NEW YORK (Reuters) - JinkoSolar Holding Co must face a shareholder lawsuit accusing the Chinese solar panel maker of concealing that one of its factories was dumping toxic waste into a nearby river, a U.S. appeals court ruled on Thursday.
The decision by the 2nd U.S. Circuit Court of Appeals in New York overturned a lower court’s January 2013 dismissal of the case against JinkoSolar and its underwriters, sending the lawsuit back to U.S. District Judge Paul Oetken.
The appeals court said JinkoSolar’s failure to disclose “ongoing, serious pollution problems” in prospectuses for two stock offerings in 2010 “rendered misleading” statements about its other efforts to comply with Chinese environmental laws.
JinkoSolar’s share price fell 40 percent over three trading days in September 2011 after hundreds of people gathered at its plant on the outskirts of Haining, in China’s Zhejiang province, whose pollution they claimed was killing fish in a nearby river.
Some protesters overturned vehicles and damaged nearby buildings before riot police dispersed the group.
JinkoSolar’s American depositary shares were down $1.08, or 4.1 percent, at $25.17 in morning trading. The company and its law firm did not immediately respond to requests for comment.
In a prospectus for its May 2010 initial public offering, JinkoSolar had described having installed equipment at its plants to lower pollution, and hired 24-hour-a-day environmental monitoring teams to ensure compliance with Chinese standards.
But shareholders said JinkoSolar’s failure to reveal the pollution it was creating made its other statements misleading, constituting securities fraud.
Writing for a three-judge 2nd Circuit panel, Circuit Judge Ralph Winter said JinkoSolar could have disclosed more, even if its prospectuses “gave comfort” to investors that it was trying to comply with environmental regulations.
“These descriptions did not guarantee 100% compliance 100% of the time,” Winter wrote. “Such compliance may often be unobtainable, and reasonable investors may be deemed to know that. However, investors would be misled ... if in fact the equipment and 24-hour team were then failing to prevent substantial violations of the Chinese regulations.”
Michael Bigin, a lawyer for the shareholders, said his clients are pleased, and look forward to pursuing their case, which seeks class-action status.
The case, which spells the company’s name differently, is Meyer et al v. JinkoSolar Holdings Co et al, 2nd U.S. Circuit Court of Appeals, No. 13-616.
Editing by Grant McCool