United States District Court, S.D. Texas, Houston Division
IN RE COBALT INTERNATIONAL ENERGY, INC. SECURITIES LITIGATION
MEMORANDUM AND ORDER
F. ATLAS Judge.
securities case is before the Court on the Motion to Dismiss
Count III of Plaintiffs' Second Amended Complaint
(“Motion to Dismiss”) [Doc. # 216] filed by
Defendants Goldman, Sachs & Co. (“Goldman
Sachs”), Riverstone Holdings LLC
(“Riverstone”), FRC Founders Corp.
(“FRC”), and ACM Ltd. (“ACM”), and
the Motion to Dismiss Count III of the Second Amended
Complaint (“Carlyle Motion to Dismiss”) [Doc. #
219] filed by Defendant The Carlyle Group L.P.
(“Carlyle”). Plaintiffs filed a consolidated
Opposition [Doc. # 23] to the Motions to Dismiss, and
Defendants filed separate Replies [Docs. # 240 and # 241].
Court has reviewed the full record, including its prior
rulings in this case and Plaintiffs' Second Amended
Complaint [Doc. # 200], as well as all briefing submitted by
the parties. Based on this review, and the application of
relevant legal authorities, the Court grants the Carlyle
Motion to Dismiss and denies the Motion to Dismiss filed by
the other moving Defendants.
background of this case is set forth fully in the Court's
Memorandum and Order [Doc. # 108] entered January 19, 2016.
Briefly, Cobalt 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. After the IPO, the moving Defendants, except
Carlyle, designated an individual of their choice to serve as
a member of Cobalt's Board.
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
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.
1, 2015, Plaintiffs filed their Consolidated Amended Class
Action Complaint (“CAC”) [Doc. # 72]. Plaintiffs
alleged in Count I of their CAC that Cobalt and its
executives violated Section 10(b) of the Securities Exchange
Act of 1934 (“Exchange Act”) and Rule 10b-5. In
Count II, Plaintiffs alleged that Cobalt and its executives
violated Section 20(a) of the Exchange Act. Plaintiffs
asserted in Count III a claim under Section 11 of the
Securities Act of 1933 (“Securities Act”) against
Cobalt, its directors, and the underwriters of the various
offerings of Cobalt securities. In Count IV, Plaintiffs
asserted a claim against Goldman Sachs, Riverstone, Carlyle
and others (identified as the “Control
Defendants”) under Section 15 of the Securities Act. In
Count V, Plaintiffs asserted a claim against the underwriters
under Section 12(a)(2) of the Securities Act.
January 2016 Memorandum and Order, the Court dismissed the
Section 11 claim by individuals who purchased Cobalt stock
after April 30, 2013. The Court denied the Motions to Dismiss
in all other respects. Plaintiffs elected not to amend their
Section 11 claim to allege reliance by the post-April 30,
March 15, 2017, Plaintiffs, with leave of Court, filed their
Second Amended Complaint. In Count III of the Second Amended
Complaint, Plaintiffs assert a claim against the Control
Defendants under Section 20A of the Exchange Act. The Control
Defendants have filed their Motions to Dismiss, which have
been fully briefed and are now ripe for decision.
STANDARD FOR MOTION TO DISMISS
motion to dismiss under Rule 12(b)(6) of the Federal Rules of
Civil Procedure is viewed with disfavor and is rarely
granted. Turner v. Pleasant, 663 F.3d 770, 775 (5th
Cir. 2011) (citing Harrington v. State Farm Fire &
Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)). The
complaint must be liberally construed in favor of the
plaintiff, and all facts pleaded in the complaint must be
taken as true. Harrington, 563 F.3d at 147. The
complaint must, however, contain sufficient factual
allegations, as opposed to legal conclusions, to state a
claim for relief that is “plausible on its face.”
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009);
Patrick v. Wal-Mart, Inc., 681 F.3d 614, 617 (5th
Cir. 2012). When there are well-pleaded factual allegations,
a court should presume they are true, even if doubtful, and
then determine whether they plausibly give rise to an
entitlement to relief. Iqbal, 556 U.S. at 679.
Except as explained below regarding the ...