Firefighters Pension & Relief Fund v. Bulmahn
Firefighters Pension & Relief Fund v. Bulmahn
Opinion of the Court
SECTION: R
ORDER AND REASONS
This case is a securities class action brought on behalf of all persons who purchased ATP Oil & Gas Corporation’s common stock in the public market between December 16, 2010 and ATP’s bankruptcy filing on August 17, 2012 (“the Class Period”). Because it is in bankruptcy proceedings, ATP is not named as a defendant in this action. Instead, court-appointed Léad Plaintiffs Brian M. Neiman, William R. Kruse, and the Moshe Issac Foundation (“Lead Plaintiffs”), individually and bn behalf of the class, are suing ATP’s senior executives, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well 'as SEC Rule 10b-5 promulgated thereunder. Déféndants T. Paul Buhlman, Albert L. Reese, Jr., Keith R. Godwin, and Leland E. Tate filed a motion to dismiss plaintiffs’ Consolidated Class Action Complaint for failure to state a claim on March 6, 2015.
I. BACKGROUND
Before filing for bankruptcy in 2012, ATP engaged in the acquisition, development, and production of oil and natural gas properties.
On April 19, 2010, ATP raised $1.5 billion by selling unregistered private notes to institutional investors in a transaction exempt from the registration requirements under the Securities Act.
Between April and December 2011, ATP issued three press releases announcing the drilling and completion of two wells at Green Canyon (“GC”) Block 300 (“Clipper”) in the deepwater Gulf of Mexico.
On October 12, 2010, ATP filed a Registration Statement and Prospectus with the Securities and Exchange Commission (“SEC”), indicating its intent to exchange the $1.5 billion in unregistered' private notes for equivalent registered notes.
The Prospectus
New regulations already issued will, and potential future regulations or additional statutory limitations, if enacted or issued, could, require a change in the way we conduct our business, increase our costs of doing business or ultimately prohibit us from drilling for or producing hydrocarbons in the Gulf of Mexico. .. ,21
On August 24, 2011, ATP issued a press release announcing the first production from Mississippi Canyon (‘MC‘) Block 941 #4 (also referred to as MC Block 941 A-2) in the deepwater Gulf of Mexico.
[t]he well delivered on ATP’s original expectations with an initial rate exceeding 7,000 Boe per day. ... Company-wide production now exceeds 31,000 Boe per day. ,.. We have finally realized the planned material production revenue of this well that has been much anticipated for 16 months. ... The greater-than-a-billion-dollar investment at Telemark reflects ATP’s continuing commitment to develop America’s energy resources.23
' On September 12, 2011, Reese spoke on ATP’s behalf at the Rodman Renshaw Global Investment Conference.
*500 You can see the numbers we have here, 21,000 barrels last year; first half of this year about 25,000 barrels, most recent report we said 31,000 barrels that’s with the .new Telemark well. On later this year, we do expect to add the last well at Telemark that should be on by .the end of this year, sort of Christmas present and New Year’s present and Thanksgiving Day present, too early to tell.25
On September 26, 2011, Moody’s Investor Services (“Moody’s”) published a report stating that ATP had a “high likelihood” of restructuring.
ATP shows a “high likelihood” it may face some type of restructuring, analysts from Moody’s Investors Service wrote in a Sept. 26 report. The company’s asset base and cash flows are ‘not sufficient to cover' the second-lien notes, according to the report. Moody’s assigns a Caa2 grade to ATP with a “negative” outlook.27
On September 29, 2011, Bloomberg News published defendant Reese’s response to. the Moody report in an article titled “ATP Says New Gulf of Mexico Oil Wells' to Stave Off Default.”
ATP Oil & Gas, one of the first oil explorers allowed to resume drilling in the U.S. Gulf of Mexico after the Deep-water Horizon disaster, expects to pump enough oil from new wells during the next three years to avoid defaulting on $1.5 billion in debt.
Moody’s Investors Service this week said ATP shows- a “high likelihood” it may have to restructure its debt because its cash flow and asset base -are insufficient to cover notes maturing in 2015. The company’s $1.79 billion in net debt exceeds that of 97% of Houston-based ATP’s U.S. .peers, according to data compiled by Bloomberg.
ATP expects to begin production from new wells at its Telemark field this year, followed by additional • output at the Clipper and Gomez projects in 2012, En-trada in 2013 and Cheviot a year later, said Albert L. Reese, ATP’s chief financial officer. All of those fields are in the Gulf of Mexico, except Cheviot, which is in the U.K.
“All of that is before the bonds come due in 2015, so I don’t know what Moody’s is talking about,” Reese said today in a 'telephone interview. “I can’t fight rumors or reports, all I can do is continue to deliver on the promises we’ve made. Our expectation is that everything is going to be fine.”29
Lead Plaintiffs allege that contrary to Reese’s words of assurance, “everything was not fine.” According to data available on the Bureau of Ocean Energy Management’s website, MC Block 941, which already contained two producing wells, produced an average of 9,379 Boe per day in July 2011, the last full month before ATP announced its first production. from Well #4.
On November 8, 2011, ATP issued a press release announcing its Third,,Quarter 2011 Results, in which- it disclosed that overall oil and gas production for the period was only 24,200 Bóe per day, in contrast to the 31,000 per day it announced in August.
Following these disclosures regarding ATP’s production rates, ATP’s common stock fell to $8.45, decreasing by $2.05 from the previous day’s closing price and $2.50 from its November 9 intra-day high.
In addition to the decline in value of ATP’s common stock, plaintiffs allege that the lower production from Well #4 cost ATP crucial revenue that it needed to complete the pipeline to the Clipper wells— approximately $20.5 million in September and October 2011 by plaintiffs’ calculations.
On June 1, 2012, ATP issued a press release announcing that Matt McCarroll had joined ATP as its new Chief Executive Officer and that he had demonstrated his commitment to the company by purchasing one million shares of its common stock at market price.
Reese testified at ATP’s bankruptcy hearing that ATP pursued numerous avenues of potential financing to improve the
Plaintiffs allege that ATP’s stock “plummeted” from $1.49 to a closing price of $0.36 on August 10, 2012 “amid reports that the Company may file for bankruptcy.”
The primary reason for the reorganization began with the Macondo well blowout in April 2010 and the imposition beginning in May 2010 of the moratoria on drilling and related activities in the Gulf of Mexico. These events prevented ATP from bringing to production in 2010 and in early 2011 six development wells that would have added significant production to ATP. As of the date of this filing, three of these wells are yet to be drilled. Had ATP been allowed to drill and complete these wells ATP believes it would have provided a material production change in 2010 continuing to today. This projected increase in production should have substantially increased cash flows, shareholder value and allowed the company the ability to withstand normal operational issues experienced by owners of oil and gas properties in the Gulf of Mexico. In addition, these incremental cash flows would have mitigated or prevented the need to enter into many of the financings ATP has closed since the imposition of the moratoria — financings that require relatively high rates of return and monthly payments.46
On August 20, 2012, the next trading day, ATP’s common stock price fell $0.1593 per share to close at $0.30 per share.
In a declaration filed in the bankruptcy action, Reese summarized the adverse impact of the moratoria on ATP’s business operations, describing the Deepwater Horizon explosion and oil spill as the “primary reason” for the company’s ultimate failure:
As detailed further below, due to adverse operational exigencies stemming from the 2010 Gulf drilling moratoria as well as subsequent events, ATP finds itself with over $2 billion of indebtedness and less than $10 million in cash as of the Petition Date. ...
When the moratorium was effectively lifted in March 2011, ATP received per*503 mits and attempted .to generate production from these projects as- quickly as possible. By February 2012, ATP was able to complete the Mississippi, Canyon 941 A-1, 1-2, and Mississippi Canyon 942 A-3 wells in its Telemark field-and connect them to the ATP Titan____■
Overall, ATP’s inability to complete various ■ wells or commence' pipeline construction when planned due to the shutdown in the Gulf created, significant liquidity problems, which were exacerbated by less than expected production rates at ATP’s Telemark Hub and cost overruns on the Octabuoy. ATP’s management, with the assistance of various outside professionals, closely monitored these challenging conditions and evaluated potential alternatives to improve ATP’s liquidity position. ATP diligently sought to solicit potential partners, joint operators, or investors with respect to its foreign operations to share in the development costs of its North Sea and Eastern Mediterranean oil and gas properties. Although it is generally recognized that the reserves and operations of ATP’s foreign affiliates have .significant value, ATP has not yet been able to complete a transaction with any parties that will bring in enough financing to complete the construction of the necessary ’infrastructure to start generating new production from these foreign deepwater operations.
Despite ATP’s best efforts, it was .unable to overcome the impact of the moratoria when ongoing project construction costs, declining oil prices and less than anticipated production put it in the untenable position of running out of cash before it could complete the Clipper Wells project and generate the revenues necessary to begin remedying its situation. In the period leading up to the Petition Date, ATP found itself facing a severe liquidity crisis, with a cash position of less than $10 million and a substantial backlog of .trade payables and amounts due under overriding royalties and net profit interests totaling, -in the aggregate, over [$170] million, along with substantial payments due on the Second Lien Notes later this fall. ATP’s inability to make current payments on many of its obligations have resulted in a number of notices of default and lawsuits from its creditors, with some seeking prejudgment relief (such as temporary restraining orders or writs of sequestration) that could further restrict the Company’s short-term cash flow and liquidity.48
When asked at the First Day Hearings whether “ATP [had] the liquidity and revenues at that time to absorb a lengthy moratorium,” Reese responded “No. We could not.”
Testimony at the First Day Hearings further revealed that ATP had retained Mayer Brown LLP to advise the' company on a potential bankruptcy no later than the last week of June 2012, and it hired Jeffer-ies & Co. “in the middle of July” 2012 for the purpose of “addressing and considering DIP [debtor in possession] financing.”
