Jackson County Employees' Retirement System v. Ghosn

IN THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

JACKSON COUNTY EMPLOYEES’ )

RETIREMENT SYSTEM, et al., )

)

Plaintiffs, )

) NO. 3:18-cv-01368

v. )

) JUDGE CAMPBELL

CARLOS GHOSN, et al., ) MAGISTRATE JUDGE NEWBERN

)

Defendants. )

MEMORANDUM

Pending before the Court are Motions to Dismiss filed by Defendant Greg Kelly (“Kelly”)

(Doc. No. 63), Defendants Nissan Motor Co., Ltd. (“Nissan”), Hiroto Saikawa (“Saikawa”),

Hiroshi Karube (“Karube”), and Joseph G. Peter (“Peter”) (Doc. No. 68), and Defendant Carlos

Ghosn (“Ghosn”) (Doc. No. 77). Plaintiffs filed a Response in Opposition (Doc. No. 86), and

Defendants filed Replies (Doc. Nos. 104, 105, 108).

Ghosn filed a Notice and Supplemental Declaration of Audra J. Soloway in support of his

Motion to Dismiss. (Doc. Nos. 112, 113). Plaintiffs filed a Response. (Doc. Nos. 117, 118). Ghosn

and Nissan filed Replies to Plaintiffs’ Response. (Doc. Nos. 123, 124, 128). Plaintiffs filed a Notice

of Supplemental Authority in Support of their Omnibus Opposition to Defendants’ Motions to

Dismiss (Doc. No. 119), to which Nissan filed a Response (Doc. No. 125). Nissan filed a Notice

of Relevant Development (Doc. Nos. 129, 130). Plaintiffs filed a Response (Doc. Nos. 131, 132)

and Nissan filed a Reply (Doc. Nos. 133, 134, 135).

For the reasons set forth more fully below, the Motions to Dismiss filed by Ghosn and

Kelly (Doc. Nos. 63, 77) will be DENIED, and the Motion to Dismiss filed by Nissan, Saikawa,

Karube, and Peter (Doc. No. 68) will be GRANTED, in part, and DENIED in part.

I. FACTUAL BACKGROUND & PROCEDURAL HISTORY

Lead plaintiff, Jackson County Employees’ Retirement System (“Jackson County”), and

named plaintiff, Providence Employees Retirement System (“Providence”), (collectively

“Plaintiffs”) filed this class action on behalf of purchasers of Nissan securities between May 11,

2014 and November 16, 2018 (the proposed class period (“Class Period”)), against Nissan, Carlos

Ghosn, former Chairman of the Board of Directors (the “Board”), Representative Director, Chief

Executive Officer, and President; Greg Kelly, former Representative Director and Executive Vice

President; Hiroto Saikawa, former Representative Director and Chief Executive Officer; Hiroshi

Karube, current Chief Financial Officer; and Joseph G. Peter, former Chief Financial Officer,

alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “1934

Act” or the “Exchange Act”), 15 U.S.C. §§ 78j(b), 78t(a), Securities and Exchange Commission

(SEC) Rule 10b–5, 17 CFR § 240.10b–5, and the Financial Instruments and Exchange Act of Japan

(“FIEA”). (Doc. No. 58).

The Amended Complaint, filed on May 6, 2019, alleges that, since at least 2010, Nissan’s

then-CEO and Chairman, Carlos Ghosn, engaged in an unlawful scheme to increase his own pay

by approving billions of yen in deferred compensation, which Nissan would be obligated to pay

him at later dates. Defendants allegedly made false and misleading statements regarding executive

compensation in Nissan’s annual financial reports, resulting in an understatement of Nissan’s

compensation expenses and a concomitant overstatement of Nissan’s operating income throughout

the Class Period. At the same time, Defendants also made false and misleading statements

regarding Nissan’s corporate governance and internal controls, compliance with applicable laws

and regulations, and commitment to ethical conduct in Nissan’s other mandatory disclosure

documents. Nissan’s annual financial reports and other mandatory disclosure documents

containing the alleged misstatements were translated into English and published on Nissan’s

investor relations website throughout the Class Period.

On August 5, 2019, Ghosn, Saikawa, and Karube moved to dismiss the Exchange Act

claims and Nissan moved to dismiss the FIEA claim pursuant to Rule 12(b)(2) for lack of personal

jurisdiction. (See Doc. Nos. 77, 68). Nissan also moved to dismiss the FIEA claim on the basis of

forum non conveniens. (See Doc. No. 68).1 Additionally, all the defendants moved to dismiss the

Exchange Act claims pursuant to Rule 12(b)(6) for failure to state a claim. (Doc. Nos. 63, 68, 77).

A. The Defendants

Nissan is a multinational automobile manufacturer with its international headquarters in

Japan. (Doc. No. 58 ¶ 16). Nissan’s common stock is traded in Japan on the Tokyo Stock Exchange

and its American Depository Receipts (“ADRs”) trade on the over-the-counter (“OTC”) market in

the United States. (See Doc. No. 58 ¶¶ 139, 140).2

Ghosn was Nissan’s President, CEO, a Representative Director, and Chairman of Nissan’s

Board of Directors during the Class Period, stepping down as CEO and President in April of 2017.

(Doc. No. 58 ¶ 32; SCIG Report, Doc. No. 73-5 at PageID # 951-53). Ghosn made many of the

false or misleading statements when presenting on behalf of Nissan at shareholders’ meetings,

(Doc. No. 58 ¶¶ 59, 65-66, 73, 79, 85), and press conferences, (Doc. No. 58 ¶¶ 58, 64, 72), by

endorsing and providing introductory letters to Annual Reports 2014, 2015, 2016, 2017 (Doc. No.

1 Nissan also moved to dismiss on the basis of international comity, however, it fails to address the

Colorado River abstention doctrine applied in the Sixth Circuit by courts in weighing concerns of

international comity. (See Doc. No. 133 at 4 (conceding that Sixth Circuit courts apply the Colorado River

doctrine in evaluating whether to relinquish jurisdiction)). Because Nissan has failed to develop an

argument under the Colorado River doctrine, the Court declines to consider the issue of international comity

in ruling on Nissan’s pending motion.

2 Jackson County purchased Nissan ADR securities and Providence purchased Nissan common

stock. (Doc. No. 58 ¶¶ 14-15).

58 ¶¶ 94, 96, 103) and Sustainability Reports 2014, 2015, 2016 (Doc. No. 58 ¶ 96 ), and by signing

“Confirmation Notes” accompanying Financial Reports 2014, 2015, 2016 (Doc. No. 58 ¶¶ 60, 68,

74).

Kelly joined Nissan’s Board of Directors in June of 2012 as a Representative Director.

(SCIG Report, Doc. No. 73-5 at PageID # 952-53, 956; Doc. No. 58 ¶¶ 3, 18). From 2009 to 2015,

Kelly was Nissan’s Senior Vice President. (SCIG Report, Doc. No. 73-5 at PageID # 952-53, 956;

Doc. No. 58 ¶ 18). As Senior Vice President, Kelly was responsible for Nissan’s Global Human

Resources and oversaw Nissan’s CEO Office, Alliance’s CEO Office, Nissan’s Secretariat’s

Office, and Nissan’s Legal Department. (SCIG Report, Doc. No. 73-5 at PageID # 956). He also

served as the liaison officer of the management side toward Statutory Auditors. (SCIG Report,

Doc. No. 73-5 at PageID # 956). Kelly was known to Nissan insiders as the “‘CEO whisperer’”

and Nissan’s internal investigation revealed that he was “‘the mastermind of [the scheme], together

with Carlos Ghosn.’” (Doc. No. 58 ¶ 3). Kelly made many of the false or misleading statements

by preparing and publishing the Annual Reports 2014, 2015, 2015, 2016, 2017, and 2018 under

his name. (Doc. No. 58 ¶¶ 18, 94, 96, 103, 108).

Saikawa became a member of Nissan’s Board and Executive Vice President in 2005. (Doc.

No. 58 ¶ 19). In 2007, Saikawa was promoted to head Nissan’s U.S. operations and served in that

position when Nissan relocated its U.S. headquarters from California to Franklin, Tennessee. (Doc.

No. 58 ¶ 19). Saikawa became a Representative Director in 2011 and served as Chief Competitive

Officer – second in command to Ghosn – from January 2014 until his appointment as co-CEO

from October 2016 until March 31, 2017. (Doc. No. 58 ¶ 19). Saikawa served as CEO of Nissan

starting on April 1, 2017. (Doc. No. 58 ¶ 19). Saikawa made many of the false or misleading

statements when presenting on behalf of Nissan at shareholders’ meetings, (Doc. No. 58 ¶ 85), and

press conferences, (Doc. No. 58 ¶¶ 78, 84), by endorsing and providing introductory letters to

Annual Reports 2017, 2018, (Doc. No. 58 ¶¶ 103, 108), and Sustainability Reports 2017, 2018,

(Doc. No. 58 ¶¶ 96, 105, 106, 108), and by signing “Confirmation Notes” accompanying Financial

Reports 2017 and 2018 (Doc. No. 58 ¶¶ 80, 86). (Doc. No. 58 ¶ 19).

Peter served as the CFO of Nissan between December 1, 2009 and May 2018, and Karube

has been the CFO since May 18, 2018. (Doc. No. 58 ¶¶ 20-21). As CFO, they were responsible

for overseeing Nissan’s financial activity, including balance sheets, cash flow, and compliance

with corporate governance practices, as well as for financial planning and analysis, control,

accounting, treasury, tax, investor relations, and M&A support. (Doc. No. 58 ¶¶ 20-21). Peter made

many of the false or misleading statements by endorsing and providing introductory letters to

Annual Reports 2015, 2016, 2017 (Doc. No. 58 ¶¶ 96, 103) and by signing “Confirmation Notes”

accompanying Financial Reports 2014, 2015, 2016, and 2017 (Doc. No. 58 ¶¶ 60, 68, 74, 80).

(Doc. No. 58 ¶ 21). Karube made many of the false or misleading statements by endorsing and

providing introductory letters to Annual Report 2018 (¶ 108) and Sustainability Report 2017 (¶

96, 105), and signing the “Confirmation Note” accompanying the Financial Report 2018 (Doc.

No. 58 ¶ 86). (Doc. No. 58 ¶ 20).

B. Nissan’s ADR Program

An ADR is a negotiable certificate that represents an ownership interest in an American

Depository Share (“ADS”) held in trust by a U.S. financial institution (the “Depository”). (Doc.

