Court Grants Class Certification in Energy Transfer Securities Fraud Case

8/23/2022 - After full briefing and oral argument, a Philadelphia federal court granted in major part the Lead Plaintiffs’ motion for class certification in the securities class action lawsuit against Energy Transfer LP, its CEO and three other senior executives.  The lawsuit alleges that the defendants made false statements to investors concerning two major pipeline construction projects in Pennsylvania. 

In June 2020, BR&B and its co-counsel filed the Operative Class Action Complaint against Energy Transfer and a number of its executives on behalf of the Lead Plaintiffs, a group of five pension fund investors in the company.  The allegations in the complaint arose in part from an FBI investigation into allegations of corruption surrounding the pipeline approval process.  The complaint also alleges that the company and its executives repeatedly misrepresented the projects’ prospects, safety and compliance with regulations.  Defendants moved to dismiss the complaint, and, after full briefing and oral argument, the court sustained  the majority of the claims in the case on April 6, 2021.   Since the ruling on the motion to dismiss, BR&B and its co-counsel have conducted extensive document discovery and also filed a motion for class certification of the action. 

In a 54-page opinion supporting his certification order, U.S. District Judge Gerald A. McHugh ruled that the Lead Plaintiffs had satisfied all elements required for class certification and had established that a presumption of classwide reliance established under the 1988 U.S. Supreme Court case Basic v. Levinson is warranted.  The court further found that in major part Energy Transfer and its executives failed to definitively show that the alleged misrepresentations did not distort the prices of Energy Transfer’s common units.  Judge McHugh wrote: "Defendants attempt to argue controlling legal principles in a way that would narrow the scope of relevant evidence and thereby erode the presumption established by Basic, but their arguments are unconvincing."  He also found that various company statements were confusing, albeit "artfully crafted," and that the “nature and timing of the disclosures here, the lack of transparency, the attempts by Energy Transfer to cast damaging information in a positive light, and the obvious confusion in the market at certain points require a more precise and nuanced analysis of when the market would have absorbed relevant information."  The court concluded that for four of the six alleged curative disclosures, the defendants did not show that the price of Energy Transfer common units was unaffected by the curative disclosures, and therefore, that class certification is appropriate in most respects.

As a result of the decision, Lead Plaintiffs will now proceed with case on behalf of a class of all purchasers, other than defendants and their affiliates, of Energy Transfer common units from Feb. 25, 2017 through Nov. 11, 2019, when it was reported that the FBI was investigating whether bribery or other misconduct affected Pennsylvania's approvals of the two proposed pipelines, Mariner East 2 and Revolution.  Going forward, the litigation will involve issues of whether Energy Transfer misrepresented and/or concealed serious safety risks and construction setbacks that jeopardized the timely completion of the pipelines.  The court’s decision on the motion for class certification is available here and at Allegheny Cty. Employees’ Ret. Sys. v. Energy Transfer LP, No. CV 20-200, 2022 WL 3597200 (E.D. Pa. Aug. 23, 2022).

BR&B looks forward to continuing the prosecution of this litigation on behalf of the Lead Plaintiffs and the now certified investor class.  BR&B partners Jeff Golan (jgolan@barrack.com), Rob Hoffman (rhoffman@barrack.com), Jeffrey A. Barrack (jbarrack@barrack.com), and Chad Carder (ccarder@barrack.com) and BR&B associates Meghan J. Talbot (mtalbot@barrack.com) and Andrew J. Heo (aheo@barrack.com) are litigating the Energy Transfer case and are available to provide additional information upon request.