955 F. Supp. 2d 658
N.D. Tex.2013Background
- Pension Plan sues Kosmos for alleged securities violations tied to Kosmos' May 11, 2011 IPO.
- Kosmos’ Jubilee field offshore Ghana began producing in 2010; Jubilee was Kosmos' sole revenue source.
- Prospectus included forward-looking production forecasts and cautionary risk disclosures; alleged misstatements concern Jubilee production and forecasts.
- Pension Plan asserts four misleading statements/omissions in the Prospectus, including production increasing, 120,000 bopd forecast, no negative indicators, and a drillstem-rate chart for J-08 and J-09.
- Defendants include Kosmos, Individual Defendants, Underwriter Defendants, and Shareholder Defendants Blackstone and Warburg Pincus; motions to dismiss filed January 22, 2013.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Materiality of the statements in the Prospectus (Section 11). | Pension Plan contends statements were false/misleading despite warnings. | Kosmos argues warnings negate materiality; assertions were forward-looking projections with risks disclosed. | Some statements survive as plausible material misstatements; cautionary language does not automatically render all projections immaterial. |
| Kosmos' § 12(a)(2) liability under Rule 159A and Pinter framework. | Rule 159A could make issuer a statutory seller in primary offerings. | Pinter controls; issuers cannot be liable under § 12(a)(2) in firm-commitment underwriting absent solicitation. | Rule 159A does not disturb Pinter precedent; Kosmos not liable under § 12(a)(2) as to the issuer. |
| Liability of Underwriter Defendants under § 12(a)(2). | Underwriters sold stock directly to Pension Plan; liability attaches. | No direct sale to Plan by underwriters; need direct solicitation or sale by underwriter. | Pension Plan adequately alleged direct purchase from Underwriter Defendants; § 12(a)(2) claim against them survives at this stage. |
| § 15 control liability of Blackstone and Warburg Pincus. | Blackstone/Warburg controlled Kosmos via voting power and by appointing directors; liable as control persons. | Ownership and board appointment alone are insufficient; no allegations of day-to-day control or agency. | § 15 claim dismissed without prejudice as to Blackstone and Warburg due to lack of adequate control allegations. |
| § 11/§ 12 claims based on drillstem-rate chart for J-08 and J-09. | Chart misrepresented production by using drillstem rates instead of actual production. | Chart presents drillstem test data; not necessarily misstatement of current production. | § 11 claim based on drillstem rates dismissed without prejudice. |
Key Cases Cited
- Rosenzweig v. Azurix Corp., 332 F.3d 854 (5th Cir.2003) (Section 11 requires only notice pleading; materiality analysis in context)
- Kapps v. Torch Offshore, Inc., 379 F.3d 207 (5th Cir.2004) (pushes pleading standards for § 11 claims; not requiring 9(b) specificity)
- Pinter v. Dahl, 486 U.S. 622 (U.S.1988) (defining who may be a statutory seller under § 12(a)(2); solicitation scope)
- Lone Star Ladies Inv. Club v. Schlotzsky's, Inc., 238 F.3d 363 (5th Cir.2001) (solicitation and agency considerations in § 12(a)(2) context)
- In re Westinghouse Secs. Litig., 90 F.3d 696 (3d Cir.1996) (underwriters' liability framework and Pinter-based analysis)
- In re Countrywide Fin. Corp. Mortg.-Backed Secs. Litig., 2013 WL 1189311 (C.D. Cal.2013) (discussion of Rule 159A and § 12(a)(2) boundaries (note: WL cited; omitted if necessary))
- In re Oppenheimer Rochester Funds Grp. Secs. Litig., 838 F. Supp. 2d 1148 (D. Colo.2012) (Rule 159A applicability in issuer liability under § 12(a)(2))