No. 58 ¶ 141). An ADS is set to a fixed ratio of underlying common stock in a foreign company

purchased by the Depository. (Doc. No. 58 ¶ 141). ADRs are denominated in U.S. dollars, pay

dividends in U.S. dollars, and are traded like the shares of U.S. based companies. (Doc. No. 58 ¶

142). Accordingly, ADRs allow U.S. investors to invest in foreign companies without the need to

transact in a foreign currency or navigate a foreign stock market. (Doc. No. 58 ¶ 142). At the same

time, ADR programs provide foreign companies access to U.S. investors. (Doc. No. 58 ¶ 142).

Nissan’s ADRs trade pursuant to a sponsored Level I ADR program. (Doc. No. 58 ¶ 143).

A sponsored Level I ADR program is initiated by the issuer (here, Nissan), and involves the filing

of a F-6 registration statement and allows an exemption under SEC Rule 12g3-2(b) from Exchange

Act registration. (Doc. No. 58 ¶ 143). In the present case, the Exchange Act claims are asserted by

Jackson County on behalf of purchasers of ADSs. (Doc. No. 58 ¶¶ 8, 16).

C. The Fraudulent Scheme

The Amended Complaint alleges that Nissan’s current organizational structure and

Ghosn’s rise to power therein are both rooted in Nissan’s financial troubles of the 1990s. (Doc.

No. 58 ¶ 28). In 1999, French carmaker Renault bailed out Nissan by purchasing 36.8% of

Nissan’s shares. (Doc. No. 58 ¶ 30). Since 1999, Nissan has been part of the Renault-Nissan-

Mitsubishi Alliance (the “Alliance”), a partnership between Nissan of Japan, Renault of France,

and, since 2016, Mitsubishi Motors of Japan. (Doc. No. 58 ¶ 16). As part of the bailout, Renault

sent Ghosn, Renault’s then-Executive Vice President, to serve as Nissan’s Chief Operating Officer.

(Doc. No. 58 ¶ 31; SCIG Report, Doc. No. 73-5 at PageID # 951-51). Ghosn implemented

significant changes to Nissan’s corporate structure and governance upon his arrival at Nissan,

including making English, not Japanese, the official language of the Company, and overhauling

the manner in which the Company compensated senior employees by enforcing a performance

based system instead of rewarding seniority. (Doc. No. 58 ¶¶ 17, 31).

By 2008, Ghosn was Nissan’s President and CEO, a Representative Director, and

Chairman of Nissan’s Board of Directors. (Doc. No. 58 ¶ 32; SCIG Report, Doc. No. 73-5 at

PageID # 951-52). Ghosn also had concurrent positions as Chairman and President of the Alliance

and Chairman and CEO of Renault starting in 2009, and Chairman of Mitsubishi Motors starting

in 2016. (SCIG Report, Doc. No. 73-5 at PageID # 951-52; Doc. No. 58 ¶ 17).

Ghosn substantially determined the amounts of compensations for individual Directors and

top line management all on his own. (SCIG Report, Doc. No. 73-5 at PageID # 956). Ghosn was

delegated by the resolution of Nissan’s Board of Directors to determine the compensations of the

Directors and top line managers (including Executive Vice Presidents, Senior Vice Presidents,

Corporate Vice Presidents, and Vice Presidents etc.), including determination of his own

compensation. (Doc. No. 58 ¶ 41; SCIG Report, Doc. No. 73-5 at PageID # 955). Nissan’s

Secretariat’s Office was in charge of paying the individual compensations Ghosn determined, and

no information on the amounts of individual Directors’ and top line managements’ compensations

was shared with other departments. (SCIG Report, Doc. No. 73-5 at PageID # 956).

Then, in 2009, in response to widespread public concern about excessive executive

compensation in the wake of the global financial crisis, Japan’s Financial System Council

recommended enhanced disclosure of director pay, along with other regulatory measures aimed at

improving corporate governance. (Doc. No. 58 ¶ 38). Taking heed of these recommendations, the

Japanese legislature amended the disclosure rules under the FIEA to require listed companies to

disclose the amount of compensation to individual directors if it exceeded ¥100 million

(approximately $1.1 million when the law came into effect). (Doc. No. 58 ¶ 38). The new law

mandated disclosure of the total amount of director remuneration and a detailed breakdown by

salary, bonus, stock option value, pension benefits, and other payments. (Doc. No. 58 ¶ 38). It

also required remuneration to be disclosed in a securities report when it was fixed, even if the

actual payout was planned for the future. (Doc. No. 58 ¶ 38). Before the new law, Japanese

companies only had to disclose the compensation of top executives as an aggregate amount without

identifying what individuals were paid. (Doc. No. 58 ¶ 38).

This change in the law impacted Nissan’s Japanese securities filings beginning with the

fiscal year 2009, which ended on March 31, 2010. (SCIG Report, Doc. No. 73-5 at PageID # 953).

Ghosn – whose awarded compensation of ¥1.75 billion (over $15 million) in the fiscal year 2009

was more than twice the amount of Nissan’s other nine top executives, combined – was concerned

by the prospect of compensation transparency and worried about public-relations fallout. (Doc.

No. 58 ¶ 39). Accordingly, beginning in the fiscal year ending in March 2010, Ghosn together with

Kelly devised a multiyear scheme to hide Ghosn’s true compensation from investors by continually

“postponing” undisclosed pay until his retirement in the form of IOUs. (Doc. No. 58 ¶¶ 3, 40, 41;

SCIG Report, Doc. No. 73-5 at PageID # 956). Year after year, Ghosn’s reported pay grew only

slightly, but he increased the IOU portion more rapidly without telling fellow board members.

(Doc. No. 58 ¶ 40). Ghosn ultimately awarded himself more than $80 million in deferred

compensation. (Doc. No. 58 ¶ 40).

D. The Whistleblower Report and Nissan’s Internal Investigation

Around the summer of 2018, a Nissan internal compliance auditor drew up a whistleblower

report, stating that a Nissan unit was being used to provide homes to Ghosn at no cost, and that the

directors’ compensation information on financial filings was incomplete. (Doc. No. 58 ¶¶ 49, 51).

Upon receiving the whistleblower report, Nissan began internal investigation into the alleged

misconduct. (SCIG Report, Doc. No. 73-5 at PageID # 950). In August 2018, Saikawa, Nissan’s

then-CEO, informed the Japanese Ministry of Economy, Trade, and Industry that “Nissan was

likely to face a serious problem later in the year.” (Doc. No. 58 ¶ 51).

On the afternoon of November 19, 2018, Ghosn and Kelly were arrested in Japan by the

Tokyo District Public Prosecutor’s Office on charges of filing falsified Annual Securities Reports

in violation of FIEA. (Doc. No. 58 ¶¶ 4, 53). Shortly thereafter, Nissan issued a release reporting

that for many years, Nissan’s Tokyo Stock Exchange reports had underreported Ghosn’s

compensation, that other improprieties by Ghosn and Kelly had been uncovered, and that Ghosn

and Kelly would be removed from their positions at Nissan. (Doc. No. 58 ¶ 112). Later that

evening, at around 10:00 p.m., Saikawa convened a press conference during which he admitted

that: (i) significant misconduct by Ghosn and Kelly had been discovered through an internal

investigation; (ii) Nissan’s securities reports filed with the Tokyo Stock Exchange misrepresented

the compensation paid to Ghosn; and (iii) Ghosn used Nissan investments and assets for his

personal use. (Doc. No. 58 ¶¶ 5, 113). When the market opened in the US hours later, and in Tokyo

the next day, the price of Nissan securities declined, causing hundreds of millions of dollars in

damages to investors who purchased Nissan securities at prices inflated by defendants’ fraud.

(Doc. No. 58 ¶¶ 6, 114-115).

II. STANDARDS OF REVIEW

A. Rule 12(b)(2)

Federal Rule of Civil Procedure 12(b)(2) allows a defendant to file a motion to dismiss for

lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2). “In deciding a motion to dismiss for lack of

personal jurisdiction, the district court may rely ‘upon the affidavits alone; it may permit discovery

in aid of deciding the motion; or it may conduct an evidentiary hearing to resolve any apparent

factual questions.’” MAG IAS Holdings, Inc. v. Schmuckle, 854 F.3d 894, 899 (6th Cir. 2017)

(quoting Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). “Although plaintiffs have

the burden of establishing that a district court can exercise jurisdiction over the defendant, that

burden is ‘relatively slight’ where, as here, the district court rules without conducting an

evidentiary hearing.” Id. (quoting Air Prods. & Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544,

549 (6th Cir. 2007)). “To defeat dismissal in this context, plaintiffs need make only a prima facie

showing that personal jurisdiction exists.” Id. (citing Air Prods, 503 F.3d at 549). “Under these

circumstances, this court will not consider facts proffered by the defendant that conflict with those

offered by the plaintiff and will construe the facts in the light most favorable to the nonmoving

party in reviewing a dismissal pursuant to Rule 12(b)(2).” Neogen Corp. v. Neo Gen Screening,

Inc., 282 F.3d 883, 887 (6th Cir. 2002).

B. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6), permits dismissal of a complaint for failure to

state a claim upon which relief can be granted. For purposes of a motion to dismiss, a court must

take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662 (2009).

To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted

as true, to state a claim for relief that is plausible on its face. Id. at 678. A claim has facial

plausibility when the plaintiff pleads facts that allow the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged. Id. In reviewing a motion to dismiss, the

Court construes the complaint in the light most favorable to the plaintiff, accepts its allegations as

true, and draws all reasonable inferences in favor of the plaintiff. Directv, Inc. v. Treesh, 487 F.3d

471, 476 (6th Cir. 2007). Thus, dismissal is appropriate only if “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

Guzman v. U.S. Dep't of Children’s Servs., 679 F.3d 425, 429 (6th Cir. 2012).

C. Securities Fraud Pleading Standards

Jackson County’s securities-fraud claims implicate the heightened pleading standards of

Federal Rule of Civil Procedure 9(b). See Dougherty v. Esperion Therapeutics, Inc., 905 F.3d 971,

978 (6th Cir. 2018). Accordingly, their complaint must “(1) specify the statements that the plaintiff

contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were

made, and (4) explain why the statements were fraudulent.” Id. (citations and internal quotation

marks omitted).

The Private Securities Litigation Reform Act (PSLRA) imposes two additional pleading

requirements. See id. (citing 15 U.S.C. § 78u-4(b)(1), (b)(2)). “Plaintiffs' complaint must “specify

each statement alleged to have been misleading along with the reason or reasons why the statement

is misleading and state with particularity facts giving rise to a strong inference that the defendant

acted with the required state of mind.” Id. (citations and internal quotation marks omitted).

