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In re OvaScience, Inc. Stockholder Litigation

Superior Court of Massachusetts, Suffolk, Business Litigation Session

April 5, 2018



          Kenneth W. Salinger, Justice Superior Court

          Plaintiffs assert claims under the federal Securities Act of 1933 on behalf of themselves and a proposed class of investors who purchased stock in OvaScience, Inc. Plaintiffs have sued OvaScience, some of its officers and directors, and three investment banks that served as underwriters during OvaScience’s January 2015 secondary public stock offering.

         Several months ago Judge Sanders denied Plaintiffs’ motion to certify a class[1] and allowed Defendants’ motion for partial summary judgment as to the claims by Phillip Hoffman, Carlos Rivas, and Cesar Castellanos [34 Mass.L.Rptr. 587].[2] The only remaining plaintiff is Westmoreland County Employee Retirement System.[3]

         Westmoreland now moves pursuant to Mass.R.Civ.P. 41(a)(2) for a voluntary dismissal of its claims without prejudice. It filed a parallel federal action two weeks after Judge Sanders denied class certification in this case. Westmoreland wants to dismiss this case without prejudice and instead press its claims and seek class certification in the pending federal action. Defendants oppose this request. The Court concludes, in the exercise of its discretion, that Westmoreland should be allowed to dismiss this case without prejudice. It will therefore ALLOW the motion.

         Westmoreland is entitled to dismiss its claims without prejudice if it wishes to do so, so long as Defendants will not be unfairly prejudiced as a result. See Quest Systems, Inc. v. Zepp, 28 Mass.App.Ct. 489, 496-97 (1990). The Court finds that Defendants will not be unfairly prejudiced if Westmoreland is permitted to dismiss its claims in this action without prejudice so that it may instead prosecute and seek class certification in the pending, parallel federal proceeding.

         Defendants have made no showing that such a dismissal now would somehow impair their ability to defend against these claims in federal court, or that they would be unfairly prejudiced in some other way if the Court were to allow Westmoreland’s motion. The mere fact that Defendants would prefer that any dismissal of Westmoreland’s claims be with prejudice is not grounds for denying Westmoreland’s request for leave to dismiss these claims voluntarily without prejudice. Id.

         1. Class Certification

          Defendants’ main reason for opposing the motion for a voluntary dismissal is that they want to keep Westmoreland from moving for class certification in federal court, under different legal rules. Defendants argue that Westmoreland is improperly seeking a "do-over" on an issue that has already been decided by Judge Sanders. The Court disagrees.

         The limited class certification issues decided by Judge Sanders will not arise or have to be relitigated in Westmoreland’s federal action. Judge Sanders determined that it would violate due process to compel OvaScience investors who do not reside in Massachusetts to join a plaintiff class, given that under Massachusetts law they have no right to opt out of the class. She also determined that it would not be appropriate to certify a plaintiff class consisting only of OvaScience investors who reside or have a principal place of business in Massachusetts [34 Mass.L.Rptr. 610]. It appears that both sides agree that neither of these issues will arise in federal court if Westmoreland is able to seek class certification there. In federal court Westmoreland would presumably be seeking certification of a class under Fed.R.Civ.P. 23(b)(3), which means that any putative class member could opt out of the class by making a timely request for exclusion. See Fed.R.Civ.P. 23(c)(2)(B)(v).[4] And it would be seeking certification of a nationwide class. As a result, Westmoreland would not be seeking "do-over" in federal court of the class certification issues that have already been decided in this case.

         The Defendant’s real reason for opposing voluntary dismissal is that they now have a tactical advantage over Westmoreland, having defeated class certification under Massachusetts law in this action, that would be lost if Westmoreland is allowed to end this case and seek class certification in federal court.

         But a defendants’ loss of the upper hand in a pending proceeding, or a plaintiff’s countervailing gain of some "tactical advantage" by dismissing an action without prejudice and then pursuing the same claims in some other forum, is no reason to deny a motion for voluntary dismissal. Davis v. USX Corp., 819 F.2d 1270, 1275 (4th Cir. 1987); Bechuck v. Home Depot U.S.A., Inc., 814 F.3d 287, 299 (5th Cir. 2016); Rosenthal v. Bridgestone/Firestone, Inc., 217 Fed.Appx. 498, 502 (6th Cir. 2007); Mullen v. Heinkel Filtering Systems, Inc., 770 F.3d 724, 728 (8th Cir. 2014); Smith v. Lenches, 263 F.3d 972, 976 (9th Cir. 2001); American Nat’l Bank & Trust Co. v. BIC Corp., 931 F.2d 1411, 1412 (10th Cir. 1991); Arias v. Cameron, 776 F.3d 1262, 1272 (11th Cir. 2015); Walter Kidde Portable Eqpt., Inc. v. Universal Sec. Instruments, Inc., 479 F.3d 1330, 1337 (Fed.Cir. 2007).

          The Court concludes that Westmoreland has presented a legitimate reason for seeking to dismiss this action and proceeding instead in federal court. Westmoreland should be allowed to abandon its state court action based on its determination that pursuing its claims in federal court is in the best interest of the putative class members. Cf. Smith v. Lenches, 263 F.3d at 976 (affirming voluntary dismissal without prejudice of class claims in federal action under Securities Exchange Act of 1934 because plaintiff decided that it would be in best interest of putative class members to instead challenge same "alleged wrongs" in state court under state law).

         2. Need to Litigate in Federal Court

         Defendants also complain that if this case is dismissed then they will have to incur additional expense to defend themselves against the same claims in the federal action. But that is not a basis for ...

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