PITTSBURGH – A federal judge has granted a motion to appoint the Institutional Investors Group (IIG) as lead plaintiff in a class action lawsuit against Energy Transfer Partners and two leading executives for alleged securities fraud.
Two competing motions were filed in the U.S. District Court for the Eastern District of Pennsylvania by The Public Employees Retirement Association of New Mexico and the IIG, a collective of the Allegheny County Employees Retirement system and other retirement systems groups from Denver; Baton Rouge, Louisiana; and the state of Iowa Public Employees' Retirement System.
"Both parties argue that they are the 'most adequate plaintiff' as that term is used in the PSLRA [Private Securities Litigation Reform Act of 1995] and defined in the case law, and this is a case where the parties rely on the same authorities but use them to reach opposite conclusions," District Judge Gerald A. McHugh wrote Feb. 18.
New Mexico argued that "some courts are skeptical of group arrangements" when artificial grouping is put together only to qualify as lead plaintiff and that the IIG's inventiveness of a group arrangement would counteract the PSLRA's lead plaintiff plan.
"Courts must investigate proposed lead plaintiffs' groups to determine that the composite entities are able to function as a cohesive and independent unit to protect and advance the interests of the class," McHugh wrote.
PSLRA requires that the group appointed protect the class' interest fairly. "The IIG satisfies the PSLRA's adequacy requirements," McHugh added.
IIG agreed to take full responsibility for providing adequate representation, describing its investors as "like-minded institutional investors that suffered substantial losses on their respective investments in energy transfer securities during the class period."
Energy Transfer partners allegedly sold more than 8.72 million collective shares to the IIG and more than 2.95 million to New Mexico during the time it was under investigation by the FBI for allegedly offering bribes to obtain permits to continue working on the Mariner East pipeline project.
"Mariner East is a multibillion-dollar, 350-mile pipeline that carries 'highly volatile natural gas liquids' from the Marcellus and Utica shales areas in Western Pennsylvania, West Virginia, and Eastern Ohio across Pennsylvania to, among other places, Energy Transfer's Marcus Hook Industrial Complex on the Deleware River," McHugh wrote.
The plaintiffs allege they were both "injured by artificially inflated Energy Transfer stock prices that resulted from materially false statements or omissions by senior executives and the subsequent decline in value of its stock holdings once the alleged misrepresentations were exposed.
The court also granted the motion of the selected lead counsel, Barrack, Rodos & Bacine – and Bernstein, Litowitz, Berger and Grossman LLP as co-lead counsel – assuring they are competent and experienced, although New Mexico raised concerns about the appointment of multiple law firms.
"New Mexico's position overlooks the fact that the two firms have worked together in complex securities litigation for three decades," McHugh wrote. "These firms have the resources, knowledge and drive to vigorously and efficiently prosecute this litigation and protect the interests of the class."
After a court has determined the most adequate lead plaintiff, the presumption may be rebutted only upon proof by a member of the purported plaintiff class under the PSLRA. New Mexico did not rebut the premise of the IIG's adequacies to be lead plaintiff, leading McHugh to grant IIG for the appointment of lead plaintiff.