Vega v. Energy Transfer LP

Background

Mike Vega filed this proposed class action on behalf of people who purchased or otherwise acquired Energy Transfer LP common shares between April 13, 2017, and December 20, 2021. The complaint alleges that Energy Transfer and its directors and officers made materially false and misleading statements, and failed to disclose information, concerning internal controls over contractors, pollution allegedly caused by contractors hired through a subsidiary, and potential civil liabilities while the Federal Energy Regulatory Commission investigated Energy Transfer.

The claims arise under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, the Private Securities Litigation Reform Act, and Securities and Exchange Commission Rule 10b-5.

Lead-Plaintiff Standard

The Private Securities Litigation Reform Act requires the court to appoint the person or group most capable of adequately representing the class as lead plaintiff. The statute creates a rebuttable presumption in favor of a timely movant with the largest financial interest who also satisfies the relevant requirements of Federal Rule of Civil Procedure 23. At this early stage, the court considered typicality and adequacy. Typicality asks whether the proposed lead plaintiff’s claims arise from the same events and legal theories as the class’s claims. Adequacy asks whether the plaintiff and counsel can fairly and effectively represent the class.

Court’s Analysis

Four potential class members sought appointment as lead plaintiff. The New Mexico State Investment Council and Public Employees Retirement Association of New Mexico, referred to as the New Mexico Funds, claimed losses greater than $55 million. The other disclosed claimed losses of $7.3 million, $3,699.36, and $276,639.72. The parties stipulated that the New Mexico Funds were the presumptive lead plaintiffs and asked the court to appoint Robbins Geller Rudman & Dowd LLP as lead counsel.

The court found that the New Mexico Funds filed their motion by the statutory deadline and had the largest financial interest. It also found their claims typical because they purchased Energy Transfer shares during the class period, alleged that the defendants’ false or misleading statements and omissions harmed them, and claimed damages as a result. The court found the New Mexico Funds adequate because their counsel was qualified and experienced, there was no conflict with the class, and the Funds had sufficient interest in the outcome. The court also noted their experience in other securities cases and their access to assistance from the New Mexico Attorney General’s Office.

Disposition

Judge Alvin K. Hellerstein granted the New Mexico Funds’ motion to appoint them as lead plaintiffs and Robbins Geller Rudman & Dowd LLP as lead counsel. The court stated that the case would proceed under the name In re Energy Transfer Securities Litigation. It directed the New Mexico Funds to file an amended complaint conforming the caption, directed the defendants to answer or otherwise respond, set an initial pretrial conference for a date stated as “DATE,” and directed the Clerk of Court to terminate the open motions listed as ECF Nos. 11, 15, 19, and 23. The order selected the lead plaintiffs and counsel; it did not decide the underlying securities claims.