Barrack, Rodos & Bacine Files Detailed Securities Class Action Complaint on Behalf of Energy Transfer LP Investors

6/15/2020 - BR&B clients, the Iowa Public Employees’ Retirement System and the Denver Employees Retirement Plan, along with three additional public pension funds, were appointed in March 2020 to serve as the Lead Plaintiffs in the securities class action brought on behalf of purchasers of common units of Energy Transfer LP (“Energy Transfer” or the “Partnership”).  The class action is pending in the United States District Court for the Eastern District of Pennsylvania (Case No. 2:20-cv-00200-GAM), before the Honorable Gerald A. McHugh. Barrack, Rodos & Bacine is serving as a Co-Lead Counsel for the Lead Plaintiffs and the putative class. 

The Operative Class Action Complaint, filed on June 15, 2020, is based on an extensive investigation and asserts securities fraud claims on behalf of all persons who purchased Energy Transfer common units from February 25, 2017 through December 2, 2019 (the “Class Period”).  The action is brought against Energy Transfer and certain of the Partnership’s current and former executives, and asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  

Energy Transfer’s Alleged Fraud

Energy Transfer is a natural gas and energy transportation and storage company.  The Partnership operates some of the largest oil and gas pipelines in the United States, including 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 primarily to Energy Transfer’s Marcus Hook terminal near Philadelphia for export to plastics producers in Europe.  On February 13, 2017, Energy Transfer obtained approval from the Pennsylvania Department of Environmental Protection ("DEP") to construct Mariner East 2 and 2X, an expansion of the Mariner East pipeline.  According to news sources, approval of the Partnership's permits was believed to be the final regulatory hurdle to begin construction of the pipeline.

Throughout the Class Period, the defendants repeatedly assured investors that Energy Transfer had lawfully obtained valid permits to begin construction on Mariner East 2 and 2X, and that the Partnership was constructing Mariner East 2 and 2X, and its connected Revolution pipeline, in a safe and environmentally protective manner.  The complaint alleges that, in reality, Energy Transfer, acting either independently or in concert with the Pennsylvania Governor’s administration, used coercion and other illicit tactics to force the DEP to approve the critical construction permits.  The complaint further alleges that the Partnership had been constructing these pipelines in a dangerous and destructive manner, which led to multiple fines for violations of environmental regulations, and significant delays to the pipelines’ completion.

The truth about the pipelines was revealed piecemeal, beginning on August 9, 2018, when Energy Transfer revealed that it would be unable to complete Mariner East 2 as promised, and and had been forced to implement a “workaround” that severely limited the total throughput of the Mariner East system.  Then, after an explosion on the Revolution pipeline on September 10, 2018, the DEP issued an order suspending construction on Energy Transfer projects.  The DEP cited the Partnership’s failure to implement safety control measures that would have helped to prevent the explosion, and Energy Transfer;s failure to provide an adequate plan to remedy the destruction caused by the explosion.

On November 12, 2019, the Associated Press published “FBI Eyes How Pennsylvania Approved Pipeline,” which reported that current and former state employees had revealed that Energy Transfer’s Mariner East pipeline project was under investigation by the FBI, and that the investigation “involves the permitting of the pipeline, whether [Pennsylvania Governor Tom] Wolf and his administration forced environmental protection staff to approve construction permits and whether Wolf or his administration received anything in return.”  And an December 3, 2019 announcement revealed the filing by the Chester County District Attorney of criminal charges involving Energy Transfer’s hiring and use of Pennsylvania Constables as its private security force for the Mariner East pipelines, In response to these revelations, the price of Energy Transfer’s common units fell precipitously, causing significant losses and damages to investors in the Partnership’s securities during the Class Period.

CASE STATUS

As noted above, BR&B clients the Iowa Public Employees’ Retirement System and the Denver Employees Retirement Plan, along with three other institutional investors, were appointed as Lead Plaintiffs by the court.  After defeating a motion filed by the Partnership to transfer the class action to the U.S. District Court for the Northern District of Texas, Lead Plaintiffs filed the Operative Class Action Complaint on June 15, 2020.  Click here for a copy of the complaint and here for a copy of the court’s decision denying the motion to transfer.

Defendants’ motion to dismiss is due to be filed by August 14, 2020; Lead Plaintiffs’ opposition is due by October 5, 2020; and defendants’ reply brief in further support of their motion to dismiss is due by October 20, 2020.

BR&B partners Jeff Golan (jgolan@barrack.com), Rob Hoffman (rhoffman@barrack.com), and Jeffrey A. Barrack (jbarrack@barrack.com), and BR&B associate Meghan Talbot (mtalbot@barrack.com) are litigating the Energy Transfer case for the Lead Plaintiffs and the putative class and are available to provide additional information about the case upon request.