NEW YORK, June 15 (Reuters) - Investors suing China-based
Duoyuan Printing Inc for securities violations have already hit
their first roadblock: locating some of the defendants.
The shareholder plaintiffs have not been able to serve
legal papers on five of the company's current and former
directors and officers named in the lawsuit, plaintiffs' lawyer
Phillip Kim of the Rosen Law Firm said at a hearing in federal
district court in New York on Wednesday. The company itself has
been served.
Serving defendants with legal papers is an essential first
step for a U.S. lawsuit to proceed.
The Duoyuan Printing case is one of a barrage of securities
class-action cases that have hit China-based, U.S.-listed
companies in the past year. More than 25 such companies have
been sued since early 2010 for misrepresenting firm revenue to
shareholders, failing to disclose transactions among company
insiders or falsifying financial reports.
These cases, all at the very early procedural stages, could
test shareholders' ability to recover losses from China-based
companies. Plaintiffs face numerous obstacles, such as
difficulty in pursuing evidence-gathering in China and
limitations on their ability to collect judgments or legal
awards.
The SEC is also pursuing an investigation of a string of
China-based companies, including Duoyuan Printing, which it is
probing over concerns that it didn't maintain adequate
financial records.
At the Wednesday hearing, Kim said he didn't have necessary
information such as personal addresses to locate the five
defendants, who he believes reside in China. He said he could
not get their personal addresses from the company.
Serving individuals in China is an arduous and costly
process and requires a central Chinese authority to forward any
requests to local Chinese courts, Kim explained to Reuters. A
personal address would be helpful to those authorities.
Kim argued on Wednesday before U.S. District Judge George
Daniels that the judge should allow for one of two
alternatives: serving the employees through the company's U.S.
office, in Wyoming; or compelling Duoyuan to turn over the
individual defendants' addresses.
In a previous securities class-action case against a
China-based company, LDK Solar Co, Ltd, plaintiffs succeeded in
serving individual defendants by going the first route, Kim
said.
Kim's arguments prompted Daniels to ask some pointed
questions of the company's lawyer, Joel Mitnick of Sidley
Austin.
"I want to know whether you will be helpful in this matter
or stand in their way?" Daniels queried Mitnick.
"I think neither," responded Mitnick.
Mitnick added that the company didn't have any legal
obligation to help provide the information to the plaintiffs.
"You have the opportunity, but maybe not the obligation,"
retorted Daniels.
But Daniels didn't let Kim, the plaintiffs' lawyer, off
easy either. He challenged Kim to do a more thorough job
seeking the addresses himself.
"I'll consider some substitute of service if it appears to
be necessary," said Daniels.
After the hearing, Kim said he would persevere. "They will
get served one way or the other," Kim said.
Mitnick, the Sidley lawyer, declined to comment on the
proceedings.
The case is Perry v. Duoyuan Printing, U.S. District Court,
Southern District of New York, No. 10-cv-07235.
For the plaintiffs: Co-lead counsel Pomerantz Haudek Block
Grossman & Gross; and the Rosen Law Firm
For the company: Sidley Austin
(Reporting by Carlyn Kolker)