Firefighters Pension & Relief Fund of the City of New Orleans v. Bulmahn et al, No. 2:2013cv03935 - Document 239 (E.D. La. 2015)

Court Description: ORDER AND REASONS - For the foregoing reasons, and for the reasons stated in the Court's November 21, 2014 Order and Reasons dismissing plaintiffs' First Amended Complaint, the Court GRANTS defendants' motion 221 to dismiss plaintiffs' Exchange Act and Section 20(a) claims with prejudice.. Signed by Judge Sarah S. Vance on 11/23/15. (Reference: 13-6083, 13-6084, 13-6233)(jjs)

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Firefighters Pension & Relief Fund of the City of New Orleans v. Bulmahn et al Doc. 239 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA FIREFIGHTERS PENSION & RELIEF FUND OF THE CITY OF NEW ORLEANS, Individually and on Behalf of All Others Sim ilarly Situated CIVIL ACTION VERSUS NO: 13-3935, c/ w 1360 83, 13-60 84, 136233 T. PAUL BULMAHN, ET AL. SECTION: R ORD ER AN D REASON S This case is a securities class action brought on behalf of all persons who purchased ATP Oil & Gas Corporation's com m on stock in the public m arket between Decem ber 16, 20 10 and ATP's bankruptcy filing on August 17, 20 12 ("the Class Period"). Because it is in bankruptcy proceedings, ATP is not nam ed as a defendant in this action. Instead, court-appointed Lead Plaintiffs Brian M. Neim an, William R. Kruse, and the Moshe Issac Foundation ("Lead Plaintiffs"), individually and on behalf of the class, are suing ATP's senior executives, alleging violations of Sections 10 (b) and 20 (a) of the Securities Exchange Act of 1934, as well as SEC Rule 10 b-5 prom ulgated thereunder. Defendants T. Paul Buhlm an, Albert L. Reese, J r., Keith R. Godwin, and Leland E. Tate filed a m otion to dism iss plaintiffs' Consolidated Class Action Dockets.Justia.com Com plaint for failure to state a claim on March 6, 20 15.1 For the reasons that follow, the Court grants the m otion. I. BACKGROU N D Before filing for bankruptcy in 20 12, ATP engaged in the acquisition, developm ent, and production of oil and natural gas properties.2 The com pany acquired and developed properties with proven undeveloped reserves in the Gulf of Mexico and the North Sea, but the m ajority of the com pany's business was in the Gulf of Mexico.3 As of Decem ber 31, 20 0 9, ATP had leasehold and other interests in 62 offshore blocks and 10 4 wells in the Gulf of Mexico, of which ATP was then operating a total of 93.4 As of March 16, 20 10 , ATP owned an interest in 36 oil platform s, including two floating production facilities: the ATP Innovator, located in the Gulf of Mexico at the com pany's Gom ez Hub, and the ATP Titan, also in the Gulf of Mexico at the com pany's Telem ark Hub.5 When ATP filed for bankruptcy in August 20 12, construction on a third floating production facility, the Octabuoy , was underway in China 1 R. Doc. 221. 2 R. Doc. 214 at 16. 3 Id. 4 Id. 5 Id. at 17. 2 for initial deploym ent at the com pany's Cheviot Hub in the North Sea.6 ATP described its floating production facilities as "fundamental to [its] hub strategy and business plan."7 On April 19, 20 10 , ATP raised $ 1.5 billion by selling unregistered private notes to institutional investors in a transaction exem pt from the registration requirem ents under the Securities Act.8 On April 20 , 20 10 , the day after the private note offering, the drilling rig Deepwater Horizon exploded and sank in the Gulf of Mexico, fracturing the well's pipe and creating "the largest oil spill in the history of the Gulf of Mexico."9 In response, the U.S. Departm ent of the Interior issued two m oratoria that halted all drilling at depths greater than 50 0 feet between May 6, 20 10 and October 12, 20 10 .10 Although the m oratoria were eventually lifted, the Governm ent instituted new rules and regulations that conditioned the issuance of drilling perm its on additional testing, training, and com pliance with new safety requirem ents.11 The Minerals Managem ent Service did not issue any drilling perm its until 6 Id. at 18. 7 Id. at 14. 8 Id. at 7; Prospectus, R. Doc. 221-2. 9 R. Doc. 214 at 6. 10 Id. 11 Id. 3 February 20 11, prom pting m em bers of the oil and gas industry to refer to this period of perm itting delays as the "de facto m oratorium ."12 ATP did not receive its first perm it after the m oratoria until March 18 , 20 11. Together, these three m oratoria halted all of ATP's exploration and developm ent operations in the Gulf of Mexico through early 20 11. The delay resulted in tens of m illions of dollars in interruption and standby costs for ATP, while at the sam e tim e delaying anticipated revenues from the wells ATP had planned to com plete and bring on line for production.13 Indeed, during the m oratoria ATP spent over $ 1 billion in infrastructure construction and other capital expenditures related to five such wells.14 Between April and Decem ber 20 11, ATP issued three press releases announcing the drilling and com pletion of two wells at Green Canyon ("GC") Block 30 0 ("Clipper") in the deepwater Gulf of Mexico.15 Upon com pletion of the "Clipper Project," ATP announced in its Decem ber 12, 20 11 press release that tests of the two wells revealed that they were capable of producing 22,0 0 0 barrels oil equivalent ("Boe") per day.16 In order to m onetize the value of the 12 Id. 13 Id. at 20 -21 14 Id. at 21. 