MARK C. MOLUMPHY (168009)

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ROBBINS

GELLER

RUDMAN

&

DOWD

LLP

JAMES

I.

JACONETTE

(179565)

655

West

Broadway,

Suite 1900

San

Diego,

CA

92101-8498

Telephone: 619/231-1

058

619/231-7423 _(fax)

Attorneys for Plaintiff

Sunny

C.

Wong

COTCHETT,

PITRE

&

MCCARTHY,

LLP

MARK

C.

MOLUMPHY

(168009)

TYSON

REDENBARGER

(294424)

San

Francisco Airport

Office

Center

840

Malcolm

Road, Suite

200

Burlingame,

CA

94010

Telephone: 650/697-6000

650/697-0577(fax)

[email protected]

tredenbarger

@cpmlegal.com

Attorneys for Plaintiff

Yanming

Li

Electmnitally

Hg.-EunmmEu:HufimmcmnqH5m Mua-fl“

W

_5/1

_2/2020

Bf

Drpml-flflk

JOHNSON

FISTEL,

LLP

FRANK

J.

JOHNSON

(174882)

West

Broadway,

Suite 1400

San

Diego,

CA

92101

Telephone: 619/230-0063

619/255-1856(fax)

AdditionalCounselfor Plaintiff

Sunny

C.

Wong

SUPERIOR

COURT

OF THE STATE OF CALIFORNIA

COUNTY

OF

SAN

MATEO

SUNNY

C.

WONG,

Individually

and

on

Behalf ofA11Others Similarly Situated,

Plaintiff,

VS.

RESTORATION

ROBOTICS,

INC.,eta1.,

Defendants.

YANMING

LI,, Individually

and

0n

Behalf 0f

A11Others Similarly Situated,

Plaintiff,

VS.

RESTORATION

ROBOTICS,

INC,

etal.,

Defendants.

VVVVVVVVVVVVVVVVVVVVV

Lead Case N0.

18CIV02609

(Consolidatedwith

N0.

19CIV03

173)

CLASS

ACTION

Assignedforallpurposes t0Dept. 2

Hon. Marie

S.

Weiner

Date ActionFiled: 05/23/18

Case N0.

19CIV03

173

CLASS

ACTION

Assignedforallpurposes t0Dept. 2

Hon. Marie

S.

Weiner

Date ActionFiled: 06/11/2019

DATE:

TBD

TIME:

TBD

DEPT:

2

10 11 12 13 14 15 16 17 18 19

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21

22

23

24

25

26

27

28

TABLE OF

CONTENTS

Page

I.

INTRODUCTION

...6

II.

THE

GRUNDFEST CLAUSE

IS

UNCONSTITUTIONAL

...7

A. SciabacucchiDeparted

from

Conventional

Wisdom

thatthe

DGCL

Does

Not

Extend

Beyond

the

Bounds

0fInternalAffairs...7

B. Grundfest ClausesViolatethe

Commerce

Clause...9

C. Grundfest ClausesViolate

The Supremacy

Clause...11

III.

NO

CONTRACT

WAS

FORMED

UNDER

CALIFORNIA

LAW

...13

A. Defendants

D0

Not (And

Cannot) Demonstrate Assent...13

B.

The

GrundfestClause Is

Not

Lawful

...14

C. Defendants

D0

Not (And

Cannot) DemonstrateConsideration ...15

IV.

THE

CLAUSE

IS

UNENFORCEABLE

UNDER

CALIFORNIA

LAW

...16

A.

Enforcement

Would

Diminish

Unwaivable

StatutoryRights...16

B.

Enforcement

Would Be

Unconscionable...19

l.

The

Grundfest ClauseIsProcedurallyUnconscionable ...19

2.

The

Grundfest ClauseIs SubstantivelyUnconscionable...19

V.

CONCLUSION

...

20

_ ₁ _

4813-243 8-6748.V1 3-5/12/20

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

TABLE OF AUTHORITIES

Page

CASES

Abramson

v. Juniper Networks, Ina,

115 Cal.

App.

4th638 (2004)... 19,

20

Armendariz

v. Found. Health PsychcareServs., Ina,

24

Cal. 4th 83 (2000)...15, 19

ASP

Props. Grp., L.P. v. Fard, Ina,

133 Cal.

App.

4th 1257 (2005) ...14

Boca

Mill C0. v. Curry,

97 P. 1117 (Cal. 1908)...7

Bustamante

v. Intuit, Ina,

141 Cal.

App.

4th 199 (2006)...13

Carnival CruiseLines v. Super. Ct. 0fL.A. Cly,

234

Cal.

App. 3d

1019 (1991) ...13, 14

Contreras v. Dowling,

5 Cal.

App.

5th

394

(2016) ...17

Cortv. Ash,

422

U.S. 66 (1975)...7

CountrywideFin. Corp. v. Bundy,

187 Cal.

App.

4th

234

(2010)...17

Cyan, Inc. v.

Beaver

Cly.

Emps.

Ref.

Fund,

138 S. Ct. 1061 (2018)...

_p

assim

Daniels Sharpsmart, Inc. v. Smith,

889

F.3d608 (9thCir. 2018) ...10

Drulias v. IstCentury Bancshares, Ina,

30 Cal.

App.

5th

696

(2018) ...18

Edgar

v.

MITE

Corp,

457

U.S.

624

(1982)... 7, 8, 9, 10

Erie

RR.

C0. v. Tompkins,

304

U.S. 64 (1938)...11

Franco

v. ArakelianEnters., Ina,

149 CalRptr.

3d

530

(Ct.

App.

2012)...17

-2-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Page

Furda

v. Super. Ct.

OfOrange

Cty.,

161 Cal.

App. 3d 418

(1984) ...19

Hallv. Super. Ct.

0f0range

Cly,

150 Cal.

App. 3d

411 (1983) ...16, 17, 18

Handoush

v.

Lease

Fin. Grp.,

LLC,

41 Cal.

App.

5th

729

(2019) ...19

Haywood

v.

Drown,

556

U.S.

729

(2009)...12, 16

Healy

v.

Beer

Inst,

491 U.S.

324

(1989)... 9, 10

Herman

v.

Harm,

2012

WL

345027

(Cal. Ct.

App.

Feb. 3, 2012) ...14

Howlett

By

&

Through

Howlez‘tv. Rose,

496

U.S.

356

(1990)...12

In re Charles

Schwab

Corp. Sec. Litig,

2009

WL

1371409

(N.D. Cal.

_May

15, 2009)...14

In re

WorldCom,

Ina, Sec.

Ling,

219

F.R.D.

267

(S.D.N.Y. 2003)...14

Iuso v. Snap, Ina,

2017

WL

10410800

(CD.

Cal.

NOV.

21,2017)... 8

Kashani

v. Tsann

Kuen

China

Enter. C0,,

118 Cal.

App.

4th531 (2004)... 15, 16

Lhotka v.

Geographic

Expeditions,Ina,

181

Cal.App.4th816

(2010)...19

Little v.

Auto

Stiegler, Ina,

29

Cal. 4th 1064 (2003)...19

Lopez

v. Charles

Schwab

&

C0.,

118 Cal.

App.

4th 1224 (2004) ...15

Lucas

v. Bakersfield

Green

Thumb

Garden

Club,

2017

WL

395115 (Cal. Ct.

App.

Jan. 30,2017)... 13

_ ₃ _

PLAINTIFFS’

REPLY

TO

DEFS’

DEMURRER

TO

PLAINTIFFS’

CONSOLIDATED

COMPLAINT

FOR

VIOLATIONS

OF THE

FEDERAL

SECURITIES

LAWS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

Page

Marin

Storage

&

Trucking, Incv.

Benco

Contracting

&

Eng’g, Ina,

89 Cal.

App.

4th 1042 (2001)...14

McKesson

HBOC,

Inc. v. N.Y. State

Common

Ret.

Fund, Ina,

339

F.3d 1087 (9thCir. 2003) ...14

Mission

Oaks

Ranch,Ltd. v. Cly. ofSanta Barbara,

65 Cal.

App.

