Jackson County Employees' Retirement System v. Ghosn et al

DECLARATION of Mitsuhiro Yasuda filed by Hiroshi Karube, Nissan Motor Co., Ltd., Joseph G. Peter, Hiroto Saikawa re: 68 MOTION to Dismiss.

Middle District of Tennessee, tnmd-3:2018-cv-01368

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UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION JACKSON COUNTY EMPLOYEES') Civil Action No. 3:18-cv-01368 RETIREMENT SYSTEM, individually and) on behalf of all others similarly situated,) CLASS ACTION) Plaintiff,)) CARLOS GHOSN, GREG KELLY,) NISSAN MOTOR CO., LTD., HIROTO) SAIKAWA, HIROSHI KARUBE, and) JOSEPH G. PETER,)) Defendants.)) DECLARATION OF MITSUHIRO YASUDA IN SUPPORT OF NISSAN MOTOR CO. LTD., HIROTO SAIKAWA, HIROSHI KARUBE AND JOSEPH G. PETER'S MOTION TO DISMISS COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS 3 PageID #: 764 DECLARATION OF MITSUHIRO YASUDA Pursuant to 28 U.S.C. § 1746, I, Mitsuhiro Yasuda, hereby declare as follows: BACKGROUND AND QUALIFICATIONS 1. I am an attorney licensed to practice law in Japan. I offer this declaration in support of Nissan Motor Co., Ltd. ("NML"), Hiroto Saikawa, Hiroshi Karube, and Joseph Peter's Motion to Dismiss the Amended Complaint in the above-captioned matter. I have reviewed the Amended Complaint filed on May 6, 2019 in this litigation (the "Amended Complaint"). The following is true of my own personal knowledge, and, if called as a witness, I could and would testify competently thereto. 2. In 1974, I passed the Bar Examination of Japan while still a university student. I graduated from the University of Tokyo in 1975 with an LL.B. degree. I became a licensed Japanese attorney (bengoshi) in 1977. In 1982, I graduated from the New York University School of Law, receiving a Master of Comparative Jurisprudence. I passed the New York bar exam in 1982. I am a member of the Daini Tokyo Bar Association in Japan and a member of the bar of the state of New York. 3. I was a foreign trainee at Sullivan & Cromwell LLP in New York, New York from 1982 until 1983. I was a founding partner at the law firm of Mitsui Yasuda Wani & Maeda in Tokyo from 1988 until 2004. In 2005, I became a global partner in the Tokyo office of Linklaters LLP. In 2007, I became a partner at Nishimura & Asahi in Tokyo, and in 2015 I joined the Marunouchi International Law Office, where I am currently of counsel. 4. I have practiced Japanese law for more than 40 years. My main practice has been the area of capital markets, including (a) international or global offerings of securities issued by Japanese corporations, (b) offerings in Japan of securities issued by non-Japanese corporations and governmental organizations and (c) cross-border listings by non-Japanese corporations on 1 3 PageID #: 765 Japanese stock exchanges. Since I became a lawyer I have handled several hundred capital market transactions. Compliance with disclosure requirements of Japanese law is one of the key areas of my practice. I have also handled many securitization matters and financial institution regulatory matters. SCOPE AND SUMMARY OF OPINIONS 5. I have been asked to opine on certain issues of Japanese law, in particular Japanese securities laws and regulations and the status of Japanese jurisprudence interpreting and applying Article 21-2 of the Financial Instruments and Exchange Act (Act No. 25 of 1948, "FIEA"). In Count III of the Amended Complaint, the plaintiffs who purchased NML shares directly on the Tokyo Stock Exchange have asserted claims against NML based on alleged violations of FIEA Article 21-2 (the "Japanese Claims"). In summary: a. the "false statements and omissions" alleged in the Amended Complaint were made in Japanese language securities filings made by a Japanese company with a Japanese regulator; b. the Japanese Claims raise a number of important issues of first impression under Japanese law for which there is no guiding Japanese court precedent and which should be resolved in a Japanese court; c. the Japanese Claims overlap with the criminal case currently ongoing in Japan in respect of key issues, and therefore create the actual risk of conflicting decisions; and d. the Japanese Claims were never intended to be asserted in a Japanese class action. OVERVIEW OF FIEA DISCLOSURE REQUIREMENTS 6. The Japanese government has enacted extensive laws and regulations governing 2 3 PageID #: 766 securities transactions, including issuances of securities in primary market and resales of securities in secondary market. Predecessors of the current Japanese stock exchanges were established in Tokyo and Osaka in 1878. Japan enacted the Securities and Exchange Act ("SEA") in April of 1948. Stock exchanges in Tokyo, Osaka, and Nagoya regulated under the SEA were established on April 1, 1949. 7. Japan's laws and regulations governing securities transactions have continued to evolve, including in 2007, when Japan fully amended the SEA, which thereafter became the FIEA. 8. An English translation of FIEA is accessible on the website of Japanese Law Translation, a database of English translations of Japanese laws operated by Japan's Ministry of Justice ("MOJ").1 English quotations of the FIEA contained in this Declaration are from the translation accessible on Japanese Law Translation's website. The MOJ instructs that "[f]or all purposes of interpreting and applying law to any legal issue or dispute, users should consult the original Japanese texts published in the Official Gazette."2 Further, the English translation of the FIEA is indicated as a "tentative translation". The MOJ instructs that "[a]ny translation that the title of a law indicates to be a tentative translation has not yet been proofread or corrected by a native English speaker or legal translation expert; this translation may be revised in the future". 