15 R. Doc. 173 at 22-23; press releases dated April 7, 20 11, August 7, 20 11, and Decem ber 12, 20 11. 16 Id. at 23. 4 Clipper wells, ATP needed to build a pipeline from the Clipper wells to the nearest production platform 16 m iles away. The Decem ber press release stated that ATP expected to com plete the pipeline in the third or fourth quarter of 20 12.17 On October 12, 20 10 , ATP filed a Registration Statem ent and Prospectus with the Securities and Exchange Com m ission ("SEC"), indicating its intent to exchange the $ 1.5 billion in unregistered private notes for equivalent registered notes.18 Defendants Bulm ahn, Reese, and Godwin signed the Registration Statem ent. Following a Decem ber 14, 20 10 am endm ent, the SEC declared the Registration Statem ent effective, and the Exchange was effected on Decem ber 16, 20 10 .19 The Prospectus 20 contained a section titled "Risks Related to Our Business," which provided a detailed account of the Deepwater Horizon explosion and the resulting m oratoria. It also described the new regulatory requirem ents for obtaining drilling perm its. It cautioned that "[t]he U.S. governm ental and regulatory response to the Deepwater Horizon drilling rig 17 Id. See also R. Doc. 214 at 21. 18 Id. at 7; R. Doc. 221-2. 19 R. Doc. 214 at 7. 20 R. Doc. 221-1. For all practical purposes, the Registration Statem ent and Prospectus contain the sam e inform ation and are interchangeable. 5 accident and resulting oil spill could have a prolonged and m aterial adverse im pact on our Gulf of Mexico operations." It also indicated that "[a]lthough Moratorium II has been lifted, we cannot predict with certainty when perm its will be granted under the new requirem ents." As discussed in further detail below, the Prospectus went on to provide a lengthy explanation of these risks. Im portantly, it contained the following warning: New regulations already issued w ill, and potential future regulations or additional statutory lim itations, if enacted or issued, could, require a change in the w ay w e conduct our business, increase our costs of doing business or ultim ately prohibit us from drilling for or producing hy drocarbons in the Gulf of Mexico. . . .21 On August 24, 20 11, ATP issued a press release announcing the first production from Mississippi Canyon ("MC") Block 941 # 4 (also referred to as MC Block 941 A-2) in the deepwater Gulf of Mexico.22 The # 4 well was one of three wells brought on production at the Telem ark Hub location utilizing the ATP Titan floating platform . The press release was signed by defendants Bulm ahn and Reese and indicated that [t]he well delivered on ATP's original expectations with an initial rate exceeding 7,0 0 0 Boe per day. . . . Com pany-wide production now exceeds 31,0 0 0 Boe per day. . . . We have finally realized the planned m aterial production revenue of this well that has been m uch anticipated for 16 m onths. . . . The greater-than-a-billion-dollar investm ent at 21 Id. at 31 (em phasis added). 22 R. Doc. 214 at 24. 6 Telem ark reflects ATP's continuing com m itm ent to develop Am erica's energy resources.23 On Septem ber 12, 20 11, Reese spoke on ATP's behalf at the Rodm an Renshaw Global Investm ent Conference.24 Specifically, Reese stated: You can see the num bers we have here, 21,0 0 0 barrels last year; first half of this year about 25,0 0 0 barrels, m ost recent report we said 31,0 0 0 barrels that's with the new Telem ark well. On later this year, we do expect to add the last well at Telem ark that should be on by the end of this year, sort of Christm as present and New Year's present and Thanksgiving Day present, too early to tell.25 On Septem ber 26, 20 11, Moody's Investor Services ("Moody's") published a report stating that ATP had a "high likelihood" of restructuring.26 Bloom berg News reported on the Moody's analysis on Septem ber 29, 20 11 in an article titled "ATP $ 1.5 Billion of Debt Falls to Yield 23.4%, Trace Data Show": ATP shows a "high likelihood" it m ay face som e type of restructuring, analysts from Moody's Investors Service wrote in a Sept. 26 report. The com pany's asset base and cash flows are "not sufficient to cover" the second-lien notes, according to the report. Moody's assigns a Caa2 grade to ATP with a "negative" outlook.27 23 Id. at 24-25. 