Plaintiffs Denied Class Certification in Chinese Automotive Lawsuit

A team of attorneys, including Neal Marder of Winston & Strawn, successfully defended China Automotive Systems against a two-part lawsuit challenging its accounting practices. The efforts of Neal Marder and his team led to the judge denying shareholders’ class certification in their lawsuit, signaling a setback for a slew of similar lawsuits against Chinese reverse-merger companies. US District Court Judge Katherine Forrest stated that the plaintiffs, three purchasers of China Automotive securities, did not effectively show that they were entitled to a class-action lawsuit.

The case stemmed from a complaint that China Automotive Systems released false and misleading accounting statements that were later revealed to be the product of accounting fraud. When the company announced that it would restate its finances, its stock price dropped and the plaintiffs who sued wanted their lawsuit to represent all American investors who bought stock in China Automotive Systems during that time period. China Automotive was one of many Chinese companies that entered the US stock market through a reverse merger during this time, and its victory in this lawsuit was widely lauded as one of the first of its kind.