III. ANALYSIS

A. Personal Jurisdiction

1. Nissan – FIEA claim

Nissan argues that the court should not exercise jurisdiction over Providence’s claim

brought under FIEA.3 Providence alleges that the court has pendent jurisdiction over the FIEA

claim because it arises from the same common nucleus of operative facts as Jackson County’s

Exchange Act claims over which the court has original jurisdiction. (Doc. No. 58 ¶¶ 9-10).

a. Pendent Personal Jurisdiction

“Pendent personal jurisdiction ... exists when a court possesses personal jurisdiction over

a defendant for one claim, lacks an independent basis for personal jurisdiction over the defendant

3 Nissan does not challenge the court’s personal jurisdiction over it with regard to Jackson County’s

Exchange Act claims.

for another claim that arises out of the same nucleus of operative fact, and then, because it

possesses personal jurisdiction over the first claim, asserts personal jurisdiction over the second

claim.” Ingram Barge Co., LLC v. Bunge N. Am., Inc., 455 F. Supp. 3d 558, 574–75 (M.D. Tenn.

2020) (quoting United States v. Botefuhr, 309 F.3d 1263, 1272 (10th Cir. 2002)). “Pendent

personal jurisdiction—which is sometimes characterized as a species of supplemental jurisdiction

and sometimes referred to as a distinct doctrine —enables a court having original specific

jurisdiction over a person with regard to a particular claim ... to exercise jurisdiction over other

claims involving that person for which it otherwise may not have jurisdiction, so long as the other

matters ‘form part of the same case or controversy.” Ingram Barge Co., 455 F. Supp. 3d at 575

(citations and internal quotations omitted); see also Wright & Miller, 4A Fed. Prac. & Proc. Civ.

§ 1069.7 (discussing basis for recognizing pendent personal jurisdiction).

As noted by Providence, Jackson County’s Exchange Act claims and Providence’s FIEA

claim derive from a common nucleus of operative facts: Nissan’s alleged misstatements as to its

financial results in its financial reports and the subsequent drop in its stock prices. Therefore, the

Court has pendent jurisdiction over Nissan with respect to Providence’s claims under FIEA.

District courts have discretion as to whether to exercise pendent personal jurisdiction, the exercise

of which should be informed by “considerations of juridical economy, convenience, and fairness

to litigants.” Oetiker v. Jurid Werke, G.m.b.H., 556 F.2d 1, 5 (D.C. Cir. 1977) (quoting United

Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966)).

Nissan asserts that the United States is an inconvenient forum because it is a Japanese

resident, the alleged misconduct happened in Japan, and the witnesses and relevant documents are

also in Japan. (Doc. No. 69 at 17). Nissan argues that it would be unfair for it defend the FIEA

claim in the United States because it is a Japanese company and Providence bought its common

stock on a Japanese exchange. (Doc. No. 105 at 15). Additionally, it asserts that the Court should

not exercise pendent jurisdiction over the FIEA claim because it would raise complex and novel

issues under Japanese law and because the class size for the FIEA claim would be much larger

than that for the Exchange Act claims. (Doc. No. 105 at 11-14). Nissan filed a Notice of Relevant

Development on November 5, 2020, stating that it had been served on August 17, 2020, with a

securities lawsuit filed in Japan also arising under FIEA based on the same alleged misconduct as

the present case. (Doc. No. 129 at 1-2). Nissan contends that exercising pendent jurisdiction over

the FIEA claim in the present case would be unfair to Nissan considering this new lawsuit in Japan.

(Doc. No. 129 at 4).

Jackson County argues that the exercise of jurisdiction over Nissan is fair because litigation

the FIEA claims would not unduly burden the company because it is already obligated to appear

in this court to defend the Exchange Act claims. (Doc. No. 86 at 68-70) (citing Wright & Miller,

4A Fed. Prac. & Proc. Civ. § 1069.7 (stating that “[n]otions of fairness to the defendant simply are

not offended” where the claims “are nearly identical or substantially overlap”); Wultz v. Islamic

Republic of Iran, 755 F. Supp. 2d 1, 36 (D.D.C. 2010) (noting that pendent personal jurisdiction

ensures against due-process concerns of unfairness because the defendant is already justifiably

hauled in to the forum to defend against other claims that derive from a common nucleus of

operative fact) (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966)).

Jackson County also asserts that the application of foreign law does not support dismissal

because the Japanese law at issue is straightforward and comprehendible, largely because FIEA

was modeled on the federal securities laws. (Doc. No. 86 at 59 (citing Declaration of Andrew M.

Pardieck (Doc. No. 87-8 ¶¶ 30; 75)). Additionally, Jackson County notes that the elements of the

FIEA claim are not in dispute and have significant overlap with the elements for securities fraud

under the Exchange Act. (Doc. No. 86 at 59-60 (citing Doc. No. 87-8, Pardieck Decl. ¶¶ 8(C), 36-

40; Doc. No. 71, Yasuda Decl. ¶¶ 27-28)). It argues that the foregoing also indicates that

adjudicating the FIEA claim will not unduly burden the court. (Doc. No. 86 at 60-61).

These considerations warrant the Court exercising pendent jurisdiction over the FIEA

claim against Nissan.

b. Forum Non Conveniens

“Forum non conveniens is a common law doctrine that allows a district court not to exercise

its jurisdiction.” Jones v. IPX Int'l Equatorial Guinea, S.A., 920 F.3d 1085, 1090 (6th Cir. 2019).

There are three considerations that a court must address when analyzing a motion: “(1) whether an

adequate alternative forum is available; (2) whether a balance of private and public interests

suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or

the court; and (3) the amount of deference to give the plaintiff's choice of forum.” Id. “Forum non

conveniens decisions are ‘committed to the sound discretion of the trial court.’” Id. (quoting Piper

Aircraft v. Reyno, 454 U.S. 235, 257 (1981)). For the reasons explained below, the Court concludes

that these factors weigh in favor of denying Nissan's motion to dismiss for forum non conveniens.

i. Availability of Adequate Alternative Forum

The Court turns first to whether “an alternative forum exists, which requires another forum

to be both available and adequate.” Jones, 920 F.3d at 1090-91 (citing Piper Aircraft, 454 U.S. at

254 n. 22). An alternative forum is typically “available” if “the defendant is amenable to process

there” and is generally “adequate” if “it can remedy the alleged harm.” Id. “The defendant bears

the burden of identifying an alternative forum that meets these criteria.” Associação Brasileira de

Medicina de Grupo v. Stryker Corp., 891 F.3d 615, 620 (6th Cir. 2018). “It bears emphasizing that

identifying an alternate forum is a prerequisite for dismissal, not a factor to be balanced. If there

is no suitable alternate forum where the case can proceed, the entire inquiry ends.” Id. at 619–20.

Nissan contends that Japan is an available and adequate forum because Nissan, which is

incorporated and headquartered in Japan, is subject to the jurisdiction of Japan, is amenable to

process in Japan. (Doc. No. 69 at 19). In support of its assertion that it is amenable to process in

Japan, Nissan filed a declaration by Ravinder Passi, Nissan Global General Counsel, in which Mr.

Passi states that “Nissan has submitted to the jurisdiction of Japan for resolution of the claim by

the Tokyo Public Prosecutors Office under Japan’s Financial Instruments and Exchange Act.”

(Doc. No. 70, Passi Decl. ¶ 4). Additionally, Nissan submits that Providence may bring suit under

FIEA against Nissan in Japan and that Japanese courts can provide Providece the remedy it seeks,

supported a declaration by an attorney licensed to practice law in Japan, Mitshurio Yasuda. (Doc.

No. 69 at 19-20; Doc. No. 71, Yasuda Decl. ¶¶ 1, 26-28). Accordingly, Nissan argues that it has

established that Japan is an available and adequate alternative forum.

Jackson County challenges Nissan’s assertion in its brief that it is amendable to process in

Japan, noting that Nissan’s supporting declaration from its Global General Counsel is simply a

non-binding assertion that does not speak to whether Nissan would submit to the jurisdiction of

Japan for prospective civil litigation brought by American shareholders. (Doc. No. 86 at 61-62).

In reply, Nissan points to Yasuda’s supporting declaration, which states in part:

a Japanese company whose securities are listed on a Japanese stock

exchange that files an annual securities report which contains

material misstatements is subject to private suits by investors

seeking civil remedies for violations of the disclosure rules resulting

from misstatements. Pursuant to Articles 3-2 and 3-3 of the Japanese

Code of Civil Procedure, a Japanese court can and will exercise

jurisdiction over claims against a defendant whose principal office

is located in Japan or whose tort action occurred in Japan. The

Yokohama District Court has jurisdiction over any such [alleged

violations of FIEA Article 21-2] against [Nissan].

(Doc. No. 71, Yasuda Decl. ¶ 26). Based on the foregoing, the Court finds that Nissan has met its

burden of establishing that Japan is an available and adequate forum.

ii. Balance of Public and Private Interest Factors

“If an adequate alternative forum is available, then courts examine whether the plaintiff's

choice of forum is unnecessarily burdensome.” Jones, 920 F.3d at 1092 (citing Zions First Nat'l

Bank v. Moto Diesel Mexicana, S.A. de C.V., 629 F.3d 520, 523 (6th Cir. 2010)). “To guide that

analysis, courts look to the private and public interests that the Supreme Court listed in Gulf Oil

Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 [ (1947) ].” Id. “The onus of showing

that a plaintiff's choice of forum is unnecessarily burdensome falls on the defendant.” Hefferan v.

Ethicon Endo-Surgery Inc., 828 F.3d 488, 498 (6th Cir. 2016). Nissan has not carried that burden.

The private-interest factors weigh against dismissing this action for forum non conveniens.

“Private-interest factors include ‘the relative ease of access to sources of proof; availability of

compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing

witnesses; possibility of view of premises, if view would be appropriate to the action; and all other

practical problems that make trial of a case easy, expeditious and inexpensive.’” Id. (quoting Gulf

Oil, 330 U.S. at 508). The Court addresses each factor in turn.

Ease of Access to Sources of Proof. Nissan has not demonstrated that access to sources of

proof renders litigating in the United States especially more burdensome than litigating in Japan.

Nissan asserts the evidence it anticipates using to defend the FIEA claim is located in Japan. (Doc.

