Jacobowitz v. Range Res. Corp.

Decision Date31 March 2022
Docket Number4:21-cv-0751-P
Citation596 F.Supp.3d 659
Parties Howard JACOBOWITZ, individually and on behalf of others similarly situated, Plaintiff, v. RANGE RESOURCES CORPORATION et al., Defendants.
CourtU.S. District Court — Northern District of Texas

Alfred G. Yates, Jr., Law Office of Alfred G. Yates Jr., Pittsburgh, PA, J. Alexander Hood, II, Pro Hac Vice, Jeremy Alan Lieberman, Pro Hac Vice, Tamar A. Weinrib, Pomerantz LLP, New York, NY, Willie Briscoe, The Briscoe Law Firm, Dallas, TX, for Plaintiff.

David J. Drez, III, Stafford Powell Brantley, Ian Brinton Hatch, Wick Phillips Gould & Martin LLP, Fort Worth, TX, Amanda Margaret MacDonald, Michael James Mestitz, Pro Hac Vice, Zachary K. Warren, Williams & Connolly LLP, Washington, DC, for Defendants Range Resources Corporation, Jeffrey L. Ventura, Mark S. Scucchi, Roger S. Manny.

David J. Drez, III, Stafford Powell Brantley, Ian Brinton Hatch, Wick Phillips Gould & Martin LLP, Fort Worth, TX, Amanda Margaret MacDonald, Michael James Mestitz, Pro Hac Vice, Williams & Connolly LLP, Washington, DC, for Defendant Dori A. Ginn.



Before the Court is DefendantsMotion to Dismiss for Failure to State a Claim ("Motion"). ECF No. 69. Having considered the Motion, briefs, arguments of counsel, record, and applicable law, the Court will GRANT the Motion (ECF No. 69); Jacobowitz's claims will therefore be DISMISSED with prejudice.


Shareholder Howard Jacobowitz sued Range Resources Corporation ("Range") and four senior executives (together, "Defendants") for allegedly committing securities fraud. He claims they made materially false or misleading statements or failed to disclose material information in securities filings and on Range's website. Am. Compl. ¶ 7. These statements and omissions concerned the status and classification of Range's oil wells, the related accounting, a state regulatory investigation and fine, and Range's Code of Ethics. Id.

Specifically, Jacobowitz theorizes that Range's filings were rendered materially false or misleading because Range misclassified 42 of its 1,272 wells in Pennsylvania's Appalachian Basin as "inactive" instead of "abandoned."2 This classification is significant because "abandoned" wells must be "plugged" by the owner. Plugging wells entails permanently closing them off and rendering them incapable of further production. Misclassifying wells in Pennsylvania can also lead to the state government imposing civil penalties. Jacobowitz claims that from July 16, 2013, to October 11, 2017, Defendants knowingly misclassified the 42 wells to dodge plugging expenses and to maintain "tons of cheap [mineral] leases" that would otherwise be lost. Id. ¶¶ 31–32.

According to Jacobowitz, the trouble started for Range when it applied for inactive status on a well called Shirocky Unit #1. Id. ¶ 33. The application stated that "significant reserves remain in place and [the applicant planned] to return the well to production." Id. The application also contained Range's certification "that this well is of future utility and that significant reserves remain in place that Range intends to produce." Id. Range, however, inadvertently attached an internal memorandum ("Shirocky Memo") from September 2017 stating this well "had ‘last produced to sales in December 2016,’ ‘had become incapable of economic production,’ and was ‘not capable of gas sales going forward.’ " Id. ¶ 34. The Shirocky Memo indicated Range would "file for Inactive Status for this well," rather than seeking an "abandoned" classification. Id.

After receiving the Shirocky Memo, the Pennsylvania Department of Environmental Protection ("DEP") investigated Range's classifications practices. In November 2017, the DEP issued a subpoena for documents relating to wells for which Range had requested inactive status in the Appalachian Basin. Id. ¶ 35. At the end of its investigation, the DEP concluded that, from July 2013 to October 2017 ("Class Period"), Range misclassified 42 wells—slightly less than 1% of Range's wells in the region. Id. ¶ 32. On January 7, 2021, the DEP settled with Range and both parties signed a Consent Assessment of Civil Penalty ("CACP"). Id. ¶ 36. Per this CACP, Range paid a $294,000 civil penalty for its regulatory infractions. Id.