9. Article 1 articulates the purpose of the FIEA as follows: "The purpose of this Act is to ensure fairness in, inter alia, the issuance of Securities and transactions of Financial Instruments, etc. and to facilitate the smooth distribution of Securities, as well as to achieve fair price formation for Financial Instruments, etc. through the full utilization of the functions of the 1 http://www.japaneselawtranslation.go.jp/law/detail/?id=2355&vm=02&re=02 2 http://www.japaneselawtranslation.go.jp/. 3 3 PageID #: 767 capital markets, by, inter alia, streamlining systems for the disclosure of corporate affairs, specifying the necessary particulars relevant to persons conducting Financial Instruments Business, and ensuring the appropriate operation of Financial Instruments Exchanges, thereby contributing to the sound development of the national economy and the protection of investors." 10. FIEA's provisions include disclosure rules applicable to listed companies in Japan (see Chapter II through Chapter II-6); regulations on conduct by entities involved in securities transactions, such as securities firms, investment fund management firms, investment advisors, ratings firms, and stock exchanges (see Chapter III through Chapter V-7); and rules relating to trading applicable to investors, such as prohibitions against market manipulation and insider trading, among other things (see Chapter VI). 11. FIEA requires companies listed on a Japanese stock exchange to submit certain disclosure documents, such as an annual securities report (yuka shoken houkokusho), quarterly reports (shihanki houkokusho), extraordinary reports (rinji houkokusho) and internal controls reports (naibu tousei houkokusho), and to disclose certain other information (collectively, "Disclosure Documents") (see Chapter II of FIEA). In the case of Japanese corporations such as NML, the Disclosure Documents must be filed in the Japanese language with the applicable Local Financial Bureau to which the Financial Services Agency of Japan ("FSA") delegates certain authority or affairs in respect of the Disclosure Documents. 12. FIEA Article 24 and Article 15 of the Cabinet Office Ordinance on the Disclosure of Corporate Affairs (Ordinance of the Ministry of Finance No. 5 of 1973), require that a Japanese company whose securities are listed on a Japanese stock exchange disclose in its annual securities report the following information about its director compensation (the "FIEA Director Compensation Disclosure Rule"): 4 3 PageID #: 768 a. director compensation pertaining to the fiscal year relating to the relevant annual securities report (当該事業年度に係る会社役員の報酬); and b. any director compensation which was paid or for which an estimate of the amount to be paid became certain during the fiscal year relating to the annual securities report (当該事業年度において受け、又は受ける見込みの額が明らかとなった会社役員の報 酬). 13. Prior to 2010, the FIEA Director Compensation Disclosure Rule required disclosure of director compensation on an aggregate basis. Beginning with annual securities filings for the fiscal year ended on or after March 31, 2010, the FIEA Director Compensation Disclosure Rule was revised to require listed companies to disclose individual director compensation of ¥100 million or more paid by the listed company or its consolidated subsidiaries. 14. NML common stock is listed on the Tokyo Stock Exchange. NML is therefore subject to the above-mentioned disclosure requirements under Article 24 of the FIEA. 15. The Japanese Claims assert that the annual securities reports filed by NML for the fiscal year ended March 31, 2011 through the fiscal year ended March 31, 2018 contain false statements and omissions. These annual securities reports are in the Japanese language and were filed with the Kanto Local Finance Bureau. The alleged false statements are in Japanese. The English translations of the annual securities reports were prepared by NML for reference purposes only and would not be considered by a Japanese court in deciding the Japanese Claims. Only the original Japanese version would be considered by the court. 16. The Japan Director Compensation Disclosure Rule and the applicable guidance issued by the FSA are in Japanese. There are no official English translations. 5 3 PageID #: 769 FIEA ISSUES OF FIRST IMPRESSION 17. The number of published Japanese court opinions involving FIEA Article 21-2 is limited. According to D1-Law.com3, a major online database of Japanese court rulings, Japanese courts have issued twenty-seven (27) published rulings regarding FIEA Article 21-2 in a total of eight (8) different cases. Of these, only three (3) rulings were issued by Supreme Court.4 18. There are no published Japanese court opinions interpreting the FIEA Director Compensation Disclosure Rule. The Japanese Claims raise a number of issues of first impression with regard to the FIEA Director Compensation Disclosure Rule, including: a. When must deferred compensation be disclosed under the FIEA Director Compensation Disclosure Rule? b. When must compensation from share appreciation rights be disclosed under the FIEA Director Compensation Disclosure Rule? c. Do shareholders who hold their shares in street name have standing to sue for violation of the FIEA Director Compensation Disclosure Rule? d. Whose acts or omissions regarding director compensation disclosure should be imputed to NML? 19. There are no published Japanese court opinions involving FIEA Article 21-2 claims based on a lack of internal controls, as asserted by the plaintiffs in the Amended Complaint. 3 https://www.d1-law.com/. 4 The Japanese judicial system has five type of courts: Supreme Court, High Courts, District Courts, Family Courts and Summary Courts. Articles 1 and 2 of the Japanese Court's Act (Act No. 59 of 1947). District Courts generally serve as the court of first instance of civil and criminal cases, Article 24 of the Japanese Court's Act, and High Courts serve as the appellate court, Article 16 of the Japanese Court's Act. The Japanese Supreme Court typically serves as the court of last resort, Article 7 of the Japanese Court's Act. 6 3 PageID #: 770 20. Because there are no published Japanese court opinions addressing these key issues, there would be no judicial precedent available to guide this Honorable Court in ruling on the Jap