No. 69 at 21; Doc. No. 70, Passi Decl. ¶¶ 15-17 (identifying potential witnesses believed to reside

in Japan)). However, Nissan has not submitted any evidence that the “cost of travel and of

obtaining testimony of witnesses” in the U.S. from Japanese residents would be “an oppressive or

vexatious burden” on Nissan. Zions, 629 F.3d at 526. Nor has it identified any specific documents

that it intends to use for its defense against Providence’s FIEA claim that would be more easily

accessible in Japan. While Nissan submits that evidence relevant to the FIEA claim is in the

possession of Tokyo Public Prosecutor’s Office in Japan and subject to limitations on use, (Doc.

No. 69 at 22; Doc. No. 70, Passi Decl. ¶ 21), that evidence would be subject to the same limitations

if this action were litigated in Japan. (See Doc. No. 70, Passi Decl. ¶ 21 (“Any document that the

Tokyo Public Prosecutor’s Office needs to support its claim under [FIEA] will not be returned to

Nissan until the [criminal FIEA] legal proceedings have concluded. Furthermore, Nissan may not

use copies of evidence provided by the Tokyo Public Prosecutor’s Office for any purpose other

than defending itself against the [criminal FIEA] asserted in Japan.”). Finally, Nissan has not

demonstrated that the cost or difficulty of obtaining or translating any other sources of proof in

Japan would be especially burdensome.

Availability of Compulsory Process. Nissan also has not demonstrated that a lack of

compulsory process over Japanese witnesses favors litigating in Japan. Nissan contends that

“[n]umerous potential Japanese witnesses …are outside this Court’s compulsory process” and that

“[o]btaining testimony in this Court from such persons—many of whom speak only Japanese—

would be far more difficult than obtaining such testimony in a Japanese court.” (Doc. No. 69 at

22; Doc. No. 73, Turner Decl. ¶¶ 2-5). But Nissan has not identified any particular witness who is

unwilling to appear and thus would require compulsory process to ensure their attendance. See

Duha v. Agrium, Inc., 448 F.3d 867, 877 (6th Cir. 2006) (“[A]lthough the availability of

compulsory process is properly considered when witnesses are unwilling, it is less weighty when

it has not been alleged or shown that any witness would be unwilling to testify.”).

The public-interest factors, in contrast, weigh in favor of dismissing this action for forum

non conveniens. “Public-interest factors include administrative difficulties flowing from court

congestion; the local interest in having localized controversies decided at home; the interest in

having the trial of a diversity case in a forum that is at home with the law that must govern the

action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign

law; and the unfairness of burdening citizens in an unrelated forum with jury duty.” Hefferan, 828

F.3d at 500 (internal quotation marks omitted) (quoting Piper Aircraft, 454 U.S. at 241 n. 6). The

most relevant public-interest factors here relate to local interests in the litigation and to conflict of

laws issues.

Local Interest in Deciding a Local Controversy. Nissan argues that Japan has a stronger

interest in adjudicating the FIEA claim because it is a Japanese statute. It asserts that the Tokyo

Public Prosecutor’s Office investigation and prosecution of Ghosn and Kelly undertaken pursuant

to FIEA underscores Japan’s strong interest in adjudicating the FIEA claim. (Doc. No. 69 at 20-

21). Jackson County argues that the United States has a strong interest in Nissan’s alleged fraud,

and points to the SEC’s investigation into the matter and resulting settlement as underscoring the

American interest in deciding the controversy. (Doc. No. 86 at 58 (quoting the co-Director of the

SEC’s Division of Enforcement, that “Nissan’s disclosures about Ghosn’s compensation were

false…Through these disclosures, Nissan advanced Ghosn and Kelly’s deceptions and misled

investors, including U.S. investors.”) (citing SEC press release dated September 23, 2019, Doc.

No. 87-7)). The court finds this factor is neutral given both countries’ respective interests.

Conflicts of Laws. The fact that the court will have to apply foreign law weighs in favor of

dismissing the action for forum non conveniens. See Jones v. IPX Int'l Equatorial Guinea, S.A.,

920 F.3d 1085, 1094 (6th Cir. 2019).

In sum, the private-interest factors weigh in favor of retaining the action here, and the

public-interest factors weigh in favor of dismissal for forum non conveniens.

iii. Deference to Plaintiff’s Choice of Forum

Forum non conveniens is largely intended to secure convenient trials, and courts defer to a

plaintiff’s choice of forum based on an assumption that the plaintiff will choose a convenient

forum. See Jones., 920 F.3d at 1094 (citing Piper Aircraft, 454 U.S. at 255–56; Hefferan v. Ethicon

Endo-Surgery Inc., 828 F.3d 488, 493 (6th Cir. 2016)). “That assumption is stronger when a

plaintiff picks his home forum, so we give greater deference in those circumstances.” Id. (citation

omitted). The Sixth Circuit has explained the deference analysis as a “sliding convenience scale”

where “the greater the plaintiff's connection to the United States ‘and the more it appears that

considerations of convenience favor the conduct of the lawsuit in the United States, the more

difficult it will be for the defendant to gain dismissal for forum non conveniens.’” Hefferan, 828

F.3d at 493–94 (quoting Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en banc)).

While Nissan argues that Providence’s choice of forum is not entitled to full deference, it

acknowledges that Providence’s choice of its home forum in the United States is entitled to at least

some deference. (See Doc. No. 69 at 19; Doc. No. 105 at 17-18).

In light of the foregoing and given the roughly equal balance between the private and public

interests, the Court in its discretion will not dismiss the FIEA claim based on forum non

conveniens. See, e.g., Silva Cruz v. Gen. Motors LLC, 464 F. Supp. 3d 906, 914 (E.D. Mich. 2020)

(“The competing interests are roughly in equipoise. That is not sufficient to warrant a transfer

based upon forum non conveniens.”) (citing Hefferan, 828 F.3d at 498).

2. Specific personal jurisdiction over Ghosn, Saikawa, and Karube

Jackson County has asserted federal securities claims over Ghosn, Saikawa, and Karube.

Nationwide service of process is available under Section 78aa of the Securities Exchange Act,

which “confers personal jurisdiction in any federal district court over any defendant with minimum

contacts to the United States.” United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1330 (6th Cir.

1993) (citing 15 U.S.C. § 78aa)). In Southern Machine Co. v. Mohasco Industries, Inc., the Sixth

Circuit articulated a three-pronged test for assessing the existence of “minimum contacts”:

First, the defendant must purposefully avail himself of the privilege

of acting in the [United States] or causing a consequence in the

[United States]. Second, the cause of action must arise from the

defendant's activities there. Finally, the acts of the defendant or

consequences caused by the defendant must have a substantial

enough connection with the [United States] to make the exercise of

jurisdiction over the defendant reasonable.

SFS Check, LLC v. First Bank of Delaware, 774 F.3d 351, 356 (6th Cir. 2014) (quoting Beydoun

v. Wataniya Restaurants Holding, Q.S.C., 768 F.3d 499, 505 (6th Cir. 2014) (quoting Southern

Machine Co. v. Mohasco Industries, Inc., 401 F.2d 374, 381 (6th Cir. 1968))).4 Additionally, the

Sixth Circuit has held that:

While it is true that “jurisdiction over the individual officers of a

corporation cannot be predicated merely upon jurisdiction over the

corporation,” Weller v. Cromwell Oil Co., 504 F.2d at 929, we hold

that the mere fact that the actions connecting defendants to the state

were undertaken in an official rather than personal capacity does not

preclude the exercise of personal jurisdiction over those defendants.

Hence, where an out-of-state agent is actively and personally

involved in the conduct giving rise to the claim, the exercise of

personal jurisdiction should depend on traditional notions of fair

play and substantial justice; i.e., whether she purposely availed

that availment.

Balance Dynamics Corp. v. Schmitt Indus., Inc., 204 F.3d 683, 698 (6th Cir. 2000). As noted

above, Nissan does not challenge the court’s personal jurisdiction over it with regard to Jackson

County’s Exchange Act claims. The Amended Complaint alleges that Ghosn, Saikawa, and Karube

were all actively and personally involved in the conduct giving rise to Jackson County’s Exchange

4 Because the Exchange Act includes a nationwide service-of-process provision, the “forum” for the

purposes of personal jurisdiction analysis is the United States, rather than any particular federal judicial

district within the United States. See City of Monroe Employees Ret. Sys. v. Bridgestone Corp., 399 F.3d

651, 665 n. 15 (6th Cir. 2005) (citing 15 U.S.C. § 78aa; United Liberty Life Ins. Co., 985 F.2d at 1330)).

Act claims: making materially false or misleading statements regarding executive compensation

in Nissan’s annual financial reports. Ghosn was allegedly personally involved in masterminding

the fraudulent scheme in addition to making false statements and both Saikawa and Karube are

alleged to have actively participated in the preparation of at least one of the materially false

financial reports and provided Confirmation Notes as to their accuracy. Accordingly, the Court

will assess whether it should exercise personal jurisdiction over Ghosn, Saikawa, and Karube

pursuant to the test outlined in Mohasco.

a. Purposeful Availment

“Purposeful availment ... is present where the defendant’s contacts with the forum state

proximately result from actions by the defendant himself that create a substantial connection with

the forum [s]tate, and where the defendant’s conduct and connection with the forum are such that

he should reasonably anticipate being haled into court there.” Beydoun, 768 F.3d at 505–06

(quoting Neogen Corp. v. Neo Gen Screening, Inc., 282 F.3d 883, 889 (6th Cir. 2002) (quoting

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474–75 (1985))). “This ‘purposeful availment’

requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of

‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or of the ‘unilateral activity of another party or a

third person.’” Neogen Corp., 282 F.3d at 889 (quoting Burger King Corp., 471 U.S. at 475).

In the present case, Jackson County asserts that Ghosn, Saikawa, and Karube knowingly

made and signed off on materially false statements in Nissan’s annual financial reports and other

disclosure documents which were then published in English on Nissan’s investor website with full

knowledge of Nissan’s longstanding ADR program and U.S. investor population. This is not an

instance where defendants’ statements reached or caused an effect in the United States by

“random” or “fortuitous” circumstances. Cf. World–Wide Volkswagen Corp. v. Woodson, 444 U.S.

