United States District Court, S.D. Texas, Houston Division
IN RE COBALT INTERNATIONAL ENERGY, INC. SECURITIES LITIGATION
MEMORANDUM AND ORDER
F. ATLAS SENIOR UNITED STATES DISTRICT JUDGE.
securities case is before the Court on Plaintiffs' Motion
for Class Certification and Appointment of Class
Representatives and Class Counsel (“Motion”)
[Doc. # 163], to which Defendants filed an Opposition [Doc. #
205], and Plaintiffs filed a Reply [Doc. # 239]. Having
reviewed the full record and the applicable legal
authorities, the Court grants the Motion.
is an exploration and production company that was formed in
2005 as a private company. Cobalt conducted an initial public
offering (“IPO”) of its shares in December 2009.
2007, Cobalt entered into an agreement with Sonangol E.P.
(“Sonangol”), the Angolan national oil company,
to acquire a 40% interest in oil exploration Blocks 9, 20,
and 21 in offshore Angola. In 2009, the Angolan Parliament
issued two decrees assigning an interest in the Blocks to
Nazaki Oil & Gaz (“Nazaki”), Sonangol
P&P, and Alper Oil, Limitada (“Alper”). In
February 2010, Cobalt and these other companies signed Risk
Services Agreements (“RSAs”) with Sonangol.
January 4, 2011, Cobalt filed a Registration Statement and
Prospectus (“January 2011 Registration
Statement”) with the Securities and Exchange Commission
(“SEC”). Based on this 2011 Registration
Statement, Cobalt conducted, inter alia, a stock
offering in late February 2012 (“February 2012 Stock
Offering”). Additionally, Cobalt conducted registered
public offerings of Cobalt convertible senior notes
(“Cobalt Notes”) in December 2012 and May 2014.
March 10, 2011, Cobalt learned that the SEC was conducting an
informal inquiry into allegations that there existed a
connection between Nazaki and senior government officials in
Angola. The next day, Cobalt contacted the Department of
Justice (“DOJ”) regarding the same allegations.
Both the SEC and the DOJ later began formal investigations
into whether Cobalt had violated the Foreign Corrupt
Practices Act of 1977 (“FCPA”). The SEC
investigation and the DOJ investigation regarding FCPA
violations have ended with no recommendation for enforcement
action against Cobalt.
Cobalt drilled two exploration wells in the offshore Angola
drilling region: Lontra on Block 20 and Loengo on Block 9.
Cobalt had no rights to gas discoveries and, instead, had
rights only to any oil that was discovered in the Blocks.
Ultimately, Lontra was found to contain a substantially
higher percentage of gas than originally estimated, and
drilling at Loengo failed to discover oil.
April 15, 2012, the Financial Times published two
reports that Nazaki was owned by Angolan officials, who had
admitted their ownership interest to the Financial
Times. On December 1, 2013, Cobalt issued a press
release disclosing that the Lontra well contained primarily
gas to which Cobalt had no rights. On August 5, 2014,
Bloomberg reported that the SEC had issued a “Wells
Notice” recommending the institution of an enforcement
action, and that “social payments” that Cobalt
was required to make to the Angolan government to fund a
research center were for a center that did not exist. On
November 4, 2014, Cobalt issued a press release disclosing
that the Loengo well was a “dry hole” with no
oil. The price of Cobalt shares declined after each of these
March 15, 2017, Plaintiffs filed their Second Amended
Complaint. Plaintiffs assert a claim under Section 10(b) of
the Securities Exchange Act of 1934 (“Exchange
Act”) and Rule 10b-5; Section 20(a) of the Exchange
Act; Section 20A of the Exchange Act; Section 11 of the
Securities Act of 1933 (“Securities Act”);
Section 15 of the Securities Act; and Section 12(a)(2) of the
Securities Act. Plaintiffs have filed a Motion seeking class
certification, appointment of class representatives, and
appointment of class counsel. The Motion has been fully
briefed and is now ripe for decision.
STANDARD FOR CLASS CERTIFICATION
class action is ‘an exception to the usual rule that
litigation is conducted by and on behalf of the individual
named parties only.'” Comcast Corp. v.
Behrend, ___ U.S. ___, 133 S.Ct. 1426, 1432 (2013)
(quoting Califano v. Yamasaki, 442 U.S. 682, 700-701
(1979)). To pursue a class action, Plaintiffs must
demonstrate compliance with the requirements of Rule 23.
See Id . (citing Wal-Mart Stores, Inc. v.
Dukes, 564 U.S. 338, 350 (2011)). Plaintiffs must prove
that “there are in fact sufficiently numerous parties,
common questions of law or fact, typicality of claims or
defenses, and adequacy of representation.” See
id.; Fed.R.Civ.P. 23(a); Torres v. S.G.E. Mgmt.,
LLC, 838 F.3d 629, 635 (5th Cir. 2016) (en
such as those here, seeking class certification pursuant to
Rule 23(b)(3) must also prove that “the questions of
law or fact common to class members predominate over any
questions affecting only individual members, and that a class
action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed.R.Civ.P.
23(b)(3); Torres, 838 F.3d at 635-36. “The
Plaintiffs have the burden of showing that these requirements
are met.” Id. at 636 (citing
Wal-Mart, 564 U.S. at 350-51).
ANALYSIS OF RULE 23(a) FACTORS
23(a) requires Plaintiffs seeking class certification to
prove that “there are in fact sufficiently numerous
parties [numerosity], common questions of law or fact
[commonality], typicality of claims or defenses [typicality],
and adequacy of representation [adequacy].” Comcast
Corp., 133 S.Ct. at 1432.
number of class members must be such that “joinder of
all members is impracticable.” Fed.R.Civ.P. 23(a)(1).
Plaintiffs have presented evidence that during the class
period, Cobalt had over 350 million shares outstanding held
by record holders ranging in number between 107 and 192.
Additionally, there were 599 institutional investors holding
Cobalt shares during ...