The Davis Polk teams that secured dismissals of securities class actions against Tencent Music Entertainment Group and Zhangmen Education received shout outs in AmLaw Litigation Daily’s “Litigator of the Week” column.

On March 31, 2023, a Davis Polk team led by Ted Polubinski and counsel Yuan Zheng and Jonathan Chang secured a complete dismissal of all claims against their clients, Tencent Music Entertainment Group (TME), several of its officers and directors and Tencent Holdings (TME’s largest shareholder) in a putative securities class action in the Eastern District of New York. This was the second time Davis Polk obtained dismissal of all claims in the case, brought on behalf of a putative class of purchasers of TME stock. The plaintiffs had alleged that TME, a music entertainment platform in China, made material omissions in its IPO registration statement and 2018 annual report because TME did not disclose that TME was the subject of scrutiny by Chinese antitrust regulators looking into potentially anticompetitive practices.

Judge LaShann DeArcy Hall granted defendants’ motion to dismiss an earlier iteration of the plaintiffs’ complaint in 2021, and the March 31 order makes clear that the court found their next attempt to state a claim no more compelling. In rejecting all of the plaintiffs’ claims, Judge DeArcy Hall adopted several of the arguments that Davis Polk had advanced in briefing, including that the plaintiffs’ allegations about a meeting with regulators were contradicted by documents incorporated in their own complaint, and that the defendants’ disclosures about that meeting were in fact completely consistent with the documents the plaintiffs themselves relied on.

In addition, on March 30, 2023, a Davis Polk team led by Brian Weinstein and counsel Jonathan Chang secured dismissal of the first U.S. securities class action arising from the PRC government’s ban on for-profit tutoring. Judge Paul Oetken of the United States District Court for the Southern District of New York granted with prejudice Davis Polk’s motion to dismiss the putative securities class action filed against Davis Polk’s client Zhangmen Education Inc., which was a leading after-school tutoring service provider for students in China at the time of its IPO in June 2021. Less than two months after the IPO, the PRC government unveiled a sweeping overhaul of the after-school tutoring industry, which included barring for-profit tutoring businesses, such as Zhangmen’s.

In granting the motion to dismiss, Judge Oetken adopted Davis Polk’s arguments and held that Zhangmen’s registration statement included extensive disclosures of regulatory risks, which “rendered any misleading statement it may have made immaterial”; that there was “no duty to disclose all details of regulatory fines”; and that the pre-IPO fine issued by the PRC government was immaterial as a matter of law.

An Early Batch of Litigator of the Week Shout Outs—With a Twist,” AmLaw Litigation Daily (April 11, 2023) (subscription required)