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PwC International Wins Dismissal of Securities Class Action Suit over NQ Mobile Audits

On March 27, 2015, Judge William H. Pauley, III of the U.S. District Court for the Southern District of New York dismissed with prejudice all claims against Cravath client PricewaterhouseCoopers International Limited (“PwCIL”) in a purported class action lawsuit filed on behalf of persons who acquired American Depository Shares of Chinese mobile Internet service provider NQ Mobile, Inc. (“NQ”) between March 6, 2013, and July 3, 2014.

Plaintiffs asserted Securities Exchange Act
Section 10(b) and Rule 10b‑5 claims against PricewaterhouseCoopers Zhong Tian LLP (“PwC China”), NQ’s outside auditor, as well as Section 20(a) claims against PwCIL as an alleged control person of PwC China. Plaintiffs sought compensatory damages arising from NQ’s alleged misrepresentations about its financial performance, internal controls and other items in NQ’s 2011 and 2012 financial statements, which, when revealed, purportedly resulted in a 56% stock price drop. In his opinion, Judge Pauley held that plaintiffs failed to sufficiently plead that PwCIL exercised actual control over the 2011 and 2012 audits of NQ or “culpably participated” or acted with a culpable state of mind in NQ’s alleged fraud in order to support a Section 20 claim.

The Cravath team included partner Antony L. Ryan, senior attorney Samira Shah and associate Deborah L. Fox. The case is In re NQ Mobile, Inc. Securities Litigation, No. 13‑cv‑7608 (S.D.N.Y.).