Opinion
Index No. 654373/2021
10-17-2022
Matter of Akebia Therapeutics, Inc. Securities Litigation, Plaintiff, v. XXX, Defendant.
Plaintiffs by: Robbins Geller Rudman & Dowd, LLP Defendants by: Ropes & Gray LLP, Boylston Street, Boston, MA
Unpublished Opinion
Plaintiffs by: Robbins Geller Rudman & Dowd, LLP
Defendants by: Ropes & Gray LLP, Boylston Street, Boston, MA
ANDREW S. BORROK, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 29, 30, 31, 32, 33, 34, 37, 38, 39, 40 were read on this motion to/for DISMISSAL.
Upon the foregoing documents and for the reasons set forth on the record (10.6.22), the Defendants' motion to dismiss must be granted and the consolidated amended complaint (the CAC; NYSCEF Doc. No. 9) asserting claims under the Securities Act of 1933 (the 1933 Act) must be dismissed without prejudice.
Simply put, the CAC fails to allege material interim information regarding MACE (hereinafter defined) from the Phase 3 Trial (hereinafter) attributable to vadadustat that deviated from that which was expected by Akebia Therapeutics, Inc. (Akebia) at the time that the Offering Documents (hereinafter defined) were issued such that (x) the failure to disclose such information, (y) representing in the Offering Documents that vadadustat remained the best commercially viable candidate to obtain FDA approval, or (z) continuing to include the Phase 2 Trial (hereinafter defined) results without further explanation based on what was then known about the Phase 3 Trial, made the Offering Documents materially misleading (Asay v Pinduoduo Inc., 2021 WL 3871269 [2d Cir 2021]; cf. In re Intrabiotics Pharmaceuticals, Inc. Sec. Litig., 2006 WL 2192109 [ND Cal 2006] [court dismissed the claims where the interim data produced a lower than anticipated adverse events than had been expected]; In re Silverstrand Investments v. AMAG Pharmaceuticals, 707 F.3d 95 [1st Cir 2013] [court held that the failure to disclose that 23 SAEs had occurred - including a death, two life threatening reactions and fourteen hospitalizations - would have been relevant to consumers in deciding to use Feraheme as opposed to another proven safer alternative and therefore adequately alleged actionable Item 303 and 503 omissions]).
More specifically, the CAC fails to allege that the MACE accrual rate for its competitor, darbepoetin alfa, was known to Akebia such that by knowing the interim data of the total accrual rate of MACE events for the Phase 3 Trial (i.e., the trial which compared the two drugs), Akebia knew the accrual rate of MACE for vadadustat and that such accrual of MACE events exceeded expectations and threatened its commercial viability and FDA approval. The CAC also fails to allege any connection between the results from the Phase 2 Trial which examined Adverse Events (AE) and Serious Adverse Events (SAE) which were in fact disclosed in the Offering Documents to the interim data that Akebia had access to during the Phase 3 Trial at the time that the Offering Documents were issued such that the statements in the Offering Documents were materially misleading when made (In the Matter of Netshoes Sec. Litig., 64 Misc.3d 926, 933 [Sup Ct, NY County 2019]). The case is not however dismissed based on the Defendants' argument that dismissal is required based on (i) lack of personal jurisdiction under CPLR 301 or 302, or (ii) pursuant to CPLR 327 on forum non-conveniens grounds.
The Relevant Facts and Circumstances
Akebia develops and commercializes therapeutics for patients based on hypoxia-inducible factors (HIF) biology. Keryx Biopharmaceuticals, Inc. (Keryx) was a company focused on medicines for kidney disease and marketed Auryxia tablets which were approved by the U.S. Food and Drug Administration (the FDA) for the control of serum phosphorous levels in patients with chronic kidney disease (CKD) who were on dialysis and for the treatment of iron deficiency anemia in adults with CKD who were not on dialysis (NYSCEF Doc. No. 9, ¶ 4).
