Court: Supreme Court of the State of New York, New York County, Commercial Division
Index Number: 653594/2018
Judge: Hon. Andrew Borrok
Case Contacts: Bill Reid, Nate Palmer, Michael Yoder
SELECTED CASE FILINGS:
- Notice to Shareholders (and ADS Holders) of Renren, Inc. of Proposed Settlement of Shareholder Derivative Action, Settlement Hearing, and Right to Appear, 10/21/21
- Summary Notice to Shareholders (and ADS Holders) of Renren, Inc. of Proposed Settlement of Shareholder Derivative Action, Settlement Hearing, and Right to Appear, 10/21/21
- Scheduling Order, 10/18/21
- Stipulation of Settlement, 10/07/21
- Amended and Supplemental Consolidated Complaint, 03/22/21
This case is a derivative action brought on behalf of nominal Defendant Renren, Inc. (“Renren”). Plaintiffs alleged that Defendants, directly or indirectly, harmed Renren in connection with a series of integrated transactions announced on April 30, 2018 (the “Transaction”) involving: (a) the offering of shares (the “Private Placement”) in a wholly owned subsidiary, Oak Pacific Investment (“OPI”), to shareholders of Renren (including holders of Renren’s American depositary shares (“ADSs”)) who qualified as “Eligible Shareholders” (i.e., shareholders who were “accredited investors” under the Securities Act of 1933 and “qualified purchasers” under the Investment Company Act of 1940, and not residents of a defined “Excluded Jurisdiction” where the Private Placement would be prohibited); (b) a cash dividend (the “Cash Dividend”) payable to shareholders of Renren (including ADS holders) other than Eligible Shareholders who accept the Private Placement offer, in an amount calculated as the “OPI Value” of $500 million divided by the total number of Renren shares (and ADSs) not participating in the Private Placement; and (c) the separation of OPI from Renren. Renren previously formed OPI as a subsidiary of Renren for the purpose of Renren’s transfer of most of its investments in privately held companies to OPI. Renren then transferred to OPI its minority interests in 44 portfolio companies, among other things (the “Investments”). The Investments included all of Renren’s shares of Social Finance, Inc. (“SoFi”), which constituted, by value, Renren’s largest single investment. Upon closing of the Private Placement, Renren would continue as a publicly held entity, with its remaining businesses and holdings. OPI would be separated as a privately held entity that owned the Investments, and Renren would no longer own any shares of OPI. The Transaction was completed in June 2018, and Renren paid the $134.3 million Cash Dividend.
The litigation was commenced on July 19, 2018 and consists of two cases, since consolidated.
Plaintiffs asserted claims under Cayman Islands law and New York law in connection with the Transaction, and included allegations that Renren was controlled by Joe Chen and other insiders who caused Renren to transfer its Investments at an undervalued price in the Transaction, thus benefitting certain Defendants and harming Renren.
Defendants filed motions to dismiss, which were denied by the Court on May 20, 2020. See 67 Misc3d 1219[A]. Defendants appealed that decision to the Appellate Division, First Judicial Department, of the Supreme Court of the State of New York. The Appellate Division affirmed the denial of the motions to dismiss on March 18, 2021. See 192 A.D.3d 539 (1st Dep’t 2021). Defendants filed motions to for leave to appeal to the Court of Appeals of the State of New York. The Appellate Division denied leave to appeal on June 22, 2021.
Following the Court’s denial of the motions to dismiss, the parties engaged in over a year’s worth of document discovery. Defendants and non-parties produced over 115,000 documents, totaling more than 792,000 pages.
Plaintiffs filed the operative complaint in the litigation on March 22, 2021. The complaint included the prior claims and added new claims relating to the disposition of interests in shares of SoFi following the completion of the Transaction and the commencement of the litigation. Those claims allege that in March 2019 and October 2019, OPI and its wholly owned subsidiaries fraudulently conveyed interest in SoFi stock to SoFi (and later SoftBank Capital Limited GCL).
Plaintiffs then filed a motion for a preliminary injunction or prejudgment attachment seeking equitable relief to prevent further divestitures by OPI of SoFi shares and other investments. On May 14, 2021, the Court issued an order granting attachment and denying the preliminary injunction as moot given the completion of the transfers and the remedy of attachment. The Court on May 24, 2021 entered an Order of Attachment directing the levy of assets held by OPI and certain other Defendants up to the amount of $560 million and prohibited those Defendants from disposing of any assets or making any payment beyond routine business expenses in amount not to exceed $400,000 per month without Court approval. Plaintiffs posted a $1 million undertaking, as required by the Court. Following notices of appeal and cross-appeal, the parties agreed to a stipulated resolution of the attachment, which stipulation included certain relief Plaintiffs had sought through the Order of Attachment. On July 7, 2021, the Court approved and entered the agreed upon stipulation, thereby vacating and superseding the Order of Attachment and ordering certain, agreed upon restrictions on OPI’s transfer of assets, the proceeds of certain asset sales, and the location of certain proceeds.
The Plaintiffs and Defendants agreed to settle the litigation, subject to the Court’s approval (the “Settlement”). The Settlement provides for Defendants to pay the greater of (a) $300 million or (b) the sum of (x) $38.6866 per ADS multiplied by the number of issued and outstanding ADS held by Renren shareholders as of the Record Date and (y) $0.859701 per Class A ordinary share multiplied by the total number of issued and outstanding Class A ordinary shares held by Renren shareholders as of the Record Date (the “Settlement Amount”).
The Settlement Amount, less any amounts awarded by the Court for Plaintiffs’ Counsel’s attorneys’ fees and expenses and Settlement-related administrative and tax expenses, will be distributed on a pro rata basis to Renren shareholders that own shares of Renren Class A common stock or Renren ADS as of a Record Date to be determined following Court approval. Defendants and certain current and/or former Renren insiders shall not be entitled to participate in or receive any portion of the Settlement.
In addition to the monetary recovery for public shareholders, the Settlement provides that Renren will agree to certain corporate governance changes, which will remain in effect for five years following approval of the Settlement.
The full terms of the Settlement are set forth in the Stipulation of Settlement, dated October 7, 2021, and are described in the Notice and Summary Notice disseminated to Renren shareholders.
On October 18, 2021, the Court issued a Scheduling Order that set a settlement hearing for December 9, 2021, at 9:30 a.m., to be conducted as a virtual, online hearing.
Further details regarding the Settlement and the settlement hearing are available at the settlement administrator’s website at www.renrensettlement.com.
Prior results do not guarantee a similar outcome.