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Monroe County Emples. Ret. Sys. v. YPF Sociedad Anonima

United States District Court, S.D. New York

February 20, 2014

MONROE COUNTY EMPLOYEES' RETIREMENT SYSTEM, Plaintiff,
v.
YPF SOCIEDAD ANONIMA, et al., Defendants

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For Plaintiffs: David Avi Rosenfeld, Esq., Samuel Howard Rudman, Esq., Mario Alba, Jr., Esq., Avital Orly Malina, Esq., Robbins Geller Rudman & Dowd LLP, Melville, NY.

For YPF Sociedad Anonima, Defendant: Thomas Joseph Hall, Esq., Marcelo Marlow Blackburn, Esq., Chadbourne & Parke LLP, New York, NY.

For Morgan Stanley, Goldman Sachs, and Credit Suisse, Defendants: Jonathan Rosenberg, Esq., Edward Nathaniel Moss, Esq., O'Melveny & Myers LLP, New York, NY.

For Repsol, Defendant: James E. Brandt, Esq., Jason Kolbe, Esq., Christopher Harris, Esq., Latham & Watkins LLP, New York, NY.

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OPINION AND ORDER

Shira A. Scheindlin, U.S.D.J.

I. INTRODUCTION

On February 5, 2013, Monroe County Employees' Retirement System filed a putative class action Complaint (the " February 5 Complaint" ) against defendants alleging violations of the Securities Act of 1933 (" Securities Act" ). On June 5, 2013, plaintiffs filed a Consolidated Amended Complaint (" CAC" ) asserting claims under the Securities and Exchange Act of 1934 (" Exchange Act" ) but omitting the original Securities Act claims. In an opinion dated October 8, 2013 (the " October 8 Order" ), I granted leave for plaintiffs to file a Second Consolidated Amended Complaint (" SAC" ) reasserting the Securities Act Claims on behalf of a new plaintiff, David Markovic.[1] I concluded that Markovic's claims against certain defendants were tolled pursuant to the doctrine set out in American Pipe & Construction Co. v. Utah.[2] For purposes of the tolling analysis, I credited plaintiffs' assertion that the statute of limitations did not begin to run until April 16, 2012, and that the CAC was filed on June 6, 2013.[3] I indicated that defendants could fully brief the issue of timeliness in their motions to dismiss.[4]

The SAC asserts claims under Sections 11 and 12 of the Securities Act against YPF Sociedad Anonima (" YPF" ); Repsol YPF, S.A. (" Repsol" ); Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, and Goldman, Sachs & Co. (the " Underwriters" ); and Sebastian Eskenazi,[5] Guillermo Reda,[6] Antonio Brufau Niubo,[7] Antonio Gomis Sá ez, Raú l Fortunato Cardoso Maycotte, Fernando Ramirez Mazarredo, Fernando Mañero, Luis Suá rez de Leze Mantilla, and Javier Monzón (the " Individual Defendants" ).[8] The Securities Act claims are based on a March 23, 2011 offering of YPF American Depository Shares (" ADSs" ) (the " Offering" ).

Although the SAC reasserts Securities Act claims against the Individual Defendants, the October 8 Order explicitly declined to toll the statute of limitations against those defendants.[9] Therefore, plaintiffs' Securities Act claims against the Individual Defendants are hereby dismissed as untimely and will not be discussed below.

The SAC also asserts claims under Section 10(b) of the Exchange Act against Repsol, YPF, and the Individual Defendants, and Section 20(a) against Repsol

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and the Individual Defendants.[10] The class period for the Exchange Act claims runs from December 22, 2009 to April 16, 2012 (the " Class Period" ).[11]

Repsol, YPF, and the Underwriters now move to dismiss the SAC. They argue that the Securities Act claims are untimely, and the Exchange Act claims fail to adequately allege material misrepresentations or omissions, scienter, loss causation and reliance. For the reasons that follow, all three motions to dismiss are granted in full. The claims against the Individual Defendants are dismissed sua sponte.