As the bankruptcy action has progressed, legal proceedings both inside and outside the bankruptcy reveal numerous creditors seeking remedies against ATP for unpaid obligations. Plaintiffs’ Consolidated Class Action Complaint lists 21 different vendors and service providers that have sued ATP for unpaid invoices dating back as far as 2007 and totaling more than $63.3 million.
Additionally, both before and during the class period, ATP sold ORRIs and NPIs to various investors and vendors. Plaintiffs allege that ATP’s management began withholding payments from some of the interest holders in order to preserve cash.
On August 5, 2013, Brian Neiman filed a class action complaint in the Southern District of Texas asserting that .defendants violated Section 10(b) of the Securities Exchange Act of> 1934. Shortly thereafter, Brian Stackhouse filed a similar complaint in the Southern District of Texas. In addition, Thomas Mansfield filed a Section 10(b) class action complaint against defendants in the Eastern District of Louisiana. The actions were "transferred to the Eastern District of Louisiana and consolidated,
(a) failed to disclose the effects of the moratoria on ATP in the Registration Statement and the company’s Forms 10-K and 10-Q, in violation of Item 303(a) of Regulation S-K;
(b)" failed to disclose 'at the September 12, 2011 Rodman Renshaw Global Investment 'Conference and in Reese’s September 29, 2011 interview' with Bloomberg News that Well 941 #4 was ño longer producing the announced 7,000 Boe per day;
(c) falsely stated in various SEC filings, earnings calls, and conferences that ATP’s liquidity was “strong” or ‘sound* and that the company could continue to .meets its obligations for the next twelve months despite the fact that (1) Well 941 #4 was underperforming, (2) ATP lacked funds to complete the Clipper pipeline project to access the revenue stream it expected from the wells’ production, and (3) A.TP was running out of cash, forcing the company to negotiate delayed payments to certain vendors, delay routine maintenance, and withhold ORRI and NPI payments from investors;
(d) misleadingly projected that ATP would complete the Clipper Wells pipe*505 line in the third quarter - of 2012 and touted the wells’ plentiful reserves despite knowing that ATP lacked the funds to complete the pipeline project; land
(e) misled investors about the reasons behind Matt McCarroll’s June-7, 2012 resignation from his position as ATP’s CEO.58
Defendants now move to dismiss the Second Amended Complaint, asserting that plaintiffs’ allegations fail to méét" the heightened pleading requirements under the Private Securities Litigation Reform Act.
II. STANDARD
To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts to -“state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible “when the plaintiff .pleads factual content that allows the court to draw the reasonable inference, that th,e defendant is liable for the misconduct alleged.” Id. A court must accept all'well-pleaded, facts as true and must-draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 239 (5th Cir. 2009).
A legally sufficient complaint need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Id. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of éach element of the plaintiffs claim. Lormand, 565 F.3d at 257. If there are insufficient factual allegations to' raise a right to relief above the speculative level, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, the Court must dismiss the claim. Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
In reviewing a motion, to dismiss, the Court is limited to the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of which the Court may take judicial notice. See Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011). In securities cases, courts may take judicial notice of the contents of public disclosure documents that are filed with the SEC as required by law; however, “these documents may be considered only for the purpose of determining what statements they contain, and not' for proving the truth of their contents.” In re Franklin Bank Corp. Sec. Litig., 782 F.Supp.2d 364, 384-85 (S.D.Tex. 2011) (citing Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1018 & n. 1 (5th Cir. 1996)).
III. DISCUSSION
A. Section 10(b)
To survive a motion for dismissal, plaintiffs' must allege facts entitling them to relief for their substantive cause of action. Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful for a person to:
use or employ; in connection with the purchase or sale of any security ... any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
make any untrue statement of 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 were made, not misleading ... in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5.
Accordingly, to state a claim under Section 10(b) and Rule 10b-5, a plaintiff must adequately allege, in connection with the purchase or sale of securities, “(1) a misstatement or an omission (2) of material fact (3) made with scienter (4) on which plaintiff relied (5) that proximately caused [the plaintiffs] injury.” Nathenson v. Zonagen Inc., 267 F.3d 400, 406-07 (5th Cir. 2001) (citing Tuchman v. DSC Commc’ns, 14 F.3d 1061, 1067 (5th Cir. 1994)). “A ‘material fact’ is one which a reasonable investor would consider significant in the decision whether to invest, such that it alters the ‘total mix’ of information available about the proposed investment.” Krim v. BancTexas Grp., Inc., 989 F.2d 1435, 1445 (5th Cir. 1993). A fact is not material if “a reasonable investor viewing the information in context would not have considered the investment significantly more risky as a result.” Id. at 1446.
A plaintiff asserting a claim for securities fraud must also plead his claim in accordance with the particularity requirements of Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), 15 U.S.C. § 78u-4. The relevant provision of the PSLRA provides:
In any private action arising under this title in which the plaintiff alleges that the defendant
(A) made an untrue statement of a material fact; or
(B) omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances in which they were made, not misleading;
the complaint shall specify each statement alleged to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the statement or omission is made on information and belief, the complaint shall state with particularity all facts on which that belief is formed.
15 U.S.C. § 78u-4(b)(1). The Fifth Circuit has held that the PSLRA’s pleading requirement “incorporates, at a minimum, the pleading standard for fraud actions under Federal Rule of Civil Procedure 9(b).” Plotkin v. IP Axess Inc., 407 F.3d 690, 696 (5th Cir. 2005) (citing Rosenzweig v. Azurix Corp., 332 F.3d 854, 865 (5th Cir. 2003)); ABC Arbitrage Plaintiffs Grp. v. Tchuruk, 291 F.3d 336, 349-50 (5th Cir. 2002) (‘[W]e have observed that “[t]he effect of the PSLRA in this respect is to at a minimum, incorporate the standard for pleading fraud under Fed.R.Civ.P. 9(b).” (quoting Nathenson, 267 F.3d at 412)). To satisfy Rule 9(b), a plaintiff must specify each allegedly fraudulent statement, the speaker, when and where the statement was made, and why the statement was false or misleading. Fin. Acquisition Partners LP v. Blackwell, 440 F.3d 278, 287 (5th Cir. 2006); Plotkin, 407 F.3d at 696. This heightened pleading standard serves an important screening function in securities fraud suits. It “provides defendants with fair notice of the plaintiffs’ claims, protects defendants from harm to their reputation and goodwill, reduces the number of strike suits, and prevents plaintiffs from filing baseless claims and then attempting to discover unknown wrongs.” Melder v. Mor
In the Fifth Circuit, “the required state of mind for scienter- is * ah intent to deceive, manipulate, defraud or severe recklessness.” Owens v. Jastrow, 789 F.3d 529, 535-36 (5th Cir. 2015) (quoting Lormand, 565 F.3d at 251). Severe recklessness, for purposes of Section 10(b)’s scienter element, is
limited to those highly unreasonable omissions or representations that involve not merely simple or even inexcusable negligence, but an extreme departure from the standards of ordinary care, and that present a danger of-misleading buyers or sellers which is either known to the defendant or so obvious that the defendant must have been aware of it.
Nathenson, 267 F.3d at 408 (quoting Broad v. Rockwell, 642 F.2d 929, 961-62 (5th Cir. 1981)).
The PSLRA also requires that a plaintiff “state with particularity facts giving rise to a strong inference” of scienter with respect to each allegedly false or misleading statement. 15 U.S.C. § 78u-4(b)(2). This requirement “alters the usual contours of a Rule 12(b)(6) ruling.” Lormand, 565 F.3d at 239. Instead of drawing all reasonable inferences in the plaintiffs favor, the Court “must take into account plausible inferences opposing as well as supporting a strong inference of scienter.” Id. This includes any “nonculpable explanations for the defendant’s conduct.” Cent. Laborers’ Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546, 551 (5th Cir. 2007). “The inference of scienter must ultimately be ‘cogent and compelling,’ not merely ‘reasonable’ or ‘permissible,’” in light of other explanations, Lormand, 565 F.3d at 239; see also Cent. Laborers’, 497 F.3d at 551. In other words, a reasonable person must find the inference of scienter to be “at least as compelling as any opposing inference one could draw from the facts alleged.” Cent. Laborers’, 497 F.3d at 551. In reviewing a plaintiffs scienter allegations, a court must “assess all the allegations holistically,” not in isolation. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 326, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).
A plaintiff may satisfy the heightened pleading requirement by alleging facts showing a motive to commit fraud and a clear opportunity to do so, or by identifying circumstances indicating conscious or reckless behavior by defendants, so long as. the totality of allegations raises a strong inference of fraudulent intent. See Tuchman, 14 F.3d at 1068. Although the strong-inference pleading standard does not license courts to resolve disputed facts at the motion to dismiss stage, it does permit the court to “engage in some weighing of the allegations to determine whether the inferences toward scienter are strong or weak.” Cent. Laborers’, 497 F.3d at 551 (quoting Rosenzweig, 332 F.3d at 867). When a complaint fails to plead scien-ter in conformity with the -PSLRA, the court must dismiss it. 15 U.S.C. § 78u-4(b)(3)(A).
Finally, the PSLRA’s “safe-harbor” provision protects defendants from liability for certain projections, statements of future economic performance, and statements of plans or objectives for future operations. 15 U.S.C. § 78u-5(I). More specifically, the PSLRA’s safe-harbor provision states that a defendant
shall not be liable with respect to any forward-looking statement, whether written or oral, if and to the extent that
(A) the forward-looking statement is-
(i) identified as a forward-looking statement, and is accompanied by meaningful cautionary language*508 identifying important factors that could cause actual results to differ materially from those in the forward-looking statement; or
(ii) immaterial; or
(B) the plaintiff fails to" prove that the forward-looking statement-
(i) if made by a natural person, was made with actual knowledge by that person that the statement was false or misleading ....
