Court Approves Favorable Settlement of Derivative Action Involving Renren

Paul, Weiss secured a favorable settlement in a high-value derivative litigation against our clients, majority owners of Renren Inc. in New York state court. On that date, N.Y. Supreme Court Justice Andrew Borrok approved a $300 million settlement with shareholder plaintiffs, ending (subject to appeals) their lawsuit against our clients Joseph Chen, Oak Pacific Investment (OPI) and related entities. The court also granted our motion for certain releases as part of the settlement.

The action arose out of a spin-off transaction involving Renren, a Cayman Islands corporation headquartered in China that had issued American Depository Receipts (ADRs) in the U.S. Renren, originally founded to be the “Facebook of China,” eventually began acquiring interests in other startups, including Social Finance, Inc. (SoFi). After the SEC threatened to declare Renren an investment company, the company entered into a transaction spinning off the bulk of its assets other than the original Renren business into OPI, with shareholders either receiving interests in OPI or a cash dividend.

Plaintiffs brought a derivative action in New York County alleging that the spun-off assets were grossly undervalued, and that our clients and others had breached fiduciary duties and engaged in other wrongdoing. In May 2020, the court denied a motion to dismiss for lack of personal jurisdiction, which the First Department affirmed. In May 2021, the court, relying upon plaintiffs’ allegations that OPI had engaged in fraudulent conveyances with SoftBank (another Renren investor), SoFi and others to keep assets out of the Court’s reach, issued an attachment order freezing virtually all of OPI’s assets. Paul, Weiss was brought onto the matter after that order.

Under clearly adverse circumstances, and under enormous pressure from the court, plaintiffs and even co-defendants, the Paul, Weiss team negotiated a resolution of the appeal from the attachment order, and ultimately a settlement involving all of the parties, including co-defendant Duff & Phelps, which had provided the initial valuation of Renren’s assets.

In December 2021, however, the court denied approval of the settlement, ruling that the settlement proceeds in the derivative action should actually be paid to former Renren shareholders. The denial spurred months of motion practice, motions to intervene and a motion by Paul, Weiss to dismiss parties who lacked standing to bring a derivative action. Ultimately, the Paul, Weiss team aggressively pursued a revised settlement agreement that satisfied the court, the named plaintiffs and defendants, which was approved at a hearing on June 9.

The Paul, Weiss team included, among others, litigation partners Allan Arffa and Gregory Laufer and counsel Jonathan Hurwitz; tax partner Brian Krause; and corporate counsel David Harris.