Bricklayers & Masons Local Union No. 5 Ohio Pension Fund v. Transocean Ltd.
866 F. Supp. 2d 223
S.D.N.Y.2012Background
- Plaintiffs sue under Sections 14(a) and 20(a) alleging false/misleading proxy for the Oct. 2, 2007 Merger of GSF and Transocean.
- Proxy incorporated the Merger Agreement and environmental representations; Deepwater Horizon disaster in 2010 prompted scrutiny of safety practices.
- Plaintiffs allege misrepresentations/omissions about environmental compliance, training/safety, and that the Exchange Price was fair.
- Defendants move to dismiss under Rule 12(b)(6); the court grants in part and denies in part; retains some claims with leave to amend.
- Standing is addressed: DeKalb has standing; Bricklayers lacks standing, with leave to amend for Bricklayers' standing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under Section 14(a) | DeKalb had statutory/constitutional standing; Bricklayers did not vote or retain stock after disclosures. | Plaintiffs lacked standing due to record-date/voting and post-disclosure ownership issues. | DeKalb has standing; Bricklayers dismissed without prejudice with leave to amend. |
| Applicability of PSLRA and Rule 9(b) pleading | Claims rely on negligent conduct; PSLRA pleading standard should apply for scienter. | PSLRA/9(b) not required or applicable to negligence-style claims; scienter not shown. | PSLRA §78u-4(b)(2) not applicable; Rule 9(b) heightened pleading applies and is satisfied. |
| Material misrepresentations/omissions in Environmental/Training statements | Proxy misrepresented environmental compliance and training; omitted unsafe practices and maintenance failures. | Allegations lack specificity and misstatement in environmental/training areas; puffery limits liability. | Plausible misrepresentations/omissions with environmental/training themes; not mere puffery; adequately pled. |
| Fairness of Exchange Price | Defendants knew undisclosed risks; fairness opinion was falsely based on misleading facts. | Fairness opinion is opinion-based and not shown to be objectively/subjectively false. | Sufficient facts to plead both objective and subjective falsity of the fairness opinion. |
Key Cases Cited
- United Paperworkers Int’l Union v. Int’l Paper Co., 985 F.2d 1190 (2d Cir.1993) (standing and materiality principles for Section 14(a) claims)
- Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (loss causation; inflationary pleadings during securities actions)
- Rombach v. Chang, 355 F.3d 164 (2d Cir.2004) (pleading fraud with particularity under Rule 9(b))
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (Tellabs standard for strong inference of scienter)
- In re Bank of Am. Secs., 757 F. Supp. 2d 260, 757 F. Supp. 2d 260 (S.D.N.Y.2010) (informing materiality and pleading standards in securities cases)