15 U.S.C. § 78u-5(c)(1). Because this provision is disjunctive, parts (A) and (B) must be considered separately. See Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 372 (5th Cir. 2004) (“The safe harbor has two independent prongs: one focusing on. the'defendant’s cautionary statements and the other on the defendant’s state of mind.”);
Under the second prong, a defendant avoids liability if the plaintiff fails to prove'that the statement was made with actual knowledge that the statement was false- or misleading. 15 U.S.C. § 78u-5(c)(1)(B). Because the second-prong places the burden of proof on the plaintiff, the PSLRA effectively requires plaintiffs to prove actual knowledge — not just recklessness — in the case of every forward-looking statement. See In re Anadarko, 957 F.Supp.2d 806, 831 n. 13 (S.D.Tex. 2013) .(“If the statements are covered by the statutory ‘safe harbor’ provision, Plaintiffs would be required to show intent to deceive, and • not merely recklessness.”) (citing Nathenson, 267 F.3d at 409). Accordingly, for each predictive statement, plaintiffs must plead specific facts giving rise to a strong inference that the defendant responsible for the forward-looking statement actually knew that the predic
B. Plaintiffs’ Claims
The Second Amended Complaint alleges that defendants are liable for seventeen different false or misleading statements made between December 2010 and June 2012.
(1) defendants failed to disclose the’effects of the moratoria on ATP'in the Registration Statement and the company’s Forms 10-K and 10-Q, in violation of Item 303(a) of Regulation S-K;
(2) defendants failed to disclose at the September 12, 2011 Rodman Renshaw Global Investment Conference ’and in Reese’s September 29, 2011 interview with Bloomberg News that Well- 941 #4 was no longer producing the announced 7,000 Boe per day;
(3) defendants falsely stated" iri various SEC filings, earnings calls, and conferences that ATP’s liquidity was ‘/strong” and “sound” and that the company could continue to meets its obligations for the next twelve months despite the fact that (1) Well 941 #4 was underperforming, (2) ATP lacked the funds to complete the Clipper pipeline in order to access the revenue stream it expected from the wells’ production, and (3) ATP was running out of cash, forcing the company to negotiate delayed payments to certain vendors, delay routine maintenance, and withhold ORRI and NPI payments from investors;
(4) defendants misleadingly projected that ATP would complete the Clipper Wells pipeline in the third quarter of 2012 and touted the wells’ plentiful reserves despite knowing that ATP lacked the funds to complete the pipeline project; and
(5) defendants misled investors about the reasons behind Matt McCarroll’s June 7, 2012 resignation from his position as ATP’s CEO.63
The Court will address each category of allegedly false or misleading statements in turn.
1. Allegations 'that Defendants Failed to Disclose the Effects of the Moratoria on ATP
Plaintiffs allege that ATP’s December 16, 2010 Registration Statement, March 16, 201110-K Filing, and Forms 10-Q covering the first, second, and third quarters of 2011 violated Item 303 of Regulation S-K by failing to disclose “the true, negative, and severe effects of the morato-ria on ATP’s liquidity and ability to meet its current obligations, and that [the mora-toria] was likely to materially impact liquidity and results of operations going forward.”
Item 303 of Regulation S-K requires the authors of certain corporate statements to disclose any known trends, events, or uncertainties that are (1) reasonably .likely to
Because Item 303 creates an affirmative obligation to disclose certain information, liability under the provision is not tied to any particular statements contained in the relevant SEC filing; rather, liability exists when a defendant fails to disclose information covered by Item 303. Thus, although plaintiffs characterize several of the statement contained in the Registration Statement, Form 10-K, and Forms 10-Q as misleading, plaintiffs make scant allegations regarding information ATP allegedly failed to disclose in these documents. With respect to the Registration Statement and Prospectus,
As the Court held in its order dismissing plaintiffs’: First Amended Complaint, the very - information that plaintiffs claim is omitted is actually disclosed in ATP’s SEC disclosures in plain English throughout the Class Period.- Indeed, to the extent that the moratoria constituted a “known trend” that was likely to have a material impact on ATP’s liquidity and revenues, ATP discussed the BP Oil Spill and the resulting moratoria in great depth in the Prospectus.
We have ongoing and planned drilling operations in the deepwater Gulf of Mexico, some of which were permitted prior to April 20, 2010, and some of which are not yet permitted. Such permits, among other required approvals, are necessary prior to commencement of offshore drilling operations. Moratorium II has caused us to delay the third and fourth wells scheduled at our Telemark Hub and, even though Moratorium II has been lifted, any delays in the re*511 sumption of the permitting process may-result in delays in our drilling operations scheduled in 2011 at our Gomez Hub. During June 2010, we agreed-.to terminate a contract for services of a drilling rig as a result of Moratorium I. Under our termination agreement, we obtained a full release of our • obligations under the contract and incurred net «costs of $8.7 million reflected as contract termination costs on our September 30, 2010 statement of operations____
The size of our operations and our capital expenditure budget limits the number of properties that we can develop in any given year. Complications in -the development of any single major well or infrastructure installation may result in a material adverse effect on our financial condition and results of operations.- For instance, production delays are occurring resulting from Moratorium I and Moratorium II as described above.in.the first risk factor under “Risks Related-to Our Business.”69
With respect to the moratoria’s potential future impact on ATP’s revenues and liquidity,'the Prospectus warned:'"
The U.S. governmental and regulatory response to the Deepwater Horizon drilling rig accident and resulting oil spill could have a prolonged and material adverse impact on our Gulf of Mexico operations ....
Although Moratorium II has been lifted, we cannot predict with certainty when permits will be granted under the new requirements____
We project a substantial increase in production over the next year as development wells are brought to production. Absent alternative funding sources, achieving our projected production growth is necessary to provide the cash flow required to fund our capital plan and meet our existing obligations, both over the next twelve months and on a longer term basis. Our ability to execute our plan depends, in part, on our ability to continue drilling for and producing hydrocarbons- in the Gulf of Mexico. Our plan is currently based on obtaining necessary drilling permits, and successfully achieving commercial production form existing wells presently scheduled to commence during the remainder of 2010 and 2011. Delays from difficulties receiving necessary permits, reduced access to equipment and services, or bad weather, could have a material adverse effect on our financial position, results of operations and cash flows. In addition to the risks associated with achieving our projected production, growth, additional regulatory requirements . and increased costs for which funding must be secured, or a negative change in commodity prices and operating cost levels, could also have a material, adverse effect on our financial position, results of operations and cash flows. While we are pursuing various other sources of funding, there is no assurance that the alternative sources will be available should any of the. above risks or uncertainties materialize..
If we aré not able to generate sufficient funds from our operations and other financing sources, we may not be able to finance our planned development activity, acquisitions or service our debt.
We have historically needed and will continue to need substantial amounts of cash to fund our capital expenditure ánd working capital requirements
Delays in the development of or production curtailment at our material*512 properties including at our Telemark Hub may adversely affect our financial position and results of operations.70
The Prospectus’s financial statement also disclosed that ATP had suffered a net loss of roughly $121.4 million in the nine months ending September 30, 2010.
New regulations already issued will,' and potential future regulations or additional statutory limitations, if enacted or issued, could, require a change in the way we conduct our business, increase our costs of doing business or ultimately prohibit us from drilling for or producing hydrocarbons- in ■ the Gulf of Mexico.72
ATP’s later filings repeated ■ these warnings and updated investors as the situation developed, disclosing the costs ATP incurred as a result of the moratoria, as well as the financing arrangements ATP made to preserve cash in the absence of revenues from operations.' ATP’s 2010 10-K stated:
We have incurred substantial costs caused by the deepwater drilling moratoriums and subsequent drilling permit delays. For example, during 2010 a side-track well operation in 7,000 feet of water was interrupted when Moratorium I was imposed and work on that project stopped, resulting in the early termination of a drilling contract. In the course,of obtaining a full release from our obligations under the contract,, we incurred net costs of $8.7 million, which are reflected as drilling interruption costs on our Consolidated Statements of Operations. Because the necessary drilling permits were not issued, drilling interruption costs also include $14.9 million-of stand-by costs for a drilling-rig and support operations at our Gomez Hub and Telemark Hub properties,
[0]ur cash flows were significantly negatively impacted by the drilling moratoriums, as we incurred the additional costs noted above and at the same time were unable to place on production three wells during 2010 that were originally part of the 2010 development program. We funded our 2010 activities through a combination of new debt financings, the sale, or conveyance of economic interests in selected properties and financing arrangements with our suppliers. ■
During this period we financed significant portions of our development program with transactions entered into with our suppliers and their affiliates. We have conveyed to certain suppliers net profits interests in our Telemark Hub, Gomez Hub, and Clipper oil and gas properties in exchange for development services. We have also negotiated with certain other vendors in the development of the Telemark Hub and Clipper to partially defer payments for a period of twelve months .... These types of financial arrangements preserve our current cash and allow us to pay from the proceeds of future production.
Our 2011'development plans in the Gulf of Mexico, as well as our longer term business plan, are dependent on receiving approval for deepwater drilling and other permits submitted to the BOEM .... [Tjhere is no assurance that [the*513 permits] mil be received in time to benefit our 2011 results or that permits 'will be-issued in the future.73
ATP’s First Quarter 2011 Form’fO-Q'up-dated investors regarding the status of permits and further disclosed ATP’s continuing efforts to preserve cash:
Our 2011 development plans in the Qulf of Mexico as well as our longer term business plan are dependent on receiving additional approvals for deepwater drilling and other permits under applications which have been and will be submitted to the Bureau of Ocean Energy Management Regulation and' Enforcement of the Department of the Interior. In the first quarter of 2011, we- received permits to drill the third well at Tele-mark and to complete drilling of a well at Green Canyon. Drilling of the third wéll at Telemark is-already underway. Also, while we believe we can satisfy the permitting requirements' for- the additional planned 2011 wells, which will allow us to significantly increase our production from current levels, there is no assurance that they will be received in time to benefit oür 2011 results or that the permits will be issued in the future.... The size of.our operations and our capital expenditures budget limit the number of properties that we can develop in a given year: A substantial portion of our current production is concentrated among'-relatively few wells located offshore in the Gulf of Mexico and-in the North Sea, which are characterized by production declines more rapid than found in conventional offshore properties. As a result, we'are particularly vulnerable to a near-term severe impact resulting from-.unanticipated complications-in the development of, or production from, any single material well or infrastructure installation, including'lack of sufficient capital, delays in receiving necessary drilling and operations permits, increased regulation, reduced, access to equipment and services, mechanical or operational failures or bad weather. Any unanticipated significant disruption to, or decline in, our current production levels or prolonged negative changes in commodity prices or operating cost levels could have a material adverse effect on oúr financial position, results of operations and cash flows and our ability to meet our commitments as they come due. We have historically obtained various other sources of funding to supplement our cash flow from operations and we will continue to pursue them in the future, however, there is no assurance that these alternative sources will be available should these risks and uncertainties materialize.