286, 295 (1980). Rather, the English translated reports containing the alleged misstatements

forming the basis for Jackson County’s Exchange act claims were published on Nissan’s investor

website in compliance with SEC regulations so that Nissan could continue to offer ADRs to

investors in the United States. (See Doc. No. 87-5 at PageID # 1257-58 (Nissan’s annual securities

reports “were translated by Nissan into English and posted on Nissan’s website consistent with

Nissan’s reliance on the Exchange Act Rule 12g3-2 exemption from Exchange Act Section 12(g)

registration.”); see also SEC Rule 12g3–2(b), 17 C.F.R. § 240.12g3-2(b); Exemption From

Registration Under Section 12(G) of the Securities Exchange Act of 1934 for Foreign Private

Issuers, 73 Fed. Reg. 52752-01, 52758 (Sept. 10, 2008) (“The purpose of this non-U.S. electronic

publication condition is to provide U.S. investors with ready access to material information when

trading in the issuer's equity securities in the over-the-counter market.”).5

Based on the preceding overt actions, Jackson County has established a substantial

connection between the United States and Defendants Ghosn, Saikawa, and Karube such that these

Defendants should reasonably anticipate being haled into court here. Accordingly, the Court finds

that the purposeful availment prong has been met. See, e.g., U.S. S.E.C. v. Sharef, 924 F. Supp. 2d

539, 547 (S.D.N.Y. 2013) (noting that signing or directly manipulating financial statements to

5 The SEC’s rulemaking comments explained that:

requiring the electronic publication in English of specified non-U.S.

disclosure documents for an issuer claiming the Rule 12g3-2(b)

exemption…should make it easier for U.S. investors to gain access to a

foreign private issuer's material non-U.S. disclosure documents, and make

better informed decisions regarding whether to invest in that issuer's equity

securities through the over-the-counter market in the United States or

otherwise.

Exemption From Registration Under Section 12(G) of the Securities Exchange Act of 1934 for Foreign

Private Issuers, 73 FR 52752-01, 52755 (Sept. 10, 2008).

cover up illegal foreign action, with knowledge that those statements will be relied upon by United

States investors satisfies the minimum contacts test).

b. Arising From

“The second requirement is that the plaintiff's cause of action arise from the defendant's

contacts with the [forum] state.” Schneider v. Hardesty, 669 F.3d 693, 703 (6th Cir. 2012). The

“arising from” requirement “is satisfied when the operative facts of the controversy arise from the

defendant’s contacts with the state. ‘Only when the operative facts of the controversy are not

related to the defendant’s contact with the state can it be said that the cause of action does not arise

from that contact.’” Calphalon Corp. v. Rowlette, 228 F.3d 718, 723–24 (6th Cir. 2000) (quoting

Mohasco, 401 F.2d at 384 n. 29). As previously addressed, Jackson County’s Exchange Act claims

“arise from” Ghosn’s, Saikawa’s, and Karube’s false statements made in Nissan’s annual financial

reports. Those reports, that were directed to the United States and U.S. investors in Nissan’s ADRs

via publication on Nissan’s investor website in English, form the basis for Jackson County’s

Exchange Act claims. Accordingly, the second prong of the analysis is met.

c. Reasonableness

“The third requirement is that the defendant have a sufficiently substantial connection to

the forum such that the exercise of jurisdiction is not unreasonable.” Schneider, 669 F.3d at 703.

“[W]here, as here, the first two criter[ia] are met, ‘an inference of reasonableness arises' and ‘only

the unusual case will not meet [the substantial connection] criteri[on].’” Id. (quoting Air Prods. &

Controls, Inc. v. Safetech Int’l, Inc., 503 F.3d 544, 554 (6th Cir. 2007) (quoting Theunissen v.

Matthews, 935 F.2d 1454, 1461 (6th Cir.1991))). “In determining whether the exercise of

jurisdiction is reasonable, the court should consider, among others, the following factors: (1) the

burden on the defendant; (2) the interest of the forum state; [and] (3) the plaintiff's interest in

obtaining relief[.]” Schneider, 669 F.3d at 703-704; see also City of Monroe Emps. Ret. Sys. v.

Bridgestone Corp., 399 F.3d 651, 666 (6th Cir. 2005) (“Whether the exercise of jurisdiction over

a foreign defendant is reasonable is a function of balancing three factors: ‘the burden on the

defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief.’”) (quoting

Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113 (1987)).

1. Ghosn

Ghosn argues that exercising jurisdiction would be unreasonable because the underlying

events took place in Japan, many of the witnesses and documents are in Japan, and because of his

ongoing defense of criminal charges in Japan. (Doc. No. 78 at 17-19; Doc. No. 108 at 11-13). He

also asserts that various restrictions on his international travel arising from the criminal charges

against in Japan are a burden that further mitigates against the exercise of personal jurisdiction.

(Doc. No. 78 at 12; Doc. No. 128 at 3-4). Jackson County argues, among other things, that this

litigation would not be an undue weight on Ghosn’s attention and resources because it involves

the same underlying conduct, witnesses, and evidence at issue in his upcoming criminal trial. (Doc.

No. 86 at 74-80). While some burden is placed on Ghosn in having to defend claims in this case,

the interest of the United States in the enforcement of federal securities laws and Plaintiffs’ interest

in obtaining relief make exercise of jurisdiction over Ghosn reasonable. See Schneider, supra.

Accordingly, the Court will deny Ghosn’s motion to dismiss for lack of personal jurisdiction.

2. Saikawa

Saikawa argues that exercising jurisdiction over him would be unreasonable because he

lives in Japan and is not a key defendant. (Doc. No. 69 at 24-25; Doc. No. 105 at 22). Jackson

County notes that Saikawa was not a low-level actor, but rather in a position of public trust with

responsibility as an officer and director. (Doc. No. 86 at 74). Indeed, Saikawa became a member

of Nissan’s Board and in 2005, served as a Representative Director throughout the entire class

period, and served as Chief Competitive Officer – second in command to Ghosn – from January

2014 until his appointment as co-CEO in October 2016 and ultimately CEO on April 1, 2017.

Jackson County also notes that Saikawa resigned as Nissan’s CEO on September 9, 2019, after the

Company’s internal investigation revealed that he had been overpaid by over $400,000. (Doc. No.

86 at 75; Doc. No. 87-22). Applying the balancing test, there is potential for some burden on

Saikawa in having to defend himself in the United States. However, the countervailing interests of

the United States and Plaintiffs’ make exercise of jurisdiction over Saikawa reasonable. See

Schneider, supra. Accordingly, the Court will deny Saikawa’s motion to dismiss for lack of

personal jurisdiction.

3. Karube

As with Ghosn and Saikawa, there is potential for some burden on Karube in having to

defend himself in the United States. Conversely, the interests of the United States and Plaintiffs in

the instant suit being prosecuted against Karube are “relatively light” given the court’s jurisdiction

over Nissan, Ghosn, Saikawa, Kelly, and Peter. See Bridgestone Corp., 399 F.3d at 666. Thus,

“the marginal addition of [Karube] would add little or nothing to the potential recovery should the

plaintiffs ultimately prevail on the merits and be awarded damages.” Id. Additionally, unlike the

other defendants, Karube was not a longstanding officer of Nissan alleged to have been aware of

and/or involved the fraudulent conduct for multiple years. Under the circumstances of this case,

the lighter interests of the United States and Plaintiffs tip against exercising jurisdiction against

Karube. Accordingly, the third prong of the analysis is not met, and the Court will grant Karube’s

motion to dismiss for lack of personal jurisdiction.

B. The Securities Exchange Act of 1934

The Securities Exchange Act of 1934 was the second in a series of Acts Congress passed

during the Great Depression that were “designed to eliminate certain abuses in the securities

industry…which were found to have contributed to the stock market crash of 1929 and the

depression of the 1930's.” Sec. & Exch. Comm'n v. Capital Gains Research Bureau, Inc., 375 U.S.

180, 186 (1963).6 “A fundamental purpose, common to these statutes, was to substitute a

philosophy of full disclosure for the philosophy of caveat emptor and thus to achieve a high

standard of business ethics in the securities industry.” Id. at 186-87 (“‘It requires but little

appreciation * * * of what happened in this country during the 1920's and 1930's to realize how

essential it is that the highest ethical standards prevail’ in every facet of the securities industry.”)

(quoting Silver v. New York Stock Exch., 373 U.S. 341, 366 (1963)). Since their enactment, the

“basic policies underlying securities regulation” have been that “‘[t]here cannot be honest markets

without honest publicity’” because “‘[m]anipulation and dishonest practices of the market place

thrive upon mystery and secrecy.’” City of Monroe Employees Ret. Sys. v. Bridgestone Corp., 399

F.3d 651, 668 (6th Cir. 2005) (quoting Helwig v. Vencor, Inc., 251 F.3d 540, 556 (6th Cir. 2001)

(quoting Basic Inc. v. Levinson, 485 U.S. 224, 230 (1988)))

Accordingly, Section 10(b) of the 1934 Act “makes it unlawful for any person to ‘use or

employ, in connection with the purchase or sale of any security ... any manipulative or deceptive

device or contrivance in contravention of such rules and regulations as the Commission may

prescribe as necessary or appropriate in the public interest or for the protection of investors.’”

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37 (2011) (quoting 15 U.S.C. § 78j(b)).

6 The Securities Act of 1933, 15 U.S.C. § 77a et seq.; the Securities Exchange Act of 1934,15 U.S.C.

§ 78a et seq.; the Public Utility Holding Company Act of 1935, 15 U.S.C. § 79 et seq.; the Trust Indenture

Act of 1939, 15 U.S.C. § 77aaa et seq.; the Investment Company Act of 1940, 15 U.S.C. § 80a–1 et seq.;

and the Investment Advisers Act of 1940, 15 U.S.C. § 80b–1 et seq.

“SEC Rule 10b–5 implements this provision by making it unlawful to, among other things,

‘make any untrue statement of a material fact or to omit to state a material fact necessary in order

to make the statements made, in the light of the circumstances under which they were made, not

misleading.’” Matrixx, 563 U.S. at 37 (2011) (quoting 17 CFR § 240.10b–5(b)). Section 20(a) of

the 1934 Act establishes liability for anyone who “directly or indirectly, controls any person liable”

under the 1934 Act. 15 U.S.C. §78t(a).

1. Section 10(b) and Rule 10b-5(b)

To state a claim under Section 10(b) of the 1934 Act and SEC Rule 10b–5(b), a plaintiff

must allege: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a

connection between the misrepresentation or omission and the purchase or sale of a security; (4)

reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” In re

Omnicare, Inc. Sec. Litig., 769 F.3d 455, 469 (6th Cir. 2014) (quoting Matrixx, 563 U.S. at 37–

38) (internal quotation marks omitted). Stated another way, “a plaintiff must allege, in connection

with the purchase or sale of securities, the misstatement or omission of a material fact, made with

scienter, upon which the plaintiff justifiably relied and which proximately caused the plaintiff's

injury.” Ashland, Inc. v. Oppenheimer & Co., 648 F.3d 461, 468 (6th Cir. 2011) (quoting Frank v.

