Walter Energy, Inc. v. Audley Capital Advisors LLP

• Decision Date: 20 February 2015
• Docket Number: 1131104.
• Citation: 176 So.3d 821
• Parties: WALTER ENERGY, INC. v. AUDLEY CAPITAL ADVISORS LLPet al.
• Court: Alabama Supreme Court

176 So.3d 821

WALTER ENERGY, INC.

v.AUDLEY CAPITAL ADVISORS LLPet al.

1131104.

Supreme Court of Alabama.

Feb. 20, 2015.

Joseph B. Mays, Jr., John D. Watson III, Marc James Ayers, and Taryn Ely Hodinkaof Bradley Arant Boult Cummings LLP, Birmingham, for appellant.

Harlan I. Prater IV, William H. Brooks, David R. Pruet III, and Wesley B. Gilchristof Lightfoot, Franklin & White, LLC, Birmingham, for appellees.

Opinion

STUART, Justice.

Walter Energy, Inc., appeals the order of the Jefferson Circuit Court dismissing claims it had asserted against investor Julian A. Treger, his firm Audley Capital Advisors LLP, and other associated investment entities (hereinafter referred to collectivelyas “the Audley defendants”¹) stemming from their alleged involvement in a scheme to improperly manipulate the share price of Walter Energy stock. We affirm.

I.

In late 2010, Birmingham-based Walter Energy agreed to purchase Western Coal Corporation, a Canadian energy company in which the Audley defendants held a significant minority stake. Between then and April 1, 2011, when the acquisition closed, the Audley defendants exchanged millions of shares of Western Coal stock for approximately $770 million in cash and Walter Energy stock. Walter Energy asserts that the Audley defendants thereafter conspired to execute a “pump and dump” scheme to drive up the price of Walter Energy stock and to further profit from Walter Energy's purchase of Western Coal.²

Walter Energy alleges that the Audley defendants initiated their scheme on July 17, 2011, when Treger sent a letter to Walter Energy stating that Audley Capital Advisors had directed an investment bank to gauge various third parties' interest in acquiring Walter Energy and intimating that Walter Energy could be sold at double its then current share price. The letter also advised that other large institutional shareholders in Walter Energy had been contacted and that they would support an acquisition of the company at the appropriate price. The letter, marked “private & confidential,” requested a response from Walter Energy by August 5, 2011; however, Audley Capital Advisors publicly released the letter on July 18, 2011, before receiving any response from Walter Energy.

The share price of Walter Energy stock, which trades publicly on the New York Stock Exchange, thereafter spiked, and, in the days and weeks that followed, the Audley defendants sold approximately 900,000 shares of Walter Energy stock. In September 2011, The Times,a London newspaper, reported that another mining company was considering making an offer to purchase Walter Energy and that it had in fact already arranged financing to do so. Shares of Walter Energy again spiked, and the Audley defendants sold approximately 300,000 more shares of Walter Energy stock that month. In October 2011, there were more media reports that various mining and energy companies were targeting Walter Energy for a takeover, and the Audley defendants sold approximately 200,000 shares of Walter Energy stock that month. Finally, in December 2012, the Daily Mailin London reported that an Australian mining company was poised to make an offer to acquire Walter Energy.

To date, however, no company has made a formal bid to acquire Walter Energy or has attempted any other sort of a takeover. Walter Energy now asserts that all the media reports indicating that an acquisition of Walter Energy was imminent were false and that they were generated by the Audley defendants in an attempt to create interest in Walter Energy stock so the share price would rise and the Audley defendants could sell their shares of Walter Energy stock at the new artificially high price.

Walter Energy further argues that the Audley defendants perpetuated the idea that the board of directors of Walter Energy was declining merger opportunities based on the directors' own self interest. On March 22, 2013, the Audley defendants gave notice that they would present their own slate of directors at the April 25, 2013, annual meeting of Walter Energy shareholders by filing the required information with the Securities and Exchange Commission and distributing a letter to all Walter Energy shareholders seeking support for their proposed slate of directors. However, Walter Energy alleges that, in fact, the intent of the March 22 letter was to hinder Walter Energy's attempt to raise $350 million by way of a debt offering. Although neither the Audley defendants' proposed slate of candidates nor the attempt to stop the debt offering was ultimately successful, Walter Energy alleges that both efforts were part of a continued effort to manipulate the share price of Walter Energy stock.

