Court Opinion

ID: 9945561
Source: CourtListenerOpinion
Date Created: 2024-02-27 21:11:05.791394+00
Date Added: 2024-06-11T14:25:32.127598
License: Public Domain

Lioubinine v Arrival
               2024 NY Slip Op 30522(U)
                    February 17, 2024
           Supreme Court, New York County
        Docket Number: Index No. 651783/2022
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                        INDEX NO. 651783/2022
  NYSCEF DOC. NO. 61                                                                                              RECEIVED NYSCEF: 02/17/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

             ALEXANDRE LIOUBININE,                                                                  INDEX NO.         6517 83/2022

                                                          Plaintiff,
                                                                                                    MOTION DATE            N/A
                                                - V -
                                                                                                    MOTION SEQ. NO.        001
             ARRIVAL, DENIS SVERDLOV, TIM HOLBROW,
             MICHAEL ANATOLITIS, GILLES DUSEMON, CSABA
             HORVATH, MICHAEL ABLESON, AVINASH RUGOOBUR,                                             DECISION+ ORDER ON
             PETER CUNEO, ALAIN KINSCH, KRISTEN O'HARA, JAE                                                MOTION
             OH, ARRIVAL VAULT US, INC., UBS SECURITIES LLC,
             BARCLAYS CAPITAL INC., and COWEN & COMPANY
             LLC

                                                          Defendants.
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 17, 18, 19, 20,
            21,22,23,24,25,26,27, 28,29, 34, 35, 36, 37, 38, 39,40,41,42,43,44,45,46,47,48,49,50,51,
            52,53,54
            were read on this motion to/for                                                         STAY

            Upon the foregoing documents, it is

                      In motion sequence number 010, defendants Arrival, UBS Securities LLC,

            Barclays Capital Inc. and Cowen & Company LLC (Movants) move to stay this action

            pursuant to CPLR 2201 pending the resolution of another putative class action filed by

            shareholders of defendant Arrival in the United States Eastern District of New York

            (EDNY Action).

            Background

                      The following facts are taken from the amended complaint unless noted

            otherwise, and for the purposes of this motion, are accepted as true.

                      On April 8, 2022, plaintiff Alexandre Lioubinine filed a putative class action

            against Arrival, an electric vehicle manufacturer and several of its officials for purported
             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                                                        Page 1 of 9
             Motion No. 001

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  NYSCEF DOC. NO. 61                                                                RECEIVED NYSCEF: 02/17/2024

            violations of the Securities Act of 1933 (1933 Act). (New York State Courts Electronic

            Filing Doc. No. [NYSCEF] 1, Summons and Complaint). Plaintiff filed an amended

            complaint on August 12, 2022 wherein plaintiff joined Arrival Vault US, Inc. (previously

            known as CIIG Merger Corp. (CIIG) 1), UBS Securities LLC (UBS), Barclays Capital Inc.

            (Barclays) and Cowen and Company, LLC (Cowen) as defendants. (NYSCEF 9,

            Amended Complaint).

                   This action is about Arrival's de-SPAC transaction (Arrival IPO2 ). (Id. ,i 8.) The

            transaction began with CIIG, a special purpose acquisition company which went public

            on December 17, 2019 through an initial public offering. (Id. ,I21.) On November 18,

            2020, Arrival and CIIG announced that the two companies would merge, and Arrival

            would become a publicly traded company, with its ordinary shares listed on NASDAQ.

            (Id. ,i 22.) Arrival filed a registration statement with the SEC on December 15, 2020. 3

            (Id. ,i 23.) After consummation of the de-SPAC transaction, Arrival's common stock and

            warrants began trading on the NASDAQ on March 25, 2021. (Id. ,i 23.)

                   Plaintiff previously held shares of CIIG Class A common stock and acquired

            shares of Arrival as a result of the Arrival IPO. (Id. ,i 19.)