In connection with a December 2018 Merger (the Merger) of Akebia and Keryx, Akebia issued 57,773,090 shares with a value of $8.94 per share pursuant to a registration statement, dated October 29, 2018 (the Registration Statement; NYSCEF Doc. No. 19). The Registration Statement was signed by (i) John Butler as Director, President and CEO of the Company, (ii) Jason Amello as Senior Vice President, Chief Financial Officer, and Treasurer, and (iii) John Butler as attorney-in-fact for Muneer Satter, Scott Canute, Michael Clayman, Maxine Gowen, Duane Nash, Ronald Renaud, Jr., Cynthia Smith, and Michael Wyzga (collectively, the Signatory Defendants) and the deal was approved by (v) Jodie Morrison, (w) Michael Rogers, (x) Steven Gilman, (y) Mark Enyedy, and (z) Michael Heffernan (hereinafter, collectively the Keryx Board Defendants; the Keryx Board Defendants, together with the Signatory Defendants, hereinafter, collectively, the Individual Defendants), each of whom was on the Keryx Board of Directors at the time of the Merger and were designated to serve on Akebia's Board of Directors following the Merger.
The Registration Statement together with a 2017 Form 10-K (NYSCEF Doc. No. 20) which 2017 Form 10-K was incorporated by reference into the Registration Statement, shall hereinafter, collectively be referred to as the Offering Documents)
The Registration Statement was drafted in New York by Akebia and Keryx's advisors, including Keryx's financial advisor MTS Securities, LLC, its legal counsel Skadden, Arps, Slate, Meagher & Flom LLP, and Akebia's financial advisors Evercore Group LLC and JP Morgan Securities LLC (NYSCEF Doc. No. 9, ¶ 15[a]). Keryx and Akebia also used Georgeson LLC and MacKenzie Partners, Inc. as their New York-based proxy solicitors in connection with the Merger (id., ¶ 15[b]). The Offering Documents referred potential investors to these proxy solicitors (i) to obtain documents incorporated by reference in the Offering Documents, (ii) for answers to questions about the materials, and (iii) for assistance submitting proxies or voting shares (id.). BlackRock Inc., an institutional shareholder of both Akebia and Keryx, was based out of New York, and solicitation efforts for investors were directed to BlackRock Inc. and other investors in New York (id., ¶ 15[c]). Representatives of Akebia also promoted Akebia at conferences in New York in advance of the Merger, including at the 2018 UBS Global Healthcare Conference, the 2018 Morgan Stanley Healthcare Conference, the Ladenburg Thalmann 2018 Healthcare Conference, and the 2018 BTIG Biotech Conference (id., ¶ 15[d]). At the time of the Merger, both Akebia and Keryx were registered to do business in New York, maintained physical presence in New York, including Keryx's principal office according to certain records, and in certain contracts Keryx designated its New York office as its point of contact (id., ¶ 15[e]).
In the Merger, each outstanding share of Keryx common stock and each outstanding Keryx equity award was converted into Akebia's common stock or substantially similar reward at an exchange ratio of 0.37433 for a total consideration of $527.8 million (id., ¶ 5). The resulting ownership was 49.4% owned by Akebia shareholders and 50.6% ownership by former Keryx shareholders on a fully diluted basis (id., ¶ 42).
In the Offering Documents, Akebia touted vadadustat and its potential to set a new standard of care in the treatment of anemia due to CKD and explained that with the Merger, together with Keryx's Auryxia, if approved by the FDA, Akebia would have the potential to offer an all-oral treatment approach for patients with anemia due to CKD:
Akebia is a biopharmaceutical company focused on developing and commercializing novel therapeutics for patients based on hypoxia-inducible factor ("HIF") biology, and building its pipeline while leveraging its development and commercial expertise in renal disease. HIF is the primary regulator of the production of red blood cells in the body, as well as other important metabolic functions. Pharmacologic modulation of the HIF pathway may have broad therapeutic applications. Akebia's lead product candidate, vadadustat, is an oral therapy in Phase 3 development and has the potential to set a new standard of care in the treatment of anemia due to CKD. The Akebia management team has extensive experience in developing and commercializing drugs for the treatment of renal and metabolic disorders, as well as a deep understanding of HIF biology. This unique combination of HIF and renal expertise enables Akebia to advance a pipeline of HIF-based therapies to potentially address serious diseases
...
Upon consummation of the Merger, Akebia will have a complementary portfolio comprising Keryx's commercial product, Auryxia, and Akebia's product candidate, vadadustat. Auryxia and vadadustat, if approved by the FDA, have the potential to deliver an all-oral treatment approach for patients with anemia due to CKD. More broadly, the combined company will have the potential to offer therapeutic options to patients across all stages of CKD, including non-dialysis dependent and dialysis dependent patients (NYSCEF Doc. No. 19, at 15 and 87 [emphasis added]).
