New York Court Approves $300 Million Settlement Benefitting Minority Shareholders in Renren Derivative Litigation Announces Reid Collins (6/09/22)
Settlement of at least $300 million is among largest ever shareholder derivative recoveries
Plaintiffs overcame novel issues of jurisdiction and standing in creating precedent-setting case law to hold foreign companies and actors accountable in U.S. courts
As Lead Counsel, Reid Collins successfully prosecuted groundbreaking claims against Renren insiders
NEW YORK, June 9, 2022 /PRNewswire/ -- Today the New York State Supreme Court granted approval of a direct pay cash settlement totaling at least $300 million resolving the In re Renren, Inc. Derivative Litigation (NYSE:RENN), one of the largest cash settlements of a derivative action in history. (The aggregate cash payment to Renren's minority shareholders and ADS holders may exceed $300 million depending on the final determination of the number of shares and ADSs held by non-Defendants). The action alleges a complex scheme by Renren insiders to take the company's billion-dollar investment portfolio for themselves.
Litigation powerhouse Reid Collins & Tsai LLP, Lead Counsel for the derivative plaintiffs, originally announced the terms of the settlement in October 2021.
Reid Collins Founding Partner William T. Reid, IV on the resolution of the Renren litigation: "This is an extraordinary result by any measure. It is very rare to settle a case for more than the damages that we originally pleaded. Yet indeed, from the vantage point of minority shareholders, we have recovered more for them in this direct pay settlement than the damage claim we set forth in the complaint. Obtaining jurisdiction over these foreign defendants was no small task, but obtaining derivative standing was an even greater achievement. What little New York law existed on establishing derivative standing under Cayman law was adverse, but the facts of this case and a thorough presentation of Cayman law nonetheless allowed us to establish that the minority were in fact entitled to pursue the company's claim under the 'fraud on the minority' exception to the general rule against derivative standing. I could not be more proud of what we have accomplished in Renren, and of our clients, including Heng Ren Silk Investments, LLC in taking on this significant and important challenge."
The shareholder derivative suit arises from a highly unusual series of interrelated transactions through which Renren's allegedly corrupt insiders took Renren's investment portfolio for themselves in 2018 to the detriment of minority shareholders. The complaint centers on alleged breaches of fiduciary duty in connection with the transfer of Renren's most valuable assets, including a substantial stake in fast-growing lender Social Finance, Inc. ("SoFi") — for far less than fair market value — to a private company, Oak Pacific Investments ("OPI"), which is owned and controlled by Renren's CEO Joseph Chen and other controlling shareholders. Chen and affiliates stood on all sides of these transactions as major investors and/or directors in Renren, OPI, and SoFi itself, facilitated by Duff & Phelps, LLC, a financial advisor to a special committee of Renren's board of directors, who it is alleged aided and abetted these breaches of fiduciary duty
"We are very pleased to have achieved a positive outcome for all minority shareholders," said Alexander Shoghi, portfolio manager at Oasis Management.
"This is an important message American investors are sending to Chinese companies on our stock markets," said Peter Halesworth, founder and manager of Heng Ren. "U.S. shareholders will fight raw deals of bad actors from China in our stock markets."
Precedent-Setting Case Will Have Long-Term Impacts for Cross-Border Fraud and Financial Misconduct
In May 2020, Reid Collins defeated all motions to dismiss filed by the original defendants. In March 2021, the Appellate Division, First Judicial Department of New York State Supreme Court affirmed the trial court's denial of all the motions to dismiss and rejected defendants' arguments over personal jurisdiction and contending that plaintiffs lack standing under Cayman Islands law. In April 2022, the New York State Supreme Court took the rare step of attaching all of the assets that OPI received in the 2018 transaction and required any sales proceeds up to $560 million be deposited in a New York escrow account.
Plaintiffs faced significant legal challenges to acquire U.S. jurisdiction over multiple foreign defendants and establish derivative standing under Cayman law. After an extensive investigation and litigation, Plaintiffs presented the complex details of the transactions and the conduct of the far-flung participants to the court, building a jurisdictional theory with which the court agreed completely and was affirmed on appeal. These wins have created new precedent to combat a growing problem in the financial sector – the difficulty in addressing fraud and wrongdoing by foreign companies (and related individual actors) publicly traded on U.S. exchanges.
The case is In re Renren, Inc. Derivative Litigation, Index No. 653594/2018 (N.Y. Sup. Ct.). Reid Collins, representing derivative plaintiffs as Lead Counsel in this action (alongside co-counsel Grant & Eisenhoffer P.A., Gardy & Notis, LLP, and Ganfer Shore Leeds & Zauderer LLP), successfully litigated these novel claims against an array of law firms, including: Skadden, Arps, Slate, Meagher & Flom LLP; Paul, Weiss, Rifkind, Wharton & Garrison LLP; McDermott, Will & Emery LLP; Morrison & Foerster LLP; Orrick, Herrington & Sutcliffe LLP; Goodwin Procter LLP; Holland & Knight, LLP; and Winston & Strawn LLP.
About Reid Collins
Reid Collins & Tsai LLP is one of the nation's leading plaintiffs' trial firms, litigating complex business disputes and achieving billions of dollars in settlements and judgments for its clients. Its team is comprised of accomplished trial lawyers who have extensive experience prosecuting financial fraud and corporate malfeasance cases, bankruptcy and insolvency related litigation, professional liability claims, and cross-border disputes. The firm represents fund managers, investor groups, trustees, receivers, liquidators, international banks, companies, governmental entities, and individuals in federal and state courts across the country.
For more information visit www.reidcollins.com
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