Dana Corp., 547 F.3d 564, 569 (6th Cir. 2008) (internal quotation marks and citation omitted).

Even with the heightened pleading standards applicable to a securities fraud case under Section

10(b), for purposes of ruling on a motion to dismiss for failure to state a claim, the allegations in

the complaint are accepted as true, and all reasonable inferences are drawn in plaintiff's favor. See

Weiner v. Tivity Health, Inc., 365 F. Supp. 3d 900, 908 n. 6 (M.D. Tenn. 2019).

Through their pending motions to dismiss, the defendants challenge the sufficiency of

Jackson County’s allegations as to the first element. Additionally, Kelly, Saikawa, and Peter

challenge the sufficiency of Jackson County’s scienter allegations.7

a. Element One: A Material Misrepresentation or Omission by the Defendant

“Successfully pleading an actionable material misrepresentation or omission requires a

plaintiff to allege facts demonstrating two things: (1) that a defendant made a statement or omission

that was false or misleading; and (2) that this statement or omission concerned a material fact.” In

re Omnicare, 769 F.3d at 470.

i. Falsity

“The PSLRA mandates that,” in order to survive a motion to dismiss, a plaintiff must

“specify each statement alleged to have been misleading, the reason or reasons why the statement

is misleading, and, if an allegation regarding the statement or omission is made on information and

belief, the complaint [must] state with particularity all facts on which the belief is formed.” In re

Ford Motor Co. Sec. Litig., 381 F.3d 563, 569 (6th Cir. 2004) (quoting 15 U.S.C. § 78u–4(b)(1));

see, e.g., In re Omnicare, 769 F.3d at 480 n. 6 (“KBC does not need to recite in the Complaint the

specific results of the audits, including the percentage of Omnicare claims audited or the non-

compliance rate. Under the PSLRA, it is enough to identify the misrepresentations (the Form 10–

7 Kelly also challenges the sufficiency of the Amended Complaint’s scheme liability allegations.

However, Kelly’s argument is relegated to a mere footnote, in which he summarily asserts that the Jackson

County’s Rule 10b-5(a) and (c) claim is premised solely on the alleged misstatements or omissions that

form the basis of its Rule 10b-5(b) claim, i.e. the alleged qualitative misstatements in Nissan’s Annual

Reports, rather than “a separate and distinct basis for scheme liability.” (See Doc. No. 64 at 16 n. 9). He

fails to develop this argument in his brief or cite authority in support of his proposition that plaintiffs are

required to allege a basis for scheme liability that is “separate and distinct” from alleged misstatements or

omissions that form the basis for their Rule 10b-5(b) claim. Instead, he opted to quote the elements of Rule

10b-5(a) and (c) scheme liability claim set out in SEC v. AgFeed Indus., Inc., 2016 WL 10934942, at *9

(M.D. Tenn. July 21, 2016). The Court finds that Kelly failed to sufficiently develop this argument in his

opening brief and, accordingly, declines to consider the sufficiency of Jackson County’s scheme liability

claim as to Kelly in ruling on his pending motion to dismiss.

K statements) and explain how they are false or misleading (they conflict with the results of the

audits, which show billing irregularities).”).

“[A] company has a duty to disclose hard information but not soft information unless other

criteria are met.” Weiner, 365 F. Supp. 3d at 913 (quoting Zaluski v. United Am. Healthcare Corp.,

527 F.3d 564, 572 (6th Cir. 2008)). “Hard information is typically historical information or other

factual information that is objectively verifiable. Such information is to be contrasted with ‘soft’

information, which includes predications and matters of opinion.” Id. (quoting Zaluski, 527 F.3d

at 572). With regard to soft information, “a defendant may choose silence or speech based on the

then-known factual basis, but it cannot choose half-truths.” See Weiner, 365 F. Supp. 3d at 913

(quoting In re Ford, 381 F.3d at 569); see also City of Monroe Employees Ret. Sys. v. Bridgestone

Corp., 399 F.3d 651, 675 (6th Cir. 2005) (“the protections for soft information end where speech

begins.”) (internal citation omitted). “Thus, once a company has chosen to speak on an issue –

even an issue it had no independent obligation to address – it cannot omit material facts related to

that issue so as to make its disclosure misleading.” Weiner, 365 F. Supp. 3d at 913 (citation and

internal quotations omitted).

1. Statements about Nissan’s ethics and legal compliance

Nissan, Saikawa, and Peter briefly argue that two alleged misstatements regarding Nissan’s

ethics are not actionable because “Jackson County never alleges facts showing how these

statements were false.” (Doc. No. 69 at 28 (citing Doc. No. 58 ¶¶ 97, 105)). The Amended

Complaint alleges that these statements about Nissan’s ethics were misleading when made because

they omitted material facts then known or recklessly disregarded by defendants, including that

relevant Nissan employees did not “practice[] compliance with high ethical standards,” and Nissan

did not “display a high level of ethics and transparency.” (Doc. No. 58 ¶ 110(f) (quoting id. ¶¶ 97,

105)).

Contrary to the defendants’ assertion, the Amended Complaint does allege facts showing

how these statements were false or misleading. As Jackson County notes, the Amended Complaint

specifically alleges that Nissan’s own independent “Special Committee for Improving

Governance” found facts demonstrating Ghosn’s and Kelly’s lack of ethics as managers. (Doc.

No. 86 at 26 (citing Doc. No. 58 ¶ 41). Additionally, the Amended Complaint alleges numerous

instances of Ghosn and Kelly, while top Nisan executives, engaging in conduct widely accepted

as unethical, including falsifying documents to circumvent disclosure of compensation and private

use of Nissan’s company funds. These allegations are sufficient to support Jackson County’s

claims that Nissan did not display a high level of ethics and that its employees repeatedly engaged

in unethical conduct.

Nissan, Saikawa, and Peter also argue that “[n]othing alleged renders false or misleading

these [sic] general statement about [Nissan]’s ‘aims’ for adhering to laws and rules.” (Doc. No.

105 at 23). However, defendants mischaracterize the alleged statement, which was not that Nissan

aimed to comply with laws, but rather that it aimed “to conduct fair, impartial and efficient business

activities … by adhering to the applicable laws and corporate rules.” (Doc. No. 58 ¶ 104).

Additionally, the Amended Complaint alleges that Nissan has admitted that Ghosn and Kelly

engaged in “serious misconduct” by manipulating and underreporting Ghosn’s compensation and

its Special Committee found “facts sufficient to suspect violations of laws and regulations” (Doc.

No. 58 ¶¶ 112, 41). The Court finds that the Amended Complaint sufficiently alleges that the

alleged misstatement was false or misleading.

2. Statements about Nissan’s corporate governance

Nissan, Saikawa, and Peter contend that the Amended Complaint fails to plead the falsity

of the statements in its Sustainability Reports that “Nissan uses a corporate structure with

supervision by the Board of Directors and auditing by the Statutory Auditors…[and that] outside

directors … make key decisions on important company operations, as well as supervising individual

directors’ execution of duties.” (Doc. No. 69 at 27 and Doc. No. 105 at 22-23 (quoting Doc. No. 58

¶ 99)). They argue that Jackson County has not shown that the statement was actually false. Instead,

according to the defendants, Jackson County has only alleged that Nissan did not effectively use

that corporate structure. They contend that allegations that a corporate structure was not effective

do not contradict statements about the structure’s existence, and thus do not demonstrate that the

statement was false when made. (Doc. No. 69 at 27; Doc. No. 105 at 23).

However, as Jackson County points out, the Amended Complaint asserts more than that

Nissan’s corporate structure was ineffective. Jackson County pleads multiple specific, detailed

factual allegations that, when taken as true, demonstrate, at least as to Ghosn’s compensation, there

was no “supervision by the Board of Directors” at all. The Complaint alleges that Nissan’s own

internal “Special Committee for Improving Governance” found that Ghosn “determin[ed] … his

own compensation” and “did not relinquish any decision-making authority regarding Nissan’s

human affairs and compensation even after retiring as CEO in 2017[.]” (Doc. No. 58 ¶¶ 41, 120).

Jackson County further alleges that Nissan’s Special Committee also “found that the Board operated

in ‘an atmosphere where it [was] not possible to ask questions about or give opinions on the agenda

at the meetings,’ and that until June 2018, the average length of the meetings of the Board ‘was less

than 20 minutes.’” (Doc. No. 58 ¶ 123). These allegations explain that it was false or misleading to

state that Nissan used a corporate structure with supervision by the Board of Directors because the

actual involvement of Nissan’s Board of Directors fell far short of the supervisory oversight role

represented to investors.

Nissan, Saikawa, and Peter also argue that Jackson County has not shown that it was false

or misleading to state that Nissan had appointed two new independent directors as part of its effort

to improve its governance because it does not allege that Nissan did not actually appoint the two

directors. (Doc. No. 69 at 28). But, when analyzed in context, the Amended Complaint alleges that

Nissan stated that it was “improving its governance through an enhanced compliance system. As

part of this effort, the company appointed two new independent directors at the beginning of the

current fiscal year. By reinforcing governance, Nissan is contributing to the growth of the company

while increasing shareholder value.” (Doc. No. 58 ¶ 109). Jackson County explains this statement

does not merely state that Nissan appointed the directors as part of its effort to improve its

governance, but instead that Nissan was improving and reinforcing its governance in part by having

appointed two new independent directors. Jackson County further explains that this statement was

misleading because the appointment of the two directors did not actually improve Nissan’s

governance, legal compliance, or controls with respect to Ghosn’s secret compensation. (See Doc.

No. 86 at 25). Nissan, Saikawa, and Peter filed a Reply but did not respond to Jackson’s County’s

argument with respect to the adequacy of its pleading the falsity of this statement. (See Doc. No.