4th713 (1998) ...15

NCAA

v. Miller,

10 F.3d633 (9thCir. 1993) ...10

0

’Byrne v. Santa

Monica-UCLA

Med.

Ctr.,

94 Cal.

App.

4th

797

(2001) ... 13, 16

Richardsv.

Lloyd

’S

ofLondon,

107 F.3d 1422 (9thCir. 1997),superseded

0n

othergrounds

by

Richardsv.

Lloyd’s

ofLondon,

135 F.3d 1289 (9thCir. 1998)...18

Rodriguez deQuijasv. Shearson/Am. Express, Ina,

490

U.S.

477

(1989)...17

Salzbergv. Sciabacucchi,

2020

WL

1280785

(Del. Mar. 18, 2020)...

p

assim

Sanchez

v. Valencia

Holding

C0.,

LLC,

353 P.3d 741 (Cal. 2015)...19

Scottv. Lee,

208

Cal.

App.

2d

12 (1962) ...13

Smith, Valentino

&

Smith, Inc. v. Super. Ct. 0fL.A. Cty.,

17 Cal.

3d

491 (1976)...

20

State

Farm

Mut. Auto. Ins. C0. v. Super. Ct. 0fL.A. Cly,

114 Cal.

App.

4th

434

(2003)...8

Trustees

ofDartmouth

Coll. v.

Woodward,

17U.S.518(1819)

...7

Vaughn

v. LJInt’l, Ina,

174 Cal.

App.

4th213 (2009)... .8

_₄ _

PLAINTIFFS’

REPLY

TO

DEFS’

DEMURRER

TO

PLAINTIFFS’

CONSOLIDATED

COMPLAINT

FOR

VIOLATIONS

OF THE

FEDERAL

SECURITIES

LAWS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Page

Verdugo

v. Alliantgroup, L.P.,

237

Cal.

App.

4th 141 (2015)...16, 17, 18

Weddingz‘on Prods., Inc. v. Flick,

60 Cal.

App.

4th793 (1998) ...13

Wellsv. Black,

48 P. 1090 (1897)...15

Westv.

Lloyd

’s,

1997

WL

1114662

(Cal. Ct.

App.

Oct. 23, 1997)... 17

Wilko v.

Swan,

346

U.S.

427

(1953)...17

Williamsv. Gaylord,

186 U.S. 157 (1902)...8

Windsor

Mills, Inc. v. Collins

&

Aikman

Corp,

25 Cal.

App. 3d 987

(1972) ...14

STATUTES,

RULES

AND

REGULATIONS

15U.S.C.

§77n

... 16 §77V(a)...

_p

assim §77z-1_{(a)(3)(B)(Vi)}...18 §77z-1(b)(1)...18 §77z-1_(c)(2)...18 §78u—4... 11, 18

CaliforniaCivil

Code

§1

550

... 13, 14

§1

667

... 15

§1670.5... 19

CaliforniaCorporations

Code

§25 701... 16

8

Delaware

General Corporation

Law

§102(b)(1)...6, 8, 17

_ ₅ _

PLAINTIFFS’

REPLY

TO

DEFS’

DEMURRER

TO

PLAINTIFFS’

CONSOLIDATED

COMPLAINT

FOR

VIOLATIONS

OF THE

FEDERAL

SECURITIES

LAWS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

I.

INTRODUCTION

In their

renewed motion

t0 dismiss, Defendants assert that the

Delaware

Supreme

Court’s

decisioninSalzbergv. Sciabacucchi,

2020

WL

1280785

(Del. Mar. 18,2020)permits Restoration Robotics, Inc. (a California-headquartered

company)

t0 limit a shareholder’s choice 0f

forum

t0

bring claims arising

from

a stock purchase merely because the

Company

is incorporated in

Delaware.1

Allowing Delaware law

t0regulatewhethera California court

_may

exercisejurisdiction expressly protected

by

Congress (15U.S.C. §77V(a)) overaclaimarisingunderfederal

law

would

ViolatetheConstitution

and

the Securities

Act

0f 1933 (“1933 Act”),

and

itis impermissibleunder

Californialaw.

The

motion

shouldbedenied.

Sciabacucchi,

2020

WL

1280785, at*18 (Del. Mar. 18, 2020), heldthatGrundfest clauses “are facially valid under

Delaware law

because they are within the statutory scope 0f Section

102(b)(1)” 0fthe

Delaware

General Corporation

Law.

As

clear

from

the decision, Sciabacucchi

resolved only afacialchallengebased

0n Delaware

statutory law. Itdidnot (andcouldnot)resolve

“the

most

difficultaspect0fthisdispute”

and

a“powerful concern”: the

“‘down

theroad’ question

0f whether [federal

forum

provisions] will be respected

and

enforced

_by

[Delaware’s] sister

states.” Id. at *20.

As

the defense bar acknowledges, “it_{remains t0 be} seen whether courts in

other states will recognize the enforceability 0f [federal]

forum

selection bylaws 0r charter

provisions[.]”2 Infact,the decisionhas

been

broadly

met

withskepticism. Seeinfra §H.A.

This Court held thatthe

Company’s

Grundfest clause “is _{directly contrary t0 the explicit}

provisions0fthe Securities

Act

0f1933, providingstatecourt

and

federalcourtjurisdiction,

which

concurrentjurisdiction

was

affirmed

in an

unanimous

decision0ftheUnitedStates

Supreme

Court

in Cyan.”

CMO

#6, at3-4. Thatholdingretains itsVitality.

And

n0

longeris there a question as

t0 whether Grundfest clauses extend Delaware’s reach

beyond

the constitutional boundaries 0f

internalaffairs

—

the

Delaware

Supreme

Court allbutansweredthatquestion inthe affirmative.

1

References t0 Restoration Robotics Defendants’ Notice 0f

Motion and

Renewed

Motion

t0

DismissPlaintiffs’

Complaint

Pursuantt0

CCP

§1008(b)are statedhereinas“Mtn.”0r“Mtn.

at_.”

2

Declaration0f

James

I. Jaconette

and

Mark

C.

Molumphy

in Support 0fPlaintiffs’ Opposition

t0 Defendants’

Renewed

Motion

t0 Dismiss (“Jaconette/MolumphyDecl.”),EX. 1 at 3.

-6-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Delaware’s admitted intent

and

purpose in Sciabacucchi greatly buttresses the conclusion

thatGrundfest clauses are invalid

and

unenforceableunder both California

law and

the

law

0fthe

land. Grundfest clauses Violate the

Commerce

Clause, for they regulate (eliminate) state court

jurisdictionprotected

by

Congress. See infra §H.B. Grundfest clauses also Violatethe

Supremacy

Clauseforatleast

two

independentreasons. Seeinfra §H.C. First, ifenforced,theGrundfestclause

negates 15 U.S.C. §77V(a). Second, the Grundfest clause discriminates against federal

law

as it

applies differentially t0 federal

and

state causes 0faction.

And

notonly does it fail t0protect

any

legitimate

Delaware

interest, itapplies onlyt0 claims againstthe

Company

ratherthan

_by

it.

For all 0fthose reasons (and

more)

Grundfest clauses are unenforceable under California

law.

N0

contract

was

formed. Seeinfra §IH.

And

even ifCalifornia

were

t0recognizethefiction

0fa contract (it should not) the Grundfest clause

would

be unenforceable forbeing void under

California

and

federal

law

prohibitions against waivers 0frights protected

_by

the securities laws.

Seeinfra §IV.A. Furthermore,Defendantsd0not (and cannot)

show

enforcementwillnot diminish

Plaintiffs’ rights. See id. Lastly, the Grundfest clause is unconscionable. See infra §IV.B.

The

Court should

find

the Grundfest clause is void for being unlawful

and

unconstitutional,

and

unenforceablefordiminishingunwaivablerights

and

forbeingunconscionable.

II.

THE GRUNDFEST

CLAUSE

IS

UNCONSTITUTIONAL

A. Sciabacucchi

Departed

from

Conventional

Wisdom

thatthe

DGCL

Does

Not Extend Beyond

the

Bounds

0f InternalAffairs

A

corporation “can exist only

by

permission 0fthe state[.]”3 In Delaware, the enabling

statute is the

Delaware

General Corporation

Law

(the

“DGCL”).