We have been financing a significant portion of our development program with transactions entered into with our suppliers and financial institutiqns that either defer payments to future periods or will be. repaid based on - production through or from the revenues, or net profits generated from future production. While these financing transactions have enabled us to continue the development of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied.74
The Company’s Second Quarter 2011 Form 10-Q repeated these warnings and discussed the ongoing impacts of the mora-toria on ATP:
*514 Events that occurred in 2010 and regulations that were enacted in 2010 and 2011 have had a major impact on our operations and ability to move forward with development plans.
Although Moratorium II has been lifted and we have received two permits to develop wells at our Telemark and Clipper properties, we cannot predict with certainty when additional permits will be granted under the new. requirements. $ $ $
During the first six months of 2011, we also obtained a significant additional financing and commitments to finance from term loans and other transactions. In the second quarter 2011, we conveyed dollar-denominated overriding royalty interests and dollar-denominated overriding royalty interests in the form of net profit interests in the Gomez Hub and the Telemark Hub for aggregate net proceeds of $70.3 million. These Overrides and NPIs obligate us to deliver a percentage of the proceeds from the future sale of hydrocarbons in the specified proved properties until the purchaser recovers it original investment, plus an overall rate of return. In June 2011 we also closed a perpetual preferred stock offering that provided net proceeds of $123.3 million, net of discount, related option contract costs and issuance costs.
Drilling interruption costs were $1.2 million and $8.7 million in the sécond quarter of 2011 and 2010, respectively. They consist of standby costs for drilling operations at our Telemark and Gomez Hubs resulting from the deepwa-ter drilling moratoriums and subsequent drilling permit delays caused by the April 2010 Macondo incident in the Gulf of Mexico. These costs are expected to continue.75
Finally, ATP’s Third Quarter 2011 Form 10-Q repeated that the BP Oil spill and the resulting moratoria ‘had a major impact on [ATP’s] operations and ability to move forward with development plans.'
Since May 2010 when the federal government imposed the first of a series of moratoriums in the Gulf of Mexico, we have faced unparalleled difficulties in obtaining permits to continue our development program. Prior to the moratoriums, we anticipated developing and bringing to production three additional wells at our Telemark Hub and two additional wells at our Gomez Hub by the end of 2010. As of September 30, 2011, we have been able to bring to production two additional wells at the Telemark Hub and the third well has been drilled to total depth .... During the third quarter, the two wells planned for the Gomez Hub were postponed to late 2012/early 2013 as permits have not yet been received for these two wells.
In addition, we have incurred capital and operating costs higher than we expected primarily due to additional regulations imposed since the deepwater Macondo incident and the requirement to sidetrack the two wells. ... While cash flows were lower than previously projected due to lower than expected production rates, the delays in bringing on new production and higher costs, we continued our development operations by supplementing our cash flows from*515 operating activities with, funds raised through various financing transactions.77
As the foregoing makes clear, ATP fully informed investors of the current impact, and likely future impact, of the moratoria in each of the challenged SEC filings. ATP’s SEC filings apprised the market that the company was facing liquidity issues, that it was negotiating payment terms with its vendors, that it was'experiencing permitting delays and increased costs, and that it was selling overriding royalty interests and net profit interests to make up for lost income and pay for its drilling projects. Plaintiffs’ claim that ATP failed to disclose the impacts of the mora-toria in violation of Item 303 is therefore without merit. In re Progress Energy, Inc. Sec. Litig., 371 F.Supp.2d 548, 552 (S.D.N.Y. 2005) (“[I]t is indisputable that there can be no omission where the alleg-' edly omitted facts are disclosed.”) (internal citation omitted).
In response, plaintiffs argue that ATP’s disclosures were themselves misleading and incomplete because ATP did .not .disclose that it was then unable to meet its obligations, that ATP was “insolvent or practically insolvent,” or that defendants “knew that the ORRI and NPI interests that ATP sold substantially hindered ATP’s ability to improve or even maintain its financial situation.”
With respect to plaintiffs’ claim that ATP failed to disclose that it was “insolvent or practically insolvent,” plaintiffs fail to allege any contemporaneous facts supporting their claim that ATP was insolvent or practically insolvent at the time ATP submitted the challenged SEC filings. To support their claim that ATP was insolvent or practically insolvent during the relevant periods, plaintiffs rely on an allegation lifted from Rodney Tow’s August 15, 2014 complaint
Shortly after .the Oil Spill, as early as May 2011, ATP began to have problems with liquidity due to the Oil Spill and foreseeable government response and entered the zone of insolvency,- which the Directors and Officers knew.84
Rodney Tow’s bankruptcy allegations, filed in an adversarial proceeding more than two years after ATP filed for bankruptcy, and more than three -and a half years after ATP’s 2010 10-K filing, fail to create a strong inference that defendants knew that ATP was insolvent, or “practically insolvent,” when the company filed its disclosure statements with the SEC. Defendants correctly point out that “fraud cannot be proved by hindsight,” Southland, 365 F.3d at 383, and plaintiffs’ use of Rodney Tow’s allegations, made in 2014 with the benefit of hindsight, is classic fraud-by-hindsight pleading. Indeed, plaintiffs do not challenge the accuracy of ATP’s .financial disclosures in any of the SEC filings. Nor do plaintiffs provide any factual allegations that ATP withheld financial data or otherwise failed to disclose the required financial information. Item 303 imposes a duty to disclose trends only if they are “presently known to management.” Plaintiffs’- reference to ATP’s August 2012 bankruptcy, and the bankruptcy trustee’s August 2014 complaint, do not give rise to an inference that defendants knew that ATP was insolvent, or practically insolvent, when defendants filed the challenged disclosures., with the.SEC. Southland, 365 F.3d at 383 (“[B]ecause fraud cannot be proved by hindsight, subsequent lawsuits are unpersuasive of scienter, as they do not show what any particular individual knew ... at the time .... ”). Absent plausible allegations that defendants knew that ATP was insolvent or practically insolvent at the time they filed the relevant disclosures with the SEC, plaintiffs have failed to plead that defendants violated Item 303.
Finally, plaintiffs claim that defendants’ disclosures were inadequate under Item 303 because the SEC filings failed to disclose that the “ORRI and NPI interests that ATP sold substantially hindered ATP’s ability to improve or even maintain its financial situation.”
In light of the foregoing, it is'clear tfiát ATP disclosed the current and likely'future impact of the moratoria, and plaintiffs have thus failed to plead that ATP omitted this information in violation of Item 803.
2. Defendants’ Alleged Failure to Disclose Less than Expected Produc- ' tion at ATP’s Telemark Hub ■
On August 24, 2011, ATP issued a press release announcing the fipt production from Telemark’s newest well, MC Block 941 #4, at “an initial rate exceeding 7,000 -Boe per day,” and that ATP’s company-wide production “now exceeds 31,0000 Boe per. day.”
We have finally realized the planned material production revenue of this well that has been much anticipated for 16 months .... The. greater-than-a-billion-dollar- investment at Telemark reflects ATP’s continuing commitment .to develop America’s energy resources.89
Less than three weeks later, on September 12, 2011, Reese gave a speech at the Rodman Renshaw Global Investment Conference (“RRGI Conference”) in which he reiterated that ATP’s “most recent report” set overall production at 31,000 Boe per day including “the new Telemark well.”
Moody’s Investor Service this week said ATP shows, a “high likelihood’’ it may have to restructure its debt because its cash flow and asset base are insufficient to cover notes maturing, in 2015. The company’s $1.79 billion in net debt exceeds that of 97 percent of Houston-based ATP’s U.S. peers, according to data complied by Bloomberg.
ATP expects .to begin production from new wells at its Telemark field this year, followed by additional output at the Clipper, and Gomez projects in 2012, En-trada in 2013 and Cheviot a year later, said Albert L. Reese, ATP’s chief finan- . cial officer. All of those fields are in the Gulf of Mexico, except Cheviot, which is in the U.K.
“All of that is before the bonds come due in 2015, so I don’t know what Moody’s is talking about,” Reese said today in a telephone interview. “I can’t find rumors or reports, all I can do is continue to deliver on the promises we’ve made. Our expectation is that everything is going to be fine.”91
On November 8, 2011, ATP issued a press release announcing its Third Quarter 2011 results, in ■ which it disclosed that company-wide production was only 24,200 Boe per day, in contrast to the 31,000 Boe per day that was announced in August.
Lead Plaintiffs allege that Reese’s September 12, 2011 reiteration of ATP’s “most recent report” — meaning the August 24, 2011 press release — and Reese’s September 29, 2011 statement that “all I can do is continue to deliver on the promises we’ve made” were misleading because data available on the Bureau of Ocean Energy Management’s (“BOEM” website indicated that MC Block 941, as a whole, produced only 2,738 Boe per day more in September 2011 than in July 2011, the last full month before Well #4 began producing.
