United Food and Commercial Workers Union et al v. Chesapeake Energy Corporation et al

MEMORANDUM in Opposition re MOTION to Dismiss Amended Complaint

W.D. Okla.February 4, 2010

480419_1 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF OKLAHOMA UNITED FOOD AND COMMERCIAL WORKERS UNION, et al., Individually and On Behalf of All Others Similarly Situated, Plaintiffs, vs. CHESAPEAKE ENERGY CORPORATION, et al., Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) No. 5:09-cv-01114-D CLASS ACTION PLAINTIFF’S OPPOSITION TO UNDERWRITER DEFENDANTS’ MOTION TO DISMISS AMENDED COMPLAINT Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 1 of 8 - 1 - 480419_1 In addition to Chesapeake Energy Corporation (“Chesapeake”) and the Individual Defendants’ Motion to Dismiss, the Underwriter Defendants filed their own Motion With Brief in Support to Dismiss Amended Complaint (“Underwriter Defs.’ Mot.”) asserting that plaintiff has failed to allege that the Underwriter Defendants were “sellers” under §12(a)(2) of the Securities Act of 1933. Underwriter Defendants’ Underwriter Defs. Mot. at 2. This argument ignores the properly plead allegations of the Amended Complaint for Violation of the Federal Securities Laws (“Complaint”) and the Underwriter Defendants’ Motion to Dismiss should be denied. As the Underwriter Defendants concede, the Supreme Court in Pinter v. Dahl, 486 U.S. 622 (1988), expands the definition of “seller” under §12(a)(2) to include a “person who successfully solicits the purchase, motivated at least in part by a desire to serve his own financial interests or those of the securities owner.” Id. at 647. Solicitation includes preparation and circulation of the prospectus as well as participation in roadshows to promote the offering. Capri v. Murphy, 856 F.2d 473, 478 (2d Cir. 1988) (finding that participation in preparation and circulation of prospectus sufficiently established seller status); In re Am. Bank Note Holographics Sec Litig., 93 F. Supp. 2d 424, 439 (S.D.N.Y. 2000) (finding that participation in preparation of registration statement and prospectus and in roadshows sufficient to show solicitation); In re OPUS360 Corp. Sec. Litig., No. 01Civ.2938(JGK)(JCF), 2002 WL 31190157, at *10 (S.D.N.Y. Oct. 2, 2002) (same). The Underwriter Defendants were sellers under §12(a)(2) because they solicited purchases in the Offering. As alleged in the Complaint, the Underwriter Defendants merchandised Chesapeake stock by arranging multi-city roadshows in which they (along Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 2 of 8 - 2 - 480419_1 with certain of the Individual Defendants) met with potential investors and presented highly favorable information about Chesapeake. ¶22.1 Additionally, the Underwriter Defendants assisted in the planning of the Offering and engaged in “drafting sessions” in which they determined: (i) the strategy to best accomplish the Offering; (ii) the terms of the Offering, including the price at which Chesapeake stock would be sold; (iii) the language to be used in the Registration Statement (including the financial statements incorporated therein by reference); and (v) what responses would be made to the Securities and Exchange Commission in connection with its review of the Registration Statement. ¶¶23, 24. The Underwriter Defendants also drafted and disseminated the Offering documents and received fees of more than $51 million collectively. ¶¶22, 25. These allegations are more than sufficient to allege seller status under §12(a)(2).2 The Underwriter Defendants rely on two cases that are inapplicable here. Underwriter Defs.’ Mem. at 2-3. In In re Royal Ahold N.V. Sec. & ERISA Litig., 351 F. Supp. 2d 334 (D. Md. 2004), the court based its decision that the plaintiffs’ allegations were insufficient on their failure to provide factual support rather than conclusory statements. Id. at 406. As demonstrated above, this is not the case here as plaintiff has provided a number of factual 1 Paragraph references (“¶_” or “¶¶__”) are to the Complaint. 