24 Id. at 25. 25 Id. 26 Id. 27 Id. 7 On Septem ber 29, 20 11, Bloom berg News published defendant Reese's response to the Moody report in an article titled "ATP Says New Gulf of Mexico Oil Wells to Stave Off Default."28 The article stated in part: ATP Oil & Gas, one of the first oil explorers allowed to resum e drilling in the U.S. Gulf of Mexico after the Deepwater Horizon disaster, expects to pum p enough oil from new wells during the next three years to avoid defaulting on $ 1.5 billion in debt. Moody's Investors Service this week said ATP shows a "high likelihood" it m ay have to restructure its debt because its cash flow and asset base are insufficient to cover notes m aturing in 20 15. The com pany's $ 1.79 billion in net debt exceeds that of 97% of Houston-based ATP's U.S. peers, according to data com piled by Bloom berg. ATP expects to begin production from new wells at its Telem ark field this year, followed by additional output at the Clipper and Gom ez projects in 20 12, Entrada in 20 13 and Cheviot a year later, said Albert L. Reese, ATP's chief financial officer. All of those fields are in the Gulf of Mexico, except Cheviot, which is in the U.K. "All of that is before the bonds com e due in 20 15, so I don't know what Moody's is talking about," Reese said today in a telephone interview. "I can't fight rum ors or reports, all I can do is continue to deliver on the prom ises we've m ade. Our expectation is that everything is going to be fine."29 Lead Plaintiffs allege that contrary to Reese's words of assurance, "everything was not fine." According to data available on the Bureau of Ocean Energy Managem ent's website, MC Block 941, which already contained two producing wells, produced an average of 9,379 Boe per day in J uly 20 11, the 28 Id. at 26. 29 Id. 8 last full m onth before ATP announced its first production from Well # 4.30 In Septem ber 20 11, the first full m onth after Well # 4's first production, Block 941 produced an average of 12,117 Boe per day. Plaintiffs reason that if, consistent with the initial production rate, Well # 4 had continued to produce 7,0 0 0 Boe per day, Block 941's overall daily production in Septem ber should have been 16,692 Boe per day.31 Plaintiffs apparently assum e that production from the two other wells at Block 941 rem ained constant, so that Well # 4 m ust have been producing no m ore than an average of 2,738 Boe per day when Reese gave his interview to Bloom berg in Septem ber– approxim ately 61 percent less than the 7,0 0 0 Boe ATP initially announced.32 On Novem ber 8, 20 11, ATP issued a press release announcing its Third Quarter 20 11 Results, in which it disclosed that overall oil and gas production for the period was only 24,20 0 Boe per day, in contrast to the 31,0 0 0 per day it announced in August.33 The following day, ATP held its third quarter earnings conference call. During the call, defendant Tate disclosed that although Well # 4 had initially tested at 7,0 0 0 Boe per day, issues with 30 Id. at 27-28. 31 Id. at 28. 32 Id. 33 Id. at 28. 9 wellbore drawdown were negatively affecting the well's com pletion efficiency, causing the well to produce only about 3,50 0 Boe per day.34 Following these disclosures regarding ATP's production rates, ATP's com m on stock fell to $ 8.45, decreasing by $ 2.0 5 from the previous day's closing price and $ 2.50 from its Novem ber 9 intra-day high.35 On Novem ber 10 , ATP's stock fell an additional $ 1.20 , closing at $ 7.25 per share.36 In addition to the decline in value of ATP's com m on stock, plaintiffs allege that the lower production from Well # 4 cost ATP crucial revenue that it needed to com plete the pipeline to the Clipper wells--approxim ately $ 20 .5 m illion in Septem ber and October 20 11 by plaintiffs' calculations.37 Plaintiffs further allege that the lower production at Telem ark created even m ore financial problem s for ATP, because the com pany would need to shut the wells down to repair them in order to increase production. When ATP filed for bankruptcy in August 20 12, Reese indicated that "declining production" was one of the reasons ATP could not survive the m oratoria, putting ATP "in the untenable position of running out of cash before it could com plete the Clipper 34 Id.; R. Doc. 221-15. 35 R. Doc. 214 at 28. 36 Id. 37 Id. at 29. 