United Food & Comm. Workers v. Chesapeake Energy, et al

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In 2008 Chesapeake Energy Corporation was one of the largest producers of natural gas in the United States, with thousands of wells in several states. By early July of that year the price of natural gas had risen and Chesapeake's stock price had risen about 50% in the prior six months. On July 9, 2008, Chesapeake sold 25 million shares of common stock in a public offering. Soon thereafter, a financial crisis rocked the global economy. The New York Stock Exchange Composite Index fell more than 30% in the three months after the Chesapeake offering. Chesapeake was hit even harder, with sharp drops in the prices of natural gas and Chesapeake's stock. Plaintiff United Food and Commercial Workers Union Local 880 Pension Fund represented the class of all persons who purchased securities in the offering, argued that Chesapeake and named individual defendants violated sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. sections 77k, 77l(a)(2), and 77o, because the Registration Statement for the offering was materially false and misleading. According to Plaintiff, Chesapeake should have disclosed: (1) that it had expanded a risky gas-price hedging strategy that made it vulnerable to a fall in natural-gas prices; and (2) that CEO Aubrey McClendon had pledged substantially all his company stock as security for margin loans and lacked the resources to meet margin calls. The district court granted summary judgment for Chesapeake. Plaintiff appealed. But finding that Chesapeake's alleged omissions were not material or misleading, the Tenth Circuit affirmed. View "United Food & Comm. Workers v. Chesapeake Energy, et al" on Justia Law