In re Houston Am. Energy Corp.

• Decision Date: 22 August 2013
• Docket Number: Civ. A. No. H–12–1332.
• Citation: 970 F.Supp.2d 613
• Parties: In re HOUSTON AMERICAN ENERGY CORP. SECURITIES LITIGATION. This Document Relates to All Actions.
• Court: U.S. District Court — Southern District of Texas

970 F.Supp.2d 613

In re HOUSTON AMERICAN ENERGY CORP. SECURITIES LITIGATION. This Document Relates to All Actions.

Civ. A. No. H–12–1332.

United States District Court,

S.D. Texas,

Houston Division.

Aug. 22, 2013.

Jeremy A. Lieberman, Pomerantz Haudek Grossman & Gross LLP, New York, NY, Sammy Ford, IV, Abraham Watkins Nichols Sorrels Agosto & Friend, Houston, TX, Charles Patrick Waites, Johnson Deluca Kurisky & Gould, P.C., Houston, TX, Donald William Gould, II, Johnson Deluca et al., Houston, TX, Gary S. Graifman, Kantrowitz, Goldhamer, & Graifman P.C., Chestnut Ridge, NY, Howard T. Longman, Stull Stull Brody, New York, NY, Timothy J. Burke, Stull, Stull & Brody, Beverly Hills, CA, Murielle J. Steven, Pomerantz Grossman et al., New York City, NY, William B. Federman, Federman Sherwood, Oklahoma City, OK, Daniel W. Jackson, The Jackson Law Firm, Houston, TX, for Plaintiffs.

Mark T. Oakes, Fulbright Jaworski LLP, Austin, TX, Shashi H. Patel, Ware Jackson et al., Houston, TX, for Defendants.

OPINION AND ORDER

MELINDA HARMON, District Judge.

Pending before the Court in the above referenced, putative federal securities class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3), brought on behalf of persons other than Defendants who purchased Houston American Energy Corp. common stock between November 9, 2009 and April 18, 2012 (the putative “Class Period”), is Defendants Houston American Energy Corp. (“Houston American”), John F. Terwilliger, James J. Jacobs, John P. Boylan, Orrie Lee Tawes III, and Stephen Hartzell's motion to dismiss (instrument # 53; memorandum, # 54) the Amended Consolidated Class Action Complaint ¹ (“Amended Complaint”) of Lead Plaintiffs Paul Spitzberg and Stephen Gerber, pursuant to the Private Securities Litigation Reform Act of 1995 (“PSLRA”) and Federal Rules of Civil Procedure 9(b) and 12(b)(6). Plaintiffs seek to recover damages and pursue remedies under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78j(b)² and 78t(a) respectively,³ and Securities Exchange Commission (“SEC”) Rule 10b–5 ⁴ ( 17 C.F.R. § 240.10b–5), promulgated thereunder, against Houston American and some of its officers and directors.

After carefully reviewing the Amended Complaint, the briefs, and the applicable law, although the adequacy of the pleading is a close question, for the reasons stated below the Court finds that Defendants' motion to dismiss for failure to state a claim for which relief can be granted should be granted.

Standards of Review

Federal Rule of Civil Procedure 8(a)(2) provides, “A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief.” When a district court reviews a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Randall D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763 (5th Cir.2011), citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.2009).

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do....” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964–65, 167 L.Ed.2d 929 (2007) (citations omitted). “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 1965,citing5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235–236 (3d ed. 2004) (“[T]he pleading must contain something more ... than ... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”). “Twombly jettisoned the minimum notice pleading requirement of Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 ... (1957) [“a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief”], and instead required that a complaint allege enough facts to state a claim that is plausible on its face.” St. Germain v. Howard, 556 F.3d 261, 263 n. 2 (5th Cir.2009), citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007) (“To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state a claim to relief that is plausible on its face.’ ”), citing Twombly, 127 S.Ct. at 1974). “ ‘A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ ” Montoya v. FedEx Ground Package System, Inc., 614 F.3d 145, 148 (5th Cir.2010), quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009). The plausibility standard is not akin to a “probability requirement,” but asks for more than a “possibility that a defendant has acted unlawfully.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955. Dismissal is appropriate when the plaintiff fails to allege “ ‘enough facts to state a claim to relief that is plausible on its face’ ” and therefore fails to “ ‘raise a right to relief above the speculative level.’ ” Montoya, 614 F.3d at 148,quoting Twombly, 550 U.S. at 555, 570, 127 S.Ct. 1955.