As an'initial matter, plaintiffs’ reliance on the BOEM data for the proposition that MC 941 #4 was producing 2,738 Boe per day on September 12, 2011 is flawed for two reasons. First, plaintiffs inexplicably assume that production remained constant at the other two wells at MC 941, such that any decline in production from the block cumulatively must have come from MC 941 #4 only. Plaintiffs provide no explanation or defense for this assumption. Second, and more importantly, the BOEM data provides block production on a monthly basis. Thus, while the BOEM data might support plaintiffs’ argument that production at MC 941 #4 had declined by the end of September, it does not support the proposition that production at MC 941 #4 must have declined to 2,738 by September 12, 2011, only twelve days into the BOEM’s reporting period.
Nevertheless, even assuming that production at MC 941 #4 had declined significantly by September 12, 2011, the Court finds that discussing MC 941 #4’s production rate was not necessary -to make Reese’s September 12 and September 29, 2011 states not misleading. With respect to Reese’s September 12, 2011 statement at the RGGI Conference, Reese merely reiterated that in ATP’s “most recent report, we said 31,000 barrels that’s with the new Telemark well.”
The Court reaches the same conclusion regarding plaintiffs’ ■ allegation that Reese’s September 29, 2011 statement that “all I can .do is continue to deliver on the promises we’ve made” was “an implicit reinforcement” of ATP’s August 24, 2011 production report.
Moreover, even if the September 12 and 29, 2011 statements could .be construed as “implicit reinforcements” of the August 24, 2011 production report, the Court finds that plaintiffs have failed to plead sufficient facts to create an inference that defendants knowingly or recklessly misled investors. Before ’turning to the allegations regarding confidential witnesses, the Court briefly addresses plaintiffs’ failure to address the Court’s concerns regarding the absence of defendants’ motive to commit securities fraud. The Fifth Circuit has held that “appropriate allegations of motive and opportunity may meaningfully enhance the strength of the inference of scienter.” Southland, 365 F.3d at 368; see also Nathenson, 267 F.3d at 411 (noting that allegations of motive and opportunity -provide “an analytical device for assessing the logical strength of the inferences arising from particularized facts pleaded by a plaintiff to establish the necessary mental state”). The Second Amended Complaint is devoid
Although failure to plead motive and intent is not dispositive of a securities fraud claim, a plaintiff must nevertheless plead “strong circumstantial evidence” of defendants’“conscious misbehavior or recklessness.” Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). In other words, “[w]here ... the plaintiff has not alleged a clear motive for the alleged misstatements or omissions, the strength of its circumstantial evidence of scienter must be correspondingly greater.” R2 Invs. LDC v. Phillips, 401 F.3d 638, 644 (5th Cir. 2005). Plaintiffs fail .to carry this burden. Indeed, plaintiffs attempt to make their case with confidential witnesses’s statements that the witnesses were “confident” that defendants “had knowledge of the lower production levels at the Telemark well,” that defendants received weekly or monthly email updates regarding well -production rates, and that “discussions and decisions about financing' occurred entirely at the executive level.”
3.'Defendants’ Statements Regarding ATP’s Liquidity and Ability to Complete the Clipper Project
At various points in the class period, defendants assured investors that ATP’s financial position was secure, and that-its liquidity was “strong” and “sound.” On multiple occasions, defendants predicted that ATP would be . able to <-continue paying its debts for at least 12 months, and they repeatedly rejected any suggestion of bankruptcy. Plaintiffs allege that the following statements regarding ATP’s financial, state were false or misleading:
• January 5, 2011 Pritchard Capital Partners Energize Conference, Reese speaking: ATP “[h]as a strong liquidity position” and has “strong liquidity to do everything that we’ve been talking about.”
• March 15, 2011 Year End 2010 Conference Call, Bulmahn speaking: “Through creative, albeit expensive financing, we are now liquid and solvent. .. ’. Not only have we been surviving during this period of time, we have expanded a foundational base to accelerate ATP’s strategy into the future.”
• March 15, 2011 Year End 2010 Confer- ’ ence Call, Reese speaking: “[W]e feel very comfortable with our liquidity’position for the entire 2011 as we go into 2012. That’s either with or without permits from a liquidity standpoint.”
• March 16, 2011 Form- 10-K for 2010, signed by Bulmahn, Reese and Godwin and certified by Bulmahn and Reese: • ““Should the permitting process in the Gulf of Mexico continue to be delayed, we believe we can continue to meet our existing obligations for at least the next twelve months; however, absent alternative funding sources, our ability to do so is dependent on maintaining existing production levels from our currently producing wells and maintaining commodity prices and operating costs near current levels. ... ”
• April 13, 2011 IPAA Oil-& Gas Investment Symposium, Bulmahn speaking: •“ATP’s liquidity is strong ... Going forward we will be able to manage leverage and liquidity at levels satisfactory to the market____[W]e are presently paying down our debt with NPI payments and we have additional. strong liquidity.”
• May 10, 2011 First Quarter 2011 Form 10-Q, signed by Réese and certified by Reese and Bulmahn: • “[W]e believe we can continue to meet our existing obli- ' gations for at least the next twelve months based on maintaining existing production' levels from our currently producing wells with commodity prices and operating costs near current lev-eJ »
• July 19, 2011 Global Hunter Securities Energy Conference, Reese speaking: “We have also done a couple of overrides. The question would be — we didn’t think you needed liquidity; wh[y] did ■ you do' that? ... • This literally' does nothing more than improve our liquidity. It protects us in the event there are any issues in the Gulf of Mexico this year.
• August 9, 2011 Second Quarter 2011 Form 10-Q, signed by Reese and certified by Bulmahn and Reese: “We- believe we can continue- to meet our existing obligations for at least the next twelve months based on forecasted production levels and the continuation of commodity sales prices and operating costs near current levels.”
• August 9, 2011 Earnings Conference Call, Bulmahn speaking: “ATP’s liquidity remains strong as we produce our reserves, we are reducing our debt with payments to NPI and Override interest holders. ... I believe we are sound and healthy, and we certainly are not flirting with bankruptcy at all. That I think we certainly are on sound footing and moving forward well and making things happen globally as well.”
• September 12, 2011 RRGI Conference, Reese speaking: “CapEx will be within the cash flow of the Company. ... [W]e have got a solid capital position, our debt is married with our production program, is married with our development program.”
• September 29, 2011 Bloomberg Article, Reese speaking: “I can’t fight rumors or reports, all I can do is continue to deliver on the promises we’ve made. Our expectation is that everything is going to be fine.”
• November 9, 2011 Third Quarter 2011 Form 10-Q, signed by Reese and certified by Bulmahn and Reese: “We expect these new wells will generate sufficient cash flows to fund subsequent development projects and service our long-term debt and other obligations. We believe we can continue to meet our existing obligations for at least the next twelve months based on forecasted production levels and the continuation of commodity sales prices and operating costs near current levels.”
• November 9, 2011 Earnings Conference Call, Reese speaking: “I think as we go into 2012 we may have a little more cushion of being able to maintain such a large cash balance.”
• November 10, 2011 Wall Street Journal article, quoting Reese: “[Suggestions that the company is sinking into bankruptcy are ‘punitive.’ Right now we believe we have complete control of our destiny and we have no plans to miss any interest payments.”
• January 4, 2012 Pritchard Capital Partner LLC Energize Conference, Reese speaking: “But as we look at it today, when you look at liquidity, and this would be first-quarter liquidity, we’re looking close to $100 million of additional capacity. ... And a strong capital position in the fact that most of our 2012 projects are completely discretionary. We’ve got many levers to pull to either bring in cash or to reduce CapEx. ... [B]ut what you see is that our entire debt is completely covered by our proved reserves.”
• March 16, 2012 Earnings Conference Call, Bulmahn and ■ Reese speaking: “And we continue to expand liquidity. »
• April 17, 2012 IPAA Oil & Gas Investment Symposium, Reese speaking: “Growing production and cash flow. We will continue to do that. In doing so, we will continue to pay dotyn some of the overrides and the net profits interest that we have. ... Liquidity is sound. I’ve heard all of the questions and. comments about the liquidity. We ended first quarter with over $200, million in cash. We have no near-term maturities or maintenance financial covenants. They do not begin — maturity doesn’t ' start until 2015.”
• May 10, 2012 Form 10-Q for First Quarter 2012, signed by Reese and certified by Bulmahn and Reese: “[W]e believe we can continue to fund our projected capital expenditures and our existing obligations, including our long-term debt and other obligations,' for at least the next twelve months.”!
Plaintiffs also allege that a number of statements were false or misleading because they either projected that the Clipper pipeline would be complete in the third quarter of 2012 or touted Clipper’s plentiful reserves. Plaintiffs allege that these statements were false or misleading because “ATP ... lacked the liquidity and cash flow to complete the pipeline and commence production from the Clipper wells.”
• August 17, 2011 EnerCom Inc. Oil and Gas Conference, Bulmahn speaking: “Clipper, you may have seen an announcement last week, and we will go into that a little bit more, with follow-ons from Entrada and Green Canyon 37 as we move into future years. Basically what we’ve done is timed these assets to meet our cásh-flów — to work within our cash flows and be able to develop them.”
• September 12, 2011 RRGI Conference, Reese speaking: “The nine and ten well, the two wells at Clipper, I think those are pretty decent wells that we will be doing because those will already be completed, its just pipeline and a couple other opportunities that we would like— look at.”
• November 8, 2011 Press Release for Third Quarter 2011 Financial Results, Bulmahn and Reese listed as contact persons: confirmed reserves at GC 300 #4 and announced flow test results for GC 300 #2 ST #1 before indicating that ' “[t]he pipeline lay barge for the Clipper wells is contracted for third quarter 2012 and will tie in both the GC 300 #4 and #2 wells to the Murphy Oil operated Front Runner production facility.”
