Electrical Works Pension Fund, Local 103, I.B.E.W. v. Six Flags Entertainment Corporation

Court: United States District Court for the Northern District of Texas
Case Number: 4:20-cv-00201-P
Class Period: 04/25/2018 - 02/19/2020
Case Leaders: Katherine M. Sinderson, Hannah Ross, Abe Alexander
Case Team: Brandon Slotkin, Caitlin Bozman

This is a securities class action filed on behalf of purchasers of Six Flags Entertainment Corporation (“Six Flags” or the “Company”) common stock between April 25, 2018 and February 19, 2020, inclusive (the “Class Period”). The case alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against Six Flags and certain of the Company’s former senior executives (collectively, “Defendants”).

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and growth prospects related to its agreements with Riverside Investment Group Co. Ltd. (“Riverside”) to develop parks in China. As development of those parks began to face delays, Defendants misled investors by downplaying the problems as “short-term” and “not material in the context of the long-term opportunity.” Defendants also assured investors that Riverside was “work[ing] through” the macroeconomic issues in China and that Riverside was in “great shape” financially. In truth, Riverside was in severe financial distress and did not have the resources to timely complete its projects with Six Flags. As a result of Defendants’ misrepresentations, shares of Six Flags’ common stock traded at artificially inflated prices throughout the Class Period.

The truth emerged through a series of disclosures, beginning on February 14, 2019, when Six Flags announced a negative $15 million revenue adjustment for the fourth quarter of 2018 due to delays in the expected opening dates of some of its China parks, which the Company falsely blamed on macroeconomic issues in China.

Then, on October 23, 2019, Six Flags again postponed the timing of its park openings in China, stating “it’s unrealistic to think it’s going to be exactly as we’ve outlined.”

On January 10, 2020, the Company disclosed that the development of its Six Flags-branded parks in China continued to encounter challenges and had not progressed as expected, placing the future of its China parks in jeopardy. The Company also revealed that Riverside continued to face significant financial challenges, which caused Riverside to default on its payment obligations to Six Flags. As a result of these disclosures, the price of Six Flags common stock declined precipitously.

Finally, on February 20, 2020, the Company revealed that it had terminated its development agreements with Riverside because Riverside had defaulted on its payment obligations to the Company during 2019. The Company also stated that it is unlikely that Six Flags would recognize any revenue or income from the development of its Six Flags-branded parks in China, and provided a dismal earnings outlook for 2020, driven by significantly lower revenue contribution from Six Flags’ international development agreements. In response to these additional disclosures, the price of Six Flags’ common stock again dropped significantly.

On May 8, 2020, the Honorable Judge Mark Pittman appointed Bernstein Litowitz lead counsel, representing lead plaintiffs Oklahoma Firefighters Pension and Retirement System and Electrical Workers Pension Fund, Local 103, I.B.E.W. On July 2, 2020, Lead Plaintiff filed their amended complaint. On March 3, 2021, the Court granted Defendants’ motion to dismiss. On March 31, 2021, Lead Plaintiffs moved to set aside the judgment and for leave to amend the complaint. On July 26, 2021, the Court denied Lead Plaintiffs’ motion. Oklahoma Firefighters Pension and Retirement System appealed.

On August 25, 2021, Lead Plaintiff Oklahoma Firefighters Pension and Retirement System filed a notice of appeal to the Court of Appeals for the Fifth Circuit. The appeal was fully briefed on December 14, 2021 and oral argument was heard on March 7, 2022. On January 18, 2023, the Fifth Circuit reversed and remanded the District Court’s dismissal and reinstated nearly all of Plaintiffs claims.

Thereafter, on March 6, 2023, the parties submitted and joint status report and proposed scheduling order. The Court entered the scheduling order, and set the deadline for motions to amend the pleadings as May 9, 2023, completed discovery by February 16, 2024, and motions for class certification for October 6, 2024.

On April 18, 2023, Oklahoma Firefighters moved to amend the Complaint and add Key West Police & Fire Pension Fund as an additional named plaintiff to obviate certain objections to class certification. On May 2, 2023, Defendants filed an opposition to the motion to amend and moved for a judgment on the pleadings, arguing that Oklahoma Firefighters lacked standing, and moved for a stay of discovery under the PSLRA. The next day the Court granted Defendants’ motion to stay discovery and ordered Plaintiffs to respond to the motion for judgment on the pleadings in one week. On May 10, 2023 Oklahoma Firefighters filed its opposition brief and Key West moved to intervene. On May 16, 2023 Defendants filed their reply in support of their motion for judgment on the pleadings and opposed Key West’s motion to intervene. On May 24, 2023, Key West filed a reply in support of its motion to intervene.

On June 2, 2023 the Court issued an Opinion and Order granting Defendants’ motion for judgment on the pleadings, holding that Oklahoma Firefighters did not have standing, and therefore could not prosecute the action or amend the Complaint, and because a class had not been certified, Key West could not intervene. The same day the Court entered a final judgment dismissing the case with prejudice. Oklahoma Firefighters and Key West filed a notice of appeal on June 30, 2023 and filled their appellate briefing seeking a reversal of the Court’s dismissal on September 29, 2023. Defendants filed their opposition appellate brief on November 14, 2023. Plaintiffs filed their reply on December 4, 2023. The appeal is now fully briefed.