Court Recommends Denial of Dismissal Bid in Apache Corporation Securities Suit

Judge Andrew Edison issued an order denying Apache Corporation’s motion to dismiss the class action securities suit against them. The judge ruled that the plaintiff’s claims of securities fraud met the standard to proceed with the case. 

Apache Corporation is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. As described in the complaint, prior to the class period, Apache’s stock value was steadily dropping. To stop this trend, on September 7, 2016, the executives allegedly falsely played up the prospects of their new Alpine Heights venture.

The lead plaintiffs argue, citing numerous unnamed witnesses, that the executives hid the findings of their geological surveys from the public and much of the company itself, findings which outlined the much dimmer picture of how poorly the wells in the region were performing. On February  26,  2020, Apache announced the discontinuation of its Alpine High project.

In February 2021, the Plymouth County Retirement system filed suit for Securities Fraud, and in December, the Trustees of the Teamsters Union No. 142 Pension Fund joined onto the class action. 

One year later, in February 2022, Apache filed a motion to dismiss arguing that the lead plaintiffs did not adequately plead actionable misrepresentations, that the defendants’ statements are covered under the Private Securities Litigation Reform Act’s (PSLRA) safe harbor provision, that the defendants’ statements were merely opinion, and that the lead plaintiffs did not adequately plead scienter.

To the claim that the plaintiffs did not adequately plead actionable misrepresentations, the judge said, “Despite their usual length, many of those filings are cut-and-paste jobs that unquestionably fail to properly allege a false or misleading statement. This is not one of those complaints.”

On the safe harbor claim, the judge ruled that while the PSLRA’s safe harbor does protect most forward-looking statements, the allegedly misleading statements in question are primarily current or historical fact. And even if the Judge granted that the claims were forward-looking, they did not contain suitable warning to warrant safe harbor status.

On the claim that the statements in question are merely non-actionable opinions, Judge Edison was unconvinced. He states that even if he did grant that the statements were matters of opinion, Supreme Court precedent grants that they are still actionable.

The judge gave a mixed decision on scienter. On the one hand, the lead plaintiffs argued that the executives at Appache were desperate to reverse the slow decline of the company, so made these allegedly false statements to save the stock prices. On the other, the defendants argued that these statements were merely overly optimistic and represented the genuine hopes of said executives. Judge Edison ruled in favor of the plaintiffs in part because of the Southland case, which set precedent for a tie between the parties going in favor of the plaintiff at the dismissal stage. The ruling also found the resignation of the lead technical advisor, Apache’s 2020 announcement of a $3 billion write-down and ceasing drilling in Alpine High, and the executives’ pay structure as plausible evidence for intent to mislead.

The case is set in the Southern District of Texas, where Apache is based. The lead plaintiffs are represented by Thomas Ajamie; Kessler, Topaz, Meltzer, and Check, LLP; and Saxena White P.A. The defendants are represented by Baker Botts