United States District Court, E.D. Texas, Sherman Division
HAMZA RAMZAN, Individually and On Behalf of All Others Similarly Situated, Plaintiffs,
GDS HOLDINGS LIMITED, WILLIAM WEI HUANG, and DANIEL NEWMAN, Defendants.
MEMORANDUM OPINION AND ORDER
KIMBERLY C. PRIEST JOHNSON, UNITED STATES MAGISTRATE JUDGE.
before the Court is Defendants’ Motion to Dismiss the
Amended Complaint and Alternatively, to Transfer Venue to the
Southern District of New York, and Memorandum of Law in
Support (the “Motion”) (Dkt. 24). In accordance
with the provisions of 28 U.S.C. 636(c), the parties
consented to proceed before the undersigned for the limited
purpose of deciding the Motion. See Dkt. 37. For the
reasons set forth below, the Motion is
Hamza Ramzan, a New York resident, initially commenced this
action; on October 26, 2018; the Court subsequently appointed
Yuanli He, a California resident, as Lead
Plaintiff. See Dkts. 1, 20, 21, 24-8 at 5.
Yuanli He filed the operative Complaint on behalf of himself
and other persons or entities who acquired GDS Holdings
Limited (“GDS”) securities publicly traded on the
NASDAQ from March 29, 2018, through July 31, 2018
(“Plaintiffs”), against GDS, William Wei Huang
(“Huang”), and Daniel Newman
“Defendants”), asserting violations of the
Securities Exchange Act of 1934 (the “Exchange
Act”). See Dkt. 21 at 2. GDS is a Cayman
Islands corporation headquartered in the People’s
Republic of China, where it purports to develop and operate
data centers. See Id . at 7. Huang is GDS’s
founder, Chairman of the Board of Directors, and Chief
Executive Officer, and Newman is GDS’s Chief Financial
Officer. See id. Both Huang and Newman reside in
Hong Kong. See Dkt. 24 at 9.
Motion, Defendants argue: (1) Defendants have no contacts
with Texas that would permit the Court to exercise personal
jurisdiction over them; (2) venue in the Eastern District of
Texas is improper; (3) the case should alternatively be
transferred to the Southern District of New York; and (4) the
case should be dismissed for failure to state a claim.
See Dkt. 24. Plaintiffs filed a response (Dkt. 31)
and Defendants filed a reply (Dkt. 33). The Court held a
hearing on the Motion on September 16, 2019 (the
“Hearing”). At the Hearing, Plaintiffs raised an
additional basis on which to establish personal jurisdiction
under Federal Rule of Civil Procedure 4(k)(2). The Court
ordered further briefing on the matter. See Dkts.
38, 39, 40, 43.
Rule of Civil Procedure 12(b)(2) requires a court to dismiss
the claims presented if it does not have personal
jurisdiction over the defendant. Holmes v. New Logic
Business Loans Inc., 2015 WL 12748311, at *1 (E.D. Tex.
Oct. 7, 2015); Fed.R.Civ.P. 12(b)(2). “When a court
rules on a motion to dismiss for lack of personal
jurisdiction without holding an evidentiary hearing, the
party asserting jurisdiction is required to present facts
sufficient to constitute a prima facie case of
personal jurisdiction to satisfy its burden.” Duke
Energy Int’l, L.L.C. v. Napoli, 748 F.Supp.2d 656,
678 (S.D. Tex. 2010) (citing Central Freight Lines Inc.
v. APA Transport Corp., 322 F.3d 376, 380 (5th Cir.
2003); Alpine View Co. v. Atlas Copco A.B., 205 F.3d
208, 214 (5th Cir. 2000)). “[O]n a motion to dismiss
for lack of jurisdiction, uncontroverted allegations in the
plaintiff’s complaint must be taken as true, and
conflicts between the facts contained in the parties’
affidavits must be resolved in the plaintiff’s favor
for purposes of determining whether a prima facie
case for personal jurisdiction exists.” Bullion v.
Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).
Rule of Civil Procedure 12(b)(3) allows a party to move to
dismiss an action for “improper venue.”
Fed.R.Civ.P. 12(b)(3). Once a defendant raises improper venue
by motion, “the burden of sustaining venue will be on
[the] Plaintiff.” Cincinnati Ins. Co. v. RBP Chem.
Tech., Inc., 2008 WL 686156, at *5 (E.D. Tex. Mar. 6,
2008). “Plaintiff may carry this burden by establishing
facts that, if taken to be true, establish proper
venue.” Id. (citations omitted). The Court
“must accept as true all allegations in the complaint
and resolve all conflicts in favor of the plaintiff.”
Mayfield v. Sallyport Glob. Holdings, Inc., 2014 WL
978685, at *1 (E.D. Tex. Mar. 5, 2014) (citing Ambraco,
Inc. v. Bossclib, B.V., 570 F.3d 233, 237–38 (5th
Cir. 2009)). In determining whether venue is proper,
“the Court may look beyond the complaint to evidence
submitted by the parties.” Ambraco, 570 F.3d
at 238. If venue is improper, the Court must dismiss,
“or if it be in the interest of justice, transfer such
case to any district or division in which it could have been
brought.” 28 U.S.C. § 1406(a); Fed.R.Civ.P.
assert that venue is proper in this judicial district
pursuant to 28 U.S.C. § 1391(b) (“Section
1391”) and Section 27 of the Exchange Act (15 U.S.C.
§ 78aa) (“Section 27”). Under Section 1391,
the general venue statute, “for all venue purposes . .