Indeed, the Plaintiffs allege that, according to the Offering Documents, based on the Phase 2 results, vadadustat, the leading product candidate, was expected to obtain FDA approval and would be scheduled for launch in 2020:
Our lead product candidate, vadadustat, is a HIF-PH inhibitor, or HIF-PHI, in Phase 3 development for the treatment of anemia due to CKD. Anemia is common in patients with CKD, and its prevalence increases as CKD progresses. Anemia is a condition characterized by abnormally low levels of hemoglobin. Hemoglobin is contained within RBCs and carries oxygen to other parts of the body. If there are too few RBCs or if hemoglobin levels are low, the cells in the body will not get enough oxygen. In patients with CKD, anemia results from inadequate EPO levels, which negatively affect RBC production. In addition, iron, which is essential to RBC production, may be deficient in patients with CKD. Left untreated, anemia significantly accelerates overall deterioration of patient health with increased morbidity and mortality. Based on third party prevalence data and company estimates, approximately 37 million people in the United States have CKD and approximately 5.7 million of these individuals suffer from anemia. Anemia from CKD is currently treated by injectable recombinant human erythropoiesis-stimulating agents, or injectable ESAs, such as EPOGEN® (epoetin alfa) and Aranesp® (darbepoetin alfa), or with iron supplementation or RBC transfusion. Based on publicly available information on ESA sales and market data compiled by a third-party vendor, global sales of injectable ESAs for all uses were estimated to be approximately $7.0 billion in 2016. The vast majority of these sales were for the treatment of anemia due to CKD.
When administered to a patient, injectable ESAs provide supra-physiological levels of exogenous erythropoietin to stimulate production of RBCs. While injectable ESAs can be effective in raising hemoglobin levels, they have the potential to cause significant side effects, and need to be injected subcutaneously or intravenously. In particular, injectable ESAs may lead to thrombosis, stroke, myocardial infarction and death. These safety concerns, which became evident starting in 2006, have led to a significant reduction in the use of injectable ESAs. Today, anemia is either not treated or inadequately treated in the majority of non-dialysis dependent, or NDD, CKD patients. There is an unmet need for treatment options that offer an improved safety profile and such agents would have significant market potential.
Vadadustat is designed to stimulate erythropoiesis and effectively treat renal anemia while avoiding the supra-physiologic EPO levels previously observed with injectable ESAs. In addition, vadadustat, if approved, would provide patients with an oral treatment option, rather than an injection. For these reasons, we believe that vadadustat has the potential to set a new standard of care for the treatment of anemia due to CKD.
Phase 1 and Phase 2 data led us to the design of our Phase 3 clinical program for vadadustat. The vadadustat Phase 3 program in NDD-CKD patients with anemia, called PRO2TECT, and in dialysis dependent, or DD, CKD patients with anemia, called INNO2VATE, is designed to enroll up to approximately 6,900 patients evaluating once daily oral dosing of vadadustat against an injectable ESA active comparator, darbepoetin alfa. The enrollment numbers and the completion of PRO2TECT and INNO2VATE will be driven by the accrual of major adverse cardiovascular events, or MACE. In December 2015, the first patient was dosed in PRO2TECT, and the first patient was dosed in INNO2VATE in August 2016. As of December 31, 2017, we expect the remaining external aggregate contract research organization, or CRO, costs of PRO2TECT and INNO2VATE to be in the range of $420.0 million to $450.0 million. We anticipate reporting top-line clinical data for the PRO2TECT and INNO2VATE studies in 2019, subject to the accrual of MACE events. Subject to marketing approvals, we plan to launch vadadustat for the treatment of anemia due to CKD in 2020. (NYSCEF Doc. No. 20, at 3 [emphasis added]).
