PHILADELPHIA – A Pennsylvania federal judge recently opted not to transfer a possible class action securities fraud lawsuit to a Texas court, ruling it and another action seeking to be joined with it were not so similar as to be duplicative.
On April 16, U.S. District Court Judge Gerald Austin McHugh issued his order to refuse the motion to transfer brought by defendants Energy Transfer LP, Kelcy L. Warren, John W. McReynolds and Thomas E. Long.
Energy Transfer is a Dallas-based energy transportation and storage company that operates some of the largest oil and gas pipelines in the United States.
“Among its projects is the Mariner East pipeline, 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 Delaware River. There the gas liquid is processed, stored, and distributed to domestic and international markets,” McHugh said.
The second phase of the project, named Mariner East II, sought to transport natural-gas liquids across Pennsylvania to a terminal in Marcus Hook, just outside Philadelphia. Though finding approval for that phase was initially problematic, the Pennsylvania Department of Environmental Protection approved the project.
The Pennsylvania Record recently reported Mariner East II defeated a challenge brought by the Delaware Riverkeeper, though the project still faces challenges.
An Associated Press story published in November regarding an FBI investigation into how the administration of Pennsylvania Gov. Tom Wolf issued permits for the pipeline and whether alleged incidents of bribery were involved sent the share price of Energy Transfer down almost 7% following the story.
The Allegheny County Employees’ Retirement System then filed suit against the defendants on Jan. 10 in the U.S. District Court for the Eastern District of Pennsylvania, alleging “violations of federal securities laws arising from Energy Transfer’s allegedly false or misleading statements about, among other things, its role in obtaining permits for the Mariner East pipeline, as well as its compliance with its internal Code of Business Conduct and Ethics.”
“The complaint alleged Energy Transfer and certain senior executives failed to disclose that the permits received to commence work on the Mariner East pipeline project in Pennsylvania were secured through bribes or other improprieties, which would have increased the risk that Energy Transfer or certain of its employees would be subject to government or regulatory action,” McHugh said.
A similar lawsuit had been filed in the U.S. District Court for the Northern District of Texas in November.
But, McHugh ruled transfer was not warranted as the cases were materially different.
“Allegheny County is filing suit on behalf of a putative class of investors against defendants, whereas in the derivative action a corporate unitholder is bringing a suit on behalf of Energy Transfer itself against allegedly malfeasant corporate leaders,” McHugh said.
“Furthermore, the claims are distinct in nature – the derivative action seeks damages on behalf of the corporation, whereas this action seeks damages for the specific losses of investors. As plaintiff points out, part of the damages claimed in the derivative action depend upon plaintiff’s initial success. And the derivative action raises separate legal claims, and no claim under federal securities law.”
After conducting the Jumara analysis of private versus public interests in transferring a case, McHugh further found that the case should not be transferred.
“As plaintiff brings federal claims, no questions of state law are at issue here. Consequently, consideration of both private and public interest factors under Jumara does not warrant transfer to the Northern District of Texas pursuant to Section 1404(a),” McHugh stated.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-00200
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com