In re Aegean Marine Petroleum Network, Inc. Sec. Litig.

Decision Date29 March 2021
Docket Number18 Civ. 4993 (NRB)
Citation529 F.Supp.3d 111
Parties IN RE AEGEAN MARINE PETROLEUM NETWORK, INC. SECURITIES LITIGATION
CourtU.S. District Court — Southern District of New York
MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, UNITED STATES DISTRICT JUDGE

Court-appointed lead plaintiff Utah Retirement Systems ("lead plaintiff") brings this securities class action individually and on behalf of other investors who purchased or otherwise acquired Aegean Marine Petroleum Network, Inc. ("Aegean") securities on the New York Stock Exchange ("NYSE") between February 27, 2014 and November 5, 2018 inclusive (the "Class Period") and were damaged as a result. Specifically, lead plaintiff brings claims against sixteen defendants, alleging violations of Sections 10(b), 20(a), 20(b), and 20A of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§ 78j(b), 78t(a), 78t(b), and 78t-1, and the rules and regulations promulgated thereunder, including Rule 10b-5, 17 C.F.R. §§ 240.10b-5(b), 240.10b-5(a) and (c). Before the Court are nine motions to dismiss the consolidated class action complaint.

This case was filed the day after Aegean issued a press release on June 4, 2018, which disclosed the existence of a fraudulent scheme that transpired over a number of years.1 According to the press release, certain accounts receivable at Aegean, amounting to approximately $200 million, would need to be written off because the transactions that gave rise to the accounts receivable "may have been, in full or in part, without economic substance and improperly accounted for in contravention of the Company's normal policies and procedures." Complaint ("Compl."), ECF No. 81 ¶ 148.

Aegean issued a second press release on November 2, 2018, announcing that an internal investigation determined that Aegean had been the victim of a fraud perpetrated by a "former affiliate of the Company," whereby "up to US$300 million of Company cash and other assets were misappropriated through fraudulent activities." Id. ¶¶ 26, 166. The Reconstituted Audit Committee "further confirmed that the approximately US$200 million of receivables are uncollectible and will be written off." Id. ¶ 149.

As alleged in the complaint, Dimitris Melissanidis,2 the founder and former chief executive officer of Aegean, was the driving force behind the scheme. Further, lead plaintiff alleges that Melissanidis was aided by various officers and directors. Aegean's auditors, moreover, are alleged to have failed to identify the scheme notwithstanding the existence of numerous red flags. As a consequence of the scheme, Aegean is alleged to have issued public filings, financial statements, and audit opinions containing false information throughout the Class Period.

Unsurprisingly, when the reconstituted Audit Committee disclosed the scheme in 2018, Aegean's stock price fell. Days later, on November 6, 2018, Aegean declared Chapter 11 bankruptcy and was delisted from the NYSE on December 3, 2018. Id. ¶ 480.

Defendants in this action include Aegean's founder and former Chief Executive Officer ("CEO"), Dimitris Melissanidis ("Melissanidis"); Aegean officers E. Nikolas Tavlarios ("Nikolas Tavlarios"), Spyros Gianniotis ("Gianniotis"), Jonathan McIlroy ("McIlroy"), and Spyridon Fokas ("Fokas"); Aegean outside directors Peter C. Georgiopoulos ("Georgiopoulos"), Yiannis N. Papanicolaou ("Papanicolaou"), John P. Tavlarios ("John Tavlarios"), Konstantinos D. Koutsomitopoulos ("Koutsomitopoulos"), and George Konomos ("Konomos"); and auditors Deloitte Touche Tohamatsu Limited ("Deloitte Touche"), Deloitte & Touche LLP ("Deloitte US"), Deloitte Certified Public Accountants, S.A. ("Deloitte Greece"), PricewaterhouseCoopers International Limited ("PwC International"), PricewaterhouseCoopers LLP ("PwC US"), and PricewaterhouseCoopers S.A ("PwC Greece").3

For the reasons set forth below, the Court grants Papanicolaou and Koutsomitopoulos’ motion to dismiss for lack of personal jurisdiction; grants Fokas’ motion to dismiss for lack of personal jurisdiction; grants in part and denies in part Melissanidis’ motion to dismiss for lack of personal jurisdiction and failure to state a claim upon which relief can be granted; grants McIlroy's motion to dismiss for insufficient service of process; grants PwC International and Deloitte Touche's motion to dismiss for failure to state a claim upon which relief can be granted; grants PwC US and Deloitte US's motion to dismiss for failure to state a claim upon which relief can be granted; grants Nikolas Tavlarios, Georgiopoulos, Konomos, and John Tavlariosmotion to dismiss for failure to state a claim upon which relief can be granted; denies Gianniotis’ motion to dismiss; and denies PwC Greece and Deloitte Greece's motion to dismiss.