For decades it

was

_widely

believed thatthe

DGCL’s

authority trackedthe boundaries 0fthe internal affairs doctrine,

which

“recognizes that only one State should

have

the authority t0 regulate . . . matters peculiar t0 the

relationships

among

0r

between

the corporation

and

itscurrent officers,directors,

and

shareholders

. . . because otherwise a corporation could be faced with conflicting demands.”

Edgar

v.

MITE

3

Boca

Mill C0. v. Curry, 97 P. 1117, 1121 (Cal. 1908); see also Cort v. Ash,

422

U.S. 66, 84

(1975) (“Corporationsare creatures 0fstate law”); Trustees

ofDartmouth

Coll. v.

Woodward,

17

U.S. 518,

636

(1819)

(“A

corporation isan artificialbeing, invisible, intangible,

and

existing only

incontemplation 0f law”).

-7-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Corp, 457

U.S. 624, 645 (1982); see alsoState

Farm

Mut.Auto. Ins. C0. v. Super. Ct. 0fL.A. Cly.,

114 Cal.

App.

4th 434,

442

(2003) (discussing California’s application 0f the internal affairs

doctrine).

Former Delaware

Chief Justice

Leo

Strine wrote that

“Delaware

corporation

law

govern[ed] only the internal affairs 0f the corporation.”4

Twenty-one

leading corporate

law

professors agreed.5

So

didthe UnitedStates DistrictCourtforthe CentralDistrict0fCalifornia.6

Sciabacucchideparted

from

conventionalwisdom.7 Itheldthatthe

DGCL

extended

beyond

internalaffairst0authorizecharter0r

bylaw

provisions regulating federal-lawclaimsbroughtunder

the Securities

Act

(which indisputably arenotinternal affairs claims).8

Drawing

a

Venn

diagram

the court explainedthat Grundfest clauses fall within anebulous “outer

band”

0fmatters that are

not“internal affairs” as

_{defined by}

theUnitedStates

Supreme

Courtbutarenonetheless authorized,

on

theirface,

by

the

Delaware

enabling statute:9

4

Jaconette/Molumphy

Decl.,EX. 2 at 2.

5

Jaconette/Molumphy

Decl.,

EX

3 at 1 (“Delaware

law

does not permit

bylaws

t0 restrict the

forum

forfederal securities actions, because the right t0 bring such actions is not a propertyright associatedwith shares 0fcorporate stock,

and

itthus falls outside 0fthe scope 0f

what Delaware

law

permitsthe corporatecharter

and bylaws

t0 regulate.”).

6

Iuso v. Snap, Ina,

2017

WL

10410800, at *4 (C.D. Cal.

NOV.

21, 2017) (“Delaware’s General

Corporation

Law

(‘DGCL’)

authorizes corporations t0 adopt provisions relating t0 the internal

affairs0fthe corporation. . . . Plaintiffdoesnotassert aclaimbased

0n

Snap’s internalworkings,

however,

and

the

bylaws

0f Snap’s corporate charter cannot

overcome

federal securities statutes

and

regulations”).

7

See

Jaconette/Molumphy

Decl.,EX. 4 at 1 (“I stillbelieve I

was

right in

my

account 0fexisting

law,

and

Salzbergv. Sciabacucchiactually

Changed

thelaw.”)

8

Edgar,

457

U.S. at 645 (“transfers 0f stock

_by

stockholders t0 a third party. ..

d0

not

themselves implicate the internal affairs 0fthe target company”); Williams v. Gaylord, 186 U.S.

157, 165 (1902)

(“when

a corporation . . .gives securities,itdoesbusiness,

and

astatuteregulating

suchtransactionsdoesnotregulate the internalaffairsofthe corporation”);

Vaughn

v.

LJInt

’l,_Ina,

174 Cal.

App.

4th 213,

223

(2009) (“securities regulations designed t0 protect participants in California’s securities marketplace are not limited

by

the internal affairs doctrine”);

Jaconette/Molumphy

Decl., EX. 5 at 1 (former

SEC

commissioner;

“The

federal securities laws

generally have

been

considered full disclosure statutes, as

opposed

t0 . . . laws governing the

internalaffairs0fcorporations”)

9

Sciabacucchi,

2020

WL

1280785

at *18 (“There are mattersthat arenot ‘internal affairs,’ but

are, nevertheless, ‘internal’ _0r ‘intracorporate’

and

stillwithinthe scope 0fSection 102(b)(1)

and

the ‘Outer Band,’ representedin Figure 1

between

points

B

t0 C. [Federal

forum

provisions] are in

this Outer Band,

and

are facially valid under

Delaware law

because they are within the statutory

_ ₈ _

PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

The

aggressive expansion 0f Delaware’s asserted authority has

been

broadly

met

with

skepticism,as“the

_{newly announced}

‘outerband’

between

internalaffairs

and

externalmatters sure

looks like an attempt

_{by Delaware}

t0 stave [off] horizontal regulatory competition.”10

Even

the

Sciabacucchi courthedged, stating there couldbe alegislative

fix

t0 “narrow,” 0r clarifythat, the

DGCL

doesnotextend

beyond

internal affairs. SeeSciabacucchi,

2020

WL

1280785, at *13.

B.

Grundfest

ClausesViolate the

Commerce

Clause

It’s

_n0

_wonder

_Sciabacucchi

_acknowledges

_{Grundfest clauses}

“may

not” _be in “Edgar’s

protectiveboundaries.” Id. at *20.

The

“Commerce

Clause precludesthe application0fastate

statute t0

commerce

that takes place wholly outside 0fthe State’s borders, whether 0r not the

commerce

has effects within the State.” Edgar,

457

U.S. at 642-43.

Because

Grundfest clauses

now

have “extraterritorial reach”under

Delaware law

they Violatethe

commerce

clause. See id.;

Healy

v.

Beer

Inst,491 U.S. 324,

336

(1989) (“astatutethat directly controls

commerce

occurring

wholly outside the boundaries 0f a State exceeds the inherent limits 0f the enacting State’s

authority”). In Edgar, an Illinois statute authorizing regulation of tender offers for Illinois

corporations,

was

heldinvalid

_by

the

Supreme

Court underthe

Commerce

Clauseforits“sweeping

scope 0f Section 102(b)(1)[.]”);Id. at *20 (recognizing that “[federal

forum

provisions] are not

‘internal affairs’ matters withinthe traditional

Edgar/McDermott

sense”).

10

Manesh,

Mohsen, (March

20,2020),https://perma.cc/3BJL-AVVW;see also

Mohsen, Manesh,

(March

20, 2020),

https://perma.cc/HTH7-NCHZ (“how

was

I supposedt0

know

aboutthe ‘outer

band’

between

internal affairs

and

external matters before the

Delaware

Supreme

Court invented

it?!?”). See also

Jaconette/Molumphy

Decl., EX. 4 at 2 (“I _found the opinion itselfkind of. . . ellipticalinitsreasoning . . . [I]t’sgoingt0bereally interestingt0

find

out

what

thecourt does,

and

doesnot, believe canbe governed

by

corporate charters

—

and

even

more

interestingt0 see if

any

other states (hello, California)

push

back”);

Jaconette/Molumphy

Decl., EX. 6 at 2 (quoting corporate

law

professor

Minor

Myers:

“The Supreme

Courthere, Ithink,reacheskind0fabizarre

outcome

insaying corporationscanregulate thebehavior0fstockholders

0n

mattersthatariseunder

federal law,”

_Myers

said. “This opinion is the

Supreme

Courttrying t0 have it both ways, giving

the corporate constituency

what

they have

been jumping

up and

down

for

and

at the

same

time trying not t0

open

aPandora’s

box

t0 every stupid idea

some

board 0fdirectors 0radviserhas t0 drafting a

new

bylaw

. . . . [It is] kind 0frolling the dice with the credibility 0f Delaware”); Id.

