Overview
In an opinion issued today, Judge Scheindlin dismissed a putative class action against an Argentinian energy company, its underwriters and executives, alleging violations of the Securities Act and Exchange Act. The plaintiffs alleged that the company, YPF Sociedad Anonima, majority owned by co-defendant Repsol YPF, S.A., had failed to warn investors of the risk that it would be taken over by the Argentine government. When YPF was in fact nationalized, its share price collapsed and the plaintiffs brought suit. Judge Scheindlin dismissed the Securities Act claims as untimely under their 1-year statute of limitations. In doing so, she determined that the plaintiffs were on notice of the risk of nationalization at least a month-and-a-half before YPF was actually taken over:
Plaintiffs allege that the Registration Statement was materially misleading for failing to disclose YPF’s inadequate investment in domestic exploration and the resulting heightened risk of nationalization. However, Argentina’s dissatisfaction with YPF’s domestic investment levels and the risk of nationalization were widely discussed in major media reports months before nationalization actually occurred. . . . In light of the widespread national coverage of the risk of nationalization and YPF’s alleged underinvestment, plaintiffs should have discovered the alleged omissions in the Registration Statement long before April 16, 2012 [when Argentina officially announced it would nationalize YPF]. At the very latest, plaintiffs should have discovered the alleged omissions by March 1, 2012.Even after tolling the statutes of limitations against certain defendants, Judge Scheindlin ruled the complaint -- filed June 6, 2013 -- untimely. Judge Scheindlin also dismissed the securities fraud and control person liability claims under the Exchange Act:
Here, plaintiffs list numerous statements made by the defendants and their representatives over the course of several years. Many of those statements are presented in the form of large block quotations from press releases and public filings. Plaintiffs then allege generally that all of the statements were misleading for the same four reasons. Plaintiffs do not distinguish which statements are attributable to which defendants, or why each statement was misleading for failing to disclose the four alleged omissions. Thus, plaintiffs fail to state a claim for securities fraud with the requisite particularity, and those claims must be dismissed.In addition, the complaint failed to allege scienter or loss causation. Finally, Judge Scheindlin denied the plaintiffs' motion to amend the complaint as futile, and sua sponte dismissed the case against the individual defendants, many of whom had not yet been served or entered an appearance in the litigation.