In re Longtop Financial Technologies Ltd. Securities Litigation
939 F. Supp. 2d 360
S.D.N.Y.2013Background
- This is a putative securities class action against Longtop Financial Technologies and related defendants regarding alleged 10(b)/Rule 10b-5 violations in the class period Oct 24, 2007–May 17, 2011.
- DTTC previously moved to dismiss Count Three; Lead Plaintiffs amended the complaint using discovery.
- The Amended Complaint expands the class period to include additional DTTC audit opinions (2007, 2008, 2009, 2010, 2011).
- Plaintiffs allege DTTC knew or should have known of internal control deficiencies, revenue contract confirmations issues, third-party information, and XLHRS-related welfare payments.
- The court granted DTTC’s Rule 12(b)(6) motion, finding no adequate scienter or misstatement and thus dismissing with leave to amend; leave to amend denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of repose bar for October 24, 2007 opinion | Plaintiffs argue relation back defeats repose. | DTTC argues repose bars the claim. | Statute of repose bars the claim against DTTC for the 2007 opinion. |
| Adequacy of scienter allegations in Amended Complaint | Amended facts show strong inference of scienter. | Amended facts do not show strong inference; not reckless. | Amended complaint fails to plead a strong inference of scienter. |
| Adequacy of material misstatement allegations against DTTC | DTTC’s opinions were false/misleading. | No adequately pled misstatements. | Amended complaint does not adequately allege material misstatements. |
| Leave to amend after PSLRA dismissal | Amendment should be allowed given discovery. | Amendment would be futile under PSLRA. | Leave to amend denied. |
Key Cases Cited
- Gould v. Winstar Communications, Inc., 692 F.3d 148 (2d Cir. 2012) (recklessness requires stronger inference, not just hindsight)
- Ashcroft v. Iqbal, 556 U.S. 662 (S. Ct. 2009) (two-prong plausibility standard for pleadings)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (S. Ct. 2007) (strong inference standard for scienter; holistic approach)
- Central Bank of Denver N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (S. Ct. 1994) (implies private right of action under 10(b))
- In re Longtop Fin. Techs. Ltd. Secs. Litig., 910 F. Supp. 2d 561 (S.D.N.Y. 2012) (district-level analysis of PSLRA scienter and duty of auditors)