Solar Firm Failed to Shine Light on Environmental Hazards
On July 31st, the Second Circuit reversed and remanded the dismissal of a securities fraud complaint. Plaintiffs allege defendants made material misstatements in the offering documents for JinkoSolar, a maker of photovoltaic products, concerning JinkoSolar's pollution problems. Reinstating the complaint, the Court found that defendants' description of pollution-preventing equipment and 24-hour monitoring teams gave comfort to investors that reasonably effective steps were being taken to comply with applicable environmental rules. Defendants' alleged failure to disclose significant existing problems was therefore materially misleading and plaintiffs stated a claim for securities fraud. Meyer v. JinkoSolar Holding Co.
Securities Fraud Plaintiffs Didn't Violate Discovery Stay
On July 30th, the Ninth Circuit addressed the contours of the Private Securities Litigation Reform Act’s automatic discovery stay. After the district court upheld portions of the plaintiffs’ complaint, plaintiffs subpoenaed defendants’ auditor. Before plaintiffs received the subpoenaed documents, defendants advised plaintiffs that they would be seeking judgment on the pleadings, which the district court granted. Plaintiffs then filed an amended complaint which relied on the documents received from the auditor. Finding that plaintiffs’ use of those documents violated the PSLRA’s automatic discovery stay during the pendency of a dispositive motion, the district court issued an order striking the amended allegations and then dismissed the complaint for failing to adequately plead falsity and scienter. Reversing and remanding, the Ninth Circuit held that a party does not violate a PSLRA discovery stay by relying on materials provided by a third party pursuant to a valid subpoena issued when no PSLRA discovery stay was in effect. Petrie v. Electronic Game Card, Inc.
In Securities Fraud Case, Size Matters
On July 25th, the U.S. District Court for the Southern District of Texas partially denied defendants’ motion to dismiss a class action securities fraud lawsuit. The Court held that defendants’ alleged misstatements concerning their manufacturing capacity and the commercial release of one of their products were actionable. By virtue of their positions and the company’s small size, the individual defendants had actual knowledge of the company’s internal affairs. And through the use of confidential witness statements, plaintiffs have alleged facts capable of proving that when defendants made the forecasts, defendants had knowledge of their falsity. Fitzpatrick v. Uni - Pixel, Inc.