News of the Day: Perry v. Duoyuan Printing, Inc.
Posted on June 20, 2011
My colleague Dan Lyne called to my attention Perry v. Duoyuan Printing, Inc., a putative class action in the Southern District of New York alleging securities fraud against a Chinese company whose stock trades in the US and is registered with the SEC. According to the Complaint, Duoyuan Printing made an initial public offering in 2009 and raised $42 million. Its registration statement included financial results for the prior three fiscal years. The plaintiffs allege that the financial results stated in the registration statement were fraudulent. In 2010, according to the complaint, Duoyuan dismissed its accountants, Deloitte Touche Tohmatsu CPA Ltd., and reorganized its top management. Its CEO, CFO, and four directors resigned after the dismissal of Deloitte. The stock plunged by more than 50% in price.
According to a recent article, the plaintiffs have had trouble serving process on the Chinese present and former officers and directors. The plaintiffs claim they do not know these defendants’ addresses. The judge was apparently unhappy with the Duoyuan’s refusal to provide the addresses:
[The plaintiffs’] arguments prompted [Judge George] Daniels to ask some pointed questions of the company’s lawyer, Joel Mitnick of Sidley Austin.
“I want to know whether you will be helpful in this matter or stand in their way?” Daniels queried Mitnick.
“I think neither,” responded Mitnick.
Mitnick added that the company didn’t have any legal obligation to help provide the information to the plaintiffs.
“You have the opportunity, but maybe not the obligation,” retorted Daniels.
The judge told the plaintiffs’ lawyer to make additional efforts to uncover the addresses, but he said he would consider alternative means of service if necessary.
If I may editorialize for a minute, I question whether Duoyuan’s approach is really sensible. Assuming that Duoyuan itself has been properly served with process (it is unclear to me as yet whether Duoyuan itself is going to challenge service of process), it seems highly likely that Duoyuan would be compelled to provide the addresses of its officers and directors in response to an interrogatory. And if for some reason the plaintiffs can’t get the addresses that way or through other diligent efforts, it seems highly likely that the court would authorize alternate methods of service, such as service on Duoyuan’s US offices. Even if the plaintiffs had the officers and directors’ Chinese addresses, they would likely end up attempting service via the Hague Service Convention, which might take longer than it will take the plaintiffs to persuade the court that they can’t get the addresses and to obtain an order for alternate means of service. So aside from high-minded questions such as whether it’s good for the administration of justice to employ what is probably only a delaying tactic, there’s a not-so-high-minded question: given that ultimately the plaintiffs are likely to be able to serve process, and given that it might take them just as long to effect service if they had the addresses, is it worth possibly angering the judge over this issue?