Key Points

  • The First Circuit held that the district court did not abuse its discretion in denying MW Gestion leave to file a second amended complaint on the ground of undue delay.
  • The court held that MW Gestion was on notice from the start of the Antigua litigation that an adverse ruling on the Rights Agreement would defeat its tortious interference with contract claim, and that it could have pleaded a tortious interference with business relations claim in the alternative.
  • The court distinguished Amyndas Pharmaceuticals v. Zealand Pharma because MW Gestion's defect was more obvious, it offered no new evidence, and it was seeking to amend for a second time.
  • The court held that MW Gestion's Exchange Act claims accrued no later than the May 2020 SEC cease-and-desist order, on which its amended complaint relied extensively, making its August 2022 suit untimely under 28 U.S.C. ยง 1658(b)(1).
  • The court rejected equitable tolling because the pending Antigua appeal did not prevent MW Gestion from suing before August 2022.

A federal appeals court on Oct. 22 refused to let an investor in Sinovac Biotech Ltd. add a new claim against a rival shareholder group. The court held that the investor waited too long to raise a fallback theory it could have pleaded years earlier.

The U.S. Court of Appeals for the First Circuit affirmed a Massachusetts federal judge's order denying MW Gestion, an investment management firm, leave to file a second amended complaint against Jiaqiang Li, his company 1Globe Capital LLC and members of his family. Circuit Judge Montecalvo wrote for a panel that also included Judges Rikelman and Aframe. The panel also upheld the dismissal of MW Gestion's securities fraud claims as time-barred.

The ruling leaves the proposed class action without a surviving claim. MW Gestion's remaining claim, for tortious interference with contract, depended on the validity of an agreement that established certain rights of Sinovac shareholders. The Judicial Committee of the Privy Council, which sits in the United Kingdom and is the highest court of appeal for Antigua and several other British Commonwealth nations, declared that agreement invalid in January 2025, and the parties later stipulated to the claim's dismissal with prejudice.

Sinovac is a biopharmaceutical company based in China and incorporated in Antigua. In March 2016 it adopted a "Rights Agreement" containing a "poison pill" provision. A shareholder that acquired 15 percent or more of the stock became an "Acquiring Person," and other shareholders received extra shares to dilute its stake.

MW Gestion alleges that Li "orchestrated" purchases of Sinovac stock by relatives across multiple accounts to increase 1Globe's stake while avoiding disclosure requirements under Section 13(d) of the Securities Exchange Act of 1934. In March 2018, 1Globe sued Sinovac in Antigua, challenging the Rights Agreement's validity. In February 2019, Sinovac announced that 1Globe and allied shareholders had triggered the poison pill, and NASDAQ suspended trading in Sinovac stock, a suspension the opinion says continues.

On May 13, 2020, the Securities and Exchange Commission issued a cease-and-desist order against Li and 1Globe for violating Section 13(d), and the two faced a $290,000 penalty. Two Antigua courts upheld the Rights Agreement. In February 2022, the Court of Appeal granted 1Globe leave to appeal to the Privy Council.

MW Gestion filed suit on Aug. 16, 2022, while that appeal was pending, and amended its complaint that December. In August 2023, U.S. District Judge Nathaniel M. Gorton dismissed the securities fraud claims but let the tortious interference claim proceed. The court later stayed the case pending the Antigua litigation. On Jan. 16, 2025, the Privy Council held that "the Rights Agreement was invalid."

At a status conference that March, MW Gestion's counsel said the firm planned to bring a claim for tortious interference with business relations, which, counsel said, "does not require a valid contract." Judge Gorton denied leave to amend in April 2025, finding that the firm had taken a "'wait and see' approach to amendment" that amounted to undue delay.

On appeal, MW Gestion argued that its "need to amend [the complaint] did not arise until January 16, 2025, when the Privy Council invalidated the Rights Agreement" and that the defendants had caused all earlier delays. The defendants argued that the firm had more than two years to bring the claim and instead waited to see how the Privy Council would rule. The panel agreed with the defendants.

Montecalvo acknowledged that MW Gestion may have expected the Antigua litigation to end with a ruling upholding the agreement. But the firm's "subjective belief in the strength" of its complaint and its expectations about the Antigua case "do not excuse its delay in bringing a claim that it could have pled in the alternative from the outset," Montecalvo wrote.

"Because an adverse decision in the Antigua action was bound to dispose of MW Gestion's tortious interference with contract claim, MW Gestion was on notice of the potential need to amend its complaint," Montecalvo wrote. That notice, the court held, ran "from the start of that litigation."

The panel rejected MW Gestion's reliance on Amyndas Pharmaceuticals, S.A. v. Zealand Pharma A/S, a 2022 First Circuit decision that found an abuse of discretion in denying leave to amend. MW Gestion's contract claim, by contrast, "relied entirely on the existence of a valid contract," and the agreement's validity had been in dispute in Antigua since the case began. The panel added that MW Gestion conceded at oral argument that it had no new evidence, and that the proposed pleading was its second attempt to amend.

On the securities claims, the panel applied the two-year deadline that runs from "the discovery of the facts constituting the violation." It held that the claims accrued no later than May 2020, when the SEC issued its order. The firm's amended complaint stated that the "details of Defendants' deceptive tactics" underlying the fraud claims "are laid out in [the May 2020 SEC] Order."

MW Gestion argued that it could not have pleaded loss causation, the link between a misrepresentation and an investor's loss, while NASDAQ trading remained suspended. The court noted that trading was still suspended when the firm filed suit. "By MW Gestion's own logic, its claims are still premature because NASDAQ trading remains suspended," Montecalvo wrote. The panel also refused to apply equitable tolling, which the court said is available only "in exceptional circumstances." The pending Antigua appeal did not stop MW Gestion from suing earlier, the court said, because the SEC order "disclosed the alleged misconduct underlying MW Gestion's securities fraud claims."

Michael Grunfeld appeared for MW Gestion, with Pomerantz LLP among those on the brief. Michael G. Bongiorno appeared for the defendants, with Wilmer Cutler Pickering Hale and Dorr LLP on the brief.

The First Circuit affirmed the district court's orders dismissing the three securities counts and denying leave to file a second amended complaint, the two rulings MW Gestion had preserved for appeal when the parties stipulated in May 2025 to dismiss the contract claim.