NEW YORK, Aug. 1, 2012 (GLOBE NEWSWIRE) -- In a decision released today, the United States Court of Appeals for the Second Circuit overturned the dismissal of the securities fraud class action complaint in In re China North East Petroleum Holdings, Ltd. The district court had held that Lead Plaintiff Acticon AG ("Acticon AG") could not demonstrate economic loss because the share price of China North's securities eclipsed Acticon's purchase price on several days after the end of the Class Period. In reversing, the Second Circuit held that the lower court's decision was contrary to the well-established "out of pocket" measure of damages and 90 day "bounce back" provision of the Private Securities Litigation Reform Act ("PSLRA").
"We are gratified by the Second Circuit's decision," says Pomerantz partner Jeremy Lieberman, who argued the case before the Second Circuit. "This case represented an unprecedented fraud upon investors, including misappropriation of $39 million to accounts controlled by corporate insiders. The Second Circuit's decision clarifies that the traditional "out of pocket" measure for calculating damages remains undisturbed by the Supreme Court's decision in Dura Pharmaceuticals, Inc. v. Broudo, 544 F.3d 336 (2005). Most significantly, the decision allows thousands of investors who have been defrauded by Defendants' overt fraud to have their day in Court."
The Complaint, filed on January 14, 2011, alleged that Defendants stole at least $39 million from the Company for personal use while simultaneously misleading investors regarding the Company's financial results. Moreover, the Complaint alleges that Defendants failed to record substantially diminished values of the Company's oil field assets, as well as warrant-related expenses and impairments, all of which resulted in a restatement that wiped out previously reported earnings.
The District Court's dismissal was based on grounds that since China North's price twelve days after the close of the Class Period exceeded Acticon's average purchase price during the Class Period, and that since Acticon had failed to sell its shares on those post Class Period days, Acticon had suffered no economic loss.
In reversing, the Second Circuit found the district court's reasoning "inconsistent with the traditional out-of-pocket measure of damages, which calculates economic loss based on the value of the security at the time that the fraud became known, and with the PSLRA's bounce-back provision, which refines the traditional measure by capping recovery based on the mean price over the look-back period." The Court further reasoned that "it is improper to offset gains that the plaintiff recovers after the fraud becomes known against losses caused by the revelation of the fraud if the stock recovers value for completely unrelated reasons."
The Pomerantz Firm, with offices in New York and Chicago, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 75 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of defrauded investors. See www.pomerantzlaw.com.