2 Whether a particular defendant engaged in sufficient solicitation to render itself liable under §12(a)(2) is ultimately a question of fact, and plaintiff need not plead solicitation with particularity as Fed. R. Civ. P. 9(b)’s specificity requirements do not apply. In re Portal Software, Inc. Sec. Litig., No. C-03-5138 VRW, 2006 WL 2385250, at *4 (N.D. Cal. Aug. 17, 2006); Degulis v. LXR Biotechnology, No. 95 Civ. 4204 (RWS), 1997 U.S. Dist. LEXIS 381, at *17 (S.D.N.Y. Jan. 21, 1997). Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 3 of 8 - 3 - 480419_1 allegations to support the Underwriter Defendants’ solicitation in the Offering. Also, in In re Countrywide Fin. Corp. Sec. Litig., 588 F. Supp. 2d 1132 (C.D. Cal. 2008), there was no discussion regarding solicitation by the underwriters, as is alleged in this case. Id. at 1183. Moreover, courts have held that plaintiffs need not identify from which defendant they purchased shares in order to give underwriter defendants fair notice of the basis for the claims under Fed. R. Civ. P. 8. See, e.g., In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 392, 423 (S.D.N.Y. 2003). The Complaint properly alleges that the Underwriter Defendants were “sellers” under §12(a)(2). Accordingly, the Underwriter Defendants’ Motion to Dismiss should be denied. DATED: February 4, 2010 Respectfully submitted, COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP JAMES I. JACONETTE FRANCIS A. DiGIACCO s/ JAMES I. JACONETTE JAMES I. JACONETTE 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP SAMUEL H. RUDMAN DAVID A. ROSENFELD 58 South Service Road, Suite 200 Melville, NY 11747 Telephone: 631/367-7100 631/367-1173 (fax) Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 4 of 8 - 4 - 480419_1 COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP RANDI D. BANDMAN 52 Duane Street, 7th Floor New York, NY 10007 Telephone: 212/693-1058 212/693-7423 (fax) LYTLE, SOULÉ & CURLEE, P.C. MICHAEL C. FELTY MICHAEL A. BETTS 119 North Robinson, Suite 1200 Oklahoma City, OK 73102 Telephone: 405/235-7471 405/232-3852 (fax) Lead Counsel for Plaintiffs SCHWARZWALD McNAIR & FUSCO LLP EBEN O. McNAIR IV 616 Penton Media Building 1300 East Ninth Street Cleveland, OH 44114-1503 Telephone: 216/566-1600 216/566-1814 (fax) Additional Counsel for Plaintiff Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 5 of 8 480419_1 CERTIFICATE OF SERVICE I hereby certify that on February 4, 2010, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the e-mail addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I have mailed the foregoing document or paper via the United States Postal Service to the non-CM/ECF participants indicated on the attached Manual Notice List. I certify under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on February 4, 2010. s/ JAMES I. JACONETTE JAMES I. JACONETTE COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101-3301 Telephone: 619/231-1058 619/231-7423 (fax) E-mail: jamesj@csgrr.com Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 6 of 8 Mailing Information for a Case 5:09-cv-01114-D Electronic Mail Notice List The following are those who are currently on the list to receive e-mail notices for this case. Hissan Ahsan Bajwa hissanbajwa@paulhastings.com Lily I Becker lbecker@orrick.com,rrivera@orrick.com,gjohnson@orrick.com Michael A Betts betts@lytlesoule.com,mjones@lytlesoule.com Francis A DiGiacco fdigiacco@csgrr.com Michael C Felty felty@lytlesoule.com,weis@lytlesoule.com E Joseph Giometti jgiometti@orrick.com Daniel Bruce Goldman dangoldman@paulhastings.com James I Jaconette jamesj@csgrr.com,karenc@csgrr.com,e_file_sd@csgrr.com David S Keenan dkeenan@orrick.com Drew Neville , Jr dneville@hartzoglaw.com,gbrown@hartzoglaw.com Reagan Therese Roth reaganroth@paulhastings.com M Todd Scott tscott@orrick.com,elee@orrick.com Robert P Varian rvarian@orrick.com,bclarke@orrick.com James R Webb jim.webb@mcafeetaft.com,karen.hill@mcafeetaft.com Page 1 of 2CM/ECF LIVE - U.S. District Court:okwd 2/4/2010https://ecf.okwd.uscourts.gov/cgi-bin/MailList.pl?254684982128533-L_426_0-1 Case 5:09-cv-01114-D Document 60 Filed 02/04/2010 Page 7 of 8 Ryan S Wilson RWilson@hartzoglaw.com,swatts@hartzoglaw.com Manual Notice List The following is the list of attorneys who are not on the list to receive e-mail notices for this case (who therefore require manual noticing). 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