In re Plains All Am. Pipeline, L.P. Sec. Litig.
| Decision Date | 29 March 2017 |
| Docket Number | Lead Case No. H:15–02404 |
| Citation | 245 F.Supp.3d 870 |
| Parties | IN RE PLAINS ALL AMERICAN PIPELINE, L.P. SECURITIES LITIGATION |
| Court | U.S. District Court — Southern District of Texas |
The plaintiffs in this putative securities-fraud class action allege that an oil and gas pipeline company falsely claimed to have a comprehensive, effective environmental and regulatory compliance program to prevent oil spills and, if they occurred, quickly remediate the effects. Instead, the plaintiffs allege, the touted compliance program was close to nonexistent, and Plains repeatedly violated regulatory mandates.
Plains allegedly deceived the public about its compliance program with falsehoods that inflated the price of the company's securities. The lack of an effective compliance program was dramatically exposed when a Plains pipeline in Santa Barbara County, California, burst and thousands of barrels of oil spilled. Plains securities lost significant value in the aftermath. This lawsuit followed.
The plaintiffs have sued Plains and several affiliated companies, certain officers and directors, and the banks that underwrote Plains's securities offerings, seeking compensation for the diminished value of Plains securities. The defendants have moved to dismiss the case. The plaintiffs responded, and the defendants replied. (Docket Entries No. 114, 115, 124, 127, 128). The parties presented oral argument at a lengthy hearing in September 2016.
Based on the briefs, the hearing, the record, and the applicable law, the court grants the motions to dismiss, (Docket Entry Nos. 114, 115), without prejudice and with leave to amend. The reasons are explained in detail below.
The plaintiffs are individuals and institutional investors who purchased equity and debt instruments issued by entities affiliated with Plains All American Pipeline, a major national oil and gas pipeline operator.1 Compl. ¶¶ 13–17. They seek to represent a class of Plains investors who purchased Plains All American Pipeline, LP ("Plains") common units between February 27, 2013 and August 5, 2015, or who purchased Plains GP Holdings, LP ("Plains Holdings") Class A Shares between October 16, 2013 and August 5, 2015. The plaintiffs also seek to represent those individuals who purchased securities "pursuant and traceable to" certain public securities offerings.
The plaintiffs' claims arise from the following public offerings:
Lead plaintiff IAM National Pension Fund is a defined benefit pension plan for members of the International Association of Machinists and Aerospace Workers. IAM bought Plains and Plains Holdings securities on the open market during the relevant class periods. Id. ¶ 13.
Plaintiff City of Warren Police and Fire Retirement System is a defined benefit governmental retirement system for police and firefighters in Warren, Michigan. It purchased 4.7% Plains notes in the April 2014 offering. Id. ¶ 14.
Plaintiff Ming Liu is an individual who purchased Plains Holdings Class A shares in the IPO. Id. ¶ 15.
Plaintiff Jacksonville Police and Fire Pension Fund is a defined benefit government retirement system for police and firefighters in Jacksonville, Florida. It purchased Plains Holdings Class A shares in the IPO and the Secondary Offering. Id. ¶ 16.
Plaintiff Detroit Police and Fire Retirement System is a defined benefit governmental retirement system for police and firefighters in Detroit, Michigan. It purchased Plains Holdings Class A shares in the Secondary Offering and Plains common units in the Plains Offering. Id. at ¶ 17.
There is no allegation that the named plaintiffs purchased notes in or traceable to the August 2013 senior-notes offering, the September 2014 senior-notes offering, or the two December 2014 senior-notes offerings. The complaint alleges that named plaintiffs purchased securities in or traceable to four of the eight transactions at issue in this case.
Plains All American Pipeline, LP ("Plains"), is a publicly traded Delaware master limited partnership that owns and operates oil and gas pipelines throughout the United States. Id. ¶ 18. A general partner, Plains All American GP LLC ("GP LLC"), manages Plains and employs Plains's officers, directors, managers, and US-based employees. Id. ¶ 19. GP LLC, in turn, is wholly controlled by Plains GP Holdings, LP ("Plains Holdings"), a publicly traded Delaware limited partnership. Id. ¶ 21. Plains Holdings is, in turn, managed by PAA GP Holdings LLC ("Holdings LLC"), which owns the general partner interest in Plains Holdings and directs that entity's activities. Id. ¶ 26. Plains itself wholly owns PAA Finance Corp., a Delaware corporation formed in 2001 to co-issue Plains's debt securities. Id. ¶ 25. Each entity is a named defendant.
I. The Officer Defendants
Greg L. Armstrong is the CEO and Chairman of the Board of GP LLC, Plains's general partner, Holdings LLC (Plains Holdings's general partner), and PAA Finance. Id. ¶ 27. Armstrong signed all of the securities offering materials at issue in the case and many of the SEC filings alleged to contain false and misleading statements and allegedly made false or misleading statements at investor meetings. Id.
Chris Herbold is the Vice President—Accounting and Chief Accounting Officer of GP LLC, PAA Finance, and Holdings LLC. Id. ¶ 28. He signed the registration statements for some of the securities offerings, as well as the SEC filings that contained allegedly misleading statements. Id.
Richard McGee is the Executive Vice–President, General Counsel, and Secretary of GP LLC and Holdings LLC. Id. ¶ 29. He signed the SEC filings that allegedly contained false and misleading statements. Id.
Harry Pefanis is President and Chief Operating Officer of GP LLC and Holdings LLC, and President of PAA finance. Id. ¶ 30. Pefanis signed the registration statement for some of the securities offerings and other SEC filings that contained allegedly false or misleading statements. Id.
Al Swanson is the Executive Vice–President and Chief Financial Officer of GP LLC, PAA Finance, and Holdings LLC. Id. ¶ 31. Swanson signed the allegedly misleading registration statements and SEC filings. Id.ii. The Director Defendants
In addition to these Officer Defendants, the plaintiffs sued various Director Defendants. Victor Burk, Everardo Goyanes, Gary Petersen, John Raymond, Bobby Shackouls, Robert Sinnott, Vicky Sutil, Taft Symonds, and Christopher Temple were all allegedly directors of various Plains entities for at least some of the relevant period. All allegedly signed securities-offering materials containing untrue or misleading statements. Id. ¶¶ 33–41.
In addition to the Plains Defendants, the plaintiffs sued various underwriter defendants. They are all financial institutions alleged to have participated in at least one Plains securities offering in which the relevant registration statement or other offering materials contained false or misleading statements. Id. ¶¶ 42–79. Different underwriter defendants allegedly participated in each of the securities offerings at issue.2
The plaintiffs assert claims under:
• § 10(b) of the Exchange Act and Rule 10b–5 against Plains, Plains Holdings, and the Officer Defendants;
• § 20(a) of the Exchange Act against Holdings LLC, Plains Holdings, and the Officer Defendants;
• § 11 of the...
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