United States District Court, Southern District of New York
November 25, 1991
MARTY KLEIN, PLAINTIFF,
MAVERICK TUBE CORP., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Owen, District Judge:
Plaintiff Marty Klein, on behalf of a class of stockholders,
sued Maverick Tube Corporation and certain of its individual
officers and its underwriters for alleged violations of §§ 11
and 12(2) of the Securities Act of 1933, 15 U.S.C. § 77k and
771(2). Plaintiff class consists of those who purchased shares
of common stock of the company between March 19, 1991 and April
15, 1991. Klein contends that Maverick's registration statement
and prospectus issued on March 19, 1991 contained material
misstatements of facts and omissions concerning the financial
health of the company and that plaintiffs sustained damages as
a result of their reliance on such information.
Maverick is a manufacturer of tubular products used in the
energy industry in oil drilling production and surface
transportation applications. Maverick became a publicly-held
company in March 1991; at that time Maverick duly filed the
appropriate registration statements with the SEC. Maverick's
prospectus clearly states that demand for its products is
affected primarily by oil and gas drilling activity, and by oil
and gas prices. In the "Investment Considerations" section of
the prospectus, Maverick explicitly states that beginning in
1982, a decline in oil and natural gas prices led to a general
reduction in domestic exploration and production activities
which caused drilling activity to remain at an historically low
level through the time of the issuance of the prospectus.
Furthermore, the prospectus notes that substantial uncertainty
existed at the time of its issuance as to the future level and
volatility of domestic oil and natural gas prices, particularly
given the events in the Middle East and their uncertain impact
on the oil market. The cease-fire in the Gulf War occurred on
February 27; any decrease in demand for Maverick's products
immediately thereafter could easily have been perceived as a
temporary phenomenon resulting from the political
Maverick moves to dismiss Klein's complaint for failure to
state a claim.*fn1 Because I find that Maverick adequately
disclosed the volatility of the situation in its prospectus,
and because I find that the global circumstances in March 1991,
and particularly the first two-and-one-half weeks of the month,
made any fluctuations in the oil business and in the demand for
Maverick's products impossible to perceive and attribute to any
continuing cycle or longer-term trend, I grant Maverick's
motion to dismiss.
The complaint fails to adequately allege any
misrepresentation or omission, much less the material omission
or false statement that the Securities Act requires. Rather,
the complaint incorrectly accuses Maverick of stating in its
prospectus that domestic drilling activity was increasing.
Klein's complaint essentially alleges that because Maverick
announced lower earnings on April 15, 1991, it should have
disclosed these results one month earlier in its prospectus.
Although Klein never specifies a date in March on which
Maverick's alleged decline in orders began, even assuming
arguendo that the decline began March 1, as stated above, I
find no cause of action. Maverick made no misleading
allegations in its prospectus concerning the future earnings of
the company, and fairly and accurately disclosed the risks of
investing in the oil industry.
Defendant's motion to dismiss is granted with prejudice;
plaintiff has asserted no facts in either his papers or his
oral argument that he reasonably could expect to uncover in
discovery to support an amended complaint.