United States District Court, W.D. Oklahoma
DUANE & VIRGINIA LANIER TRUST, individually and on behalf of all others similarly situated, et al., Plaintiffs,
SANDRIDGE MISSISSIPPIAN TRUST I et al., Defendants.
CHARLES B. GOODWIN UNITED STATES DISTRICT JUDGE
before the Court is the Motion for Partial Judgment on the
Pleadings filed pursuant to Federal Rule of Civil Procedure
12(c) by Defendants SandRidge Energy, Inc.
(“SandRidge”),  Tom L. Ward, James D. Bennett,
Matthew K. Grubb, and SandRidge Mississippian Trust I
(“Trust I”). See Defs.' Mot. (Doc.
No. 215). Lead Plaintiffs have responded in opposition,
see Pls.' Mem. (Doc. No. 231), and Defendants
have replied, see Defs.' Am. Reply (Doc. No.
explored, developed, and produced natural gas and oil
reserves in, among other locations, the Mississippian
Formation, “a geological formation located in northern
Oklahoma and south-central Kansas.” Consol. Am. Compl.
¶ 87. “[T]o finance increased capital expenditures
planned for 2011, SandRidge decided to ‘monetize'
certain of its existing oil and gas assets in [n]orthern
Oklahoma by selling interests in those assets to the public
via a royalty trust.” Id. ¶ 4. To this
end, SandRidge created Trust I and conveyed to it royalty
interests consisting of a share of SandRidge's revenue
from (a) existing horizontal oil and gas wells in five
Oklahoma counties, collectively referred to as the
“Trust I Area of Mutual Interest” (“Trust I
AMI”), and (b) specific horizontal oil and gas wells to
be drilled in the Trust I AMI. See id. To pay for
these royalty interests, Trust I committed to sell common
units to investors in an initial public offering
(“Trust I IPO”) and transfer the net proceeds of
that sale to SandRidge. Id. ¶ 5.
thereafter decided to raise additional funds to finance its
capital expenditures and in December 2011 formed the
SandRidge Mississippian Trust II (“Trust II”).
Id. ¶ 19. SandRidge conveyed to Trust II
royalty interests consisting of a share of SandRidge's
revenue from (a) existing horizontal wells in nine counties
in Oklahoma and Kansas, collectively referred to as the
“Trust II Area of Mutual Interest” (“Trust
II AMI”), and (b) certain horizontal oil and gas wells
to be drilled in the Trust II AMI. Id. As with Trust
I, to compensate SandRidge for these royalty interests Trust
II committed to sell common units in an initial public
offering (“Trust II IPO”) and transfer those
proceeds to SandRidge. Id. ¶ 20.
November 2012, SandRidge made certain statements that
concerned the performance of oil and gas wells in the
Mississippian Formation. In a press release dated November 8,
2012, SandRidge “reported a ‘net loss applicable
to common stockholders of $184 million, or $0.39 per diluted
share, for third quarter 2012 compared to net income
available to common stockholders of $561 million, or $1.16
per diluted share, in third quarter 2011.'”
Id. ¶ 227.
next day, “before markets opened, SandRidge held a
conference call for analysts and investors to discuss the
financial results and other information in the . . . [p]ress
[r]elease.” Id. ¶ 228. During that
earnings call, Defendant Ward, who was SandRidge's
founder and then chief executive officer and chairman of
SandRidge's Board of Directors, “disclosed that . .
. SandRidge's wells in the Mississippian Formation
consisted of far more gas and far [fewer] oil deposits than
the market had previously been led to believe.”
Id. In response to an analyst's “concern
over the drop in oil production in the Mississippian
Formation, ” “Defendant Ward conceded that wells
in the Mississippian Formation . . . were producing less
oil.” Id. ¶ 230. On that same call,
Defendant Grubb, then SandRidge's president and president
and chief operating officer of Trust I and Trust II, further
“As for the Mississippian, while the gas performance
has been on target, we are seeing a steeper oil decline than
we previously anticipated and have made revision to our model
accordingly for 2013.”
Id. ¶ 229.
these disclosures, the prices of SandRidge common stock and
Mississippian Trust units dropped. SandRidge's common
stock declined from a close of $6.10 per share on November 8,
2012, to a close of $5.51 per share on November 9, 2012.