(quoting corporate

law

professor

Lawrence

Hamermesh:

“I_thought

_we

_were

_{ina predictableroom,}

butthe door has

opened

up

intoveryuncertain challenges

and

positions . . . . There’s a nice

Venn

diagramthere,

and

concepts like outerbands. If

anybody

cantell

me

what’s inside those abstract

sets, they’re abetter person than I am,”);

Jaconette/Molumphy

Decl., EX. 7 at2 (“the analysis is

notthe cleanest that

TCD

has seen

from

the

Supreme

Court”)

-9-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

extraterritorial effect.”

457

U.S. at642.

As

inEdgar,herethe state’s

law

does“not . . . implicate

the internal affairs” 0fthe

Company.

Id. at645.

Plaintiff

Sunny

Wong,

a California resident, purchased shares 0fRestoration Robotics (a

California-headquartered

company) 0n

the

NASDAQ.

The

DGCL

cannotcreatea corporate

power

limiting Plaintiff’s choice of

forum

for claims arising

from

that transaction merely because the

Company

is incorporated in Delaware.

Allowing

a

Delaware

statute t0 regulate whether a

California court

may

exercisejurisdiction expressly given t0 it

_by

Congress ₍₁₅ U.S.C. _§77V(a))

overaclaimarisingunderfederal

law

is invalidunderthe

Commerce

Clause. See Healy, 491 U.S.

at 336. Sciabacucchi

acknowledges

that “a well-developed

body

0f law, including

Commerce

Clause precedent . . . exists t0 prevent a valid state

law from

having extraterritorial application.”

2020

WL

1280785, at *22. Sciabacucchi,however, states Grundfest clauses d0not “offend these

constitutional principles”becausethey are“procedural

mechanisms” and

not“substantive.” Id.

Thaterroneousinterpretation0ffederal constitutional

law

isneitherbindingnorpersuasive.

Edgar

does not hold itis acceptable t0 have extraterritorial application 0f“procedural” laws. In

NCAA

v. Miller, 10 F.3d 633,

637

(9th Cir. 1993), for example, the Ninth Circuit invalidated a

Nevada

statute that sought t0 ensure “certain procedural due process protections during an[y]

[NCAA]

enforcement proceeding in

which

sanctions [could] be

imposed”

because 0f its

extraterritorial effect.“

Nor

does Sciabacucchi’s “procedural” distinction

make

any

sense.

What

couldbe

more

“offen[sive t0] sister [s]tates”(Edgar,

457

U.S. at643)than applying

Delaware law

t0 divest other states’ courts 0fjurisdiction over Securities

Act

claims expressly protected

by

Congress. See 15 U.S.C. §77V(a); Cyan, Inc. v.

Beaver

Cty.

Emps.

Ret.

Fund,

138 S. Ct. 1061,

1066 (2018) (“ifaplaintiffchose t0 bring a 1933

Act

suit in state court, the defendant could not

11

SeealsoDaniels Sharpsmart, Inc. v. Smith, 889 F.3d608,

616

(9thCir. 2018) (explainingthat

in Miller, “the State 0f

Nevada

sought t0

impose

rules 0f procedure that

would

in effect control

proceedings inotherstates, even ifthose statesdidnot

impose

the

same

restrictions

0n

procedures

and

couldevenprescribeotherrules.

As

we

thendeclared: ‘theStatutecouldcontrol theregulation

0fthe integrity0faproductin interstate

commerce

thatoccurs wholly outside

Nevada’s

borders.

Thatsort 0fextraterritorial effectisforbidden

_by

the

Commerce

Clause’”).

-10-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

changetheforum”).

And

if

forum

selection clausesaremerely “procedural,” thenunderErie

RR.

C0. v. Tompkins,

304

U.S. 64 (1938),

Delaware law

would

notapply inthe first instance.

C.

Grundfest

ClausesViolate

The

Supremacy

Clause

Sciabacucchi characterizes Grundfest clauses as

mere

“Post-Cyan Efficiencies” that

“nothingin

Cyan

prohibits.”

2020

WL

1280785, at*19. Thatisanoversimplificationatbest. This

Courtheld thatthe

Company’s

Grundfest clause “is _{directly contraryt0 the explicitprovisions 0f}

the Securities

Act

0f 1933, providing state court

and

federal courtjurisdiction,

which

concurrent

jurisdiction

was

affirmed

in an

unanimous

decision 0ftheUnited States

Supreme

Courtin Cyan.”

CMO

#6, at 3-4. That holdingretains itsVitality.

First, the Grundfest clause cannot be reconciledwiththe

Supremacy

Clause because, ifit

were

enforced, it

would

negate 15 U.S.C. _§77V(a). Protection 0fthe state court

forum

against

defendants unilaterally electing t0 litigate in federal court has remained in 15 U.S.C. §77V(a)’s

concurrentjurisdiction

and

anti-removal provisions

from

enactment throughthe Private Securities

Litigation

Reform

Act

0f 1995

and

the Securities Litigation

Uniform

Standards

Act

0f1998,inline

withthe“long

and

unusually

pronounced

tradition0faccordingauthorityt0 statecourts over 1933

Act

litigation.” Cyan, 138 S. Ct. at 1075.

Evading

that

would

constitutea “dramatic change . . . in

the 1933 Act’sjurisdictionalframework.” Id. at 1065.

But

Delaware’s

law

rejectsCongress’ (and

the United States

Supreme

Court’s)

judgment

in favor 0f Delaware’s desire t0 “provide”

corporations the

power

t0 “manag[e] the procedural aspects 0fsecurities litigation following the

United States

Supreme

Court’s decision in

Cyan”

Sciabacucchi,

2020

WL

1280785, at *5.

Furthermore, the ruling’sexpress goal isthatevenif

“Edgar

’sprotectiveboundaries

_may

notfully

encompass”

Grundfestclausestheclausesshould“nevertheless,beenforced”

“by

oursister states.”

Id. at*20.

A

policywith such cross-state (effectively, federal)reachis inCongress’ domain.

Second, the Grundfest clause discriminates against federal

law and

is therefore invalid

under the

Supremacy

Clause.

As

Sciabacucchi squarelyholds,

Delaware law

permits a corporate

charter t0eliminatestatecourtjurisdictionoverfederal

law

claims,but notparallel state-lawclaims.

2020

WL

1280785, at *20 H.146. That discrimination violates the

Supremacy

Clause.

Where

Congress has expressly conferred concurrentjurisdiction under a federal statute

by

which

“state

-11-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

courts as well as federal courts are entrusted with providing a

forum

for the Vindication federal

rights,”states“lackauthority t0 nullifyafederal right0rcause0faction they believeisinconsistent

With their local policies.”

Haywood

v.

Drown,

556

U.S. 729,

736

(2009). In

Haywood,

a

New

York

policy nullified

§1983

suits in state courtt0 relieve court congestion

and

shield correction

officers

from

liability.

The Supreme

Courtheldthatalthough

New

York’s rule

was

“denominated

jurisdictional,” itforeclosed federalremedies

and

thus violatedthe

Supremacy

Clause.

Both

state

and

federal courts

have

jurisdiction over _§ 1983 suits.

So

strong is the

presumption 0f concurrencythat itis defeated only

when

Congressexpressly ousts

state courts 0fjurisdiction. . . . States retain substantial leeway t0 establish the

contours 0f theirjudicial systems, but lack authority t0 nullify a federal right or cause0faction they believeis inconsistentwiththeirlocalpolicies.

Id. at 730. Furthermore, a state

law

0rlocalpolicy is especially improper where, like Delaware’s

rule here, itapplies differentiallyt0 federal

and

statecauses 0faction. See Howlett

By

&

Through

Howlett v. Rose,

496

U.S. 356, 375 (1990). InHowlett, the

Supreme

Court held that a state

law

defense t0

§1983

actions,

which

would

preclude all state court suits for certain defendants under

§1983, violatedthe

Supremacy

Clause.

