For some time now, some observers had been predicting that we would be seeing a bunch of data breach-related securities class action lawsuits, but the predicted wave never seemed to materialize. However, with a recent uptick in these kinds of cases, that could be changing. On October 8, 2018, in the latest of these kinds of lawsuits to be filed, a plaintiff shareholder filed a securities class action lawsuit against China-based Huazhu Group. As discussed below, there are a number of interesting features of this latest data breach-related securities suit.
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It is axiomatic in the current global economy that every business needs to have a China strategy. Most business enterprises are drawn to the world’s most populous country and second-largest economy. But while China represents an attractive business marketplace, it can also in many respects be a perilous place to try to do business, particularly from a regulatory and compliance standpoint. While most businesses may recognize these challenges, many may struggle to try and address the concerns. A new book entitled “Governance, Risk and Compliance Management in China” (here), which I review below, may provide substantial help to companies trying to address compliance concerns arising from doing business in China. Of particular interest to this blog’s readers, the book includes an interesting chapter on D&O insurance issues in China.  
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As I noted in a post last week discussing the derivative lawsuit and settlement involving 21st Century Fox, allegations of failure to prevent alleged misconduct within company operations or at company facilities can translate into potential liability exposure for the company and its senior management. Another example of this phenomenon has emerged. In the weeks just after RYB Education completed its late September 2017 IPO, news reports began circulating of alleged child abuse at company preschool education facilities in China. Now a shareholder has filed a securities class action lawsuit in the U.S. against the company and certain of its executives. As discussed below, this new lawsuit represents the latest example of several different securities class action lawsuit filing trends.
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cflagLong-time readers of this blog will recall that in 2011, there was a rash of U.S. securities class action lawsuits filed against U.S.-listed Chinese companies. Many of these companies had obtained their U.S.-listings by way of a reverse merger with a U.S.-listed public shell. The 39 securities suits filed in 2011 against U.S.-listed Chinese companies represented 18% of all securities class action lawsuits filed in the U.S. that year. While the number of lawsuit filed against Chinese reverse-merger companies has abated since the peak in 2011, U.S. securities lawsuits continue to be filed against Chinese companies at a significant rate.
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chinaFor a brief period in the 2010-2012 time frame, U.S. securities lawsuits filings against U.S.-listed Chinese companies surged as investors filed a wave of lawsuits against Chinese companies that obtained U.S.-listings by way of a merging with a publicly traded shell. The Chinese reverse merger lawsuit filing wave eventually subsided – yet filings against U.S.-listed

During the twelve months ending June 30, 2011, at least 32 Chinese companies were hit with U.S. securities suits. In addition, the U.S. Securities and Exchange Commission has initiated a number of enforcement actions and other proceedings against U.S.-listed Chinese companies, issued a formal bulletin warning investors about the risks of investing in Chinese companies