Complete dismissal for Tencent Music Entertainment in securities class action

On March 31, 2023, Davis Polk secured a complete dismissal of all claims against clients Tencent Music Entertainment Group (TME), several of its officers and directors and Tencent Holdings (TME’s largest shareholder) in a putative securities class action in the Eastern District of New York. This was the second time Davis Polk obtained dismissal of all claims in the case, brought on behalf of a putative class of purchasers of TME stock. The plaintiffs had alleged that TME, a music entertainment platform in China, made material omissions in its IPO registration statement and 2018 annual report because TME did not disclose that TME was the subject of scrutiny by Chinese antitrust regulators looking into potentially anticompetitive practices.

Judge LaShann DeArcy Hall granted defendants’ motion to dismiss an earlier iteration of the plaintiffs’ complaint in 2021, and the March 31 order makes clear that the court found their next attempt to state a claim no more compelling.

In rejecting all of the plaintiffs’ claims, Judge DeArcy Hall adopted several of the arguments that Davis Polk had advanced in briefing, including that the plaintiffs’ allegations about a meeting with regulators were contradicted by documents incorporated in their own complaint, and that the defendants’ disclosures about that meeting were in fact completely consistent with the documents the plaintiffs themselves relied on. The opinion also noted, as the defendants had argued in briefing the motion, that the plaintiffs’ ultimate complaint was that TME “did not characterize” its interactions with regulators “in a more negative light” – which is no basis for a claim. As she had in dismissing the prior complaint, Judge DeArcy Hall affirmed the key legal principle that “the existence of a government investigation alone does not create a duty to disclose.”

The Davis Polk litigation team included partner Edmund Polubinski and counsel Yuan Zheng and Jonathan K. Chang. Members of the Davis Polk team are based in the New York and Hong Kong offices.