                   In connection with the Arrival IPO, Arrival and the other defendants made several

            public disclosures including in the registration statement and communications made

            after its shares were listed on NASDAQ. (Id. ,i,i 69, 151.) Arrival claimed that its unique

            1 Arrival Vault US, Inc. is referred to as CIIG in this decision.
            2 While the process by which Arrival listed on NASDAQ is referred to as a de-SPAC

            transaction, the process functions like a traditional IPO in all material aspects.
            (NYSCEF 9, Amended Complaint ,i 24.)
            3 This registration statement was subsequently amended on January 21, February 16,

            February 25, 2021, and declared effective on February 26, 2021. (NYSCEF 9, Amended
            Complaint ,i,i 143, 145.)
             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                           Page 2 of 9
             Motion No. 001

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  NYSCEF DOC. NO. 61                                                                   RECEIVED NYSCEF: 02/17/2024

            'microfactory model' enabled it to manufacture and assemble vehicles at a faster rate

            with lower capital expenditures and would result in greater profitability for Arrival

            compared to its competitors. (Id.      ,m 44-48, 136.) A microfactory uses advanced
            robotics and modular technology cells to manufacture vehicles in smaller factories with

            the assistance of fewer workers, as compared to an assembly line method used in

            traditional auto manufacturing. (Id.     ,m 44-45.)
                    Arrival also claimed that its microfactories were "poised and ready for mass

            production." (Id. ,i 110.) Plaintiff claims "[t]he Registration Statement was inaccurate

            and misleading, contained untrue statements of material fact, omitted to state other

            facts necessary to make the statements made not misleading, and omitted to state

            material facts required to be stated therein." (Id. ,i,i 191, 205.) Specifically, plaintiff

            alleges that the defendants made four categories of materially untrue statements, (1)

            the status of Arrival's microfactories; (2) the core features and purported advantages of

            the microfactories; (3) key attributes of Arrival's vehicles including the total cost; and (4)

            Arrival's financial outlook including revenues associated with the microfactory model.

            (Id. ,i 109.)

                    Plaintiff asserts that Arrival's subsequent disclosures and fund raising (a

            convertible notes offering and a Follow-on Offering of shares) indicated that Arrival's

            previous statements about its microfactory model and its long-term profitability were

            untrue. (Id. ,i,i 155, 163-167.) Plaintiff's shares of Arrival declined in value as a result

            of defendants' materially untrue and misleading statements. (Id. ,i,i 162, 168.) On April

            8, 2022, plaintiff initiated this action alleging violations of Sections 11, 12 (a) (2), and 15

            of the 1933 Act. (NYSCEF 1, Complaint.)

             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                               Page 3 of 9
             Motion No. 001

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                   Prior to the commencement of this action, other shareholders of Arrival filed

            putative class actions in the United States District Courts for the Southern District of

            New York,, i.e., Schmutter v Arrival S.A., No. 1:21-cv-11016-NRB (SONY filed Dec. 22,

            2021) (SONY Action) and the Eastern District of New York, i.e., Sanchez v Arrival S.A.,

            No. 1:22-cv-00172-DG-RLM (EDNY filed Jan. 12, 2022) (EDNY Action) asserting claims

            under Sections 10 (b) and 20(a) of the Securities and Exchange Act of 1934 (1934 Act)

            on behalf of all person and entities that purchased or acquired Arrival common stock

            between November 18, 2020 and November 19, 2021. 4 (NYSCEF 23, EDNY Original

            Complaint.) On September 12, 2022, approximately five months after this action was

            filed, the plaintiffs in the EDNY Action filed an amended complaint adding UBS

            Securities, Barclays, Cowen, CIIG Capital Partners and nine other individuals as

            defendants and adding claims under Sections 11, 12 (a) (2), 15 of the 1933 Act and

            Section 14 (a) of the 1934 Act. (NYSCEF 19, EDNY Amended Complaint.) On

            February 14, 2023, the plaintiffs in the EDNY Action amended their complaint adding

            claims against CIIG Merger Corp. (now known as Arrival Vault US, Inc.) (NYSCEF 57,

            EDNY Second Amended Complaint.)

                   The Movants seek to stay this action pursuant to CPLR 2201 pending the

            resolution of the EDNY Action because (1) plaintiffs in the EDNY Action assert the same

            claims, against all but one of the same defendants here, (2) it arises out of the same

            facts, and (3) plaintiffs in both actions seek the same relief.

            4 The SONY plaintiffs filed a notice of voluntary dismissal of the SONY Action on March

            7, 2022. (NYSCEF 29, Movants' Memo of Law at 8.)
             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                            Page 4 of 9
             Motion No. 001

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            Discussion

                   Movants' motion to stay this action is granted. A court's decision to stay an

            action under CPLR 2201 is discretionary. (See GE Oil & Gas, Inc. v Turbine Generation

            Servs., L.L.C., 140 AD3d 582, 583 [1st Dept 2016].) Factors relevant to the court's

            determination as to whether to stay an action include (1) which forum will offer a more

            complete disposition of the issues; (2) which forum has greater expertise in the type of

            matter; (3) which action was commenced first and the stage of the litigations; (4)

            whether "there is substantial overlap between the issues raised" in each court; (5)

            whether a stay will avert "duplication of effort and waste of judicial resources;" and (6)

            whether plaintiffs have demonstrated that they would be prejudiced by a stay or that

            there is a risk of inconsistent rulings. (Asher v Abbott Labs, 307 AD2d 211, 211-212

            [1st Dept 2003]).

