International Business Law Professor Jasper Kim Nicolas Sausa Wednesday, April 10, 2013 Batchelder Vs. Kawamoto

1 Mr. Batchelder (plaintiff) American Depositary Receipt holder Mr. Kawamoto (Director defendants) Director American Honda Motor company inc. Vs.

2 Depository Receipt: Negotiable financial instrument Issued by a bank Represents a foreign company’s publicly traded securities

3 American Honda Motor Company Inc. Honda Japan Motor Company Ltd. Third parties Derivative Action : Breach of duty Waste of corporate asset Abuse of control Constructive fraud Mismanagement Dissemination of false Misleading proxy statements in violation of US code

4 Whether the holder of an American Depository Receipt has standing to bring a shareholder derivative action against a Japanese corporation?

5 The general rule is: “ADR holders are not shareholders of record” under Japanese law and therefore “are not allowed to make the demand and then institute a derivative action”.

Here in this case :  Batchelder owes 1,246 ADRs  Each of which would reflect ownership of 10 shares of stock in Honda Japan 6

1,246 American Depositary Receipt :  Morgan Trust Guaranty of New York  Deposit agreement 7

The district court ruled that Batchelder’s complaint failed as the matter of law:  The Deposit Agreement > Japanese law  Batchelder is not a share holder  Cannot bring a derivative action 8

Batchelder (Plaintiff) appealed:  The district court erred  Bring California and federal claim  Assert a “double derivative” 9

Honda’ expert in Japanese law (defendant) :  Section 7.07 of the Deposit Agreement  Under Japanese law, a holder of ADRs is not considered a registered shareholder  Have no right to or power to the requisite pre-suit demand or to initiate a derivative action  No Conflicst-of-law 10

Conclusion:  Batchelder has submitted no authority to compel a different conclusion  Batchelder, as an ADR Holder under Japanese law can not bring a Shareholder derivative action  The district court didn’t err and its dismissal of Batchelder’s action is AFFIRMED 11

“No, the holder of an American Depository Receipt has no standing to bring a shareholder derivative action against a Japanese corporation under Japanese law.” 12

13  No conflict-of-law  Choice- of-law Vs choice-of-forum  Bremen Vs Zapata Off shore case

14 Thank you for listening