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In re Sandridge Energy, Inc. Securities Litigation

United States District Court, W.D. Oklahoma

September 30, 2019

IN RE SANDRIDGE ENERGY, INC. SECURITIES LITIGATION

          ORDER

          CHARLES B. GOODWIN, UNITED STATES DISTRICT JUDGE.

         In December 2012, Lead Plaintiffs[1] filed this lawsuit alleging that Defendants SandRidge Energy, Inc. (“SandRidge”) and its senior executives Tom L. Ward, James D. Bennett, and Matthew K. Grubb had violated the federal securities laws in 2011 and 2012. Following dismissal of various claims, there remain pending allegations of violation of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78j(a), as amended, and the Securities and Exchange Commission's Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.[2]

         Now before the Court is Lead Plaintiffs' Motion for Class Certification, in which Lead Plaintiffs request certification of a class “consisting of all purchasers of SandRidge common stock between February 24, 2011 and November 8, 2012, inclusive, ” “who were damaged thereby.”[3] Lead Pls.' Mot. (Doc. No. 268) at 7; see also Lead Pls.' Decl. (Doc. No. 269); Third Am. Compl. ¶¶ 1, 33 (Doc. No. 225). Defendants have responded, see Doc. Nos. 329, 330, 331, 332, and Lead Plaintiffs have replied, see Doc. Nos. 340, 341, 342, 343, 344, 345, 346. In addition, the Court heard argument at a hearing on the Motion on September 6, 2019. See Doc. No. 448.

         Upon review of the relevant record, and for the reasons outlined below, the Court hereby GRANTS Lead Plaintiffs' Motion, subject to one modification to the named Class Representatives.

         I. Background

         As previously outlined by the Court,

SandRidge is an oil and gas exploration company, see [Third Am. Compl.] ¶ 2, and this lawsuit focuses on “one of SandRidge's core holdings referred to as the Mississippian play, ” id., “a geological formation that extends hundreds of miles across northern Oklahoma and south-central Kansas.” Id. at 21, ¶ 53.
The Lead Plaintiffs have contended that during the Class Period, co-defendant Tom L. Ward, SandRidge's founder and then chief executive officer and Chairman of its Board of Directors (“Board”), see Id. at 15, ¶ 29, together with Bennett, then SandRidge's chief financial officer and a senior vice president, see Id. at 16, ¶ 30, and Grubb, then SandRidge's president and chief operating officer, see Id. ¶ 31, made certain materially false and misleading statements and failed to disclose certain material information about SandRidge's business and its activities in the Mississippian formation.

In re SandRidge, 2017 WL 3309758, at *2-3 (footnote omitted).

In their remaining claim, Lead Plaintiffs allege that
although Ward, Grubb and Bennett “told investors that SandRidge was investing in the Mississippian due to the large amounts of oil reserves and the favorable amount of oil relative to gas in the area, '” [Third Am. Compl.] at 7, ¶ 4; e.g., id. at 62, ¶ 152, these “statements misrepresented the nature of the Mississippian properties, ” id. at 7, ¶ 4[.]

Id. at *4 (alteration omitted). Specifically, Lead Plaintiffs allege that Defendants misrepresented the economic value of the Mississippian formation to investors by (i) understating the amount of gas relative to oil (the “GOR”) in the formation; and (ii) overstating the amount of oil recoverable from a typical horizontal well-i.e., the estimated ultimate recovery (the “EUR”)-in the formation. Id. at *4 n.10; see also Third Am. Compl. ¶¶ 47, 51, 132, 141-148, 152, 153(d), 155-156.

         II. Class Certification Standard

         “‘The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.'” Wallace B. Roderick Revocable Living Tr. v. XTO Energy, Inc., 725 F.3d 1213, 1217 (10th Cir. 2013) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011)). Federal Rule of Civil Procedure 23 prescribes the requirements for class certification.

Rule 23(a) requires the party seeking certification to demonstrate that: (1) the class is so numerous that joinder of all members is impracticable (numerosity); (2) there is a question of law or fact common to the class (commonality); (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class (typicality); and (4) the representative parties will fairly and adequately protect the interests of the class (adequacy).

Id.

         The class also must satisfy one of the three requirements listed in Rule 23(b). In this case, Lead Plaintiffs rely on Rule 23(b)(3), which requires the Court to find that “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).

         “A party seeking class certification must affirmatively demonstrate his compliance with [Rule 23]-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Dukes, 564 U.S. at 350. The Court “has an independent obligation to conduct a rigorous analysis before concluding that Rule 23's requirements have been satisfied.” Roderick, 725 F.3d at 1217 (internal quotation marks omitted). “Granting or denying class certification is a highly fact-intensive matter of practicality.” Monreal v. Potter, 367 F.3d 1224, 1238 (10th Cir. 2004).

         III. Discussion

         A. Rule 23(a)

         Before analyzing the Rule 23(a) factors, the Court must determine whether the suit has been brought by “[o]ne or more members of [the] class.” Fed.R.Civ.P. 23(a); Paton v. N.M. Highlands Univ., 275 F.3d 1274, 1278 (10th Cir. 2002); see also Dukes, 564 U.S. at 348 (noting that “a class representative must be part of the class” (internal quotation marks omitted)).

         As defined above, the putative class consists of “all purchasers of SandRidge common stock between February 24, 2011 and November 8, 2012, inclusive, ” “who were damaged thereby.” Lead Pls.' Mot. at 7 (emphasis added). The parties' argument and evidence reflect that the SandRidge stock relevant to Vladimir and Angelica Galkin, who are husband and wife, was purchased during the class period through an individual brokerage account owned and held by Angelica Galkin only. See Defs.' Resp. (Doc. No. 332) at 32-33; id. Ex. 12, V. Galkin Dep. 38:19-40:6 (Doc. No. 331-4); id. Ex. 21 (Doc. No. 331-7) at 22-100; id. Ex. 21 (Doc. No. 331-8) at 2-60; Hr'g Tr. 55:19-56:18 (Doc. No. 449). As a result, regardless of how the law in the Galkins' state of residence might characterize the posttrade ownership of the stock, Vladimir Galkin was not a “purchaser” of SandRidge stock during the class period.[4] It follows that Mr. Galkin is not a member of the proposed class and may not “sue . . . as [a] representative part[y] on behalf of all members” of that class. Fed.R.Civ.P. 23(a); see Dukes, 564 U.S. at 348; cf. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 318 (2007) (“Section 10(b) . . . affords a right of action to purchasers or sellers of securities injured by its violation.” (emphasis added)).[5]

         1. Numerosity

         To satisfy the element of numerosity, Lead Plaintiffs must show that “the class is so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). This element, which is “rarely disputed in securities fraud class actions, ” is not contested by Defendants and is clearly met here. In re NII Holdings, Inc. Sec. Litig., 311 F.R.D. 401, 406 (E.D. Va. 2015); see Third Am. Compl. ¶ 35 (alleging that SandRidge is a publicly traded company with approximately 415.4 million shares outstanding in February 2012).

         2. Commonality

         To establish commonality, Lead Plaintiffs need only demonstrate a “single” “question[] of law or fact common to the class.” Dukes, 564 U.S. at 359; Fed.R.Civ.P. 23(a)(2). Here, Lead Plaintiffs' claims all “depend upon” at least one “common contention”-i.e., that Defendants made material misrepresentations as to the makeup of the Mississippian formation-that is “of such a nature that it is capable of classwide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Dukes, 564 U.S. at 350; see also Third Am. Compl. ¶ 39. Defendants do not contest that this element has been met and the Court likewise finds it so.

         3. ...


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