The initial complaint only alleged violations of the Securities Act, 15 U.S.C. § 77a et seq.

         On February 6, 2017, counsel filed the statutory notice pursuant to the PSLRA announcing the filing of a securities class action and advising investors that they had until March 27, 2017, to file a motion to be appointed as lead plaintiff.

         On March 27, 2017, Wang Yan moved to be appointed as lead plaintiff. In his memorandum in support, Yan contended that he had the largest financial interest of any prospective lead plaintiff.

         Also on March 27, the Investor Group moved to be appointed as lead plaintiff. In its memorandum in support, the Investor Group indicated that it was unaware of “any other applicant or applicant group that has sustained greater financial losses.” (Docket No. 8, Ex. 1 at 11). On April 10, 2017, upon learning that Yan had a larger financial interest, the Investor Group withdrew its motion to be appointed lead plaintiff.

         On May 1, 2017, the 90-day period under Fed.R.Civ.P. 4(m) for service of the complaint expired.

         On May 10, 2017, counsel for Yan filed affidavits of service of process.[1] The affidavits stated that on May 5, 2017, ReWalk and the underwriter defendants were served with the summons and original complaint. The service on the corporate entities was four days late.[2]The affidavits stated that the individual defendants (both domestic and foreign) were served by simply mailing the summons and complaint to ReWalk's corporate offices. The purported service on the individual defendants was ineffective, regardless of the timing, because mailing to a person's place of work is not one of the proper methods of service under Rule 4.[3]

         On June 9, 2017, the Court entered an order appointing Yan as lead plaintiff, finding that he appeared to satisfy the requirements for lead plaintiff designation under § 21D(a)(3)(B)(iii) of the Securities Exchange Act of 1934 (15 U.S.C. § 78u-4(a)(3), as amended by the Private Securities Litigation Reform Act of 1995 (“PSLRA”)).

         At some point after June 9 (“within days”), an attorney for lead plaintiff, Leigh Smollar, called defendants' lead counsel, Douglas Baumstein, to ask whether he would accept service of process on the individual defendants' behalf. (Pl. Ex. A at 1). Smollar's declaration states that Baumstein orally responded that he would accept service of process for certain individual domestic defendants, but not the individual foreign defendants. (Id.). Although there is no contemporaneous evidence supporting that claim, there is also no affidavit from Baumstein denying the claim. In any event, no actual service was effected at that time.

         Lead plaintiff filed a consolidated amended complaint on August 9, 2017. That amended complaint added a new domestic individual defendant, Kevin Hershberger, and claims under the Exchange Act, 15 U.S.C. § 78a et seq.

         It appears that the individual domestic defendants (Hershberger, Jasinski, Weisman, and Muir) ultimately consented to service by e-mail on August 22, 2017. (Defs. Mem. in Supp at 11 n.6; Defs. Ex. E). Service of the individual domestic defendants was finally accomplished that day, 203 days after the filing of the complaint.

         The individual foreign defendants (Kraft, Goffer, Dykan, Ron, Shniar, Dan, and Ichiki) had to be served pursuant to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. See Fed. R. Civ. P. 4(f)(1). Under the Hague Convention, countries are required to “establish a Central Authority to receive requests for service of documents from other countries and to serve those documents.” Zhang v. Baidu.com, Inc., 932 F.Supp.2d 561, 565 (S.D.N.Y. 2013). (citing Hague Convention arts. 2-6). The relevant Central Authority is responsible for completing service of process. Affidavits of service were filed by counsel for lead plaintiff on November 6, 2017, indicating that the Israeli individual defendants (that is, all foreign defendants other than Ichiki) were served pursuant to Hague Convention protocol in October 2017. (Docket Nos. 67-72). Counsel has represented that defendant Ichiki has not yet been served because the Japanese Central Authority takes a significant amount of time to complete service of process. (Pl. Ex. B).

         Defendants have moved to dismiss for failure to complete service of process within 90 ...


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