The

“existence 0fthe [statecourt] jurisdiction”t0 enforce

C“

afederal right creates an implication 0f duty t0 exercise it.”’ _{Id. at 370, 373.}

_{“The Supremacy}

Clauseforbidsstatecourts t0 dissociatethemselves

from

federal

law

because 0f disagreement with

itscontent 0r arefusal t0recognizethe superiorauthority 0fits source.” Id. at 357. “Federal

law

is enforceable in state courts not because Congress has determined that federal courts

would

otherwisebe burdened0rthatstate courtsmight provide a

more

convenient

forum

—alth0ugh both

mightwellbe true

—

butbecausethe Constitution

and

laws passedpursuant t0 it are as

much

laws

inthe States as laws passed

by

the statelegislature.” Id. at367.

The

rationale above applies with

more

force here. There is

n0

legitimate state interest

because the

Delaware

law

protects only

Delaware

companies, not Delaware’sjudiciary.

And,

the

Grundfest clause is one-sided: it applies only t0 claims broughtagainst the

Company

rather than

by it;

and

it grants the

Company

the exclusive

power

t0 decide whether t0 require litigation in

federal court. Lastly, inall 0fitsdecisions involving

forum

selection clauses, the

Supreme

Court

has only foundclassicbilateral contracts giveriset0

forum

selection.

The

Grundfest clauseisunconstitutional forallthereasons stated.

-12-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

III.

NO CONTRACT

WAS FORMED

UNDER

CALIFORNIA

LAW

Recently,

Delaware

courts have dispensed with the fact—specific analysis 0f determining

whether

bylaws

0r charterprovisions

form

contracts

and

simply hold thatthe charter

and bylaws

arecontractswith(against) shareholders.

But Delaware law

doesnot applyherebecause Grundfest

clauses

d0

not govern internal affairs.

Under

California law, whether 0r not

bylaws

0r charters

C“ 3”

constituteavalid contract turns

0n

whether the elements0facontract are present.

0

’Byrne v.

Santa

Monica-UCLA

Med.

Ctr., 94 Cal.

App.

4th 797, 808 (2001) (citing Scott v. Lee,

208

Cal.

App.

2d

12, 15 (1962)).12

Under

black-letterCalifornia law, asheld

_by

theFirst District’s Court 0f

Appeal

in

Lopez

v. Charles

Schwab

&

C0., 118 Cal.

App.

4th 1224, 1230 (2004) in“consider[ing]

whether [parties]

formed

a contract,” the “essential elements” are: ₍₁₎ “parties capable 0f

contracting”; ₍₂₎ the parties “consent”; ₍₃₎ a “lawful object”;

and

₍₄₎ “sufficient cause 0r

consideration.” Seealso Cal. CiV.

Code

§1550

(same); Carnival CruiseLines v. Super. Ct. 0fL.A.

Cty.,

234

Cal.

App. 3d

1019, 1026-27 (1991) (same).

The

complete failure 0f Defendants t0 demonstrate

any

essential element 0f contract

formation warrants denial ofthe Motion. See Carnival Cruise,

234

Cal.

App.

3d. at 1026-27 (if

partyinvoking

forum

selectionclausefailst0 establisheach element 0fCal. CiV. Code. §1550, “n0

valid contractwithrespectt0 such clause thus exists”).

A.

Defendants

D0

Not (And

Cannot) Demonstrate Assent

“Contract formationrequires mutual consent,

which

cannot existunless the parties ‘agree

upon

the

same

thing in the

same

sense.”’

Bustamante

v. Intuit, Ina, 141 Cal.

App.

4th 199,

208

(2006). See also Weddington Prods., Inc. v. Flick, 60 Cal.

App.

4th 793, 811 (1998).

Because

79 ‘6

mutual assentrequires “adequate notice, an offeree, regardless 0fapparent manifestation 0fhis

12

“Althoughdicta in

some

older cases

had

indicated that, undertheirparticular facts,provisions

0f bylaws

may

potentially create contractual rights 0r obligations,” subsequent decisions explain

thatthe “trueholding” 0f suchcases

was

simplythat

where

“‘by-laws

fixed

the rights

and

duties0f

the corporation against

and

t0 its shareholders,”’ they

may

be interpreted

_by

the

same

canons

and

precedentused t0 interpretcontracts. See, e.g.,

Lucas

v. Bakersfield

Green

Thumb

Garden

Club,

2017

WL

395115, *7 n.10 (Cal. Ct.

App.

Jan. 30, 2017) (citing Scott,

208

Cal.

App.

2d

at 14).

None

0fthatdecades—olddicta,however, standsforthesweepingpropositionthat

bylaws

somehow

alwaysconstitutevalid contractswithoutregardt0 the standardelements0fformation.

-13-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

consent,isnot

bound by

inconspicuouscontractualprovisions0f

which

he

was

unaware,contained ina

document

whose

contractualnature isnot obvious.”

Windsor

Mills, Inc. v. Collins

&

Aikman

Corp,

25 Cal.

App. 3d

987, 988 (1972). See also

Marin

Storage

&

Trucking, Inc v.

Benco

Contracting

&

Eng’g, Ina, 89 Cal.

App.

4th 1042, 1049-50 (2001) (partynot

bound

ifthere “does

notappeart0 beacontract

and

theterms arenotcalled t0 the attention0fthe recipient”).

N0

ordinary investor

had any

reasont0 expectt0 be

bound

by

aGrundfest clause.

T0

the contrarystate courtjurisdiction isprotectedunderthe 1933 Act.

The

Grundfest clause

was

buried

in an exhibit in turn buried several

hundred

pages into one 0f several

amendments

t0 the

Registration Statement. Its “inconspicuous” existence does not establish mutual assent. See

Windsor

Mills, 25 Cal.

App. 3d

at 993.13

Because

Defendants d0 not (they cannot) establish

Plaintiffs received “sufficient notice 0f the forum-selection clause prior t0 entering into the

,9‘6

[purported] contract, the requisite mutualconsentt0 thatcontractualtermislacking

and

n0

valid

contractwithrespectt0 suchclause thus exists.” Carnival Cruise,

234

Cal.

App. 3d

at 1027.

B.

The

Grundfest Clause

Is

Not Lawful

Equallyifnot

more

damning,isthatDefendantsd0not(andcannot)satisfythelawfulobj ect

element 0fcontract formation. SeeCal.CiV.

Code

§1550

(codifying“alawful object”as “essential

t0 theexistence0facontract”);

ASP

Props. Grp., L.P. v. Fard,Ina, 133 Cal.

App.

4th 1257, 1268-69 (2005) (“Formation 0fa contract requires . . . a lawful object . . . .”) (citing Cal. CiV.

Code

§1550);

Herman

v.

Harm,

2012

WL

345027,at*5 (Cal.Ct.

App.

Feb.3,2012)(holding“n0contract

had been formed”

because defendant

had

“made

n0

attemptt0

show

thatthere

was

a lawful obj ect

t0thecontract”

and

thus“hadnot

met

hisinitialburdent0demonstratecontract formation”).

Under

California law, the object 0fapurported contractual provision is unlawful ifis “[c]0ntrary t0 an

13

Nor

d0

the Securities

Act

claims alleged require Plaintiffs read the Registration Statement’s

hundreds 0f pages 0fexhibits. See, e.g., In re

WorldCom,

Ina, Sec. Litig,

219

F.R.D. 267,

294

(S.D.N.Y. 2003) (explainingthat Securities

Act “makes

explicit” that plaintiffhas “n0 burden” t0

show

she “actually read the registration statement”).

And

it is well established that registration statements are not contracts. See, e.g.,

McKesson

HBOC,

Inc. v. N.Y. State

Common

Ret. Fund, Ina,

339

F.3d 1087, 1091-92 (9thCir. 2003) (prospectus

and merger

agreementnot acontract);In

re Charles

Schwab

Corp. Sec. Litig.,

2009

WL

1371409, *5 (N.D. Cal.

May

15, 2009) (“offering

documents

under securities laws are generally different than contract ‘offers’ _(a far narrower

concept),

and

bareallegations d0not equatethe two”).

-14-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

express provision0flaw,” contraryt0 “the policy 0fexpress law,” 0rotherwise “contrary t0

good

morals.” Cal.CiV.

