In re Venator Materials PLC Sec. Litig.
| Decision Date | 07 July 2021 |
| Docket Number | Civil Action No. 4:19-cv-03464 |
| Citation | 547 F.Supp.3d 624 |
| Parties | IN RE VENATOR MATERIALS PLC SECURITIES LITIGATION |
| Court | U.S. District Court — Southern District of Texas |
Eight months before Venator Materials PLC went public, a massive fire caused extensive damage to one of its most important manufacturing plants in Pori, Finland. The fire was disclosed, along with statements of intention to restore the production capacity of the devastated plant. Venator's initial and secondary public offerings then proceeded in August and December of 2017. The price of that stock later suffered sharp declines in September and October of 2018, when Venator announced that it was abandoning the Pori facility altogether and had experienced previously undisclosed cost overruns amounting to hundreds of millions of dollars.
This securities class action largely concerns alleged misrepresentations and omissions by Venator executives and others prior to and after the IPO and SPO. These addressed information on such topics as the ability to rebuild the Pori facility after the fire, the pace and expectations in that regard, the restored production capacity and future benchmarks at various points along the way, the available insurance proceeds, and the anticipated costs. The overall contention is that it was only the alleged misrepresentations and omissions on these topics that even allowed the IPO and SPO to go forward in the first place, while fraudulently propping up the stock price thereafter.
Plaintiffs Cambria County Employees’ Retirement System, City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, Fresno County Employees’ Retirement Association, and City of Pontiac General Employees’ Retirement System, individually and on behalf of similarly situated persons and entities, bring action for violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and related regulations against (i) Venator Materials PLC, whose shares they purchased; (ii) Simon Turner, Kurt D. Ogden, Stephen Ibbotson, Mahomed Maiter, and Russ R. Stolle, who were all Venator executives at the pertinent time; (iii) Douglas D. Anderson, Kathy D. Patrick, Sir Robert J. Margetts, and Daniele Ferrari, who were all Venator directors at the pertinent time; (iv) Peter R. Huntsman, who was a Venator director at the pertinent time, as well as Huntsman Corporation's CEO and one of its directors; (v) Huntsman Corporation, Huntsman (Holdings) Netherlands BV, and Huntsman International LLC, who sold the Venator shares; and (vi) Citigroup Global Markets Inc, Merrill Lynch, Pierce, Fenner & Smith Inc, Goldman Sachs & Co LLC, and JP Morgan Securities, who underwrote the sale of Venator's shares. Dkt 41.
Defendants move to dismiss the action in its entirety for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Dkt 58. The motion is granted in part and denied in part.
As to the claims under section 10(b) of the Exchange Act and SEC Rule 10b-5 against Venator, Turner, and Ogden, it is granted with respect to statements regarding the market demand for titanium dioxide and Venator's insurance coverage, including as related to business-interruption coverage of events at the Venator facility in Pori, Finland. It is denied with respect to statements regarding the manufacturing capacity of the Pori facility and the timeline to rebuild it after the subject fire.
As to the control-person claims under section 20(a) of the Exchange Act for primary violations of section 10(b) against Huntsman Corporation, Turner, Ogden, Ibbotson, and Stolle, it is denied.
As to the claims under section 11 of the Securities Act against Venator, Turner, Ogden, Ibbotson, Stolle, Peter Huntsman, Anderson, Patrick, Margetts, Ferrari, Citigroup, Merrill Lynch, Goldman Sachs, and J.P. Morgan, it is denied.
As to the claims under section 12(a)(2) of the Securities Act against Venator, Citigroup, Merrill Lynch, Goldman Sachs, J.P. Morgan, Huntsman Corporation, Huntsman Holdings, and Huntsman International, it is granted.
As to the control-person claims under section 15 of the Securities Act for primary violations of section 11 against Turner, Ogden, Ibbotson, Stolle, Peter Huntsman, Anderson, Patrick, Margetts, Ferrari, Huntsman Corporation, Huntsman Holdings, and Huntsman International, it is denied. As to such claims for primary violations of section 12(a)(2), it is granted.
