Southern District Of Texas Dismisses Securities Class Action Against Oil And Gas Exploration Company Based On Alleged Misstatements Regarding Compliance With Safety Standards

Author:Shearman & Sterling LLP
Profession:Shearman & Sterling LLP
 
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On June 19, 2018, Judge Lee H. Rosenthal of the United States District Court for the Southern District of Texas dismissed with leave to amend a putative securities class action against Anadarko Petroleum Corporation ("Anadarko" or the "Company") and certain of its officers. Edgar v. Anadarko Petroleum Corp., et al., No. 17-1372 (S.D. Tex., June 19, 2018). Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 by allegedly making material misstatements about the safety of its gas wells and compliance with regulatory requirements. The Court found all but one of the alleged misstatements was not actionable because they amounted to opinions and "corporate cheerleading." Although the Court found one alleged misstatement actionable, it held that the complaint failed to establish scienter, and granted leave to amend the complaint.

The Company is an oil and gas exploration and production company. In 2013, it acquired land north of Denver, including approximately 1,500 existing oil wells that allegedly were decades old and did not comply with health, safety, and environmental laws and regulations. After discovering that several hundred of the wells posed safety and environmental hazards, the Company authorized tens of millions of dollars for remediation. However, after oil prices plummeted in 2014, Plaintiffs alleged that the Company reversed course, slashed its remediation budget, and laid off 30 percent of its workforce responsible for well remediation. Plaintiffs alleged that defendants' failure to remediate caused a significant oil spill, and a deadly explosion at a Colorado home, which the local fire department confirmed was caused by a methane leak from a Company well. The Company's stock price fell the day following the fire department's announcement.

Plaintiffs alleged that various...

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