About one month later, on February 10, 2021, the DEP announced its settlement with Range in a press release. Id. ¶¶ 105, 107. This press release is the purported corrective disclosure upon which Jacobowitz's claims rely. See id. ¶¶ 105, 109. Range's stock price fluctuated both during and after this announcement. Id. ¶ 107. Specifically, Jacobowitz alleges that "as the market fully digested the significance of the DEP's announcement, Range's stock price fell $0.62 per share, or 6.08%, from its closing price on [the day of the press release], to close at $9.57 per share [the next day]."3 Id. He frames this drop as a "precipitous decline in the market value of [Range's] securities[.]" Id. ¶ 108. Jacobowitz thus claims that Range's stock fluctuation was not merely correlated with the DEP's press release, but that the temporary drop in stock price was directly caused by this announcement.

Jacobowitz thus alleges that Defendants, with intent to deceive, defraud, or manipulate or with severe recklessness, misclassified Range's wells and hid that decision and the ensuing investigation from investors. This, he argues, rendered Range's securities filings from 2016 to 2020 as false or misleading. Defendants’ pertinent statements and omissions appear in several places: Range's annual 10-K filings, its quarterly 10-Q filings, and its website.

Jacobowitz advances several theories in support of his claims. He argues that Range's securities disclosures were false or misleading because: (1) Range improperly classified wells; (2) Range failed to plug wells as required by Pennsylvania regulations; (3) Range's conduct exposed it to liability and "artificially decreased [its] periodically reported cost estimates to plug and abandon its wells"; and (4) a state agency investigated and fined Range for misclassifying wells. Am. Compl. ¶ 7. Jacobowitz relies heavily on confidential witnesses ("CWs") to support these claims. Id. ¶ 31, nn.1–4.

DefendantsMotion to Dismiss is fully briefed. The Court also heard oral arguments on the Motion. Order, ECF No. 80. The Motion is thus ripe for the Court's review.

A. Rule 12(b)(6) Standard

To defeat a motion to dismiss pursuant to Rule 12(b)(6), a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’ " Id. (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ).

In reviewing a Rule 12(b)(6) motion, the Court must accept all well-pleaded facts in the complaint as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mut. Auto. Ins. Co. , 509 F.3d 673, 675 (5th Cir. 2007). The Court is not, however, bound to accept legal conclusions as true, and only a complaint that states a plausible claim for relief survives a motion to dismiss. Iqbal , 556 U.S. at 678–79, 129 S.Ct. 1937. If there are well-pleaded factual allegations, the Court assumes their veracity and then determines whether they plausibly give rise to an entitlement to relief. Id.

B. Rule 9(b) Pleading Standard

Pleading private claims for securities fraud is difficult by design. Because Jacobowitz alleges Defendants committed securities fraud, his pleadings must satisfy the heightened pleading requirement of Federal Rule of Civil Procedure 9(b). FED. R. CIV. P . 9(b).

Rule 9(b) requires that pleadings "state with particularity the circumstances constituting fraud or mistake." See Elec. Workers Pension Fund, Loc. 103, I.B.E.W. v. Six Flags Ent. Corp. , 524 F. Supp. 3d 501, 523 (N.D. Tex. 2021) (Pittman, J.) (quoting Mun. Empls.’ Ret. Sys. of Mich. v. Pier 1 Imps., Inc. , 935 F.3d 424, 429 (5th Cir. 2019) ). Accordingly, "a plaintiff must ‘identify the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what that person obtained thereby.’ " Owens v. Jastrow , 789 F.3d 529, 535 (5th Cir. 2015) (quoting Tuchman v. DSC Commc'ns Corp. , 14 F.3d 1061, 1068 (5th Cir. 1994) ) (internal citation and alterations omitted).

C. Pleading Standard Under the Private Securities Litigation Reform Act

Private securities fraud claims brought in federal court "must also comply with the strictures imposed by the Private Securities Litigation Reform Act (‘PSLRA’)." Six Flags Ent. Corp. , 524 F. Supp. 3d at 523 (citing 15 U.S.C. § 78u–4). "The PSLRA has raised the pleading bar even higher and enhances Rule 9(b) ’s particularity requirement for pleading fraud in two ways." Neiman v. Bulmahn , 854 F.3d 741, 746 (5th Cir. 2017) (quoting Loc. 731 I.B. of T. Excavators & Pavers Pension Tr. Fund v. Diodes, Inc. , 810 F.3d 951, 956 (5th Cir. 2016) ); see also 15 U.S.C. § 78u–4(b)(1). "First, the plaintiff must specify each statement alleged to have been misleading." Id. (quoting Diodes, Inc. , 810 F.3d at 956 ). "Second, for each act or omission alleged to be false or misleading, ...

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