In May 28, 2013, Walter Energy sued the Audley defendants in the Jefferson Circuit Court seeking damages based upon their alleged improper manipulation of the share price of Walter Energy stock, as well as an injunction barring any further attempts to do so.³As eventually amended, Walter Energy's complaint alleged violations of the Alabama Securities Act, § 8–6–1 et seq., Ala.Code1975; various species of fraud; felonious injury; conspiracy; intentional interference with contractual or business relations; negligent misrepresentation; and unjust enrichment. Following the filing of Walter Energy's initial complaint, and again following the filing of three amended complaints, the Audley defendants moved the trial court to dismiss all the claims asserted against them on Rule 12(b)(6), Ala. R. Civ. P., grounds. On May 20, 2014, the trial court granted the Audley defendants' motion to dismiss and dismissed with prejudice all the claims asserted against them by Walter Energy. On June 30, 2014, Walter Energy filed its notice of appeal to this Court.

II.

We explained the standard of review applicable to an appeal of a trial court's order granting a motion to dismiss in Crosslin v. Health Care Authority of Huntsville,5 So.3d 1193, 1195 (Ala.2008):

“In considering whether a complaint is sufficient to withstand a motion to dismiss under Rule 12(b)(6), Ala. R. Civ. P., a court ‘must accept the allegations of the complaint as true.’ Creola Land Dev., Inc. v. Bentbrooke Housing, L.L.C.,828 So.2d 285, 288 (Ala.2002)(emphasis omitted). ‘ “The appropriate standard of review under Rule 12(b)(6)[, Ala. R. Civ. P.,] is whether, when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle [it] to relief.” ’ Smith v. National Sec. Ins. Co.,860 So.2d 343, 345 (Ala.2003)(quoting Nance v. Matthews,622 So.2d 297, 299 (Ala.1993)). In determining whether this is true, a court considers only whether the plaintiff may possibly prevail, not whether the plaintiff will ultimately prevail. Id.Put another way, ‘ “a Rule 12(b)(6)dismissal is proper only when it appears beyond doubt that the plaintiff can prove no set of factsin support of the claim that would entitle the plaintiff to relief.” ’ Id.(emphasis added).”

Thus, we afford the trial court's order of dismissal no presumption of correctness, and we review the sufficiency of Walter Energy's complaint de novo. See also DGB, LLC v. Hinds,55 So.3d 218, 223 (Ala.2010)(quoting Nance v. Matthews,622 So.2d 297, 299 (Ala.1993)) (“ ‘On appeal, a dismissal is not entitled to a presumption of correctness.’ ”).

Although the trial court dismissed all the claims Walter Energy had asserted against the Audley defendants, Walter Energy challenges only the trial court's dismissal of its Alabama Securities Act claim and its intentional-interference-with-contractual-or-business-relations claim, arguing that those claims were adequately pleaded and not due to be dismissed under Rule 12(b)(6). We first consider Walter Energy's claim that the Audley defendants violated the Alabama Securities Act.

III.

Walter Energy specifically argues that the Audley defendants violated § 8–6–17(a), Ala.Code 1975, a provision of the Alabama Securities Act, which provides:

“It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, to:

“(1) Employ any device, scheme, or artifice to defraud;

“(2) Make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or

“(3) Engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.”

The facts as alleged by Walter Energy in its third and final amended complaint, which we must accept as true at this stage of the proceedings, do indicate that the Audley defendants engaged in conduct that appears to fall within the list of activities prohibited by § 8–6–17(a). Indeed, although it appears that the Audley defendants will dispute whether they actually engaged in such conduct at a later time if the need to do so arises, their arguments in support of the trial court's order of dismissal do not include an argument that their alleged conduct, if proven, would not constitute conduct prohibited by the terms of § 8–6–17(a).

Rather, the Audley defendants argue that § 8–6–17(a)does not apply to any of their activities in connection with the sale of Walter Energy stock because, they argue, § 8–6–12(a), Ala.Code 1975, provides that the Alabama Securities Act applies only “to persons who sell or offer to sell [securities] when (1) an offer to sell is made in this state, or (2) an offer to buy is made and accepted in this state.” Subsection 8–6–12(c) further provides that “[a]n offer to sell or to buy is made in this state, whether or not either party is then present in this state, when the offer (1) originates from this state, or (2) is directed by the offeror to this state and received at the place to which it is directed.” There has been no allegation that there was an offer to buy in this case, and the Audley defendants argue that they have never made any offer to sell...