            A. Complete Disposition of the issues and Substantial Overlap between issues

                   The Movants claim that there is substantial overlap between this action and the

            EDNY Action. First, plaintiffs in both actions assert claims under Sections 11, 12(a)(2)

            and 15 of the 1933 Act, challenging almost the exact same disclosures which

            purportedly contained materially misleading statements or omissions. (NYSCEF 29,

            Movants' Memo of Law at 11-13.) Second, the putative class members (i.e. all persons

            or entities who purchased or otherwise acquired Arrival ordinary shares pursuant to or

            traceable to the registration statement and/or purchased or otherwise acquired Arrival

            shares pursuant to communications related to the de-SPAC transaction) are the same.

            Third, the claims are based on Arrival's statements about the microfactory model and its

            impact on production capability and Arrival's profitability were untrue. (NYSCEF 29,

             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                            Page 5 of 9
             Motion No. 001

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                                                                        ,m 124, 137, 113,
            Movants' Memo of Law at 10.) (See NYSCEF 9, Amended Complaint

            136, 114, 115, 129 compared to NYSCEF 57, EDNY Second Amended Complaint ,m

            117, 252, 243, 247, 282, 248, 249.)        In addition to the putative plaintiffs, there is

            substantial identity of parties between defendants in the two actions where all but one of

            the sixteen defendants in this action are also defendants in the EDNY Action.

            (NYSCEF 29, Movants' Memo of Law at 11.) Further, plaintiffs in both actions seek

            money damages and equitable relief.5

                   Given the substantial overlap between the two actions, the Movants claim that

            the EDNY Action offers a more complete disposition of the case as it also encompasses

            claims under the 1934 Act which can only be raised in a federal court. 6 (NYSCEF 29,

            Movants' Memo of Law at 13-14.) While plaintiff admits to overlaps between the two

            actions, he challenges movants assertion that the actions are identical because the

            pleading standard is indisputably different; the 1933 Act claims filed in the EDNY Action

            would be subject to a heightened pleading standard as compared to the same claims in

            this action. (Camelot Event Driven Fund v Morgan Stanley & Co. LLC, 77 Misc 3d

            1232(A) [Sup Ct 2023].) Prejudice is addressed below as it is a separate factor from

            substantial overlap and complete disposition. Since the actions are nearly identical and

            5 The plaintiffs in the EDNY Second Amended Complaint seek compensatory damages

            and equitable relief. (NYSCEF 57, EDNY Second Amended Complaint at 173.) Plaintiff
            in this action seeks compensatory damages. (NYSCEF 9, Amended Complaint at 81.)
            Here, plaintiff also asserts a "right to rescind and recover the value exchanged for their
            shares, and hereby tender their Arrival shares to Defendants sued in this Count." (Id. ,I
            211.) Therefore, as plaintiff seeks both compensatory damages and equitable relief
            here, the court finds that the relief overlaps with the EDNY Action too.
            6 See Cyan, Inc. v Beaver Cty. Emples. Ret. Fund, 138 S. Ct. 1061, 1066 (2018)

            (Private rights of action under the1934 Act fall within the "exclusive jurisdiction" of the
            federal courts])
             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                                  Page 6 of 9
             Motion No. 001

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  NYSCEF DOC. NO. 61                                                                  RECEIVED NYSCEF: 02/17/2024

            resolution of the EDNY Action will dispose of or limit the issues to be resolved in this

            action, the first factor favors a stay in this action pending the resolution of the EDNY

            Action. ( See Hipple, 2022 NY Slip Op 50411 (U), *2.)

            B. First to File and Stage of the Litigations

                   The Movants contend that the EDNY Action was filed months before this action

            and, thus, the first-filed action rule favors a stay. ( See Matter of PPDAI Group Sec.

            Litig, 2019 NY Slip Op 51075 [U], *5 [Sup Ct, NY County 2019] ["general rule in New

            York is that the court which has first taken jurisdiction is the one in which the matter

            should be determined, and it is a violation of the rules of comity to interfere"] [internal

            quotation marks and citation omitted].) Plaintiff claims that this action was first-in-time

            to assert the 1933 claims. (NYSCEF 37, Plaintiff's Memo of Law at 14.)