. a defendant not resident in the United States may be sued
in any judicial district.” 28 U.S.C. § 1391(c)(3).
Section 27’s venue provision reads: “Any suit or
action to enforce any liability or duty created by this
chapter or rules and regulations thereunder, or to enjoin any
violation of such chapter or rules and regulations, may be
brought in any such district or in the district wherein the
defendant is found or is an inhabitant or transacts
business.” 15 U.S.C. § 78aa.
of the solitary reference to the statute in their Amended
Complaint, Plaintiffs make no attempt to demonstrate that
venue is appropriate under Section 27. Rather, Plaintiffs
state in one footnote in their response to the Motion,
“Courts have also held that venue could be established
under Section 27 for any publicly-traded company on the
NASDAQ, such as GDS.” Dkt. 31 at 23. The only case
cited for this general proposition contains one statement, in
dicta, that it is “theoretically” possible venue
could exist in any district under Section 27 due to the
NASDAQ listing. See Id . (citing In re
Geopharma, Inc., No. 04 CIV. 9463 (SAS), 2005 WL
1123883, at *1 n.12 (S.D.N.Y. May 11, 2005)) (“Indeed,
because GeoPharma was a publicly traded company on the NASDAQ
National Market and the alleged misstatements were widely
disseminated and defrauded a nationwide class, plaintiffs
could theoretically have brought suit under section 27 in any
district in the United States.”). The Court has not
found, and Plaintiffs have not cited, any case in which the
NASDAQ listing alone established venue under Section 27. In
fact, courts require action by a defendant that
“reaches into” the forum district that is
“of material importance” to the consummation of
the alleged violation. See GRM v. Equine Inv. & Mgmt.
Grp., 596 F.Supp. 307, 312 (S.D. Tex. 1984) (citing
Hilgeman v. Nat’l Ins. Co. of Am., 547 F.2d
298, 301 (5th Cir. 1977)). Notably. Plaintiffs not only
abandon but entirely contravene their previously pled
position regarding Section 27 in their supplemental briefing.
See Dkt. 40 at 8 (“The Court should find that
the existence of Section 27 of the Exchange Act, a
situation-specific federal statute granting jurisdiction to
other courts, is irrelevant the Rule 4(k)(2) analysis because
it does not grant jurisdiction to this Court.”).
Plaintiffs have not pled any such facts in this case, and
therefore, Plaintiffs have not demonstrated that venue is
proper herein under Section 27.
argue venue is proper under the general venue statute,
Section 1391, as Section 1391 applies even when a cause of
action has a particular, restrictive venue statute.
See Dkt. 31 at 18. In Brunette Mach. Works, Ltd.
v. Kockum Indus., Inc., the Supreme Court held that
Section 1391 is “properly regarded” as a
“declaration of the long-established rule that suits
against aliens are wholly outside the operation of all the
federal venue laws, general and special.” 406 U.S. 706,
714 (1972). Defendants recognize the “long-established
rule, ” but argue that because Section 1391 was amended
in 2011, there is no reason to interpret the statute as
applying differently for alien defendants than for domestic
defendants. See Dkt. 24 at 22.
TC Heartland LLC v. Kraft Foods Grp. Brands LLC, the
Supreme Court addressed the relationship of Section 1391 and
the patent venue statute, 28 U.S.C. § 1400(b), in cases
involving domestic defendants. 137 S.Ct. 1514 (2017). The
Supreme Court explained their findings related
only to domestic defendants:
The parties dispute the implications of petitioner's
argument for foreign corporations. We do not here address
that question, nor do we express any opinion on this
Court's holding in Brunette Machine Works, Ltd. v.
Kockum Industries, Inc., 406 U.S. 706, 92 S.Ct. 1936, 32
L.Ed.2d 428 (1972) (determining proper venue for foreign
corporation under then existing statutory regime).
Id. at 1519, n.2. The Federal Circuit recently
addressed whether the ruling in TC Heartland
contravened the “long-established rule that suits
against aliens are wholly outside the operation of all the
federal venue laws, ” as stated in Brunette. See In
re HTC Corp., 889 F.3d 1349 (Fed. Cir. 2018). In In
re HTC, a Taiwanese company headquartered in Taiwan
contended venue was not proper in the District of Delaware,
and the 2011 amendments to Section 1391 (the “savings
clause”) meant the express venue statute for patent
cases governs and displaces Section 1391. The Federal Circuit
ruled that, despite the existence of a patent venue statute,
“the 2011 amendments do not sufficiently indicate an
intent to make venue protections applicable to alien
defendants, ” and the Supreme Court’s
“decision in TC Heartland does not
alter” the conclusion in Brunette that when
§ 1391(d) was codified in 1948, “Congress was
apparently quite content to leave suits against alien
defendants exempt from the venue statutes, in patent cases as
in all others.” Id. at 1356–57.
District, Chief Judge Gilstrap recently applied the finding
in In re HTC, holding, “BIScience, as a
foreign corporation, is subject to suit in any judicial
district for venue purposes.” Luminati Networks
Ltd. v. BIScience Inc., No. 2:18-CV-483-JRG, 2019 WL
2084426, at *7 (E.D. Tex. May 13, 2019). Likewise, the Court
finds that the “long-established rule” holds
true, such that neither general nor special venue laws apply
to alien defendants. Accordingly, as GDS, Huang, and Newman
reside outside of the United States, venue is proper pursuant
to Section 1391 in any district, including the Eastern
District of Texas.