• November 9, 2011 Earnings Conference Call, Tate speaking: .“The answer on Clipper is the lay-barge is contracted for , late in July and we have no reason to believe that it won’t stay on schedule. It actually could be earlier than that, but that’s the schedule that we were working towards. It will .take 30 days, to 60 days to actually get the pipeline laid and the facilities hooked up. So I would say late third quarter is not an unreasonable time for startup at Clipper. A1 [Reese] can talk more about the potential financ- •- ing of the pipeline. ... [Reese speaking:] I think if you look back in our last several quarters we continue to operate at better than $100 million in cash. As we have moved through this period of the moratorium now that the moratorium is behind us, we have wanted to maintain as much cash as we can to be able to get the next well on at Telemark [and] to get the Clipper projects done. I think as we go into 2012 we may have a little more cushion of being able to maintain such a large cash balance.”
• January 1, 2012 Pritchard Capital Part- , ner LLC Energize Conference, Reese .speaking: “Between now and 2015, we expect to have Telemark in full production, which will be [20]12, Clipper in full production which will be [20]12, Entrada at full production, which will be 2013 or -2014, and then Cheviot at full production beginning sometime in 2014, 2015.... Clipper production will commence later this year.”
• February 27,' 2012 JP Morgan High Yield & Leveraged Finance Conference, Reese'speaking: “[ATP] [p]roduced 24.6 Mboe/fl in 2011 and expect[s] significant uplift in production in 2012 with key new wells at Telemark and Clipper.”
• March 15, 2012 Year End 2011 Earnings Press Release, listing Bulmahn and Reese as contacts: “Capital spending for 2012 includes ongoing expenditures related to ATP’s Telemark Hub described above and the completion of the Clipper pipeline targeted for completion in late third quarter or early fourth quarter 2012. Once installed, this pipeline will connect the two Clipper wells to a host platform’.... ATP expects to fund these projects through cash flow and additional sources of liquidity already announced or planned ... .”
• 2011 Form 10-K, filed March 15, 2012, signed by Bulmahn, Reese and Godwin and certified by Bulmahn and Reese: “Later in 2012, we expect to complete a pipeline that will bring to production the two wells at our Clipper project. These two wells were completed and tested during 2011.----We expect with these two new wells and workovers we will be performing on existing wells in, the first quarter and the two new Clipper wells expected to be placed on production later in the year, we will generate higher operating cash flows in 2012 than in 2011.”
• April 17, 2012 IPAA Oil & Gas Symposium, Reese speaking: “And the initial
• May 9, 2012 Press Release for First Quarter 2012, Bulmahn and Reese listed as contacts: “ATP’s two wells at Clipper (Green Canyon 300) are on schedule to begin production in late third quarter or early fourth quarter 2012, Both wells were drilled and completed in 201T, and ATP has begun preparatory work for the installation of the Clipper pipeline during third quarter 2012.”
• May 10, ■ 2012 Form 10-Q, signed by Reese and certified by Bulmahn and Reese: “[W]e forecast overall production and operating cash flow growth in 2012 due to new production' from our Clipper property and from projected increases at our Telemark Hub.”
• May 10, 2012 Earnings Conference Call, Reese speaking: “[W]e were very successful in putting together an override forego, excuse me, for Clipper, $100 mil- ■ lion- item that is pre-funded and we’ll basically pay for-the pipeline installation that we’re going to have there ____ [T]he two deepwater wells at Clipper, which are scheduled to begin production in the third quarter,-I think those wells will be material to the Company’s interest.”
In sum, plaintiffs allege that defendants falsely stated that ’ ATP’s liquidity was sound, that they believed ATP could continue to meets its obligations for the next twelve months, and that ATP was not “flirting with, bankruptcy” when defendants knew, or were reckless in not knowing, that ATP was in a “liquidity crisis” and did not have the liquidity to survive the moratoria. Similarly, plaintiffs allege that defendants falsely stated that the Clipper wells would be brought to production in the third or fourth quarter of 2012 when defendants knew, or recklessly did not know, that ATP did not have the liquidity to complete the Clipper pipeline. Plaintiffs allege that defendants knew, or recklessly did not know, that ATP was “in the zone of insolvency” or was “insolvent or practically insolvent”
(1) Rodney Tow’s Bankruptcy' Trustee Complaint, filed August 15, 2014, alleges that “[sjhortly after the oil spill, as early as May 2010, ATP began to have problems with liquidity ... and entered the zone of insolvency, which the Directors and Officers knew;”138
(2) several confidential witnesses opine that “ATP had continual liquidity problems,” that ATP renegotiated the terms of its credit service agreements to preserve funds,139 and that the “Company was over-leveraged and was not financially solid;”140
(3) according to yet another confidential witness, ATP delayed maintenance work and negotiated delayed payments to vendors to preserve cash;141
(4) ATP sold ORRIs and NPIs to vendors which substantially hampered the company’s ability to generate cash flow;142
*526 (5) that, “by May 2012,” defendants decided to withhold ORRI and NPI payments due third parties in order to preserve cash;143
(6) ATP’s assets turned out to be insufficient to cover its liabilities and, on June 26, 2014, ATP’s Chapter 11 bankruptcy petition was converted to ■Chapter 7;144 and
(7) the Judge presiding over the Bankruptcy proceedings stated on June 26, 2013 that ATP “filed for bankruptcy far too late.”145
As an initial matter, the projections relating to the Clipper pipeline and defendants’ statements that “we expect to continue to meet our obligations for the next twelve months” are forward-looking statements. As such, each statement contains three implicit assertions of fact that may or may not be true at the time the statement is made. These include (1) that the speaker genuinely believes the statement is accurate; (2) that there is a reasonable basis for that belief; and (3) that the speaker is unaware of any undisclosed facts that would tend to seriously undermine the accuracy of the statement. In re Anadarko Petroleum Corp. Class Action Litig., 957 F.Supp.2d at 831 (quoting Rubinstein v. Collins, 20 F.3d 160, 170 (5th Cir. 1994)). At the same time, however, the forward looking nature of defendants’ statements renders them subject to the PSLRA’s safe harbor provision. Southland, 365 F.3d at 371. The PSLRA’s safe harbor protects defendants from liability for certain projections, statements of future economic performance, or statements of plans or objectives for future operations. Id. Under the first prong of the statutory safe harbor, there is no liability if, and to the extent that, the statement is: (i) “identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement,”
Under the second prong of the PSLRA, a defendant avoids liability if the plaintiff fails to prove that the statement was made with actual knowledge that the statement was false or misleading. 15 U.S.C. § 78u-(c)(1)(B). Because the second prong places the burden of proof on the plaintiff, the PSLRA effectively requires proof of actual knowledge — not just recklessness — in the case of every forward-looking statement. See In re Anadarko, 957 F.Supp.2d at 831 n. 13 (“If the statements are covered by the statutory safe harbor provision, Plain
In addition, -several of the statements plaintiffs challenge contain' statements of historical, readily verifiable ■ fact.
Finally, many of the statements regarding ATP’s liquidity situation are statements of-opinion. With respect to such statements, both parties cite principles articulated in the a recent Supreme Court opinion, Omnicare, Inc. v. Laborers Dist. Council Indus. Pension Fund, — U.S. -, 135 S.Ct. 1318, 191 L.Ed.2d 253 (2015). There, the Supreme' Court held, in the context of a claim under Section 11 of the Securities Act of 1933 that a statement of opinion may be actionable in two limited circumstances:. (1) as an untrue statement of material fact, if the opinion is both objectively false and not genuinely believed by the defendant; or (2) as misleading, if the defendant omits material facts underlying the basis for the opinion and “those facts conflict with what a reasonable investor would take- from the statement itself.” Id. at 1329. It is not clear, however, that the Supreme Court’s analysis in Omnicare extends to securities fraud claims under Section 10(b) of the Securities Act of 1934. Section 11 of the 1933 Act and Section 10(b) of the 1934 differ in
Accordingly, the Court-will not apply the Omnicare test to defendants’ forward-looking statements of opinion. With respect to such statements, plaintiffs must meet the pleading requirements for forward-looking statements -under the PLSRA, as discussed above. In the case of non-forward-looking opinion statements, the Court will use Omnicare as guidance and will consider the relevant principles articulated in the -Supreme Court’s decision. See In re Merck & Co., Inc. Sec., Derivative & “ERISA" Litig., No. CIV.A 05-1151 SRC, 2015 WL 2250472, at *11 n. 7 (D.N.J. May 13, 2015) (noting that while “Omnicare, actually, is not directly applicable” to- plaintiffs Section 10(b) claims, “Omnicare’s analysis of its discussion of misleading opinions is, to some extent, instructive on the viability of [those], claims as to the.opinion-based” statements).
With these principles in mind, the Court turns to the alleged reasons defendants knew, or- recklessly did not know, that ATP lacked the liquidity to survive the moratoria and complete the Clipper pipeline project. First, plaintiffs cite Rodney Tow’s August 14, 2014 Bankruptcy Trustee complaint for the proposition that ATP entered the “zone of insolvency” as early as May 2010, ■ and that the defendants knew this.
Next, plaintiffs allege that defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the moratoria and complete the Clipper pipeline project because several confidential witnesses who worked for ATB believed that ATP was in a “liquidity crisis” during the class period. In essence, plaintiffs allege that defendants knew, or ■ recklessly did not know, that ATP lacked the liquidity to survive the moratoria and complete the Clipper project because other ATP employees believed that ATP was in financial trouble.
Plaintiffs also allege that defendants knew or recklessly did not know that ATP lacked sufficient liquidity to finish the Clipper pipeline or survive the mora-toria because, throughout the class period, ATP delayed routine maintenance projects and was “forced” to negotiate delayed payments with some of its vendors. This allegation fails to give rise to an inference that defendants knew or recklessly did not know that ATP lacked sufficient liquidity for several reasons. First, defendants cannot be liable for failing to disclose ATP’s efforts to delay payments because the company repeatedly disclosed that it was engaging in negotiations, and would continue to engage in negotiations, with vendors to delay payments.