II. BACKGROUND INFORMATION[12]

A. Timeline of Events

YPF describes itself as " Argentina's leading energy company, operating a fully integrated oil and gas chain with leading market positions" in exploration, production, and refining petroleum.[13] Throughout the Class Period, YPF ADSs were traded on the New York Stock Exchange.[14] In 1999, Repsol, a Spanish corporation, acquired ninety-nine percent of YPF.[15] Although Repsol decreased its stake significantly after 2007, it remained YPF's majority shareholder throughout the relevant time period.[16]

On November 26, 2010, YPF filed a Form F-3 Registration Statement for a proposed stock offering (the " Registration Statement" ).[17] On March 23, 2011, YPF completed the stock offering of over 26.2 million ADSs at $41 per share.[18] The Prospectus Supplement to the Registration Statement, which became effective the date of the Offering, incorporated by reference the " risk factors" section of YPF's Form 6-K from February 24, 2011.[19]

On January 30, 2012, media reports indicated that " Argentine officials were discussing a government takeover of YPF because of the Company's lack of investment." [20] In response, the value of YPF's ADSs declined by more than ten percent.[21]

In early February 2012, the Argentinian Planning Minister criticized YPF's lack of production and investment in domestic oil, stating that YPF had " not conducted the investment necessary to expand its refineries in the timeframe needed by the sustained growth in demand in the country." [22]

On February 8, 2012, Repsol announced additional successes in the Vaca Muerta area, stating that if " exploration proves successful in the Vaca Muerta formation and immediate intensive development began in the area, in 10 years its capacity could double Argentina's existing gas and

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oil production." [23] In response to this news, the price of YPF ADSs rose by over ten percent.[24]

On February 29, 2012, Brufau met with Argentinian President Cristina Fernández de Kirchner to discuss the government's dissatisfaction with YPF's domestic investment levels. In response, YPF's stock fell by over fourteen percent.[25]

The same day, Repsol issued a press release stating that " Argentina has the opportunity to reproduce the revolution in non-conventional hydrocarbons seen in the United States by developing the resources contained in the Vaca Muerta foundation." [26] The following day, March 1, 2012, YPF's stock rose by over twelve percent.[27]

On March 29, 2012, YPF announced that it had discovered the presence of significant additional oil resources in the Vaca Muerta foundation. That day, YPF's stock rose by over five percent.[28]

On April 16, 2012, the government of Argentina officially announced that it would nationalize YPF, citing a lack of domestic production and investment.[29] Trading in YPF ADSs was halted on April 17, 2012. When trading resumed on April 18, 2012, the price of YPF ADSs had dropped by over thirty-two percent.[30]

The government of Argentina subsequently initiated an audit and investigation of Repsol and published its findings in the " Mosconi Report" on June 1, 2012.[31] The Mosconi Report's self-proclaimed purpose was to " provide evidence [of Repsol's] strategy of depredation, disinvestment and failure to appropriately supply the domestic market" since assuming control of YPF in 1999.[32]

B. The Registration Statement

Plaintiffs contend that " the risk of nationalization was reasonably likely to have a material impact on YPF's continuing operations and, therefore, was required to be disclosed in the Registration Statement, but was not." [33] Instead, the Registration Statement discussed in general terms the potential impact of government policy on YPF's operations.[34] The Registration

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Statement also disclosed the risk that exploration and production concessions could be terminated for " substantial and unjustifiable failure to comply with specified production, conservation, investment, work or other obligations." [35] Similarly, YPF's Form 6-K of February 24, 2011, which was incorporated by reference into the Registration Statement, discussed " risks and challenges relating to government regulation and control of the energy sector," [36] as well as the risk of losing concessions contracts with Argentinian provinces.[37]

Plaintiffs contend that the above excerpts from the Registration Statement and Form 6-K were inaccurate and misleading for failing to disclose that:

(i) Repsol was deliberately not investing in Argentinean exploration projects and, instead, was using the Company's profits to pay unusually high dividends to fund its international expansion efforts; (ii) YPF failed to finance domestic exploration and development, which caused the Company to breach its concession contracts with various Argentinean provinces; and (iii) YPF failed to invest domestically, which increased the risk that the Company would be nationalized.[38]

C. Misrepresentations and Omissions Under the Exchange Act

In addition to the alleged misrepresentations in the Registration Statement, plaintiffs allege that YPF, Repsol and the Individual Defendants made many other misrepresentations and omissions of material fact during the Class Period. Most of the offending statements were either optimistic predictions about the Vaca Muerta formation or expressions of YPF's commitment to increasing domestic investment and ...


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