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Marco Peters, Individually and On Behalf of All Others Similarly v. Jinkosolar Holding Co.

February 27, 2013

MARCO PETERS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
JINKOSOLAR HOLDING CO., LTD., XIANDE LI, KANGPING CHEN, XIANHUA LI, WING KEONG SLEW, HAITAO JIN, ZIBIN LI, STEVEN MARKSCHEID, LONGGEN ZHEN, CREDIT SUISSE SECURITIES (USA) LLC, OPPENHEIMER & CO. INC., ROTH CAPITAL PARTNERS, LLC, WILLIAM BLAIR & CO. AND COLLINS STEWART LLC,
DEFENDANTS.



The opinion of the court was delivered by: J. Paul Oetken, District Judge:

AMENDED MEMORANDUM AND ORDER

Vaughn Leroy Meyer, Richard Matkevich, Abdullah al-Mahmud, and Azriel Shusterman ("Lead Plaintiffs" or "Plaintiffs") bring this action individually and on behalf of all persons and entities that acquired Jinkosolar Holding Co., LTD. ("Jinkosolar" or "the Company") New York Stock Exchange-traded American Depository Shares ("ADS") between May 13, 2010 and September 20, 2011 ("the Class Period"). Plaintiffs sue, inter alia, Jinkosolor, alleging violations of Sections 10(b) and 20 of the Securities Exchange Act of 1934 ("the Exchange Act"), as well as Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 ("the Securities Act"). Various Defendants now move to dismiss Plaintiffs' action, pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(b).

For the reasons that follow, Defendants' motions to dismiss are granted, and Plaintiffs' action is dismissed.

I.Background

A.Factual Background

The following facts are taken from Plaintiffs' Amended Complaint (Dkt. No. 57 ("Am. Compl.")) and are presumed true for purposes of this motion.

Jinkosolar is a manufacturer of solar technology products with operations based in Jiangxi and Zhenjiang Providence in China. It is one of the world's largest manufacturers of photovoltaic ("PV") products. Jinkosolar was initially in the business of producing silicon wafers and solar modules, but after acquiring Zhejiang Sun Valley Energy Application Technology Co., Ltd. ("Sun Valley") in 2009, it rapidly expanded its production of solar cells. To facilitate its growth, Jinkosolar decided to go public; its initial public offering ("IPO") on the New York Stock Exchange occurred on May 13, 2010 ("the May offering"). There was a second public offering of Jinkosolar stock on November 4, 2012 ("the November offering").

1. Environmental Problems and Investors' Discovery

Concomitant with Jinkosolar's rapid growth were troubling environmental missteps. In June 2010, Jinkosolar submitted a report to the Haining Environmental Protection Bureau ("the EBP") concerning the Company's "existing problem" with disposing of hazardous waste in the appropriate manner and with emitting high levels of fluorides. Jinkosolar submitted additional reports to the EPB in February and July of 2011, both of which discussed the high levels of fluorides in the Zhenjiang plant. The EPB also informed Jinkosolar of high levels of fluorides in the water in April and May of 2011: In April, Jinkosolar received a "pre-trial production notice" from the EPB stating that high levels of fluoride had been detected in Jinkosolar's waste;*fn1 the next month, the EPB reported high levels of fluoride in the waste water.

None of these correspondences-nor the environmental woes discussed therein-were disclosed to shareholders until late September, when a kerfuffle at the Zhenjiang plant forced Jinkosolar's hand. In August 2011, residents living near the Zhenjiang became alarmed about the large scale die-off of fish and the contamination of adjacent land. By no later than September 7, 2011, Jinkosolar appears to have tacitly acknowledged to the residents, but not to its shareholders, that it was responsible for the pollution and would reimburse locals for crop damage and livestock deaths. On September 15, 2011, news outlets began to report on hundreds of locals demonstrating outside Jinkosolar's Zhenjiang plant. These protests lasted until September 18, 2011, and galvanized a wave of revelations about Jinkosolar's environmental record in the Zhenjiang plant.

On September 19, 2011, Jinkosolar issued a press release explaining that it had "suspended operations at its facility in Haining." (Am. Compl. at ¶ 117.) The press release also admitted that "[a]n initial investigation conducted by the local environmental protection authority indicates that the pollution may have been caused by the improper storage of waste containing fluoride." (Id.) News stories published from September 18 to September 20, 2011 detailed the EPB's past concerns about the Zhenjiang plant. In a follow-up press release dated September 22, 2011, Jinkosolar admitted that it had received notification that its fluoride levels were too high as early as May 2011.

From September 15, 2011 to September 20, 2011, as the news of the protests and the company's history of environmental woes trickled out, Jinkosolar shares dropped from $10.02 per share to $5.89 per share. In other words, Jinkosolar was worth 41% less on September 20 than it is was less than a week before.

2. Jinkosolar's Statements to Investors

As explained supra, Jinkosolar's environmental woes began not long after its IPO in May 2010, but investors were not informed of any of the problems with the Zhenjiang plant until September 19, 2011.

In its May 2010 Prospectus, Jinkosolar stated that [Jinkosolar has] installed pollution abatement equipment at our facilities to process, reduce, treat, and where feasible, recycle the waste materials before disposal, and we treat the waste water, gaseous and liquid waste and other industrial waste produced during the manufacturing process before discharge. We also maintain environmental teams at each of our manufacturing facilities to monitor waste treatment and ensure that [these] waste emissions comply with PRC [People's Republic of China] environment standards. Our ...


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