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Plains Defeats Securities Litigation Arising from 2015 Pipeline Spill

A Texas federal judge has issued a resounding victory to Vinson & Elkins client Plains All American Pipeline, LP, dismissing putative class action securities litigation brought by Plains investors who claimed nearly $1.5 billion in damages for stock losses allegedly incurred in the aftermath of a 2015 pipeline leak in Santa Barbara County, California.

The litigation was originally commenced in the Central District of California before the plaintiff in that case agreed to refile in the Southern District of Texas.

On April 2, 2018, Chief Judge Lee Rosenthal of the Southern District of Texas dismissed the lawsuit with prejudice. The litigation began in 2015, shortly after an underground pipeline owned by Plains leaked. The investor plaintiffs sued Plains, several of its officers and directors, as well as the underwriters of eight Plains securities offerings, alleging that the defendants misrepresented the effectiveness of Plains’ pipeline safety and maintenance programs over a multi-year period. Plaintiffs asserted claims under Section 10b-5 of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933. The Section 11 claims were premised on various securities offerings Plains had completed during the period at issue, and plaintiffs also joined each of the 37 underwriters for those offerings.

This was the second dismissal in the litigation. In March 2017, following a lengthy oral argument, Judge Rosenthal dismissed a prior complaint without prejudice, but granted plaintiffs permission to file a second amended complaint. In both opinions, the Court found that the complaints failed to plead an actionable misrepresentation, and with respect to the 10b-5 claims, that the complaints failed to plead a strong inference of scienter. Of particular note, in Judge Rosenthal’s second opinion, the Court held that statements in material agreements attached as exhibits to registration statements could not provide the basis for a securities fraud claim. The opinions provide a roadmap for the sorts of securities claims that can be brought following material operational events and a primer on how to defeat them. Copies of the opinions are available here and here.

Plains and its officers and directors were represented by Michael Holmes, Craig Zieminski, Jeff Johnston, and Kimberly McCoy, as well as other V&E attorneys during the course of litigation.

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