See Decl. of Mark P. Gimbel, Ex. 1 (Doc. No. 216-1)
at 11, ¶ 12. “[T]he price of Trust I Units
declined from a close of $18.95 per [u]nit on November 8,
2012 to a close of $17.54 per [u]nit on November 9, 2012 (a
7.4% decline and a 16.5% decline from the Trust I Offering
price of $21/Unit).” Consol. Am. Compl. ¶ 232.
From “November 12 [to] 15, 2012, the price of Trust I
Units dropped further on each trading day to close at $14.81
on November 15, 2012-an additional decline of 15.6%, ”
resulting in a total decline of 21.8%. Id.
“[T]he price of Trust II Units declined from $19.36 per
unit on November 8, 2012 to close at $17.70 per unit on
November 9, 2012 (an 8.5% decline, and a 15.7% decline from
the Trust II Offering price of $21/Unit).” Id.
¶ 233. From “November 12 [to] 15, 2012, the price
of Trust II Units dropped further on each trading day to
close at $15.36 on November 15, 2012-an additional drop of
13.2%, ” resulting in a total decline in the price of
Trust II units of 20.7%. Id.
Procedural History of In re Sandridge Energy, Inc.
Securities Litigation, No. CIV-12-1341-G
December 5, 2012, a complaint was filed in this Court on
behalf of a putative class of investors in SandRidge common
stock, asserting claims against SandRidge, Ward, Grubb, and
Bennett (who was executive vice president of SandRidge and
chief financial officer of both SandRidge and the two
Trusts). See Glitz v. SandRidge Energy, Inc., Case
No. CIV-12-1341 (W.D. Okla.). Initially, no claims were
asserted on behalf of Trust I or Trust II investors, and
neither Trust I nor Trust II was a named defendant.
Complaint alleged that SandRidge, together with its officers
and directors, had violated federal securities laws by
“disseminati[ng] . . . false and misleading statements
concerning . . . [SandRidge's] business and operational
status and FY 2012 financial expectations.”
Glitz, Compl. (Doc. No. 1) ¶ 1. The Complaint
contended that “the truth” about defendants'
conduct had “beg[un] to be revealed” on November
8, 2012, through a “publicly issued . . . letter”
written by “D[i]nakar Singh, CEO of . . . TPG-Axon,
which then owned 4.5% of SandRidge's stock.”
Id. ¶ 52 (emphasis and capitalization omitted).
This letter discussed “SandRidge's
‘disastrous performance' and over 76% decline in
its stock price.” Id. To this end, the
Complaint also cited a November 8, 2012 press release, in
which “Defendants [had] reported a loss of $184
million, or 39 cents per share, in the 3Q 2012, compared with
a profit of $561 million, or $1.16 per share, in the 3Q
2011.” Id. ¶ 54 (emphasis omitted). And
it cited a November 9, 2012 conference call, during which
“Defendant Ward [had] acknowledged that SandRidge had
been overstating the value of its Mississippian assets . . .,
disclosing that in reality, [SandRidge's] Mississippian
formation assets consisted of far more low-margin natural gas
deposits and far fewer high-margin oil deposits than the
market had previously been led to believe.”
Complaint also alleged that the defendants had made
misstatements and omissions about “the extent and value
of [SandRidge's] oil reserves” so that SandRidge
could “monetize its interests in the Mississippian
formation assets.” Id. ¶ 66. These
misstatements and omissions, said the plaintiffs, had
“[a]rtificially inflat[ed] and manipulat[ed]
SandRidge's stock price, ” and when they
“became apparent to the market on November 8, 2012,
SandRidge's stock price fell precipitously.”
Id. ¶ 67.
was eventually consolidated with Carbone v. SandRidge
Energy, Inc., No. CIV-13-19, also pending in the Western
District of Oklahoma. See Glitz, Order of Mar. 6,
2013 (Doc. No. 60) (West, J.). Laborers Pension Trust Fund
for Northern Nevada, Construction Laborers Pension Trust of
Greater St. Louis, Vladimir Galkin, and Angela Galkin,
purchasers of SandRidge common stock, were appointed Lead
Plaintiffs in the re-styled consolidated action. See
id. at 2, 4. In July 2013, they amended their complaint.
