Broker-Dealer Litigation - Greenberg Traurig LLP

Hysong v. Encore Energy Partners LP, 2011 U.S. Dist. LEXIS 130688 (D. Del. Nov. 10, 2011).
The plaintiff, a holder of limited partnership shares in Encore Energy Partners (“the
partnership”), filed a class action complaint against the partnership, several general partners, and
partnership executives. The plaintiff alleged violations of Section 14(a) of the Exchange Act of
1934, claiming that the Form S-4 Registration Statement issued by the defendants was
misleading due to several omissions. Plaintiff identified two categories of omitted facts that he
claims altered the totality of information: (1) information about the sales process and the
partnership’s efforts to auction the partnership rather than enter into a merger; and (2) the
underlying methodologies to calculate the value of the partnership.
The court found that the plaintiff’s complaint “does not adduce ‘enough facts to raise a
reasonable expectation that discovery will reveal evidence’ that any statement in the Registration
Statement is either (1) affirmatively misleading, or (2) rendered misleading by the omission of a
material fact.” The court found the plaintiff’s complaint to be nothing more than a “threadbare
recital” of the elements of a Section 14(a) claim, and held that that plaintiff failed to identify any
specific misleading statement and thus failed to state a cause of action against the defendants
under Section 14(a).
Resnik v. Boskin, 2011 U.S. Dist. LEXIS 16634 (D.N.J. Feb. 17, 2011).
The plaintiff, a stockholder of Exxon, filed suit against numerous defendants, including
Exxon, the corporation, for various claims in connection with 2008 and 2009 proxy statements
soliciting shareholder votes. In 1997 and 2003, Exxon solicited and obtained shareholder
approval for an executive compensation program and an employee performance compensation
program (collectively, the “Programs”). The plaintiff alleged that Exxon’s 2008 and 2009 proxy
statements, which solicited shareholder vote for the election of Exxon directors, ratification of
the selection of Exxon’s independent auditor, and various other proposals, never asked Exxon
shareholders to vote for the Programs or the tax treatment of the Programs. Moreover, the
plaintiff claimed that Exxon violated Section 14(a) of the Securities Exchange Act of 1934 when
it improperly solicited shareholder vote by erroneously stating that the Programs were taxdeductible.
The court granted defendants’ motion to dismiss plaintiff’s Section 14(a) claim, finding
that plaintiff had failed to establish that the alleged misrepresentations regarding the tax
implications of the Programs related to anything on which Exxon shareholders were called to
vote in the 2008 and 2009 proxy statements. Indeed, the 2008 and 2009 proxy statements dealt
only with the election of Exxon directors, the ratification of an independent auditor, and other
proposals not related to the Programs. Therefore, because neither the Programs nor their taxdeductibility
were covered by the 2008 and 2009 proxy statements, the court found that
defendants did not make a materially false or misleading proxy solicitation in connection with
the 2008 and 2009 shareholder votes.
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