I. Background 4

Melissanidis founded Aegean in 1995 as a single bunkering station in Piraeus, Greece. Compl. ¶ 120. Aegean grew into a marine fuel logistics company that supplied and marketed refined marine fuel and lubricants to ships in port and at sea. Id. ¶ 43. Aegean also owned and operated a fleet of bunkering tankers, which supplied fuel for use by ships. Id. On June 6, 2005, Aegean was incorporated under the laws of the Marshall Islands, but it maintained its headquarters in Piraeus, Greece and had an office in New York, New York. Id. ¶¶ 43, 46.

Aegean is not named as a defendant since, as noted earlier, Aegean filed for bankruptcy on November 6, 2018 in the United States Bankruptcy Court for the Southern District of New York following the disclosure of Melissanidis’ fraud.

A. Parties
1. Lead Plaintiff

Lead plaintiff Utah Retirement Systems is a public pension fund that provides retirement and insurance benefits for Utah public employees. Id. ¶ 42. Lead plaintiff purchased shares of Aegean securities during the Class Period. Id.

2. Defendant Melissanidis

After founding Aegean in 1995, Melissanidis served as President and CEO of Aegean from June 2005 until December 2006 and served as director and Chairman of the Board until July 2006. Id. ¶ 49. Following Aegean's Initial Public Offering ("IPO") in 2006 and until September 2016, Melissanidis served as the Head of Corporate Development. Id. From September 2016 until May 2018, Melissanidis worked as a consultant to Aegean. Id. As will be explored in greater detail below, Melissanidis and his family are also alleged to have owned and/or controlled other businesses that engaged in related-party transactions with Aegean, including Aegean Oil, S.A. and Aegean Shipping Management S.A. Id. ¶ 51.

Lead plaintiff brings claims against Melissanidis pursuant to Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder alleging scheme liability; Section 20(a) of the Exchange Act alleging control liability; Section 20(b) of the Exchange Act alleging action "through or by means of another person"; and Section 20A of the Exchange Act alleging insider trading. At the threshold, Melissanidis challenges the Court's exercise of personal jurisdiction.

3. Officer Defendants

Lead plaintiff brings claims against four officer defendants ("Officer Defendants"). Nikolas Tavlarios was President and Principal Executive Officer ("President") of Aegean from December 2006 until June 1, 2017. Id. ¶ 52. Thereafter he worked as a consultant to Aegean from an office in New York City. Id. Gianniotis was the Chief Financial Officer ("CFO") of Aegean from 2008 until April 17, 2018. Id. ¶ 55. Fokas was General Counsel and Secretary for Aegean as well as a Board member beginning in June 2005. Id. ¶ 57. McIlroy was the manager of global trading from January 2016 until July 2017, and then served as the President of Aegean until November 2018. Id. ¶ 56.

Lead plaintiff brings claims against each of the Officer Defendants pursuant to Section 10(b) of the Exchange Act and Rule 10b-5(b) promulgated thereunder alleging fraudulent misstatements or omissions; Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder alleging scheme liability; and Section 20(a) of the Exchange Act alleging control liability. Lead plaintiff also brings claims against Gianniotis and Fokas under Section 20A of the Exchange Act alleging insider trading. At the threshold, Fokas challenges this Court's exercise of personal jurisdiction and McIlroy argues that he was not properly served.

4. Director Defendants

Lead plaintiff also brings claims against five director defendants ("Director Defendants") who sat on the Board of Directors of Aegean (the "Board"). Georgiopoulos served as Chairman of the Board of Aegean from December 2006 until his resignation on June 16, 2017. Id. ¶¶ 60, 195. Likewise, John Tavlarios served as a Board member from December 2006 until his resignation on June 16, 2017. Id. ¶ 66, 195. Papanicolaou became a Board member in December 2006, and also served as a member of Aegean's Audit Committee. Id. ¶ 65. Koutsomitopoulos and Konomos also served as a Board members, beginning in May 2008 and November 2008 respectively, and they also served on the Audit Committee until they were removed on June 4, 2018. Id. ¶¶ 69, 70. Together, Koutsomitopoulos, Konomos, and Papanicolaou are referred to as the "Audit Committee Defendants."

Lead plaintiff brings claims against each of the Director Defendants pursuant to Section 10(b) of the Exchange Act and Rule 10b-5(b) promulgated thereunder alleging fraudulent misstatements or omissions; Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder alleging scheme liability; and Section 20(a) of the Exchange Act alleging control liability. Additionally, lead plaintiff brings claims under Section 20(a) of the Exchange Act against the Audit Committee Defendants with respect to their alleged supervision of the auditors. At the threshold, Papanicolaou and Koutsomitopoulos challenge this Court's exercise of personal jurisdiction.

5. Auditor Defendants

Lead plaintiff sued six auditor defendants ("Auditor Defendants"), three of which are affiliated with the...

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