Lioubinine v. Arrival

2024 NY Slip Op 30522(U)

• Court: New York Supreme Court, New York County
• Decided: February 17, 2024
• Status: Unpublished

Opinion

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

1 of 9 [* 1] INDEX NO. 651783/2022 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

2 of 9 [* 2] INDEX NO. 651783/2022 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

3 of 9 [* 3] INDEX NO. 651783/2022 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 02/17/2024

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

4 of 9 [* 4] INDEX NO. 651783/2022 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 02/17/2024

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

5 of 9 [* 5] INDEX NO. 651783/2022 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 02/17/2024

,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

6 of 9 [* 6] INDEX NO. 651783/2022 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.

651783/2022 LIOUBININE, ALEXANDRE vs. ARRIVAL ET AL Page 7 of 9 Motion No. 001

7 of 9 [* 7] INDEX NO. 651783/2022 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 02/17/2024

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

8 of 9 [* 8] INDEX NO. 651783/2022 NYSCEF DOC. NO. 61 RECEIVED NYSCEF: 02/17/2024

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

[* 9] 9 of 9