109 at 22-24).

ii. Materiality

The Supreme Court has endorsed “a fact-intensive test” of materiality in securities fraud

cases that is dependent “on the significance the reasonable investor would place on the withheld

or misrepresented information.” See City of Monroe Employees Ret. Sys. v. Bridgestone Corp.,

399 F.3d 651, 669 (6th Cir. 2005) (quoting Helwig v. Vencor, Inc., 251 F.3d 540, 555 (6th Cir.

2001) (quoting Basic Inc. v. Levinson, 485 U.S. 224, 240 (1988))). Accordingly, “the materiality

inquiry requires the court to place itself in the shoes of a reasonable investor deciding whether to

buy, sell, or retain the company’s stock.” Grae v. Corr. Corp. of Am., No. 3:16-CV-2267, 2017

WL 6442145, at *16 (M.D. Tenn. Dec. 18, 2017); see, e.g., Ashland, Inc. v. Oppenheimer & Co.,

648 F.3d 461, 468 (6th Cir. 2011) (“Misrepresented or omitted facts are material only if a

reasonable investor would have viewed the misrepresentation or omission as having significantly

altered the total mix of information made available.”) (citation omitted). Additionally, context

must inform determinations of materiality:

In general, the federal judiciary has a limited understanding of

investor behavior and the actual economic consequences of certain

statements. Thus, we must tread lightly at the motion-to-dismiss

stage, engaging carefully with the facts of a given case and

considering them in their full context. See Jennifer O'Hare, The

Resurrection of the Dodo: The Unfortunate Re-emergence of the

Puffery Defense in Private Securities Fraud Actions, 59 Ohio St.

L.J. 1697, 1727–1731 (1998) (illuminating the importance of

context to materiality determinations). Otherwise, we risk

prematurely dismissing suits on the basis of our intuition.

In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 472 (6th Cir. 2014); see, e.g., id. at 478 (“as we

have said and the Supreme Court has made clear, context matters when analyzing materiality”)

(citing Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 43 (2011)). The question of whether

alleged misrepresentations or omissions are material is a mixed question of law and fact. See

Helwig, 251 F.3d at 563 (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976)); see

id. (noting that “[c]ourts generally reserve such questions for the trier of fact.”).

In the present case, the defendants generally assert that most, if not all, of the alleged

qualitative misstatements in Nissan’s Financial Reports, Annual Reports, and/or Sustainability

Reports during the Class Period concerning Nissan’s corporate governance and internal controls,

compliance with applicable laws and regulations, and commitment to transparent and ethical

conduct are immaterial puffery that cannot form the basis for Jackson County’s claims under the

Section 10(b) because they are merely “generalized statements of optimism that are not capable of

objective verification.” (Doc. No. 78 at 25-26; see also Doc. No. 69 at 25-26).

Jackson County argues that the alleged misstatements about Nissan’s Board’s role and

transparency in corporate governance and performance disclosures are not puffery because they

are statements of fact that can be proven or disproven using standard tools of evidence. (Doc. No.

86 at 28 (citing Bridgestone, 399 F. 3d at 669, 674)). It argues the alleged misstatements about

legal compliance are not puffery either, noting that liability can attach to a company’s general

assertion of legal compliance if the complaint adequately alleges that the Defendants knew that

the statements were untruthful. (Doc. No. 86 at 29 (citing Omnicare, 769 F.3d 480-81 (rejecting

argument that a company cannot be held liable for stating it was “in material compliance with law

regulations” when it possessed contrary facts that a jury could find were material)). As for the

alleged misstatements about Nissan’s ethics, Jackson County notes that these too must still “be

evaluated in context to determine if they convey more than just generalized optimism,” and asserts

that, as pled, they did. (Doc. No. 86 at 29 (quoting Grae v. Corr. Corp. of Am., No. 3:16-CV-2267,

2017 WL 6442145, at *14 (M.D. Tenn. Dec. 18, 2017)).

The defendants filed replies but did not advance arguments or analysis as to the challenged

statements in the context of the facts alleged in the Amended Complaint. (See Doc. No.105 at 23

(“such amorphous statements about general corporate transparency are textbook puffery.”); Doc.

No. 108 at 16-17 (“the qualitative statements in Section V.B of the Amended Complaint are exactly

the type of immaterial puffery the Sixth Circuit has found to be inactionable.”)). At this stage in

the lawsuit, construing the Amended Complaint in the light most favorable to Jackson County, the

Court finds that a reasonable juror could conclude that defendants’ statements concerning Nissan’s

corporate governance and internal controls, legal compliance, and ethics, were material

misrepresentations.

iii. “Making” a Statement

As noted above, Rule 10b–5(b) makes it unlawful for “any person, directly or indirectly,

... [t]o make any untrue statement of a material fact” in connection with the purchase or sale of

securities. 17 CFR § 240.10b–5(b) (emphasis added). In Janus Capital Group, Inc. v. First

Derivative Traders, 564 U.S. 135 (2011), the Supreme Court held that “the maker of a statement

is the person or entity with ultimate authority over the statement, including its content and whether

and how to communicate it.” Id. at 142-145 (“participating in the drafting of a false statement …

is merely an undisclosed act preceding the decision of an independent entity to make a public

statement.”). The Court reasoned that “[w]ithout control, a person or entity can merely suggest

what to say, not ‘make’ a statement in its own right,” and explained:

This rule might best be exemplified by the relationship between a

speechwriter and a speaker. Even when a speechwriter drafts a

speech, the content is entirely within the control of the person who

delivers it. And it is the speaker who takes credit—or blame—for

what is ultimately said.

Id. at 142–43. On the facts of Janus, this meant that an investment adviser involved in the drafting

and preparation of a client’s prospectuses was not the “maker” of allegedly fraudulent statements

published in the client’s prospectuses because only the client -- not the advisor -- bore the statutory

obligation to file the prospectuses under federal law. Id. at 147.

Ghosn argues that the Amended Complaint fails to plead that he “made” alleged

misstatements in Nissan press releases announcing Nissan’s financial results for the fiscal years

ending in March of 2014, 2015, and 2016 (Doc. No. 58 ¶¶ 58, 64, 72) because the specific

misstatements were not directly quoting him and the portions of the releases that did directly quote

him did not contain misstatements. (Doc. No. 78 at 20-21; Doc. No. 108 at 14). Ghosn’s “maker”

argument concerning alleged misstatements in Nissan’s Annual and Sustainability Reports

employs same reasoning: that because the alleged misstatements were not contained within his

opening letters and introductory remarks the Amended Complaint fails to plead that he “made”

them. (Doc. No. 78 at 21-23; Doc. No. 108 at 14-15).

However, under Janus the key to § 10(b) liability is whether a party has “control over a

statement's content and whether and how to communicate it.” 564 U.S. at 142 (rejecting the

argument that § 10(b) liability requires that the defendant “create” the statement); see also Lorenzo

v. Sec. & Exch. Comm'n, 139 S. Ct. 1094, 1096 (2019) (“in Janus, we sought an interpretation of

“make” that could neatly divide primary violators and actors too far removed from the ultimate

decision to communicate a statement.”). As Jackson County points out, Ghosn was the only

individual quoted in the press releases and is alleged to have led press conferences the day after

each release where he “delivered the statements in the press releases himself.” (Doc. No. 86 at 30

(citing Doc. No. 79; Doc. No. 58 ¶¶ 58, 64, 72)). Additionally, at the time of the alleged

misstatements published in Nissan’s Reports, Ghosn was Nissan’s CEO and Chairman and alleged

to have exercised total control over all aspects of the Company’s governance and internal

management. The Court finds that the Amended Complaint adequately alleges Ghosn’s ultimate

authority over Nissan’s press releases, Annual Reports, and Sustainability Reports, including

control over the alleged misstatements’ content and whether and how to communicate them. Janus,

564 U.S. at 142.

Kelly challenges the adequacy of the Amended Complaint’s allegations that he, as one of

Nissan’s representative directors, authorized the alleged misstatements in the Annual Reports and

allowed the Annual Reports to be published under his name and helped prepare them. (Doc. No.

58 ¶¶ 18, 94, 96, 103, 108). Kelly argues that court should ignore the allegations that these reports

were published under his name because the reports themselves disprove those allegations. (Doc.

No. 64 at 17-18). Alternatively, Kelly argues that he was not the “maker” of the alleged

misstatements in the Annual Reports because he “did not sign” them, belong to a group that

“authored” them, provide a letter for inclusion, or have any specific pieces of pieces of information

“attributed” to him. (Doc. No. 86 at 18-19).

First, as Kelly acknowledges, his name appears in each of the Reports. (Doc. No. 64 at 17).

Significantly, Kelly’s name appears in the “Corporate Governance” sections of these reports.

Viewing the facts in the lights most favorable to Jackson County, as the Court is required to do at

the motion to dismiss stage, the Court finds that the reports do not disprove or otherwise contradict

the allegations that they were published by Kelly and under his name. As for Kelly’s second

argument, the Court is not persuaded that Jackson County fails to adequately plead Kelly’s status

as a maker of the alleged misstatements in the reports simply because Kelly did not contribute

letters, statements, or direct quotes to the reports. The Amended Complaint alleges that Kelly was

intimately involved in this scheme and received all of the reports either before or shortly after they

were published. Viewing the facts alleged in the Amended Complaint in the light most favorable

to Jackson County, the Court finds that the Amended Complaint sufficiently alleges that Kelly

possessed ultimate authority over the alleged misstatements in Nissan’s Annual Reports, including

control over their “content and whether and how to communicate it.” Janus, 564 U.S. at 142.

b. Element Two: Scienter

Kelly, Saikawa, and Peter also argue that the Amended Complaint fails to allege facts

plausibly suggesting that they acted with scienter. “To establish liability under § 10(b) and Rule

10b–5, a private plaintiff must prove that the defendant acted with scienter, ‘a mental state

embracing intent to deceive, manipulate, or defraud.’” Matrixx Initiatives, Inc. v. Siracusano, 563

U.S. 27, 48 (2011) (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007)).

“In the securities-fraud context, scienter includes a knowing and deliberate intent to manipulate,

deceive, or defraud, and recklessness.” Doshi v. Gen. Cable Corp., 823 F.3d 1032, 1039 (6th Cir.

2016) (internal quotations and citation omitted). “Recklessness is defined as ‘highly unreasonable

conduct which is an extreme departure from the standards of ordinary care. While the danger need

not be known, it must at least be so obvious that any reasonable man would have known of it.’”

Frank v. Dana Corp., 646 F.3d 954, 959 (6th Cir. 2011) (quoting PR Diamonds, Inc. v. Chandler,

364 F.3d 671, 681 (6th Cir. 2004)). “Recklessness is not negligence, but more ‘akin to conscious

disregard.’” Id. (quoting PR Diamonds, Inc., 364 F.3d at 681).

