A Delaware judge on Wednesday refused to dismiss a lawsuit that seeks to force China MediaExpress Holdings to turn over company records that Starr International believes will show evidence of mismanagement and wrongdoing.
The suit was filed by a unit of Starr International, which is run by former American International Group Inc. chairman Hank Greenberg.
Following a hearing, Vice Chancellor Donald Parsons said he would hold a trial in late November to decide whether the Chinese company, which places TV advertising on intercity and airport express buses in China, should be forced to open up its books to Starr Investments Cayman II.
Starr filed a separate lawsuit against China MediaExpress in March in U.S. District Court in Wilmington, alleging that the company misrepresented its financial performance in order to attract investors. The suit claims that shares for which Starr paid $13.5 million in October 2010 are now basically worthless.
Attorneys for China MediaExpress, or CCME, argued that Starr was improperly seeking its records in the Chancery Court lawsuit in order to circumvent a stay on discovery in the federal lawsuit. The stay was issued pending a ruling on CCME's motion to dismiss that case.
But Parsons agreed with Starr attorney Andre Bouchard that the issue of whether Starr was using the state lawsuit as an end-run around the federal court stay on exchanging information was one to be decided at trial, not on a motion to dismiss.
China MediaExpress was delisted by NASDAQ in May after analysts began questioning its financial results. Its outside auditing firm resigned in March, saying it had "lost confidence" in the representations of management, and in the commitment of the company's board and audit committee to good governance and reliable financial reporting.
CCME, led by chairman and CEO Zheng Cheng, also has seen the resignations of its chief financial officer, the chairman of its audit committee, and a board member who was a representative of Starr.
Albert Manwaring IV, an attorney for China MediaExpress, argued Wednesday that the issues in the state and federal lawsuits are virtually identical.