Code

§1667.

Because

the Grundfestclause isunlawfulin several respects,itis

void. See

Armendariz

v. Found. Health Psychcare Servs., Ina,

24

Cal. 4th 83, 124 (2000)

(purported contractvoidifitcontains “multiple defects” 0rifits“centralpurpose” is “taintedwith

illegality”).14

The

Grundfestclause directly contravenesthe 1933 Act’s concurrentjurisdiction

and

anti-removalprotections, aswellas the

Supreme

Court’s decisioninCyan. Seeinfraat 11-12

&

nn.15-17. Itone-sidedly eliminatesstatecourtjurisdiction, discriminates againstfederallaw,

and

negates

federal prerogatives reflected in the 1933

Act

and Cyan. See supra §H.C. That is precisely

why

this clause

was

adoptedintothe

Company’s

charter. See, e.g.,

Jaconette/Molumphy

Decl.,EX. 8 at

7 ("a_{straightforward (and low-cost)}

mechanism

for

companies

t0 skirttheunpredictable nature 0f

astatecourtsuit . . .”);Id.,EX. 9at4(pitching the“Grundfest Solution”: “If

you want

t0be serious

aboutavoiding state courtlitigation in connectionwith your IPO, . . . talk t0youroutside counsel

sooner than later about adopting federal choice 0f

forum

provisions indoor corporate bylaws").

Because

“California

law

includesfederallaw,”Defendant’s “Violation0ffederal

law

is aViolation

0f

law

forpurposes 0f determining whether 0r not [its purported] contract” has a lawful object.

Kasham'

v. Tsann

Kuen

China

Enter. C0,, 118 Cal.

App.

4th 531,543 (2004). Defendants’

forum-selectionclause is alsocontrary t0the public policyclearlyevident in California’s Blue

Sky

laws.

Seeinfra n.15. Itisalso plainlyunconstitutionalunderthe

Dormant

Commerce

Clause. See supra

§H.B.

C.

Defendants

D0

Not (And

Cannot) Demonstrate

Consideration

Under

California law, a statutory 0rlegal obligation t0 perform an act

_may

not constitute considerationforacontract. See, e.g.,Mission

Oaks

Ranch, Ltd. v. Cly. ofSanta Barbara, 65 Cal.

App.

4th 713, 723 (1998).

The

Company,

as a

Delaware

chartered corporation,

was

obligated t0

14

Bylaws

are voidifthey“contravenefl anyprovision0fthe federal 0rstateconstitution” 0rare

“repugnant t0, 0r inconsistent with,

any

federal 0r state statute.” 8 Fletcher Cyc. Corp. §4185.

Indeed, it has

been

long held at a matter 0fCalifornia

law

that corporate

bylaws

that Violate the constitution

and

state

law

are void. Wells v. Black, 48P. 1090, 1092 (1897).

-15-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

adoptcorporate bylaws. See

DGCL

_§§102, 109.

As

thebylaws

were

obligated

by

law,theycannot

constituteconsideration undercontrollingCaliforniacontract law. See

0

’Byrne, 94 Cal.

App.

4th

at808.

Nor

isthere otherwise consideration demonstrated

by

Defendantsthat in

any

way

supports

contractformationhere.

IV.

THE

CLAUSE

IS

UNENFORCEABLE

UNDER

CALIFORNIA

LAW

A.

Enforcement

Would

Diminish

Unwaivable

Statutory Rights

The

burden is

0n

Defendants t0 establish thatenforcement 0ftheir forum-selection clause

would

notcontravene §14 0fthe 1933

Act

0rthepublic policycodified therein.

Although

a party opposing enforcement 0f a

forum

selection clause ordinarilybears the burdent0

show

enforcement

would

be unreasonable 0runfair,

the burdenisreversed

when

theunderlying claims are based

0n

statutory rights the

Legislature has declared t0 be unwaivable. In that instance, the party seeking t0 enforce the

forum

selection clause has the burdent0

show

enforcement

would

not diminishunwaivableCaliforniastatutoryrights.

Verdugo

v. Alliantgroup, L.P.,

237

Cal.

App.

4th 141, 144-145 (2015). Defendants d0 not (and

cannot) carrytheirburden.”

And

theyadmit“California’s interest”(Mtn. at 16n.4)isgreatergiven

thatthe Plaintiff

who

initiated thiscase isa Californiaresident. SeeDeclaration0f

Sunny

C.

Wong

in Support 0fPlaintiffs’ Oppositiont0 Defendants’

Renewed

Motion

t0 Dismiss. Moreover, even

ifthe burden

were

not shifted, it is clear that enforcement

would

be unreasonable 0runfair. See

infra §IV.B.2; supra §H.C. Section 14 0f the 1933

Act

voids

any

“condition, stipulation, 0r

provision . . . t0

waive

compliance

any

provision 0fthe Securities Act.” 15 U.S.C. §77n.

The

15

Verdugo

speaks t0 the burden shift

when

there is an anti-waiver policy per “California law,”

butunder the

Supremacy

Clause, “California

law

includes federal law.” Kashani, 118 Cal.

App.

4that543;see also

Haywood,

556

U.S.at734-735 (“[F]ederal

law

isas

much

the

law

0ftheseveral

States as are the laws passed

by

their legislatures. Federal

and

state

law

‘together

form

one system 0fjurisprudence,

which

constitutes the

law

0fthe land for the State . . .”’). Thus, Defendants’

assertion “there are

n0

California substantive rights at issue” (Mtn. at 17) is a red herring

—

and it

isincorrect.

The

very

same

policyiscodified under analogousCalifornialaw. SeeCal.Corp.

Code

§25701 (“Any

condition, stipulation 0r provision purporting t0 bind

any

person acquiring

any

security t0

waive

compliance with

any

provision 0f this

law

0r

any

rule 0r order hereunder is

V0id.”); Hall v. Super. Ct.

0f Orange

Cly, 150 Cal.

App. 3d

411,

418

(1983) (explaining that “California’s policy t0 protect securities investors,” akin t0 the “similar

nonwaiver

provision”

codified in _§ 14, “compels denial 0f enforcement” 0fsimilar forum-selection clauses). See also

infran.18 (detailing additional rights diminished).

-16-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

United States

Supreme

Court hasheldthatthe “theright t0 selectthe judicial

forum

isthe kindof

‘provision’ thatcannotbe

waived

under§14.” Wilkov.

Swan, 346

U.S. 427,

434

(1953).“

Defendants assert “the

Delaware

Supreme

Court addressed this concern head-on. . .

and

correctly interpreted federallaw.” Mtn. at 13. Incorrect. Sciabacucchi

makes

n0

mention 0fWilko,

and

n0

mention 0f_{§ 14.} Itmerely decided whether Grundfestclausesare facially validunder8Del.

C. §102(b)(1). See Sciabacucchi,

2020

WL

1280785, at *4.

Any

discussion

beyond

that

and

whetherother courts should allow Delaware’s

“power

grab” _(Id. at *20) isneitherpersuasivenor

binding

0n

this Court’s interpretation 0ffederal

and

Californialaw. Defendants assertRodriguez

“fully overruled Wilko

and

forecloses Plaintiffs’

argument

here.” Mtn. at 14.

Wrong.

See supra

n.16 (analyzing Rodriguez). Rodriguez’sholdingconcernsarbitration --

_any

_language

_beyond

_that

holding is dicta

and

“therefore binding

0n n0

one.” Contreras v. Dowling, 5 Cal.

App.

5th 394,

407

(2016) (“Incidental statements 0r conclusions not necessary t0 the decision are not t0 be

regarded as authority.”’). It is thus

n0

surprise that California appellate courts (and the Ninth

Circuit)

have

consistentrecognizedthe arbitration-specific holding 0fRodriguez

and

endorsed the

continuingVitality0f Wilkonotwithstanding.”

16

The Supreme

Courtlatercabined Wilko t0the extentthatthe Federal Arbitration

Act (“FAA”)

conflicts with §14 in the context of international agreements. See Rodriguez de Quijas v.

