Peter B. Morrison

LOS ANGELES - As one of California's most prominent securities litigators, Peter B. Morrison represents large, blue-chip companies in a wide variety of industries.

Morrison was first chair in defending Baidu, Inc., a Cayman Islands internet company that operates the second-largest search engine in the world and is headquartered in Beijing. Ikeda v. Baidu Inc. et al., 5:20-cv- 02768 (N.D. Cal.)

Morrison was able to secure the dismissal of a securities fraud class action brought against Baidu and two of Baidu's senior officers.

"This was significant as over the last several years the plaintiffs' bar and certain shareholders have tried to bring cases against Chinese issuers based on China's evolving standards and policies and their government regulation of these entities," he said. "This case really was the strongest statement yet that those types of cases will not be successful, particularly where companies have robust risk disclosures in their public filings about the Chinese regulatory environment."

A potential Baidu shareholder alleged that the company had misrepresented its ability to comply with Chinese internet content regulations in a series of 12 public statements spanning more than a year. Specifically, the plaintiff alleged that Baidu had failed to warn investors that Chinese regulators might find certain news articles and other content on Baidu's platforms objectionable and take adverse action as a result.

"Baidu is considered to be the second largest search engine in the world. Because it's based in China, it is subject to extensive regulation by the Chinese government, which seeks to ensure that information made available through these platforms is consistent with its evolving standards of practices," Morrison said. "Baidu's regulatory filings warned investors of that fact and disclosed that the Chinese government's internet content regulations are often uncertain and in flux, and that enforcement actions may be driven by unpublished internal rules and policies that one may or may not know in advance."

The court agreed with Skadden that none of the company's statements were false or misleading in light of the company's detailed risk disclosures.

"At some point, a Chinese regulator temporarily suspended several new channels after taking the position that they contained unspecified "lowbrow" content, and a shareholder then brought suit following a stock drop," Morrison explained. "But Baidu's public filings contained robust disclosures concerning the Chinese regulatory environment, and Baidu could not predict the Chinese regulator would come out with this ruling, so we moved to dismiss arguing that there were no false statements and that no public statements were made with any intent to defraud. The court agreed with us completely."

The Baidu opinion is the most definitive rejection yet of this type of claim and may prove influential in persuading other courts to reject similar theories.