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Duane & Virgina Lanier Trust v. Sandridge Mississippian Trust I

United States District Court, W.D. Oklahoma

October 30, 2019

DUANE & VIRGINA LANIER TRUST, individually and on behalf of all others similarly situated, Plaintiffs,
v.
SANDRIDGE MISSISSIPPIAN TRUST I, et al., Defendants.

          ORDER

          CHARLES B. GOODWIN UNITED STATES DISTRICT JUDGE.

         Before the Court are the motions for partial judgment on the pleadings based on the Court's January 18, 2019 Order, filed by Defendants Tom Ward, James Bennett, and Matthew Grubb (“Individual Defendants”) and Defendant SandRidge Energy, Inc. (“SandRidge”). See Ind. Defs.' Mot. (Doc. No. 284); SandRidge's Mot. (Doc. No. 299). Lead Plaintiffs[1] have responded in opposition. See Doc. Nos. 294, 295, 296, 297, 310, 311, 312, 313. The Individual Defendants and SandRidge have replied. See Ind. Defs.' Reply (Doc. No. 298); SandRidge's Reply (Doc. No. 318).

         Summary of the Pleadings

         SandRidge 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 the SandRidge Mississippian Trust I (“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) certain horizontal oil and gas wells to be drilled in the Trust I AMI. 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.

         SandRidge subsequently 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.

         Lanier Trust brought the instant action on June 9, 2015. See Compl. (Doc. No. 1). A consolidated amended complaint followed on November 11, 2016. See Consol. Am. Compl. In that pleading, Lanier Trust joined with Nibur and Rath (who like Lanier Trust had purchased Trust I units) and with Luna and Willenbucher (who like Lanier Trust had purchased Trust II units) to bring claims on behalf of themselves and those 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., Consol. Am. Compl. ¶¶ 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.

         Relief was sought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), as amended by the Private Securities Litigation Reform Act of 1995, 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), 77o.

         The Exchange Act and Rule 10b-5 claims were asserted against Trust I, SandRidge, and the Individual Defendants. The Securities Act claims were asserted against both Trust I and Trust II, SandRidge, the Individual Defendants, a number of other individuals associated with SandRidge, and certain entities that had underwritten the Trust offerings and/or had helped draft and disseminate prospectuses for the two offerings. On August 30, 2017, the Court, without objection, dismissed Lead Plaintiffs' Securities Act claims. See Doc. No. 129.

         On January 18, 2019, the Court granted Trust I's motion for partial judgment on the pleadings and dismissed the Trust II purchasers' claims against Trust I with prejudice. See Order of Jan. 18, 2019 (Doc. No. 282) at 14. Specifically, the Court found that Trust II purchasers (Luna, Willenbucher, and certain purchasers in Lanier Trust) lacked statutory standing to assert their Exchange Act claims against Trust I. See id.

         Based upon the Court's January 18, 2019 Order, both the Individual Defendants and SandRidge have moved for partial judgment on the pleadings, contending that Trust II purchasers (Luna, Willenbucher, and certain purchasers in Lanier Trust) also lack statutory standing to assert their Exchange Act claims against them.

         Standard of Review

         Rule 12(c) of the Federal Rules of Civil Procedure permits a party to move for judgment on the pleadings “[a]fter the pleadings are closed-but early enough not to delay trial.” Fed.R.Civ.P. 12(c). The Court evaluates the motion under the familiar standard for Federal Rule of Civil Procedure 12(b)(6) motions. See Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000) (citing Mock v. T.G. & Y. Stores Co., 971 F.2d 522, 528 (10th Cir. 1992)). Accordingly, the Court “accept[s] all facts pleaded by the non-moving party as true and grant[s] all reasonable inferences from the pleadings in favor of the same.” Adams v. Jones, 577 Fed.Appx. 778, 782 (10th Cir. 2014)

         (internal quotation marks omitted). “[T]o survive judgment on the pleadings, the complaint “must allege ‘a claim to relief that is plausible on its face.'” Sanchez v. U.S. Dep't of Energy, 870 F.3d 1185, 1199 (10th Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “To determine whether the claim to relief is ‘plausible on its face,' we examine the elements of the particular claim and review whether the plaintiff has pleaded factual content that allows the court to draw the reasonable inference that the defendant is liable for the ...


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