Plaintiffs’ allegation that defendants knew or recklessly disregarded ATP’s “liquidity crisis” because ATP was “forced” to sell ORRIs and NPIs to vendors fails to create an- inference of scienter for the same reason. First, defendants fully disclosed the ATP was engaging in such transactions in an effort to increase liquidity.
Next, plaintiffs allege that “by May 2012” defendants decided to withhold ORRI and NPI payments due third parties in order to preserve cash. Plaintiffs b’ase this claim on Reese’s testimony in the bankruptcy proceedings:
Q: Turning to the NPI/ORRI issue, were a lot of these — weren’t some of these NPIs given to vendors?
Reese: The — in 2009, I believe, yes. There were some given to vendors. That would have been the Diamond Override. I think we refer to it as the Bristow Override, and Airlog and those. Those are the only ones that were true vendors.
# * *
Q: Wasn’t it true you were default well in advance of this bankruptcy in some of these NPIs and overrides?
Reese: Yes. We had failed to make some payments.
% * H<
Q: And I believe that the May production proceeds attributable to our net revenue interests were not distributed to us; is that correct?
Reese: I believe that is correct.
Q: That’s the amount that should have been distributed on July 31 [2012]?
Reese: That’s what I was trying to think — Yes, that would be correct.
& H*
*532 Q: Co-mingled. And then it is-ultimately distributed to the parties who are entitled to receive it?
Reese: Yes, it is.
Q: Except that on July 31st it did not?
Reese: Correct.157
Reese further testified that he, Bulmahn, Tate, and Godwin would have made the decision to withhold ORRI and NPI payments.
Plaintiffs’ allegation that defendants had already decided to withhold ORRI payment “by May 2012” is not supported by the material it cites, as plaintiffs point to no ORRI on which payment was expected that- had gone unpaid by May 10, 2012.
Finally, plaintiffs point to ATP’s August 14, 2012 bankruptcy and various developments in the bankruptcy proceeding as evidence that defendants must have known that ATP was doomed to run out of money before it completed the Clipper pipeline. First,. plaintiffs quote the bankruptcy judge’s June 23, 2013 statement that “we had a debtor [ATP] that filed-bankruptcy far too. late.”
As an initial matter, ATP’s August 2012 bankruptcy does not provide grounds for an inference that defendants knew that ATP lacked the liquidity to survive the moratoria or finish the Clipper pipeline by the end of 2012. Although ATP’s August 2012 bankruptcy demonstrates that defendants were ultimately wrong regarding ATP’s ability to survive the moratoria and finance the Clipper pipeline, it 'does not tend to show that defendants were aware of undisclosed facts that undermined then-statements at the time such statements were made. Shields, 25 F.3d at 1129 (“This technique is sufficient to allege that defendants were wrong; but misguided optimism is not a cause of action, and does not support an inference of fraud.”). Plaintiffs cannot simply point to ATP’s eventual demise and cry fraud because defendants failed to predict the company’s collapse. See Novak v. Kasaks, 216 F.3d 300, 309 (2d Cir. 2000) (“Allegations that defendants should have anticipated future events and made certain disclosures earlier than they actually did do not suffice to make out a claim of securities fraud.”); Rombach, 355 F.3d at 176 (affirming district court’s rejection of claim that defendant “faced a liquidity crisis” because “[p]laintiffs do not allege facts and circumstances that would support an inference that defendants knew of specific facts that are contrary to their public statements”). Plaintiffs’ reliance on Reese’s and the bankruptcy judge’s statements during the bankruptcy proceedings likewise fail to create an inference that, at the time defendants made the challenged statements, defendants were aware, or were recklessly unaware, of undisclosed facts that rendered the statements false or misleading. Nee Hutchinson v. Perez, Civ. A. No. 1073, 2012 WL 5451258, at *5 (S.D.N.Y. Nov. 8, 2012) (“While these [bankruptcy] declarations show that the company’s financial' position was increasingly precarious during the Class Period, they do not ... show that Defendants had knowledge of or access to contradictory facts'/).
Plaintiffs attempt to circumvent the prohibition on pleading fraud by hindsight by citing the Fifth Circuit’s statement in Plotkin v. IP Axess, Inc. that “the fact that a business files for bankruptcy on ‘Day Two,’ may, under the right surrounding circumstances, provide grounds for inferring that the -business was performing poorly on ‘Day One.’” Id. at 698. In Plotkin, the Fifth Circuit held that even though the
Plaintiffs’ final allegation is that a report authored in August or September 2012 by petroleum engineer Netherland Sewell demonstrates that ATP had wholly encumbered the value of its assets and that “ATP’s assets were far less valuable than had been publicly disclosed.”
In sum, the Court has cumulatively evaluated all of plaintiffs’ allegations and finds that plaintiffs fail to plead contemporaneous facts giving rise to a compelling inference that defendants knowingly or: recklessly misled investors regarding ATP’s liquidity or ability to complete the Clipper pipeline.
A Matt McCarroll’s Tenure as CEO.
Plaintiffs’ final claim is that defendants knowingly or recklessly misled investors regarding Matt McCarfoll's brief tenure as ATP’s CEO.
Less than a week later, on June 7, 2012, ATP issued a second press- release which stated:.. . ■ >
On June 1, 2012, ATP Oil and Gas Corporation announced that Mr. Matt McCarroll replaced Mr. T. Paul Bul-mahn as Chief Executive . Officer of the company. Mr. Bulmahn continues to serve as Chairman and also in the newly created position of Executive Chairman of ATP. However, as of today, June 7, 2012, the company announced that it was unable to reach a mutually agreeable employment agreement with Mr. McCarroll and effective today he has submitted'his resignation. In conjunction with his resignation, the previously announced purchase of shares from the company by Mr. McCarroll mentioned in the June 1, 2012 press release was rescinded.172
Plaintiffs contend that this press release was also misleading because, according to plaintiffs, the “true reason for Mr. McCar-roll’s departure was that ATP’s finances were a disaster, and that Mr. McCarroll wanted to begin restructuring immediately but the ATP Board, including Defendant Bulmahn, would not agree.”
The Court - finds that plaintiffs have failed to plead the existence of an actionable misstatement or omission with respect to either press release. Under the securities laws, “a defendant is not required to disclose all known information, but only information that is necessary to make other statements not misleading.”
As for the June 7, 2012 announcement of McCarroll’s resignation, that statement was not misleading because it was evident that there had been a parting of ways. The press release made clear that McCarroll had “submitted his resignation” after less than one week on'the job and that he had rescinded his purchase of one millions shares of ATP stock. Although plaintiffs take issue with the characterization that the parties were “unable to reach a mutually agreeable employment agreement,” that statement adequately conveyed that there was ah area of disagreement between McCarroll and ATP’s management; Moreover, according to plaintiffs’ complaint, ATP’s stock price decreased by $0.53, or 9%, from the previous day’s- closing price on the news of McCarroll’s departure,
Accordingly, the Court finds that, viewed holistically, plaintiffs’ allegations fail to give rise to a compelling inference that' defendants knowingly or recklessly misled investors about the effects of the moratoria, production levels at the Tele-mkrk Hub, or ATP’s liquidity and its ability to complete the Clipper project. The Court, also finds that plaintiffs have failed to plead that defendants made any actionable misstatement or omission regarding Matt McCarroll’s tenure as ATP’s CEO. Thus, the Court finds that plaintiffs have failed to plead violations! of the Section 10(b) of the Securities Exchange Act of 1934.
It is true that ATP’s financial position deteriorated rapidly after the issuance of the May 10, 2012 Form 10-Q for the First Quarter of 2012, which gives plaintiffs’ hindsight argument some appeal with respect to statements' made during May 2012. The relevant financial statements from this period revealed an extremely leveraged, and increasingly cash poor company. They also make clear that by the end of July 2012, the bottom had fallen out, leaving ATP in an untenable financial position. If defendants’ May 2012 statements were to be judged on a recklessness standard, the Court may well have reached
B. Section 20(a) Claim
Section • 20(a), codified at 15 U.S.C. § 78t(a), provides: “Every person who, directly or indirectly, controls any person liable under any provision of this chapter ... shall also be liable jointly and severally with and to the same extent as such controlled person .15 U.S.C. § 78t(a); see also Tarica v. McDermott Int’l, Inc., CIV.A.99-3831, 2000 WL 1346895 (E.D.La. Sept. 19, 2000). Control person liability under section 20(a) requires an underlying violation of the Exchange Act. See R2 Inv. LDC v. Phillips, 401 F.3d 638, 641 (5th Cir. 2005).
Here, defendants do not' dispute their status as control persons. Nevertheless, because the Court finds that plaintiffs fail to allege an Exchange Act violation, plaintiffs’ Rule 20(a) claim likewise fails..
IV. CONCLUSION
For the foregoing reasons, and for the reasons stated in the Court’s November 21, 2014' Order and Reasons dismissing plaintiffs’ First Amended Complaint, the Court GRANTS defendants’ motion to dismiss plaintiffs’ Exchange Act and Section 20(a) claims' with prejudice,
. R. Doc. 221.
. R. Doc. 214 at 16.
. Id.
. Id.
. Id. at 17.
. Id. at 18.
. Id. at 14.
. Id. at 7; Prospectus, R. Doc. 221-2.
. R. Doc. 214 at 6.
. Id.
. Id.
. Id.
. Id. at 20-21
. Id. at 21.
. R. Doc. 173 at 22-23; press releases dated April 7, 2011, August 7, 2011, and December 12, 2011.
. Id. at 23.
. Id. See also R. Doc. 214 at 21.
. Id. at 7; R. Doc. 221-2.
. R. Doc. 214 at 7.
. R. Doc. 221-1. For all practical purposes, the Registration Statement and Prospectus contain the same information and are interchangeable.
. Id. at 31 (emphasis added).
. R. Doc. 214 at 24.
. Id. at 24-25.
. Id. at 25.
