Vega v. Energy Transfer LP

Background

The opinion concerns a proposed securities class action against Energy Transfer LP, Kelcy L. Warren, Thomas E. Long, Marshall S. McCrea III, Bradford Dicer(k)son Whitehurst, and John W. McReynolds. The complaint alleges that Energy Transfer and its directors and officers made materially false or misleading statements and failed to disclose information concerning internal controls, contractors’ alleged illegal drilling-related conduct, severe pollution, and potential civil liabilities while the Federal Energy Regulatory Commission was investigating.

The proposed class consists of people who purchased or otherwise acquired Energy Transfer common shares between April 13, 2017, and December 20, 2021. The claims arise under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and the related Securities and Exchange Commission Rule 10b-5.

Four potential class members sought appointment as lead plaintiff: the Police and Fire Retirement System of the City of Detroit, Mike Vega, Josephine Dameyer, and the New Mexico State Investment Council together with the Public Employees Retirement Association of New Mexico. The applicants reported claimed losses ranging from $3,699.36 to more than $55 million. 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.

Legal standard

The Private Securities Litigation Reform Act requires the court to appoint the person or group most capable of adequately representing the class. The statute creates a rebuttable presumption in favor of the applicant who timely filed or moved, has the largest financial interest in the requested relief, and satisfies the relevant requirements of Rule 23 of the Federal Rules of Civil Procedure. At this early stage, the court considered typicality and adequacy.

Analysis

The court held that the New Mexico Funds met the statutory requirements. Their motion was timely, and they claimed losses exceeding $55 million, which was the largest financial interest among the applicants. The court therefore treated them as the presumptive lead plaintiffs.

The court also found that the New Mexico Funds’ claims were typical because they alleged that they purchased Energy Transfer shares during the class period, were affected by the defendants’ allegedly false or misleading statements and omissions, and suffered resulting damages. The court found them adequate because they had retained qualified and experienced counsel, had no conflict with the class, had a sufficient interest in the outcome, and had experience supervising securities litigation. The court also noted their access to advice and assistance from the New Mexico Attorney General’s Office.

The court approved the New Mexico Funds’ selection of Robbins Geller Rudman & Dowd LLP as lead counsel.

Ruling and deadlines

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 case was to proceed under the name “In re Energy Transfer Securities Litigation.” The New Mexico Funds were ordered to file an amended complaint by August 22, 2022. Defendants were ordered to answer or otherwise respond by September 15, 2022. The parties were ordered to appear for an initial pretrial conference on October 14, 2022, at 10:00 a.m. The Clerk of Court was directed to terminate the open motions listed as ECF Nos. 11, 15, 19, and 23. The opinion addressed case management and representation of the proposed class; it did not decide the merits of the securities allegations.