The details of the Phase 2 Trial were also disclosed in the 2017 Form 10-K:
We completed a multi-center Phase 2b study of vadadustat in non-dialysis subjects with anemia due to CKD. This double-blind, randomized, placebo-controlled study evaluated the efficacy and safety of vadadustat over 20 weeks of dosing in 210 subjects (138 vadadustat and 72 placebo) with CKD stages 1 to 5. Subjects were enrolled into one of three groups: (1) injectable ESA naïve with hemoglobin ó10.5 g/dL, (2) previously treated with injectable ESA with hemoglobin ó10.5 g/dL, or (3) actively treated with injectable ESA with hemoglobin ò9.5 and ó12.0 g/dL, and were randomized at a rate of 2 to 1 to once daily vadadustat or placebo. The primary endpoint was the percentage of subjects with either a mean hemoglobin of ò11.0 g/dL or an increase in hemoglobin by ò1.2 g/dL from baseline. A protocol-defined dose adjustment algorithm was used to achieve the primary endpoint and to minimize variations of hemoglobin from baseline, known as hemoglobin excursions, of ò13 g/dL.
The average age of subjects was 66 years; approximately 75% of subjects had diabetes mellitus; and the mean estimated GFR was 25 mL/min/1.73m2. 54.9% of vadadustat treated subjects compared to 10.3% of placebo treated subjects met the primary endpoint (p=0.0001). Only 4.3% of subjects in the vadadustat group had any hemoglobin excursion ò13.0 g/dL. Between Groups 1 and 2 (the two correction cohorts; ESA-naïve and ESA previously treated), mean Hb increased significantly in the vadadustat group from pre-dose average to end-of-study average (Week 19/20). In Group 3 (conversion cohorts; ESA actively treated), placebo treated subjects experienced a decline in the mean hemoglobin within the first 2 weeks, whereas subjects randomized to vadadustat maintained a stable hemoglobin throughout the study.
Increases in hemoglobin in the vadadustat group were preceded by an increase in reticulocytes and accompanied by an increase in total iron binding capacity and a decrease in serum hepcidin and ferritin. There was no difference between the vadadustat and placebo groups in vascular endothelial growth factor, or VEGF, levels during the study.
A similar percentage of subjects experienced an AE in the vadadustat and placebo treatment groups (vadadustat 74.6% vs. placebo 73.6%); however, the frequency of certain AEs - diarrhea, nausea, hypertension and hyperkalemia - was greater in the vadadustat arm compared to placebo. In the vadadustat arm, a higher number of subjects reported SAEs of acute and chronic renal failure compared to placebo (9.4% vs. 2.8%, respectively); however, none were considered drug-related by the investigator. The percentage of subjects who had an SAE resulting in dialysis initiation, an objective measure of the severity of renal disease, was comparable between vadadustat and placebo groups (8.0% versus 9.7%, respectively) and the number of subjects who discontinued from the study due to AEs of worsening CKD requiring dialysis was also comparable between the vadadustat (4.3%) and placebo (5.6%) groups. There were three deaths in vadadustat-treated subjects of which two were considered to be unrelated to vadadustat and one was considered by the investigator to be possibly related because no autopsy was performed to assess relatedness. There were no deaths in the placebo group.
In summary, vadadustat achieved the desired outcomes of raising and maintaining hemoglobin and increasing iron mobilization, while minimizing hemoglobin excursions ò13 g/dL. Pergola et al published the results of this study in Kidney International 2016 (id., at 8-9).
This according to the Plaintiffs was materially misleading because the Offering Documents failed to disclose the interim data that they knew about the Phase 3 Trial results.
At the time of the Merger, vadadustat was in Phase 3 development (NYSCEF Doc. No. 9, ¶ 36). Akebia was conducting two major clinical trials: (i) the INN2OVATE trial for dialysis patients suffering from anemia due to CKD and (ii) the PRO2TECT trial (collectively, the Phase 3 Trial) for non-dialysis dependent (NDD) patients suffering from anemia due to CKD (id., ¶ 37). The PRO2TECT trial was particularly important to the company because the NDD patient population suffering from CKD is significantly higher than the dialysis CKD patient population (id.).
The PRO2TECT trial began in December 2015 and was expected to achieve full enrollment in 2019, after the Merger (id., ¶ 38). The primary safety endpoint for the PRO2TECT trial involved an assessment of major cardiovascular events (MACE) and a comparison of MACE for vadadustat to MACE for darbepoetin alfa, an injectable standard for patients not on dialysis with anemia due to CKD (id.). The PRO2TECT trial was an open-label study, meaning that the treatment given was not concealed from the researchers or the subjects (id., ¶ 39). The previous phase of testing was a blinded trial of over 200 patients, two-thirds of whom received vadadustat and one-third of whom received a placebo (the Phase 2 Trial; id., ¶ 55). In the Phase 2 Trial, 44 patients, or about one-fifth of the patients in the trial, experienced SAEs (id.). Of these 44 patients, 33 received vadadustat and 11 received the placebo (id.). As discussed above this was disclosed in the Offering Documents.