. Id.
. Id.
. Id.
. Id. at 26.
. Id.
. Id. at 27-28.
. Id. at 28.
. Id.
. Id. at 28.
. Id.; R. Doc. 221-15.
. R. Doc. 214 at 28.
. Id.
. Id. at 29.
. Id.
. Id. at 31.
. Id.
. Id. at 34.
. Id. at 37.
. Id.
. Id. at 58.
. Id.
. Id.
.Id.
. Id. at 34-35.
. Id. at 36.
. Id. at 42-47.
. Id. at 48.
. Id. at 48-49.
. Id. at 51.
. Id. at 53.
. R. Docs. 77, 78, 105.
. R. Doc. 129.
. R. Doc. 173.
. R. Doc. 234 at 9-11.
. R. Doc. 221-1.
. Any suggestion to the contrary in Lormand v. US Unwired, Inc., 565 F.3d 228, 244 (5th Cir. 2009), conflicts with the Fifth Circuit’s earlier holding in Southland and does not bind this Court. Rios v. City of Del Rio, 444 F.3d 417, 425 n. 8 (5th Cir. 2006) (”[W]here two previous holdings or lines of precedent conflict the earlier opinion controls and is the binding precedent in this circuit----”).
. Oral statements can qualify for the safe harbor if (1) the statement is accompanied by a cautionary statement that the "particular” oral statement is forward-looking and that actual results could differ materially (essentially a formality as to the form of the statement); (2) the statement is accompanied by an oral statement that additional information could cause actual results to differ materially is contained in a readily-available written document; (3) the statement identifies the document or portion thereof containing. the additionál information; and (4) the identified document itself contains appropriate cautionary language. 15 U.S.C. § 78u-5(c)(2).
. R. Doc. 214 at 3.
. R. Doc. 234 at 9-11.
. R. Doc. 214 at 66, 70, 73, 76, 89. Defendant Tate did not sign any of these documents, so any alleged falsehoods contained within these documents may not be attributed to him. Bulmahn, Reese, and Godwin each signed the Registration Statement and the Forms 10-K. Only Reese signed the Forms 10-Q, but both Bulmahn and Reese certified them pursuant to the Exchange Act and the Sarbanes-Oxley Act.
. For all practical purposes, the Registration Statement and Prospectus contain the same information and are interchangeable,
. R. Doc. 214 at 66.
. Id. at 70, 73, 76, 89.
. R. Doc. 221-2 at 30-31.
. Id. at 33.
. Id. at 30-32.
. Id. at 43.
. Id. at 31.
. R. Doc. 221-5 at 37-38.
. R. Doc. 221-7 at 25.
. R. Doc. 221-9 at 26-31.
. R. Doc. 221-13 at 28.
. Id. at 28-29.
. R. Doc. 234 at 21.
. R. Doc. 214 at 23.
. See, e.g., 2010 Form 10-K, R. Doc. 221-5 at 37 (“We have also negotiated with certain other vendors involved in the development of the Telemark Hub and Clipper to partially delay payments for a period of twelve months. .,. We have arranged with the fabricator of the floating production facility to defer $121,5 million of payments until 2011 and the remainder until 2012. These types of financial arrangements preserve our current cash and allow us to pay from the proceeds of future production.”); 2011 Second Quarter Form 10-Q, R. Doc. 221-9 at 13-14 (“In the Gulf of Mexico, in addition to the NPIs exchanged for development services described above, we have negotiated with certain other vendors involved in the development of the Telemark and Gomez Hubs to partially defer payments over a twelve-month period beginning with first production.”).
. 2010 Form 10-K, R. Doc. 221-5 at 18.
. Id.
. On June 26, 2014, ATP’s Chapter 11 petition was converted to a Chapter 7 proceeding. Shortly thereafter, the Bankruptcy Court appointed Rodney Tow as bankruptcy trustee. Rodney Tow filed a complaint against Bul-mahn, Tate, Reese, and Godwin, among others, on August 15, 2014.
. R. Doc. 214 at 38.
. R. Doc. 234 at 21.
. R. Doc. 221-7 at 25.
. R. Doc. 221-5 at 18.
. R. Doc. 214 at 24.
. Id. at 24-25,
. Id. at 25.
. Id. at 26.
. Id. at 28.
. Id.
. Id. at 27-28.
. Id.
. Id. at 30.
. Id.
. Id. at 31.
. Id. at 25.
. Id. at 26.
. Id.
. Id. at 28.
. Id. at 30.
. Id. at 66.
. Id. at 68.
. Id.
. Id. at 69.
. Id. at 71.
. Id. at 72.
. Id. at 74.
. Id. at 75.
. Id. at 77.
. Id. at 82.
. Id. at 84.
. Id. at 88.
. Id. at 90.
. Id. at 91.
. Id. at 94.
. Id. at 101.
. Id. at 102-103.
. Id. at 104.
.Id. at 112.
. Id. at 22.
. Id. at 78.
. Id. at 79.
. Id. at 85.
. Id. at 88.
. Id. at 89-90.
. Id. at 92.
. Id. at 96.
. Id. at 97.
.Id. at 101.
. Id. at 103..
. Id. at 111.
. Id.
. Id.
. R. Doc. 234 at 21.
. R. Doc. 214 at 38.
. Id.
. Id. at 22.
. Id. at 24.
. Id.
. Id. at 50-51.
. Id. at 55.
. Id.
. Oral statements can qualify for the safe harbor if (1) the statement is accompanied by a cautionary statement that the "particular” oral statement is forward-looking and that actual results could differ materially; (2) the statement is accompanied by an oral statement that additional information that could cause actual results to differ materially is contained in a readily available written document; (3) the statement identifies the document or portion thereof containing the additional information, and (5) the identified document itself contains appropriate cautionary language, 15 U.S.C. § 78u-5(c)(2).
. See R. Doc, 214 at 76 ("ATP;s liquidity remains strong as we produce our reserves, we are reducing our debt with payments to NPI and Override interest holders. In fact, because of increased production and higher oil prices, ATP is paying back its debt at an accelerated pace and even had to recognize additional interest expense this quarter.”); id. at 92 ("But what you see is that our entire debt is completely covered by our proved reserves. And sitting on top of that is the infrastructure, some more proved reserves, as well as the probable reserves. Net debt and total obligations of $2.4 billion you’ll see a chart in the back in the appendix that lays that out.”).
.Nonetheless, the Court notes that since Omnicare was decided, a number of courts have applied Omnicare to securities fraud claims — often' without analyzing the differences in the statutory schemes. See e.g., Nakkhumpun v. Taylor, 782 F.3d 1142, 1159 (10th Cir. 2015) (citing Omnicare in a securities fraud case for the proposition that "an opinion is considered false if the speaker does not actually or reasonably hold that opinion”); Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu CPA, 96 F.Supp.3d 325, 344-347 (S.D.N.Y. 2015)(applying Omnicare to claims under Section 10(b) and Section 18 of the Exchange Act). Other courts have cited Omnicare as instructive or as persuasive authority. See e.g., In re Merck & Co., Inc. Sec., Derivative & “ERISA" Litig., No. CIV.A 05-1151 SRC, 2015 WL 2250472, at *11 n. 7 (D.N.J. May 13, 2015) (noting that while “Omnicare, actually; is not directly applicable” to plaintiff’s Section 10(b) claims, "Om-nicare’s analysis of its discussion of misleading opinions is, to some extent,' instructive on the viability of [those] claims as to the opinion-based” statements).
. R. Doc. 214 at 38.
. Id.
. See, e.g., R. Doc. 214 at 22 (“CW3 thought the Company was over-leveraged and was not financially solid. ... CW3 believed that ATP was having serious liquidity problems.”); id. at 31 ("CW6 compared ATP’s strategy of accruing so much debt to gambling in a Las Vegas casino.”).
. Id. at 48.
. See, e.g., 2010 Form 10-K, R. Doc. 221-5 at 37 ("We have also negotiated with certain other vendors involved in the development of the Telemark Hub and Clipper to partially defer payments for a period of twelve months.”); 2012 First Quarter 10-Q, R. Doc. 221-23 ("In certain cases, we will also continue to work with certain vendors to extend out the timing of certain payments to preserve cash.”).
. See, e.g., Year 2010 Form 10-K, R. Doc. 221-5 at 37-38 ("We have conveyed to certain suppliers net profit interests in our Telemark Hub, Gomez Hub, and Clipper oil and gas properties in exchange for development services. ... These types of financial arrange
. Id. at 25 ("While these financing transactions have enabled us to continue the development of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied."),
. Form 10-Q for First Quarter 2012, R. Doc. 221-23 at 34 ("As discussed, we have conveyed to certain vendors and investors NPIs and Overrides in our Telemark Hub, ' Gomez Hub and Clipper oil and gas properties in exchange for development services, equipment and cash. ... These arrangements allow us to match our development cost cash flows with those from production. During the first quarter of 2012, we sold for an aggregate $185.0 million certain Overrides in our Gomez Hub and Clipper property, which is currently being developed.”).
. R. Doc. 214 at 49-50.
. Id.
. Id. at 51.
. May 10, 2012 is the date ATP released its 2012 First Quarter results. Defendants’ statements in the May 10, 2012 Form 10-Q and in a May 10, 2012 earnings conference call are the last statements challenged by plaintiffs regarding ATP’s liquidity or ability to complete the Clipper pipeline.
. Id. at 37.
. Id. at 112.
. Id. at 32.
. Id. at 55.
. Id. at 36.
. R. Doc. 214 at 37.
. Id. at 57.
. Id. at 113.
. Id. at 114.
. Id.
. Id.
. Id.
. Id.
. Id.
. Id. at 115.
Reference
- Full Case Name
- FIREFIGHTERS PENSION & RELIEF FUND OF THE CITY OF NEW ORLEANS, Individually and on Behalf of All Others Similarly Situated v. T. Paul BULMAHN
- Status
- Published