[Asia Economy Reporter Kim Hyung-min] The Supreme Court has made its first substantive ruling on the securities class action system 15 years after its introduction. It ruled in favor of the shareholders of the telecommunications equipment company C-Motech in a class action lawsuit.
The Supreme Court's 3rd Division (Presiding Justice Lee Dong-won) on the 27th upheld the lower court's ruling ordering DB Financial Investment to pay approximately 1.45 billion won to 186 investors, including Mr. Lee, who filed the securities-related class action lawsuit against DB Financial Investment. This final ruling affects a total of 4,972 related parties.
Securities-related class actions allow some victims to file a lawsuit as representative parties, and if they win, the ruling applies to other victims as well. Unless an investor opts out of the lawsuit, the effect of the class action automatically applies, meaning virtually all investment victims can receive compensation based on the lawsuit outcome.
However, since class actions require court approval, obtaining litigation permission from the court alone can take several years. Due to this difficulty, there have not been many securities class actions filed since the law was enacted.
The shareholders, including Mr. Lee, participated in a paid-in capital increase in January 2011 and acquired shares issued by C-Motech. However, after the capital increase, C-Motech suffered from adverse events such as embezzlement and breach of trust by the CEO and stock price manipulation, leading to its final delisting in September of the same year, causing losses. Accordingly, Mr. Lee and others filed a class action lawsuit against DB Investment & Securities, the lead underwriter and securities underwriter at the time of the capital increase, demanding compensation for damages. They claimed that "false statements were made in the investment prospectus and securities registration statement regarding matters that could significantly influence investors' investment decisions."
The first and second trials recognized DB Investment & Securities' liability for compensation but limited the liability ratio to 10%, ordering payment of approximately 1.455 billion won, partially ruling in favor of the plaintiffs. Both plaintiffs and defendants appealed, but the Supreme Court affirmed the lower court's judgment, stating there was no error.
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