In Ashcroft v. Iqbal, 129 S.Ct. at 1940, the Supreme Court, observed “the tenet that “only a complaint that states a plausible claim for relief survives a motion to dismiss,” a determination involving “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” “[T]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice” under Rule 12(b). Iqbal, 129 S.Ct. at 1949. The plaintiff must plead specific facts, not merely conclusory allegations, to avoid dismissal. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir.2000). “Dismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief ....” Rios v. City of Del Rio, Texas, 444 F.3d 417, 421 (5th Cir.2006), cert. denied,549 U.S. 825, 127 S.Ct. 181, 166 L.Ed.2d 43 (2006).

“Rule 12(b) is not a procedure for resolving contests about the facts or the merits of a case.” Gallentine v. Housing Authority of City of Port Arthur, Tex., 919 F.Supp.2d 787, 794 (E.D.Tex.2012), citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1356, at 294 (1990).

As noted, on a Rule 12(b)(6) review, although generally the court may not look beyond the pleadings, the Court may examine the complaint, documents attached to the complaint, and documents attached to the motion to dismiss to which the complaint refers and which are central to the plaintiff's claim(s), as well as matters of public record. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir.2010), citing Collins, 224 F.3d at 498–99;Cinel v. Connick, 15 F.3d 1338, 1341, 1343 n. 6 (5th Cir.1994). See also United States ex rel. Willard v. Humana Health Plan of Tex., Inc., 336 F.3d 375, 379 (5th Cir.2003) (“the court may consider ... matters of which judicial notice may be taken”). Taking judicial notice of public records directly relevant to the issue in dispute is proper on a Rule 12(b)(6) review and does not transform the motion into one for summary judgment. Funk v. Stryker Corp., 631 F.3d 777, 780 (5th Cir.2011). “A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b).

In addition to Rules 8(a) and 12(b)(6), fraud claims must also satisfy the heightened pleading standard set out in Federal Rule of Civil Procedure 9(b): “In allegations alleging fraud ..., a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” A dismissal for failure to plead with particularity as required by this rule is treated the same as a Rule 12(b)(6) dismissal for failure to state a claim. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.1996). The Fifth Circuit interprets Rule 9(b) to require “specificity as to the statements (or omissions) considered to be fraudulent, the speaker, when and why the statements were made, and an explanation of why they were fraudulent.” Plotkin v. IP Axess, Inc., 407 F.3d 690, 696 (5th Cir.2005). See also Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir.2004) (“To satisfy Rule 9(b)'s pleading requirements the plaintiffs must;specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.' ”) ( quoting Williams v. WMX Technologies, Inc., 112 F.3d 175, 177–78 (5th Cir.1997), cert. denied,522 U.S. 966, 118 S.Ct. 412, 139 L.Ed.2d 315 (1997)).

“When a corporation is alleged to have made false representations, the court must [identify and] look to ‘the state of mind of the corporate official or officials who make or issue the statement.’ It follows that ‘[a] corporation can be held to have a particular state of mind [e.g., fraudulent intent] when that state of mind is possessed by a single individual.’ ” 7–Eleven Inc. v. Puerto Rico–7 Inc., Civ. A. No. 3:08–CV–00140–B, 2008 WL 4951502, *2 (N.D.Tex. Nov. 19, 2008), quoting Southland Sec. Corp., 365 F.3d 353, 366–67 (5th Cir.2004).

Private litigants who bring securities fraud claims must also satisfy the pleading requirements of the PSLRA before any discovery is...