We won dismissal of a putative securities class action on behalf of Lizhi

On March 3, 2022, Justice Andrew Borrok of the Commercial Division of the New York Supreme Court, New York County, granted in full a motion to dismiss a putative securities class action filed against Davis Polk client Lizhi Inc., the largest user-generated audio platform in China.

The complaint, brought on behalf of a putative class of purchasers of Lizhi stock, asserted claims under Sections 11, 12 and 15 of the Securities Act of 1933. Lizhi completed its IPO in January 2020, shortly after the very first COVID-19 cases were beginning to appear in China. The complaint alleged that Lizhi failed to sufficiently disclose certain alleged facts concerning the existence of the COVID-19 pandemic and its impact on the company.

In granting Lizhi’s motion to dismiss, Justice Borrok confirmed that “whether a registration statement is false or misleading is viewed at the time such statement is made not retroactively in hindsight” and that the complaint failed to plead any actual misstatement or omission in Lizhi’s IPO registration statement, including because Lizhi had no obligation to disclose “otherwise public information about COVID-19.”

This is a victory for Davis Polk’s client in one of the first securities fraud actions brought against a Chinese company in the wake of the COVID-19 pandemic.

The Davis Polk litigation team included partner Edmund Polubinski, who is based in the New York office, and counsel Jonathan K. Chang, who is based in Hong Kong.