The Plaintiffs allege that the Phase 3 Trial was critical for demonstrating vadadustat's commercial viability (NYSCEF Doc. No. 9, ¶ 37). The first patient in the Phase 3 Trial was dosed in December 2015 and the trial was on track to achieve full enrollment shortly after the Merger in 2019 (id., ¶ 38). The Phase 3 Trial was an open-label study, which is a clinical trial in which the treatment given to a subject is not concealed from either the researchers or the subjects (id., ¶ 39). The Plaintiffs allege that the open-label nature of the Phase 3 Trial gave Akebia and its officers and directors material information regarding the occurrence of MACE among the treatment population and vadadustat's safety profile as compared to existing treatments, and that this information was available long before the Merger (id.).
The Plaintiffs allege that Akebia and its officers and directors knew of the MACE levels in the Phase 3 Trial at the time the Offering Documents were issued. In support of this contention, they allege that, on an August 2018 earnings call, Rita Jain, Chief Medical Officer for Akebia, stated that as the Phase 3 Trial was getting further along in terms of enrollment and actual MACE events, Akebia would be better able to estimate the timeline to completion of the study (NYSCEF Doc. No. 9, ¶ 40). They also allege that she told investors that Akebia had seen a very steady rate of enrollment over the first half of 2018 and that the MACE rates were running in the expected range, such that the Company was confident in the timelines provided for the completion of the Phase 3 Trial (id.).
In other words, the Plaintiffs allege that notwithstanding the picture painted by the Offering Documents, the Defendants knew at the time of the Merger that it simply was not true that vadadustat was on track to obtain FDA approval because the MACE rates were not within expected range. The Plaintiffs allege that this omission made the Offering Documents materially misleading - particularly in light of the statements of corporate optimism about the drug's commercial viability. Indeed, on September 3, 2020, Akebia issued a press release announcing the top-line results from its PRO2TECT trial and disclosed that vadadustat was linked to increased heart risks compared to darbepoetin alfa and that it did not meet the primary safety endpoint of the trial, which was defined as the non-inferiority of vadadustat compared to darbepoetin alfa in time to first occurrence of MACE (NYSCEF Doc. No. 23, at 1).
The Plaintiffs allege that this news caused the trading price of the Company's shares to fall $7.35 per share to close at $2.65 per share on September 3, 2020, and that, as of the time of the filing of this action, the Company's shares were valued at approximately $3.54 per share (NYSCEF Doc. No. 9, ¶¶ 63-64).
The Plaintiffs sued bringing this putative class action alleging (i) violation of § 11 of the 1933 Act as against all Defendants (first cause of action), (ii) violation of § 12(a)(2) of the 1933 Act as against all Defendants (second cause of action), and (iii) violation of § 15 of the Securities Act as against all Defendants except the Keryx Board Defendants (third cause of action).
Discussion
The 1933 Act "protects investors by ensuring that companies issuing securities make a full and fair disclosure of information relevant to a public offering (Omnicare, Inc. v Laborers Dist. Council Const. Indus., 575 U.S. 175, 178 [2015] [internal quotation marks omitted]). The "linchpin" of the 1933 Act is its registration requirement, which must contain specified information about both the company itself and the security for sale (id.). Sections 11, 12, and 15 of the 1933 Act impose strict liability for material misstatements contained in registered securities offerings (NECA-IBEW Health & Welfare Fund v Goldman Sachs & Co., 693 F.3d 145, 148 [2d Cir 2012]).