Contents
b. Section 20(a) control-person claims...665
c. Summary as to Exchange Act claims...666
a. Statute of limitations...667
b. Section 11 claims...668
c. Section 12(a)(2) claims...669
d. Section 15 control-person claims...670
e. Summary as to Securities Act claims...670
Securities law isn't for the faint of heart. It's a bit dense, to say the least. Justice Antonin Scalia once remarked the same as to administrative law, as he invited his audience to lean back, clutch the sides of their chairs, and steel themselves for what was ahead. Antonin Scalia, The Essential Scalia: On the Constitution, the Courts, and the Rule of Law , 283 (Crown Forum 2020) (Judge Jeffrey S. Sutton and Edward Whelan, eds) (speech delivered in 1989 on Chevron deference).
The reader here is similarly advised to buckle up. The law in this area may at first appear to be arcane, being neither intuitive nor straightforward. But even a slightly better understanding of securities class actions hopefully provides its own reward.
Plaintiffs. Cambria County Employees’ Retirement System, City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, the County Employees’ Retirement Association, and City of Pontiac General Employees’ Retirement System are governmental entities that provide benefits to eligible public employees. They bring individual and class claims, complaining generally of losses sustained by purchasing shares of stock in Venator Materials PLC between August 3rd and November 30th of 2017. Dkt 41 at ¶¶ 20–22.
Venator. Venator Materials PLC manufactures and markets chemical products. Over 70% of its revenue is derived from selling just one product—titanium dioxide, which is "a white inert pigment that provides whiteness, opacity and brightness to a range of everyday products." Id at ¶ 24. Venator primarily focuses on producing specialty TiO2, which is used in end products such as fibers, catalysts, food, pharmaceuticals, and cosmetics. Id at ¶¶ 57–58. Plaintiffs accuse Venator generally of knowing (or not exercising reasonable care to know) about alleged misrepresentations and omissions in its IPO and SPO materials along with other filings with the Securities and Exchange Commission. They further allege that Venator knew (or should have known) about alleged misrepresentations and omissions made by its executives during earnings calls. Id at ¶¶ 207–23, 292, 370.
The Selling Shareholder Defendants. Prior to its initial public offering in August 2017, Venator was organized as the Pigments & Additives Division within Defendant Huntsman Corporation, a multinational manufacturer of chemical products based in The Woodlands, Texas. Id at ¶¶ 24, 37. Defendants Huntsman (Holdings) Netherlands BV and Huntsman International LLC are wholly owned subsidiaries of Huntsman Corporation. These three Huntsman entities each sold shares offered in the IPO and a secondary offering shortly thereafter. Id at ¶¶ 40–41. Plaintiffs accuse Huntsman Corporation and its two subsidiaries generally of knowing (or not exercising reasonable care to know) about the alleged misrepresentations and omissions in the IPO and SPO materials. Id at ¶¶ 43, 365–74. Plaintiffs further seek to hold Huntsman Corporation liable for the alleged misrepresentations and omissions made by Venator's executives because Huntsman maintained a controlling interest in Venator. Id at ¶ 300.
The Executive Defendants. Simon Turner is the chief executive officer of Venator and one of its directors. Kurt D. Ogden is the chief financial officer of Venator. Stephen Ibbotson was a vice president and the corporate controller for Venator. Mahomed Maiter is the executive vice president of Venator and was a senior vice president over the business operations of it "white pigments division." Russ R. Stolle was a senior vice president and deputy general counsel for Huntsman Corporation before the IPO and is now a senior vice president, general counsel, and chief compliance officer for Venator. Id at ¶¶ 25–29. Plaintiffs accuse these five generally of making materially false and misleading statements and omissions concerning the capacity of the Pori facility after a catastrophic fire described below, the rebuilding progress and costs, the impact on TiO2 prices, the impact on Venator's business, and Venator's use of related insurance proceeds. Id at ¶¶ 207–23. They seek to hold Turner and Ogden liable for statements they each made during various earnings calls, and to hold all of them liable for Venator's alleged misrepresentations and omissions. Id at ¶¶ 287–303. Plainti...
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