“Under the PSLRA, a plaintiff must ‘state with particularity facts giving rise to a strong

inference that the defendant acted with the required state of mind.’” Matrixx, 563 U.S. at 48

(quoting 15 U.S.C.A. § 78u–4(b)(2)(A)).8 “This standard requires courts to take into account

‘plausible opposing inferences.’” Id. (quoting Tellabs, 551 U.S. at 323). “A complaint adequately

8 The Sixth Circuit has enumerated a “non-exhaustive list of factors that do not necessarily establish

scienter, but are ‘usually relevant’ to its analysis,” which includes allegations of:

(1) insider trading at a suspicious time or in an unusual amount; (2)

divergence between internal reports and external statements on the same

subject; (3) closeness in time of an allegedly fraudulent statement or

omission and the later disclosure of inconsistent information; (4) evidence

of bribery by a top company official; (5) existence of an ancillary lawsuit

charging fraud by a company and the company's quick settlement of that

suit; (6) disregard of the most current factual information before making

statements; (7) disclosure of accounting information in such a way that its

negative implications could only be understood by someone with a high

degree of sophistication; (8) the personal interest of certain directors in not

informing disinterested directors of an impending sale of stock; and (9) the

self-interested motivation of defendants in the form of saving their salaries

or jobs.

Frank, 646 F.3d at 959 n. 2 (citing Helwig v. Vencor, Inc., 251 F.3d 540, 552 (6th Cir. 2001).

pleads scienter under the PSLRA ‘only if a reasonable person would deem the inference of scienter

cogent and at least as compelling as any opposing inference one could draw from the facts

alleged.’” Id. (quoting Tellabs, 551 U.S. at 324). The inquiry “[is] not whether any individual

allegation, scrutinized in isolation, meets that standard.” Tellabs, Inc., 551 U.S. at 322-23. (“The

strength of an inference cannot be decided in a vacuum.”). Rather, “[i]n making this determination,

the court must review ‘all the allegations holistically.’” Matrixx, 563 U.S. at 48 (quoting Tellabs,

551 U.S. at 326).

Here, when the factual allegations are considered collectively, there is a strong inference

that Defendants acted with at least reckless disregard for the misleading nature of their statements

that is at least as compelling as any innocent inference.

i. Kelly

The Amended Complaint alleges that Nissan’s own internal “investigation showed that

over many years both Ghosn and Kelly have been reporting compensation amounts in the Tokyo

Stock Exchange securities report that were less than the actual amount, in order to reduce the

disclosed amount of Carlos Ghosn’s compensation.” (Doc. No. 58 ¶ 112). Jackson County alleges

Kelly’s “deep involvement” in working to shield Ghosn’s compensation from disclosure, including

that Kelly personally “had various discussions on how to pay the Postponed Compensations

without disclosing.” (Doc. No. 58 ¶¶ 38-41, 112). Pursuant to these discussions, Kelly, “as the

person responsible for Global Human Resources and Legal,” was alleged to have been involved in

“falsif[ying]” documents and “manipulat[ing]” the “details of compensation” to increase the

amount paid to Ghosn and decrease the amount disclosed. (Doc. No. 58 ¶ 41). Kelly was also

personally in charge of the use of Nissan’s Dutch subsidiary, Zi-A, to buy or rent properties for

Ghosn’s use, instead of to fund venture capital investments as was that entity’s supposed purpose.

(Doc. No. 58 ¶ 48).

Kelly asserts without reference to authority that allegations that “predate the Class Period

… cannot form the basis for Plaintiffs’ claims. (See Doc. No. 64 at 4). However, “[t]he proposed

class period dates function only to define the plaintiff class, not to restrict the universe of relevant

or actionable facts in the case.” Zwick Partners, LP v. Quorum Health Corp., No. 3:16-CV-2475,

2018 WL 2933406, at *6 (M.D. Tenn. Apr. 19, 2018) (citing Zelman v. JDS Uniphase Corp., 376

F.Supp.2d 956, 970 (N.D. Cal. 2005)). Kelly does not argue a competing inference could be drawn

from the allegations in the Amended Complaint, but rather urges the Court to disregard the

allegations as untrue. As noted by Jackson County, at this stage, the Court must accept the well-

plead allegations in the Amended Complaint as true. Although Kelly filed a Reply, he did not

respond to Jackson County’s arguments regarding its scienter allegations. (See Doc. No. 104).

ii. Saikawa

Jackson County argues the compelling inference of knowledge or recklessness can be

derived from the fact that Saikawa was a representative director during the entire Class Period and

that Ghosn continued to control the Company and did not relinquish his decision-making authority

regarding human affairs and compensation even after Saikawa became CEO of Nissan in April of

2017. Saikawa also signed documents regarding Ghosn’s deferred compensation and “post-

retirement treatment” and then signed off on financial reports that omitted Ghosn’s post-retirement

compensation. Additionally, a senior Nissan executive who managed the CEO’s office at the time

Saikawa was either co-CEO or CEO had identified improprieties by Ghosn that may have risen to

the level of criminal conduct.

While Saikawa argues the inference to be drawn from the facts alleged in the Amended

Complaint is that he was “deceived by Ghosn and Kelly” and that Kelly “obfuscate[d] the already

hidden conduct” from him, (Doc. No. 69 at 30-31), the Amended Complaint alleges that, as a

member of Nissan’s Board of Directors, Saikawa was responsible for supervision, and that as a

representative director, he was specifically supposed to consult with respect to director

compensation. (Doc. No. 58 ¶¶ 99, 93, 120). Accordingly, Saikawa’s claimed ignorance supports

Jackson County’s allegation of recklessness given his alleged duties to monitor the specific

conduct at issue.

iii. Peter

Jackson County argues the compelling inference of knowledge or recklessness can be

derived from the fact that, as CFO, Peter was responsible for overseeing Nissan’s finance’s

controls and compliance with corporate governance practices. (Doc. No. 58 ¶¶ 20-21). Peter points

to the Sixth Circuit’s statement in PR Diamonds, Inc. v. Chandler that “fraudulent intent cannot

be inferred merely from the Individual Defendants’ positions in the Company and alleged access

to information.” (Doc. No. 69 at 29 and Doc. No. 104 at 24 (quoting 364 F.3d 671, 688 (6th Cir.

2004)). That holding, however, considered whether executives could be presumed to have

knowledge of “accounting issues [that were] relatively arcane in nature and scope” and that did

not “pertain[ ] to central, day-to-day operational matters.” See Grae v. Corr. Corp. of Am., No.

3:16-CV-2267, 2017 WL 6442145, at *21 (M.D. Tenn. Dec. 18, 2017) (quoting PR Diamonds,

364 F.3d at 688). While the Sixth Circuit held that an individual defendant could not be presumed

to have knowledge of every fact to which he had access, the court also included the important

corollary that “high-level executives can be presumed to be aware of matters central to their

business’s operation.” Id. The overall operation of Nissan’s corporate governance and internal

controls, including how director compensation was set, was a matter central to Nissan’s operations.

Additionally, like Saikawa, Peter argues in favor of a competing inference that he too was

“deceived by Ghosn and Kelly.” (Doc. No. 69 at 30-31). However, his claimed ignorance supports

Jackson County’s allegation of recklessness given that he is alleged to have had a duty to monitor

Nissan’s finance’s controls and compliance with corporate governance practices. (Doc. No. 86 at

39-40).

Taken collectively, the Court finds that these allegations give rise to a “cogent and

compelling” inference that the Defendants acted with at least deliberate recklessness that “a

reasonable person” would deem “at least as compelling as any opposing inference one could draw

from the facts alleged.” Tellabs, 551 U.S., at 323, 324.

2. Section 20(a) – Controlling Persons

Section 20(a) of the Securities Exchange Act provides that “[e]very person who ... controls

any person liable under any provision of this chapter or of any rule or regulation thereunder shall

also be liable jointly and severally with and to the same extent as such controlled person.” 15

U.S.C. § 78t(a). The “controlling person” must be an actual participant and in control of the

specific activity at issue. See Zwick Partners, LP v. Quorum Health Corp., No. 3:16-CV-2475,

2018 WL 2933406, at *11 (M.D. Tenn. Apr. 19, 2018). Because control person liability is

derivative, a plaintiff may hold a defendant liable under this theory only if the defendant controlled

an entity that violated the Securities Act. North Port Firefighters' Pension—Local Option Plan v.

Fushi Copperweld, Inc., 929 F.Supp.2d 740, 788-89 (M.D. Tenn. 2013). In order to plead control

person liability, a plaintiff needs to establish that the defendant actually participated in the

operations of the violator and that the defendant possessed the power to control the specific

transaction or activity upon which the primary violation is predicated. See Zwick Partners, 2018

WL 2933406, at *11. “‘Allegations of control are not averments of fraud and therefore need not

be pleaded with particularity.’” Fushi, 929 F. Supp. 2d at 789.

a. Kelly

The Court has already found that Kelly was a “maker” of the alleged misrepresentations in

Nissan’s Annual Reports. For the same reasons, the Amended Complaint sufficiently alleges that

Kelly exercised at least some control over Nissan’s allegedly misrepresented financials results

reported within the Annual Reports. See Zwick Partners, 2018 WL 2933406, at *11. Therefore,

the Second Amended Complaint sufficiently states a claim for Section 20(a) liability for purposes

of Kelly’s Motion to Dismiss.

b. Saikawa and Peter

The Amended Complaint alleges that Saikawa and Peter each participated in the operations

of Nissan while holding their respective positions as representative director and CEO and CFO.

(Doc. No. 58 ¶¶ 19-21). While in these positions, Peter and Saikawa each are alleged to have

actively participated in the preparation of at least one of the materially false financial reports,

providing Confirmation Notes as to their accuracy. (Doc. No. 58 ¶¶ 60, 68, 74, 80, 86). Thus,

these defendants are alleged to have had the “‘power to control the specific transaction or activity

upon which the primary violation is predicated’” and to have exercised that power by actively

participating in the disclosures. Fushi, 929 F. Supp. 2d at 788. The Court finds that these

allegations sufficiently plead that Saikawa and Peter were “control persons” for purposes of

Jackson County’s “control-person” claims.

IV. CONCLUSION

For the foregoing reasons, the Motions to Dismiss filed by Defendants Ghosn and Kelly

(Doc. Nos. 63, 77) will be DENIED. The Motion to Dismiss filed by Defendants Nissan, Saikawa,

Karube, and Peter (Doc. No. 68) is GRANTED, in part, and DENIED in part.

WILLIAM L. CAMPBELL, J

UNITED STATES DISTRICT JUDGE

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