Section 11 of the 1933 Act imposes liability based on the contents of a registration statement, both for what it includes and for what it omits (Omnicare, 575 U.S. at 179). Whether a statement is materially false or misleading is viewed at the time such statement is made, not retroactively or in hindsight (In the Matter of Netshoes Sec. Litig., 64 Misc.3d 926, 933 [Sup Ct, NY County 2019]). Item 303 requires the disclosure of trends or uncertainties that the issuer reasonably expects will have a material, unfavorable impact on revenues or income from continuing operations (Litwin v Blackstone Group, L.P., 634 F.3d 706, 716 [2d Cir 2011]). Section 12 imposes liability on any person who offers or sells securities pursuant to a prospectus containing material misstatements or omission of material fact (Mahar v General Electric, 65 Misc.3d 1121, 1129 [Sup Ct, NY County 2019], affd 188 A.D.3d 534 [1st Dept 2020], citing In re Morgan Stanley Info. Fund Sec. Litig., 594 F.3d 359 [2d Cir 2010]). Accurate statements about past performance, expressions of puffery, and expressions of corporate optimism are not actionable under the 1933 Act (In the Matter of Netshoes Sec. Litig., 64 Misc.3d at 926).
On a motion to dismiss, the court must afford the pleading a liberal construction, accept the facts as alleged in the complaint as true, and accord the plaintiffs the benefit of every possible favorable inference to determine only whether the facts as alleged fit within any cognizable legal theory (Leon v Martinez, 84 N.Y.2d 83, 87-88 [1994]).
I. The Complaint Fails to Allege Actionable Misrepresentations or Omissions
The Defendants argue that the CAC must be dismissed because the Phase 3 Trial MACE interim data attributable to vadadustat was not known at the time of the Merger. All that the CAC alleges is that Akebia knew that MACE was accruing and this was the very point of the Phase 3 Trial - i.e., to measure MACE accrual between vadadustat and its competitor. Any statements made about the commercial viability about vadadustat was purely non-actionable corporate optimism (In the Matter of Netshoes Sec. Litig., 64 Misc.3d at 926). The Phase 2 Trial results also can not form the predicate for a 1933 Act claim because those results were in fact in the Offering Documents. Lastly, according to the Defendants, the Plaintiffs have already played this tune before in a case captioned Fortunato v Akebia Therapeutics, Inc., 2017 WL 716356 (Mass Super Ct, Suffolk County 2017, Salinger, J.) and in that case the court there already held that the unknown interim results of the Phase 2 Trial were not actionable. Indeed, according to the Defendants, this case is brought here in New York as a blatant attempt to avoid the Fortunato holding.
Although the Defendants lean in a little too heavily on the Fortunato holding, they are correct that the CAC fails. As discussed above, the CAC fails to allege material interim information regarding MACE from the Phase 3 Trial attributable to vadadustat that deviated from that which was expected by Akebia at the time that the Offering Documents were issued such that (x) the failure to disclose such information, (y) representing in the Offering Documents that vadadustat remained the best commercially viable candidate to obtain FDA approval, or (z) continuing to include the Phase 2 Trial data results without further explanation based on what was then known about the Phase 3 Trial, made the Offering Documents materially misleading. This is fatal as the Plaintiffs need to allege that the interim data was material in that it would affect "the total mix of information made available" and require disclosure. (Asay, 2021 WL 3871269, at * 4). To be clear, the CAC simply does not adequately articulate that the MACE rate was known for darbepoetin alfa so that by knowing the overall interim data of the MACE accrual rate of the Phase 3 Trial, Akebia knew the rate for vadadustat. If this was in fact known and the Plaintiffs were to allege this and that the MACE rate for vadadustat was therefore known, and the results were allegedly a material deviation, because vadadustat was material to the Merger, this may well be actionable. Thus, the CAC must be dismissed without prejudice. Put another way, just as in Fortunato, the court dismissed the case because the defendants could not have been obligated to report data they did not have (Fortunato, 2017 WL 716356, at * 13), the same result based on the CAC is required here. Because the causes of action under Sections 11 and 12 of the 1933 Act are dismissed, the cause of action under Section 15 of the 1933 Act must also be dismissed.
II. The Court has Specific Jurisdiction under CPLR 302
The Defendants argue that the case must also be dismissed because this Court lacks jurisdiction over Akebia because this Court does not have (x) general jurisdiction under CPLR 301 or (y) long-arm jurisdiction under CPLR 302. In sum and substance, the Defendants argue that this case involved the Merger between two Massachusetts companies, the Merger and the Defendants lack sufficient contacts with New York and that the assertion of jurisdiction violates due process. The argument fails.