See In re SandRidge Energy, Inc. Securities
Litigation, No. CIV-12-1341-G
(“SandRidge”), Doc. Nos. 67, 73,
as additional plaintiffs in that pleading were Judith
Greenberg, Charles Blackburn, and Ted Odell, who sought to
assert claims on behalf of a putative class of purchasers of
Trust I and Trust II Units. See SandRidge Compl.
(Doc. No. 75) ¶¶ 1, 23-25. These Trust I and II
Unitholders likewise alleged that Defendants' alleged
misrepresentations and omissions about wells in the
Mississippian Formation had artificially inflated the price
of Trust I and Trust II Units. They further alleged that,
“[a]s a direct result of Defendants'
disclosures” on November 8 and 9, 2012, and “a
materialization of the undisclosed risk of investing in . . .
the SandRidge Trusts, ” the price of Trust I and Trust
II Units “fell precipitously.” See id.
¶¶ 329-331, 361.
11, 2015, the Court dismissed the claims brought by
Greenberg, Blackburn, and Odell without prejudice for failure
to comply with certain requirements of the Private Securities
Litigation Reform Act of 1995 (“PSLRA”), 15
U.S.C. § 78u-4. See SandRidge, Order of May 11,
2015 (Doc. No. 180) (West, J.).
Procedural History of Current Action, No. CIV-15-634-G
9, 2015, immediately after the dismissal of the claims of
Greenberg, Blackburn, and Odell in SandRidge, Lanier
brought the instant action. See Compl. (Doc. No. 1).
A consolidated amended complaint followed on November 11,
2016. See Am. Compl. (Doc. No. 78). In that pleading,
Lanier joined with Nibur and Rath (who like Lanier had
purchased Trust I units) and with Luna and Willenbucher (who
also like Lanier had purchased Trust II units) to bring
claims on behalf of themselves and the individuals and
entities that had purchased or otherwise acquired common
units of (a) Trust I pursuant or traceable to the Trust I
IPO, deemed effective April 5, 2011, and/or at all other
times between April 5, 2011, and November 8, 2012, inclusive
(the “Class Period”), see, e.g.,
id. ¶¶ 2, 3; and/or (b) Trust II pursuant
or traceable to the Trust II IPO, deemed effective April 17,
2012, and/or at all other times during the Class Period,
see, e.g., id.
was sought under sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 (“Exchange Act”), as amended
by the PSLRA, 15 U.S.C. §§ 78j(b), 78t(a), and Rule
10b-5, promulgated thereunder. See 17 C.F.R. §
240.10b-5. Lead Plaintiffs also sought to hold certain
defendants liable under sections 11, 12(a)(2), and 15 of the
Securities Act of 1933 (“Securities Act”), 15
U.S.C. §§ 77k, 77l(a)(2) and 77o.
Exchange Act and Rule 10b-5 claims were asserted against
Trust I and nominal Defendant SandRidge as well as against
Defendants Ward, Bennett, and Grubb. The Securities Act
claims were asserted against both Trust I and Trust II,
SandRidge, Ward, Bennett, and Grubb. Also named as Defendants
were Randall D. Cooley, who served as SandRidge's senior
vice president-accounting, members of SandRidge's Board
of Directors (Jim J. Brewer, Everett R. Dobson, William A.
Gilliland, Daniel W. Jordan, Roy T. Oliver, Jr., and Jeffrey
S. Serota), and certain entities that had underwritten the
Trusts' offerings and/or had helped draft and disseminate
prospectuses for the two offerings.
August 30, 2017, the Court, without objection, dismissed Lead
Plaintiffs' Securities Act claims. See Order of
Aug. 30, 2017 (Doc. No. 129) (Miles-LaGrange, J.). Judgment
on those claims was thereafter entered pursuant to Federal
Rule of Civil Procedure 54(b) on December 5, 2017.
See J. (Doc. No. 146) (Palk, J.). The Court also
dismissed Luna's and Willenbucher's claims against
Trust I on January 18, 2019. See Order of Jan. 18,
2019 (Doc. No. 282) (Goodwin, J.). What remains are the
individual claims of Lanier, Nibur, and Rath and the claims
they have asserted on behalf of putative ...