NEW YORK–(BUSINESS WIRE)–Reid Collins & Tsai LLP, a leading national trial law firm, announced today that it has defeated five motions to dismiss filed by defendants in a suit involving an alleged scheme by Renren insiders to squeeze out minority shareholders and take the company’s billion-dollar investment portfolio for themselves. The New York Supreme Court for New York County today entered a 71-page order denying all of the motions filed by insiders and others involved in the transaction.
The defendants – Joseph Chen, David Chao and related DCM Investments funds, Oak Pacific Interactive (“OPI”), and Duff & Phelps, LLC – had moved to dismiss, asserting lack of personal jurisdiction and that Reid Collins’ clients, including Renren shareholders Heng Ren Silk Road Investments LLC and Oasis Investments II Master Fund Ltd., lacked derivative standing under Cayman law to pursue the claims.
“We are pleased that the New York State Supreme Court rejected the defendants’ attempts to dismiss the case so we can proceed in securing justice for our clients,” said William T. Reid, IV, lead litigator and co-founder of Reid Collins.
The suit arises out of Mr. Chen’s and Mr. Chao’s alleged scheme to take Renren’s billion-dollar investment portfolio for themselves and their associates through a sham transaction in which Renren’s investment portfolio was transferred to an entity (OPI) that was then divested from Renren. Unlike a normal spin-off, Renren’s minority shareholders did not receive shares of OPI, but instead received an artificially low cash dividend based on a deflated value for OPI and its assets, including a $560+ million interest in renowned fintech company Social Finance, Inc. The valuation on which the cash dividend was based undervalued the investment portfolio by hundreds of millions of dollars. Renren had originally obtained the investment portfolio at issue with the proceeds of its initial public offering of American depository shares on the New York Stock Exchange.
In a meticulously detailed opinion, Justice Andrew Borrok rejected the defendants’ arguments that New York courts could not exercise specific personal jurisdiction, noting: “Nearly every aspect of the IPO and the Transaction are connected to New York. And, Renren’s New York-based contacts were not merely incidental to listing its ADS on the NYSE; they related to a deliberate decision to structure the disposition of assets from Renren pursuant to the Transaction, which necessarily involved New York.” Justice Borrok further observed “the Amended Complaint in this case draws a straight line from the IPO and the investments made from the proceeds thereof to the Transaction and the ultimate divesture of those investments in the Separation.”
Justice Borrok similarly rejected the defendants’ arguments that the claims at issue did not give rise to derivative standing under Cayman law’s “fraud on the minority” exception. In doing so, Justice Borrok noted: “The allegations of deliberate and dishonest breaches of duty of the Director Defendants and DCM Defendants leap off the pages of the Amended Complaint.”
About Reid Collins & Tsai LLP
Reid Collins & Tsai LLP is a national trial law firm that practices complex litigation nationally and internationally. With offices strategically located in New York, Washington D.C., Austin, Dallas, and Los Angeles, its trial attorneys include a team of former federal prosecutors, judicial law clerks, and forensic accountants who maximize recoveries and resolve complicated disputes for clients in and out of the courtroom. Its practice spans a wide range of complex commercial litigation, including financial fraud matters, Ponzi scheme-related cases, cross-border disputes, and professional-liability matters. The firm represents trustees, receivers, liquidators, foreign governments, international banks, individuals, and companies from the U.S. and abroad in federal and state courts across the country. For more information visit www.reidcollins.com
Amanda Lornson: 512.647.6117
Reid Collins & Tsai LLP