389 F. Supp. 3d 232
S.D. Ill.2019Background
- Sky Solar Holdings (Cayman) conducted a U.S. IPO in November 2014; Prospectus and registration statements described its projects (Japan, Chile), management (notably CEO/shareholder Weili Su), financing plans, internal controls, and related‑party transactions.
- Plaintiffs allege Prospectus misstatements/omissions under Sections 11, 12(a)(2), and 15 of the Securities Act and Section 10(b)/Rule 10b‑5 and Section 20(a) of the Exchange Act, based on: (a) positive descriptions of Su and management while omitting adverse prior judgments and alleged misconduct; (b) overstating internal controls and related‑party review processes; and (c) misleading statements about market conditions and project status in Japan and Chile (including a claimed IADB financing mandate).
- Prospectus expressly disclosed internal control weaknesses, numerous related‑party transactions, risks to financing, FIT reductions in Japan, and that Chilean grid connection permits are typically granted only after construction completion.
- After the IPO, certain related‑party transactions occurred (2016 board‑approved transaction, and 2017 unapproved transactions) that benefitted Su; Sky later rescinded transactions and announced Su’s removal; plaintiffs filed consolidated complaints and the SAC added underwriter defendants.
- Moving defendants (Sky, CFO Wang, and underwriters) moved to dismiss the SAC for failure to state claims and as time‑barred; Court considered Prospectus and public media reports in ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Prospectus statements about Su and management were materially false or misleading | Su’s prior judgments, alleged creditor‑defrauding transfers, and partner fraud in Spain rendered positive biographical and management representations misleading | Statements were puffery/opinion or disclosed; omissions did not render disclosures false | Dismissed — biographical praise and general management statements were non‑actionable puffery or not rendered misleading by omissions |
| Whether statements about internal controls and code of ethics were misleading | Prospectus touted related‑party review and governance while omitting that controls were ineffective, making statements misleading given Su’s past | Prospectus expressly disclosed material weaknesses and risks; aspirational/code statements are non‑actionable absent specific misleading assurances | Dismissed — disclosures and caveats preclude Section 11/10(b) liability; aspirational statements not actionable |
| Whether market and project statements re: Japan/Chile (including Item 303/503 duties) were materially misleading | Sky failed to disclose known adverse trends in Japan/Chile and mischaracterized projects as shovel‑ready; IADB mandate misrepresented as secured financing | Relevant market/regulatory information was publicly available and/or disclosed; many statements were forward‑looking opinions protected by cautionary language; the IADB "mandate" was ambiguous | Dismissed in part: most claims about Japan/Chile and regulation/opinions dismissed; IADB financing statement survives pleading challenge on merits but is barred by Securities Act repose period if asserted after three years |
| Exchange Act Rule 10b‑5 scienter for Wang and corporate scienter for Sky | Wang and Sky misrepresented adherence to approval processes; later unapproved transactions show prior knowledge or recklessness | Plaintiffs fail to plead particularized facts showing motive, access to contrary facts, or conscious recklessness for Wang or a corporate agent whose knowledge is imputable to Sky | Dismissed — Plaintiffs failed to plead a strong inference of scienter for Wang or corporate scienter for Sky; 10b‑5 and control claims dismissed |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must plausibly show entitlement to relief)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard; allegations must rise above speculation)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (scienter inference must be cogent and at least as compelling as opposing inferences)
- Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015) (opinion statements actionable only when issuer lacked belief or omitted facts making opinion misleading)
- CalPERS v. ANZ Securities, 137 S. Ct. 2042 (2017) (Section 11/12 repose: three‑year statute of repose cannot be equitably tolled)
- ECA, Local 134 IBEW Joint Pension Tr. v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (scienter may be shown by motive/opportunity or strong circumstantial evidence of recklessness)
- In re ProShares Trust Sec. Litig., 728 F.3d 96 (2d Cir. 2013) (materiality: omitted information must be such that a reasonable investor would view disclosure as having significantly altered the total mix of information)