Justia Corporate Compliance Opinion Summaries

Shanda Games Limited, a video game company registered in the Cayman Islands, issued proxy materials as part of a freeze-out merger. The lead plaintiff, David Monk, alleged that these materials were materially misleading, causing him to accept the merger price instead of exercising his appraisal rights. The United States District Court for the Southern District of New York dismissed Monk’s claims, stating he failed to properly allege loss causation.The district court found that Monk had adequately pleaded that Shanda made two material misstatements but ruled that Monk had failed to plead reliance because the market in ADS was not efficient after the merger announcement. The court also held that the statements about the merger's fairness were inactionable opinions. Monk's motion for reconsideration was denied in part and granted in part, and his motion to add another lead plaintiff was denied. Monk filed a second amended complaint, which was again dismissed for failure to state a claim.The United States Court of Appeals for the Second Circuit reviewed the case and held that the district court erred in dismissing Monk’s claims. The appellate court concluded that Monk adequately alleged material misstatements, including the preparation of financial projections, the projections themselves, and the fairness of the merger. The court also found that Monk adequately pleaded scienter, reliance, and loss causation. The court affirmed in part, vacated in part, and remanded the case for further proceedings. View "In re Shanda Games Ltd. Securities Litigation" on Justia Law