Shearson/Am. Express, Ina,

490

U.S. 477,

478

(1989) (“Thequestion here iswhethera predispute

agreement t0 arbitrate claims under the Securities

Act

0f 1933 is unenforceable.”). Rodriguez

“stressed thestronglanguage 0ftheArbitration Act,

which

declares asa matter0ffederal

law

that arbitrationagreements ‘shall_{bevalid, irrevocable,}

and

enforceable, save

upon

suchgroundsas exist

at

law

0rin equity forthe revocation0f

any

contract,”’

and

that petitioners “had not carried their

burden 0f

showing

that arbitrationagreementsarenot enforceableunderthe Securities Act.” Id. at

483.

But

here, the

FAA

has

n0

application whatsoever,

and

thus Wilko’s interpretation 0f §14

remains controlling

and

dispositive. Seealso infran.17(case

law showing

Wilko remainsVital).

17

See, e.g., Verdugo,

237

Cal.

App.

4th at 155 n.4 (explaining Rodriguezpartial overruling of

Wilko

was

“based

0n

the Federal Arbitration Act’s public policy favoringarbitration . . .”); Westv.

Lloyd’s, 1997

WL

1114662

at *6-*7, *9 (Cal. Ct.

App.

Oct. 23, 1997) (favorably citing Wilko,

finding

forum

selectionprovision “void”

and

stating “subsequent history” 0f

Wilko had n0

effect

0n

the reasoning 0f Hall because Rodriguez only “overrul[ed] Wilko . . . _[t0] reconcile[e]

two

competingfederal legislative policies, one

embodied

intheArbitration Act,

which

strongly favors

the enforcement 0f agreements t0 arbitrate, and the protections afforded

_by

_[§ 14 0f the 1933

Act].”); Countrywide Fin. Corp. v. Bundy, 187 Cal.

App.

4th 234, 250-51 (2010) (Rodriguez’s overruling 0f Wilko

was

limited t0 “whether [S]ection 14 0fthe Securities

Act

0f 1933 voided an

agreementt0 arbitrate.”);

Franco

v. Arakelian Enters., Ina, 149 CalRptr.

3d 530

(Ct.

App.

2012)

(Rodriguez overruled Wilko insofar as it

“exempted

claimsunder the Securities

Act

0f 1933

from

arbitration”).

So

too, theNinth Circuithas recognized thatRodriguez only overruled Wilko t0 the extent it upheld an arbitration clause

“by

Virtue 0fthe Arbitration Act,”

and

with

“two

federal

_ ₁₇ _

PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Defendants also

expend

greateffort assertingthe SixthDistrict’s decisioninDrulias v. Ist

Century Bancshares, Ina, 30 Cal.

App.

5th 696, 703 (2018) supports enforceability. See Mtn. at

16-18.

But

inDrulias the plaintiffs broughtaderivative action assertingbreach 0f fiduciary duty

claimsunder

Delaware

law. 30 Cal.

App.

5th at 700.

Every

rationale 0fthe courtpointed t0

by

Defendants isbased

0n Delaware

case

law

arisingout0finternal affairsmatters -_notthe

_gravamen

here. Indeed, the basis 0fthe court’s ruling thata

forum

selection

bylaw

(notaGrundfest clause)

steering internal affairs claims t0

Delaware

did not conflict with California

law

0r public policy

was

thatthere

was

n0

conflictunderthe “internal affairsdoctrine,”

which

requiredthe “application

0fthe

law

0fthe state 0fincorporation in certain actions . . . involving the corporation’s internal

affairs.” Id. at 706.

The

court held

“we

agree . . . there is ‘no unfairness in a requirement that

claims against a

Delaware

corporation

under

Delaware law

be broughtin

Delaware

court.” Id. at

709. Grundfest clauses are faroutsidethe orbit0f Drulias notonly because theyregulatefederal

law, but also because they discriminately exertan extraterritorial impact

upon

the jurisdiction of

statesoutside

Delaware and

upon

personalrights thatareindisputablynotinternalaffairs matters.

Because

Defendants’ forum-selection clause is void under §14, it is unenforceable as a

matter 0fCalifornia contract law,

and

thus Defendants’

motion

should be denied. See Verdugo,

237

Cal.

App.

4th at 157 (forum selection clause unenforceable due t0 statutory anti-waiver

provision); Hall, 150 Cal.

App. 3d

at

418

(same). Furthermore, Defendants d0 not (and cannot)

show

enforcementwillnot diminishPlaintiffs’ rights.”

statutesinconflict,the considerations0finternational

commerce

tippedthebalance,”

and

thus that

where,as here, “‘theprovisions0ftheArbitrationAct’”arenot implicated, forum-selection clauses

remain “void becausetheyViolatethe 1933 Act.” Richards v.

Lloyd

’s

ofLondon,

107 F.3d 1422,

1424, 1426-27(9thCir. 1997), superseded

0n

othergrounds

by

Richardsv.

Lloyd

’s

ofLondon,

135

F.3d 1289 (9th Cir. 1998) (enbane).

18

For example, while Plaintiffshere are entitled t0 discoveryunderthe Civil Discovery

Act and

the Tenth

Amendment,

the

PSLRA

would impose

a

mandatory

stay0fdiscovery in federal court.

See 15 U.S.C. _§ 77z-1(b)(1).

And

whereashereplaintiffs inCalifornia courtare freet0pursue

any

and

all 1933

Act

class claims they

may

have as they arise, the

PSLRA

strictly limits the

same

plaintiff to

no

more

than

five

such class claims in

any

three--year period. 15 U.S.C. _§ 77z-1(a)(3)(B)(Vi). A11

0n

penalty0f

mandatory

sanctions

n0

less. 15U.S.C. _§ 77z-1(c)(2). Plaintiffs

are also entitled t0 anon-

unanimous

juryverdict 1nstatecourt, while1nfederal courta

unanimous

jury verdict

would

be required t0 prevail 1n this case. These differences (and others) materially affectwhich,

when, and

how

Plaintiffs’ claims can (0rcannot) be asserted

and

resolved,

and

thus they are “intimately

bound up”

with California’s “substantive decision making’”

and

likely t0

_ ₁₈ _

PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

B.

Enforcement

Would

Be

Unconscionable

This Court has the discretion t0 refuse enforcement because the Grundfest clause is

unconscionable. Cal. CiV.

Code

§1670.5.

The

“unconscionability doctrine is concernednot with

‘a _{simple old-fashioned}

_bad

_{bargain’ butwith terms that are ‘unreasonably favorable t0 the}

_more

powerfulparty.’”

_Sanchez

v. Valencia

Holding

C0.,

LLC,

353 P.3d741,

748

(Cal. 2015) .

A

forum

selectionclause

may

be unenforceableifitis

shown

that“it

_was

_{outsidethereasonable expectations}

0f the

weaker

0r adhering party 0r that enforcement

would

be unduly oppressive 0r

unconscionable.”

Furda

v.Super. Ct.

0f Orange

Cly., 161 Cal.

App. 3d

418,

420

(1984).

Unconscionabilityrequires a

showing

0f both procedural unconscionability

and

substantive

unconscionability. Armendariz,

24

Cal. 4that 114.

Both components must

bepresent,but not in

the

same

degree;

by

the use 0f a sliding scale, a greater

showing

0f procedural 0r substantive

unconscionabilitywillrequire less 0fa

showing

0fthe othert0 invalidatethe claim. Id.

1.

The

Grundfest Clause

Is Procedurally

Unconscionable

Oppression0r surprisedue t0 unequalbargaining

power

between

theparties. Sanchez, 61

Cal. 4th at 910. Plaintiffs

had n0

opportunity t0 negotiate the terms 0fthe Grundfest clause, nor

did they

have any

power

t0 d0 so.

Such

unequal bargainingpower, demonstratesahigh degree 0f

oppressiveness.

SeeAbramson

v.Juniper Networks, Ina, 115 Cal.

App.

4th 638,663 (2004).

Even

if they

knew

about the Grundfest clause buried in the

Company’s

charter (and they did not)

investorslike Plaintiffs

had n0

choice but t0 purchase shares purportedly subj ect t0 the Grundfest

Clause. See Lhotkav.

