Kingsun Asks Guangdong Court to Move its False Statement Lawsuit Case to Another District Court

Kingsun Optotronics asked Guangdong Intermediate People’s Court to transfer its investor false statement lawsuit case to Dongyuan’s Third People Court, a Chinese-language financial media "Investor Flash News" (投資者快報) cited Liu Guohua, head of the Guangzhou-based Benben Law Firm.

Investors only have five months left before the statue of limitations for seeking compensation expires.

Kingsun demands to move case to Dongyuan Third People’s Court

Kingsun Lighting’s “application to challenge jurisdiction” stated: “The defendant believes the case is a commercial dispute that belongs to the jurisdiction of Dongyuan’s Third People’s Court. Based on Article 29 of the Civil Procedure law of China, ‘A lawsuit brought on a tortious act shall be under the jurisdiction of the people's court of the place where the tort is committed or where the defendant has his domicile.’”

According to Liu, Kingsun Lighting jurisdiction objection is an attempt to buy time, and delay the ruling. Under Article 8 of the “Some Provisions of the Supreme People's Court on Trying Cases of Civil Compensation Arising from False Statement in Securities Market”, civil compensation related to false security market statements fall under the jurisdiction of the intermediate people’s court of the city directly under the Central Government control including province, municipality, autonomous regions, or of a city directly under state planning of the special economic zone. Dongyuan Third People’s Court jurisdiction does not cover these type of lawsuits.

Even though investors only have five months left before their statue of limitations to file plaintiff expires, Liu was confident investors would win the case. There have been many successful misleading statement ruling precedents including the infamous Foshan Lighting lawsuit where judges ruled the company should compensate investors RMB 59.31 million (US $9.49 million) in total .

Timeline of Kingsun Lighting misleading statement case

On Feb. 25, 2013, Chinese media reported the company’s potential presentation of false statements to investors. The report suspected the company intentionally concealed its relationship and trade situation with Guangdong Quality LED, and inflated its 2011 revenue performance. Three days later, Kingsun Lighting issued a statement denying the claims.

By March 26, 2013, another media investigated Kingsun’s misleading security statement, and questioned whether the company misconduct involved the above claims. In a statement on April 2, 2013, Kingsun finally admitted its relationship with Quality LED and Guangzhou Badon Illumination. The company had been trading with Best LED from 2010 to 2011, and its trade with Badon Illumination in 2008 was a related trade.

Kingsun received an administrative penalty decision letter from China Securities Regulatory Commission (CSRC), which ruled the company did not follow regulations that require it to publish related trade transactions, failed to announce its second largest domestic client in 2009, and even denied its relationship with Quality LED. The commission requested Kingsun to make necessary improvements, warned the company and fined the company RMB 400,000 (US $62,516.12). Five high ranking company officials were also fined.

Once the penalty was made public, many investors filed plaintiffs seeking compensation against the company. Investors that meet any of the following two criteria can seek compensation: Investors that purchased Kingsun Optoelectronic shares in Feb. 25, 2013, and sold or continued to hold on to the shares after the date and incurred loss from the investment. The second condition is if investors had acquired shares between Feb. 25, 2013 to March 26, 2013, and continued to hold onto shares after March 26. These investors also are eligible to seeking compensation for any financial loss from investing in Kingsun Opto.

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