                   The EDNY Action was not first in time with respect to the claims under the 1933

            Act which were first raised in this action in April 2022 and were added in the EDNY

            Action only in September 2022. This factor favors no stay. (See Convery v Jumia

            Techs., 2020 NY Slip Op 32639[U], *5 [Sup Ct, NY County 2020]].) Moreover, when

            plaintiff filed first, he chose this court. (Macomb County Employees' Retirement Sys. v

            Venator Materials PLC [N.Y. Sup Ct, New York County 2020].) The second factor

            though significant, is not dispositive. (Certain Underwriters at Lloyds, London v

            Millennium Holdings LLC, 13 Misc 3d 1204(A) [Sup Ct 2006], affd, 44 AD3d 536 [1st

            Dept 2007].)

            C. Expertise

                   As there is no disagreement between the parties about the expertise of this court

            to adjudicate the claims under the 1933 Act, this factor is neutral.

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             Motion No. 001

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            D. Duplication of Effort and Waste of Judicial Resources

                   The Movants contend that allowing two entirely overlapping actions to proceed

            simultaneously will result in duplication of effort and waste judicial resources and

            therefore a stay should be granted in this action. (NYSCEF 29, Movants' Memo of Law

            at pgs. 14-15; NYSCEF 51, Movants' Reply Memo of Law at 15-16.)

                   Plaintiff counters that the mere fact that two trials will be conducted

            simultaneously does not provide an appropriate basis for a stay and coordination of the

            two actions will mitigate any risk of duplication. (NYSCEF 37, Plaintiff's Memo of Law at

            17.) While it is indeed correct that the possibility of two trials in actions involving

            differing claims is not a basis for a stay and cooperation between parties and courts in

            sophisticated securities cases usually addresses concerns pertaining to duplication of

            effort and waste of judicial resources (Convery, 2020 NY Slip Op 32639[U], *6), the

            actions here involve entirely overlapping claims, as discussed above. As there is

            substantial overlap between the two actions, this factor weighs in favor of a stay. This

            court reached a different result on this issue in Convery "where the actions involve[d]

            differing claims, the possibility or actuality of two trials is of no importance" because the

            claims at issue in the federal and state actions were different. (Id.)

            E. Prejudice and risk of inconsistent rulings

                   Plaintiff claims that it would be prejudiced by a stay of this action as the 1933 Act

            claims asserted by it in this action would be subject to a heightened pleading standard

            in the EDNY Action. (NYSCEF 37, Plaintiff's Memo of Law at 17.) Relying on Convery,

            054plaintiff contends that this factor is dispositive. (2020 NY Slip Op 32639[U], *6;

            NYSCEF 37, Plaintiff's Memo of Law at 16-17.) Plaintiff's reliance on Convery is

             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                              Page 8 of 9
             Motion No. 001

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            misplaced since there were multiple reasons for the stay in Convery; prejudice was not

            dispositive. The movants counter that this factor is neutral because New York applies a

            heightened standard to fraud claims. While movants statement of the law is correct for

            a fraud claim, the law in New York is clear that this heightened pleading standard does

            not apply to claims in New York State Courts under the 1933 Act. (Feinberg v Marathon

            Patent Group Inc., 193 AD3d 568 [1st Dept 2021].) This factor does not favor a stay.

                    However, the court agrees with movants that the risk of inconsistent rulings is

            material here because of the significant overlaps.

                    The court has considered all other arguments and they do not demand a different

            result. A stay is appropriate in this case.

                    Accordingly, it is

                    ORDERED that motion of defendants Arrival, UBS Securities LLC, Barclays

            Capital Inc. and Cowen & Company LLC to stay the action is granted and further

            proceedings in this action are stayed, except for an application to vacate or modify this

            stay; and it is further

                    ORDERED that either party may make an application by order to show cause to

            vacate or modify this stay following final adjudication of the EDNY Action.

                    2/17/2024
                      DATE                                                     ANDREA MASLEY, J.S.C.
             CHECK ONE:                   CASE DISPOSED                NON-FINAL DISPOSITION

                                          GRANTED         □ DENIED     GRANTED IN PART          □ OTHER
             APPLICATION:                 SETTLE ORDER                 SUBMIT ORDER

             CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN   FIDUCIARY APPOINTMENT    □ REFERENCE

             651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL                                 Page 9 of 9
             Motion No. 001

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