Cases

St. Lucie County Fire District Firefighters’ Pension Trust Fund, et al. v. Bryant, et al.

Court: United States District Court, Southern District of Texas
Case Number: 14-cv-3428
Judge: Hon. Nancy F. Atlas
Class Period: 3/1/2011 - 11/3/2014 (inclusive)
Case Contacts: Avi Josefson, David R. Stickney, Jonathan D. Uslaner, Brandon Marsh, Jenny E. Barbosa

On November 30, 2014, BLB&G filed a securities class action on behalf of St. Lucie County Fire District Firefighters’ Pension Trust Fund and Fire and Police Retiree Health Care Fund, San Antonio against Cobalt International Energy, Inc. (“Cobalt” or the “Company”), certain of its senior executives and directors, the underwriters of its securities offerings and certain investment firms that controlled the Company (collectively “Defendants”). On March 3, 2015, the Court appointed GAMCO Gold, Natural Resources & Income Trust, and GAMCO Natural Resources, Gold & Income Trust, as Lead Plaintiffs.  On May 1, 2015, Lead Plaintiffs filed an amended consolidated class action complaint asserting claims under Sections 11, 12(a), and 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on behalf of investors in Cobalt securities during the period of March 1, 2011 to November 3, 2014, inclusive (the “Class Period”).  A copy of the Amended Complaint is available here.  On June 30, 2015, Defendants moved to dismiss the Amended Complaint.  Plaintiffs filed briefs in opposition to each of Defendants’ motions to dismiss, and on January 19, 2016, the Court denied in part Defendants’ motions.  Plaintiffs filed their motion for class certification on November 2, 2016.  On March 15, 2017, Plaintiffs filed a second amended complaint to add a claim under Section 20A of the Securities Exchange Act of 1934.  A copy of the Second Amended Complaint (“Complaint”) is available here

On April 14, 2017, the Controlling Entity Defendants moved to dismiss the newly added 20A claim.  Plaintiffs filed a brief in opposition and on June 15, 2017, the Court issued an order largely denying Defendants’ motion.  That same day, the Court issued a second order certifying the action to proceed as a class action, appointing GAMCO Global Gold, Natural Resources & Income Trust; GAMCO Natural Resources, Gold & Income Trust; St. Lucie County Fire District Firefighters’ Pension Trust Fund; Fire and Police Retiree Health Care Fund, San Antonio; Sjunde AP-Fonden; and Universal Investment Gesellschaft m.b.H. as Class Representatives, and appointing BLB&G and Entwistle & Cappucci as Class Counsel.      

On June 29, 2017, Defendants filed a petition for permission to appeal the District Court’s class certification order.  Plaintiffs filed their opposition on July 10, 2017, and on August 4, 2017, the Fifth Circuit granted Defendants’ motion for leave to appeal and set a briefing schedule. Defendants’ opening briefs were filed on October 10, 2017 and Plaintiffs’ answering briefs were filed on November 9, 2017.  Defendants’ reply briefs were filed on December 1, 2017. 

While the petition for permission to appeal was pending, Defendants filed in the District Court a motion for reconsideration of the class certification order, as well as a motion to stay the action pending resolution of the appeal.  Plaintiffs filed their oppositions to both motions, and on August 23, 2017, the District Court denied Defendants’ motion for reconsideration and motion to stay the action.  The next day, Defendants filed a motion to stay with the Fifth Circuit.  Plaintiffs opposed the motion, and on September 15, 2017, the Fifth Circuit denied Defendants’ request.

On December 14, 2017, Cobalt filed petitions for relief under Chapter 11 of the United States Bankruptcy Code.  That same day, Cobalt filed a motion in Bankruptcy Court seeking to stay Plaintiffs’ claims in this Securities Action against the 56 Non-Debtor Defendants, including the Controlling Entity Defendants and the Underwriter Defendants.  United States Bankruptcy Judge Marvin Isgur held a hearing on the motion on January 4, 2018.  At the hearing, the parties reached an agreement to resolve the stay motion and related adversary proceeding as memorialized in the subsequent judgment issued by Judge Isgur, which states, among other things, that effective at 12:01 a.m. on April 21, 2018, the “automatic stay [of this Civil Action No. 4:14-3428] is terminated as to all matters in the civil action; provided, the automatic stay remains in effect solely as to the prosecution of any claims against or issuance of any judgment against the Debtors.” 

As set forth in the Complaint, the action is brought on behalf of purchasers of Cobalt’s securities between March 1, 2011 and November 3, 2014, inclusive (the “Class Period”), including: persons who purchased or otherwise acquired:  (i) Cobalt securities on the open market; (ii) Cobalt’s common stock pursuant and/or traceable to registered public offerings conducted on or about February 23, 2012, January 16, 2013 and May 8, 2013; and/or (iii) Cobalt’s 2.65% Convertible Senior Notes due 2019, pursuant and/or traceable to the registered public offering conducted on or about December 12, 2012, and/or Cobalt Convertible Senior Notes due 2024, pursuant and/or traceable to the registered public offering conducted on or about May 8, 2014 (collectively, the “Offerings”).

Cobalt is an oil exploration and production company headquartered in Houston, Texas with operations in the Gulf of Mexico and offshore West Africa.  The Complaint alleges that during the Class Period, Cobalt and certain of its senior executives violated provisions of the Exchange Act by issuing materially false and misleading press releases, filings with the Securities and Exchange Commission (“SEC”), and statements during investor conference calls.  The Complaint also alleges that in connection with the Offerings, the Company issued securities pursuant to materially misstated filings with the SEC. 

As alleged in the Complaint, Cobalt has portrayed itself as a company with “world class,” “large” and “oil-focused” wells in the Republic of Angola and claimed that the Company gained access to those wells in compliance with the U.S. law outlawing the bribery of foreign officials (the Foreign Corrupt Practices Act or “FCPA”).  In truth, Cobalt obtained access to its Angolan wells from the Republic of Angola by partnering with shell companies in Angola that were partially owned by high-level Angolan officials, putting the Company at serious risk of enforcement action by the SEC and U.S. Department of Justice (“DOJ”) for violations of the FCPA and the federal securities laws.  In addition, Cobalt misrepresented the value of its wells in Angola after the Company learned that they contained very little or no oil.

As a result of the Company’s statements to investors, the prices of Cobalt’s stock and bonds were artificially inflated during the Class Period.  Investors first began to learn the truth when: (i) on December 1, 2013, the Company revealed negative results from its Lontra well; (ii) on August 5, 2014, it was revealed that Cobalt had paid the Angolan government for a research center that did not exist, and that the SEC had escalated its then-ongoing investigation of the Company for possible violations of the federal securities laws by issuing Cobalt a Wells Notice; and (iii) on November 4, 2014, Cobalt disclosed negative results regarding its Loengo well.  In response to these disclosures, the prices of Cobalt securities fell sharply and investors incurred significant losses as a result.

If you wish to discuss this action or have any questions concerning your rights or interests, please contact Avi Josefson (212-554-1493); avi@blbglaw.com.

 

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