Geographic

Expeditions,Ina, 181 Cal.

App.

4th 816,821 (2010) (procedural

unconscionability

may

be proven

by

showing

that a party has

n0

meaningful opportunity t0

negotiateterms 0rthecontractispresented

0n

a takeit0rleave itbasis).

2.

The

Grundfest Clause

Is Substantively

Unconscionable

Substantively unconscionable terms

_may

take various forms, but

_may

generally be

described as unfair 0r one-sided. Little v.

Auto

Stiegler, Inc.,

29

Cal. 4th 1064, 1071 (2003).

impact“interest[s]theCaliforniaConstitution zealously guards.” See

Handoush

v.

Lease

Fin. Grp.,

LLC,

41 Cal.

App.

5th 729,

739

(2019).

-19-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

Grundfest clauses provide the

Company

alone has the right t0 control the

forum

0f a lawsuit:

“[u]nless the Corporation consents in writing to the selection 0fan alternate forum, the federal

districtcourts0ftheUnitedStates0f

America

shallbe theexclusive

forum

fortheresolutionof

any

complaint asserting a cause 0f action arising under the Securities

Act

0f 1933, as

amended.”

Declaration0f

Gavin

M. Masuda

in Support 0fRestorationRobotics Defendants’

Renewed

Motion

toDismissPlaintiffs’ Complaint Pursuantto

CCP

§1008(b), EX.

B

atArticleVIII(emphasisadded).

They

therefore lack basic fairness. See

Abramson,

115 Cal.

App.

4that

657

(2004) (agreements

must

contain at least “a

modicum

0fbilaterality” t0 avoid unconscionability). Plaintiffs

had

the

reasonable expectation theycould choose this

forum by

arightprotectedfordecades with an

anti-removalbarbuttressing the Court’s concurrentjurisdiction. Thatright

was

Vitiated

_by

aunilateral

waiver,furtherdemonstratingtheclauseisunenforceable. Smith, Valentino

&

Smith, Inc. v. Super.

Ct. 0fL.A. Czy., 17 Cal.

3d

491,

495-496

(1976) (contract not “enteredinto freely

and

voluntarily

by

parties

who

havenegotiatedat arm’slength”can beunenforceable).

Defendants asserttheGrundfest clauseexistsforavalidpurpose ofconsolidating claimsin

a single forum. Mtn. at 17. There is

n0

evidence offered

_by

Defendants 0f the

Company’s

“purpose” in adopting the provision. It is pretty obvious

What

is the motivation behind clause:

avoidingstate courtjurisdictionprotected

by

15U.S.C. §77V(a)

and

Cyan. Taking

_away

aright t0

file Securities

Act

cases in state court thathas existed

and been

protected

_by

an anti-removal bar

fordecadesis hardly a motivationthat is fair0r reasonable.

V.

CONCLUSION

The

Court should

find

theGrundfestclauseisvoidforbeing unlawful

and

unconstitutional,

and

unenforceablefordiminishingunwaivablerights

and

forbeingunconscionable.

DATED:

May

12,

2020

Respectfully submitted,

ROBBINS

GELLER

RUDMAN

&

DOWD

LLP

JAMES

1.

CONETTE

fw3.

w

WES

1.

WRITE

-20-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

DATED:

May

12,

2020

655

West

Broadway,

Suite 1900

San

Diego,

CA

92101-8498

Telephone: 619/231-1058

619/231-7423 (fax)

ROBBINS

GELLER

RUDMAN

&

DOWD

LLP

SAMUEL

H.

RUDMAN

58 South ServiceRoad, Suite

200

Melville,

NY

11747

Telephone: 631/367-7100

631/367-1 173 (fax)

Attorneys for Plaintiff

Sunny

C.

Wong

JOHNSON

FISTEL,

LLP

FRANK

J.

JOHNSON

CHASE

M.

STERN

655

West

Broadway,

Suite 1400

San

Diego,

CA

92101

Telephone: 619/230-0063

619/255-1856 (fax)

AdditionalCounselfor Plaintiff

Sunny

C.

Wong

COTCHETT,

PITRE

&

MCCARTHY,

LLP

MARK

C.

MOLUMP Y

TYSON REDE

A

ER

MARK

CMGLLLMBIJIY

San

Francisco Airport

Office

Center

840

Malcolm

Road, Suite

200

Burlingame,

CA

94010

Telephone: 650/697-6000

650/697-0577 (fax)

[email protected]

tredenbarger

@cpmlegal.com

Attornevsfor Plaintiff

Yanming

Li

-21-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

DECLARATION

OF

SERVICE

BY

EMAIL

I, CarolineBarrett, not a partyt0 the withinaction, herebydeclarethat

0n

May

12, 2020, I

servedtheattached

PLAINTIFFS’

OPPOSITION

TO DEFENDANTS’

RENEWED

MOTION TO

DISMISS

on

the parties in thewithin action

_by

email addressedas follows:

COUNSEL

FOR

PLAINTIFFS:

NAME

FIRM

EMAIL

James

I. Jaconette

ROBBINS

GELLER

RUDMAN

&

DOWD

LLP

655

West

Broadway,

Suite 1900

San

Diego,

CA

92101

Tel: 619/231-1058

jamesj

@rgrdlaw.com

Samuel

H.

Rudman

ROBBINS

GELLER

RUDMAN

&

DOWD

LLP

58 South ServiceRoad, Suite

200

Melville,

NY

11747

Tel: 631/367-7100

[email protected]

Frank

J. Johnson

Chase

M.

Stern

JOHNSON

FISTEL

LLP

600

West

Broadway,

Suite 1400

San

Diego,

CA

92101 Tel: 619/230-0063 frankj

_@j

ohnsonfistel.com chases@j ohnsonfistel.com

Mark Molumphy

Tyson

Redenbarger

COTCHETT,

PITRE

&

MCCARTHY,

LLP

San

Francisco Airport

Office

Center

840

Malcolm

Road, Suite

200

Burlingame,

CA

94010

Tel: 650/697-6000

[email protected]

[email protected]

COUNSEL

FOR

DEFENDANTS:

NAME

FIRM

EMAIL

Matthew

Rawlinson

HilaryH. Mattis

Daniel R. Gherardi

LATHAM &

WATKINS

LLP

140 ScottDrive

Menlo

Park,

CA

94025

Tel: 650/328-4600

[email protected]

[email protected] [email protected]

Gavin

M. Masuda

Michael P.

Waks

LATHAM &

WATKINS

LLP

505

Montgomery

Street, Suite

2000

San

Francisco,

CA

94111

Tel: 415/391-0600

AttorneysforRestorationRobotics

&

IndividualDefendants

[email protected]

[email protected]

-1-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION

TO

DISMISS

10 11 12 13 14 15 16 17 18 19

20

21

22

23

24

25

26

27

28

NAME

FIRM

EMAIL

John

R. Loftus

STROOCK

&

STROOK

&

[email protected]

Christine E. Ellice

LAVAN

LLP

[email protected]

2029

Century ParkEast

Los

Angeles,

CA

90067-3086

Tel: 310/556-5000 Attorneysfor Underwriter Defendants PatrickGibbs Jeffrey

Lombard

Jessie

Simpson

Lagoy

Cooley

LLP

3175

Hanover

Street Palo Alto,

CA

94304-1 130

Tel: 650/843-5000

Attorneysfor Venture Capital

Defendants

[email protected]

[email protected]

[email protected]

CHAMBERS

COPY WILL ALSO

BE

DELIVERED

TO:

Hon. Marie

S.

Weiner

San

Mateo

SuperiorCourt

Department

2located at

Courtroom

2E

400 CountV

Center.

Redwood

CitV.

CA

94063

I declare under penalty 0f perjury that the foregoing is true

and

correct. Executed

0n

May

12,2020, at

San

Diego, California.

01

CAROLINE

BARRETT

-2-PLAINTIFFS’

OPPOSITION

TO

DEFENDANTS’

RENEWED

MOTION TO

DISMISS