New York courts have general jurisdiction over a corporate defendant where the defendant is incorporated or has its principal place of business in New York, or where its ties to New York are so continuous and systematic as to render it essentially at home in New York (Aybar v Aybar, 37 N.Y.3d 274, 289 [2021]). New York courts have general jurisdiction over an individual pursuant to CPLR 301 where the individual is domiciled in the State or where their contacts with the State are so extensive as to support general jurisdiction notwithstanding domicile elsewhere (IMAX Corp. v The Essel Group, 154 A.D.3d 464, 465-466 [1st Dept 2017] citing Daimler AG v Bauman, 571 U.S. 117, 137 [2014]). The allegations in the CAC do not support general jurisdiction.
New York courts may exercise specific jurisdiction pursuant to CPLR 302 where (i) the defendant conducted sufficient activities to have transacted business within the state and (ii) the plaintiff's claims arise from the transactions (English v Avon Products, Inc., 206 A.D.3d 404, 406 [1st Dept 2022]). There must be a substantial relationship between the transaction and the claim asserted, but a strict causal relationship is not necessary (id.). In other words, the plaintiff's claims must have an articulable nexus with the defendant's transactions within the state (id).
According to the CAC, (i) the Registration Statement was drafted in New York by the Defendants' New York-based advisors, (ii) Akebia and Keryx hired New York-based solicitors to disseminate the Registration Statement, solicit investors, and act as the primary contact for the Merger, (iii) significantly, several of the Defendants promoted Akebia in New York just prior to the Merger, (iv) Akebia and Keryx both maintained strong physical presence in New York, and (v) the largest shareholder of Akebia and of Keryx was BlackRock Inc., which is based in New York and which was a primary target of solicitation for the Merger. Under the circumstances, this is sufficient under CPLR 302(a)(2) at this stage of the litigation to ground jurisdiction and the assertion of jurisdiction would not violate due process.
III. Dismissal Pursuant Forum Non-Conveniens is Not Appropriate
Lastly the Defendants argue that dismissal on forum non-conveniens grounds is appropriate because (i) the Defendants are located outside of New York, (ii) the Plaintiffs' claims arise from events outside of New York, (iii) witnesses and documents are located outside of New York, (iv) the Defendants are forum shopping in New York, and (v) the public interest factors weigh in favor of Massachusetts, not New York. The argument is unavailing.
CPLR 327 codifies the common law doctrine of forum non-conveniens. In performing a forum non-conveniens analysis, courts balance various factors, including (i) the burden on New York courts, (ii) the potential hardship to the defendants, (iii) the unavailability of an alternative forum, (iv) the residence of the parties, and (v) where the transaction at issued occurred (Islamic Republic of Iran v Pahlavi, 62 N.Y.2d 474, 479 [1984]). The defendant bears a heavy burden of demonstrating that New York is not a convenient forum, regardless of the residence of the plaintiff (Bank Hapoalim [Switzerland] Ltd. v Banca Intesa S.p.A., 26 A.D.3d 286, 287 [1st Dept 2006]) and the plaintiff's choice of forum should rarely be disturbed, only where the balance is strongly in favor of the defendant (Waterways Ltd. v Barclays Bank PLC, 174 A.D.2d 324, 327 [1991]).
All of the factors that support specific jurisdiction also establish New York's strong interest in adjudicating this action, and establish a strong factual and legal connection with New York. The burden on this Court is minimal - i.e., this Court regularly presides over claims involving alleged violations of the 1933 Act involving companies from all over the world. Equally significant, although the Defendants do not reside in New York and the Plaintiffs do not specify in the CAC where they reside, the Plaintiffs allege that Massachusetts does not provide an alternative suitable forum because Massachusetts does not provide a forum for a nationwide class action like New York. Finally, as discussed above, the CAC sufficiently alleges that a substantial amount of activity took place in New York (including the drafting of the Offering Documents and the promotion of the Merger) such that it can not be said that New York is an inconvenient forum.
It is hereby ORDERED that the motion to dismiss is granted without prejudice; and it is further
ORDERED that the Plaintiffs shall file an consolidated second amended complaint within 30 days of the date of this order; and it is further
ORDERED that if the Plaintiffs fail to timely file a consolidated second amended complaint, this dismissal shall be deemed to be with prejudice.