On September 21, 2021, Luckin Coffee Inc. entered into a binding term sheet to resolve claims asserted in the provisionally certified class action pending in the United States District Court for the Southern District of New York. Kessler Topaz and its co-counsel represent the Swedish pension fund AP7 and its co-lead plaintiff in the action. Luckin is a Cayman Islands corporation that operates an extensive network of retail coffee stores in China. Luckin conducted an initial public offering of American Depository Shares on May 17, 2019 and a secondary public offering on January 10, 2020. The action stems from Luckin’s admitted fabrication of nearly $300 million in sales between the second and fourth quarters of 2019. Kessler Topaz was appointed co-lead in June 2020. Following an investigation, in September 2020, Lead Plaintiffs filed the Amended Complaint, which alleged that Luckin and certain of its officers and directors violated the federal securities laws by making material misrepresentations and omissions to investors in connection with Luckin’s public offerings concerning the Company’s reported revenues and expenses, compliance with laws and regulations, internal controls over financial reporting, and undisclosed related-party transactions. In March 2021, the Court provisionally certified for settlement purposes a Class of investors consisting of all purchasers of the Company’s ADSs between May 17, 2019 and July 15, 2020.
While the action was pending, Luckin entered into provisional liquidation proceedings in the Cayman Islands, and the Cayman Islands court appointed Joint Provisional Liquidators to negotiate a resolution of the claims of Luckin’s creditors. Luckin’s Joint Provisional Liquidators commenced a proceeding under Chapter 15 of the U.S. Bankruptcy Code in order to seek certain protections, including an automatic stay of all litigation against the Company. Lead Plaintiffs successfully obtained an exemption from the automatic stay in order to continue to negotiate a settlement on behalf of the Class. The settlement agreement provides for a global settlement amount of $187.5 million, which will be reduced on a pro-rata basis based on the number of opt-out notices received prior to the September 17, 2021 opt-out deadline set by the Court. The settlement represents an outstanding outcome for the Class, particularly in light of Luckin’s provisional liquidation.