In re Royal Dutch/Shell Transport Sec. Litigation
| Decision Date | 09 August 2005 |
| Docket Number | Civil Action No. 04-374(JWB). |
| Parties | In re ROYAL DUTCH/SHELL TRANSPORT SECURITIES LITIGATION. |
| Court | U.S. District Court — District of New Jersey |
Lynch, Martin, Kane, Kuper, Keefe & Bartels, by John E. Keefe, Jr., Esquire, Shrewsbury, NJ, Liaison Counsel for the Class.
Robertson, Freilich, Bruno & Cohen, by William W. Robertson, Esquire, Jeffrey A. Cohen, Esquire, Newark, NJ, and Debevoise & Plimpton, by Colby Smith, Esquire, Washington, DC, for Defendants Royal Dutch Petroleum Company; N.V. Koninklijke Nederlandsche Petroleum Maatschappij; The "Shell" Transport and Trading Company, PLC; Shell Petroleum, N.V.; and The Shell Petroleum Company Limited.
Akin Gump Strauss Hauer & Feld, by James Osborne, Esquire, Washington, DC, for Defendant Van der Vijver.
Robinson & Livelli, by Donald A. Robinson, Esquire, Newark, NJ, Shearman & Sterling, LLP, by Steven F. Molo, Hayden S. Baker, New York City, NY, for Defendant KPMG NV.
Bressler, Amery & Ross, by Thomas A. McKinney, Esquire, Morristown, NJ, for Defendant KPMG, Int'l.
Lowenstein Sandler, by Douglas S. Eakeley, Esquire, Marcela A. DePaulis, Esquire, Roseland, NJ, Heller Ehrman, LLP, by Lawrence Zweifach, Richard Cashman, New York City, NY, for Defendant PWC Int'l.
Hughes Hubbard & Reid, by John N. Poulos, Esquire, Jersey City, NJ, and Hughes Hubbard & Reid, by William R. Maguire, Esquire, Savvas A. Foukas, Esquire, New York, NY, for Defendant PWC UK.
This matter comes before the Court on various motions to dismiss, pursuant to Federal Rules of Procedure 12(b)(1), 12(b)(2) and 12(b)(6), by the Individual and Corporate Defendants of Royal Dutch/Shell Transport and Defendants KPMG NV, KPMG International, PwC UK and PwC International. On July 13 and July 15, 2005, this Court heard oral arguments on the aforesaid motions.1 This court has jurisdiction over this matter pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa.
Lead Plaintiff, the Pennsylvania State Employees' Retirement System and the Pennsylvania Public School Employees' Retirement System ("Lead Plaintiff"), brings this action on behalf of itself and all persons who purchased the securities of N.V. Koninklijke Nederlandsche Petroleum Maatschappij, a/k/a the Royal Dutch Petroleum Company, ("Royal Dutch") and The Shell Transport and Trading Company, PLC ("Shell Transport") (together, Royal Dutch and Shell Transport will be referred to as either "RDS", "The Shell Group" or the "Companies"), including the ordinary shares traded on overseas markets and the New York Stock Exchange ("NYSE") and the American Depository Receipts ("ADRs") trading on the NYSE between April 8, 1999 and March 18, 2004 (the "Class Period"). The Defendants include: RDS, several of RDS's current and former senior executives, and RDS's outside auditors, PricewaterhouseCoopers LLP ("PwC UK") and KPMG Accountants N.V. ("KPMG NV"), as well as PricewaterhouseCoopers International and KPMG International. The Complaint seeks to recover damages caused by alleged violations of the federal securities laws.
The claims in the Complaint stem from the dissemination by RDS of what Plaintiff characterizes as "materially false and misleading statements" concerning RDS's reported proved oil and natural gas reserves. See Consolidated Amended Class Action Complaint ("Complaint"), ¶ 3. The Complaint alleges that, during the Class Period RDS issued false public reports, overstating: (a) their proved oil and natural gas reserves by billions of barrels of oil equivalent ("boe"), (b) their reserves replacement ratio ("RRR"), and (c) their future cash flows by over $100 billion. Id. Plaintiff claims that before and during the Class Period, the RDS Defendants repeatedly represented to the investing public that RDS was successfully identifying new proved oil and gas reserves and replacing existing proved reserves depleted by production. New and existing proved reserves are key performance indicators in the oil and gas industry. Id. ¶ 4. Such representations were made in proposals to market analysts, press releases, Annual Reports, filings with the United States Securities and Exchange Commission ("SEC") and through other public media. Id. RDS's joint reports include Form 20-F, which the SEC requires to be filed annually. The RDS Defendants represented the following on Form 20-F for the years 1998-2002:
1998
During 1998 the Group's total proved reserves for oil (including natural gas liquids) and natural gas increased from 19.4 to 20.5 billion barrels of oil equivalent.... The net additions to proved reserves more than replaced the 1998 production, with replacement ratios of some 140% for oil (compared with 130% in 1997) and some 250% for gas (compared with 210% in 1997).
The overall 1999 replacement ratio of proved crude oil and natural gas reserves and oil sands stands at 101% (147% excluding 1999 divestments and acquisitions).... The three-year rolling average replacement ratio for total crude oil and natural gas proved reserves ... stands at 132%, reflecting the fact that oil and gas production over 1997-99 has been more than replaced by net additions over the same period.
The proved hydrocarbon reserves replacement ratio for 2000 was 105%.... Therefore production during the year of 1.4 billion barrels of oil equivalent was more than replaced.... The three-year rolling average proved hydrocarbon reserves replacement ratio... stands at 117%.
The proved hydrocarbon reserves replacement ratio for 2001 is 74% ... [A]nd the three-year rolling average ... now stands at 101%. Proved reserves are equivalent to more than 14 years of current production.
The proved hydrocarbon reserves replacement ratio for 2002...
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