10 Wells project and generate the revenues necessary to begin rem edying the situation."38 On J une 1, 20 12, ATP issued a press release announcing that Matt McCarroll had joined ATP as its new Chief Executive Officer and that he had dem onstrated his com m itm ent to the com pany by purchasing one m illion shares of its com m on stock at m arket price.39 Six days later, however, McCarroll resigned his position and rescinded his stock purchase. In a J une 7, press release, ATP cited a failure "to reach a m utually agreeable employment agreem ent" as the reason for McCarroll's departure.40 Defendants Bulm ahn and Reese were listed as the contact persons on both press releases, and Reese signed the Form 8-K to which each press release was attached. Reese testified at ATP's bankruptcy hearing that ATP pursued num erous avenues of potential financing to im prove the com pany's liquidity, including sales of assets, taking on partners, the sale of overriding royalty interests ["ORRIs"] and net profit interests ["NPIs"], equity raises, and borrowing against its equity positions in the ATP Titan and the ATP Innovator.41 Despite 38 Id. 39 Id. at 31. 40 Id. 41 Id. at 34. 11 incurring additional debt obligations, including an increase in its first lien credit facility by $ 150 m illion and the sale of $ 185 m illion in ORRIs in the first quarter of 20 12, ATP ultim ately succum bed to the liquidity constraints caused by the m oratoria and the com pany's production problem s. The com pany's cash position deteriorated from $ 224 m illion on March 31, 20 12 to between $ 25 and $ 30 m illion by J une 30 , 20 12.42 Reese later said that "[p]rior to the [bankruptcy] filing, we did not have the ability to go borrow m ore m oney or encum ber the assets."43 Plaintiffs allege that ATP's stock "plum m eted" from $ 1.49 to a closing price of $ 0 .36 on August 10 , 20 12 "am id reports that the Com pany m ay file for bankruptcy."44 ATP filed for Chapter 11 bankruptcy protection on August 17, 20 12, reporting total debts of $ 3.49 billion and assets of $ 3.64 billion.45 ATP issued a press release announcing the bankruptcy filing, in which it indicated its intent to continue operating during its financial restructuring using $ 618 m illion in debtor-in-possession funding. The press release stated in part: The prim ary reason for the reorganization began with the Macondo well blowout in April 20 10 and the im position beginning in May 20 10 of the 42 Id. at 37. 43 Id. 44 Id. at 58. 45 Id. 12 m oratoria on drilling and related activities in the Gulf of Mexico. These events prevented ATP from bringing to production in 20 10 and in early 20 11 six developm ent wells that would have added significant production to ATP. As of the date of this filing, three of these wells are yet to be drilled. Had ATP been allowed to drill and com plete these wells ATP believes it would have provided a m aterial production change in 20 10 continuing to today. This projected increase in production should have substantially increased cash flows, shareholder value and allowed the com pany the ability to withstand norm al operational issues experienced by owners of oil and gas properties in the Gulf of Mexico. In addition, these increm ental cash flows would have m itigated or prevented the need to enter into m any of the financings ATP has closed since the im position of the m oratoria– financings that require relatively high rates of return and m onthly paym ents.46 On August 20 , 20 12, the next trading day, ATP's com m on stock price fell $ 0 .1593 per share to close at $ 0 .30 per share.47 In a declaration filed in the bankruptcy action, Reese sum m arized the adverse im pact of the m oratoria on ATP's business operations, describing the Deepwater Horizon explosion and oil spill as the "prim ary reason" for the com pany's ultim ate failure: As detailed further below, due to adverse operational exigencies stem m ing from the 20 10 Gulf drilling m oratoria as well as subsequent events, ATP finds itself with over $ 2 billion of indebtedness and less than $ 10 m illion in cash as of the Petition Date. . . . When the m oratorium was effectively lifted in March 20 11, ATP received perm its and attem pted to generate production from these projects as quickly as possible. By February 20 12, ATP was able to com plete the 46 Id. 47 Id. 13 Mississippi Canyon 941 A-1, 1-2, and Mississippi Canyon 942 A-3 wells in its Telem ark field and connect them to the ATP Titan. . . . Overall, ATP's inability to com plete various wells or com m ence pipeline construction when planned due to the shutdown in the Gulf created significant liquidity problem s, which were exacerbated by less than expected production rates at ATP's Telem ark Hub and cost overruns on the Octabuoy. ATP's management, with the assistance of various outside professionals, closely m onitored these challenging conditions and evaluated potential alternatives to im prove ATP's liquidity position. ATP diligently sought to solicit potential partners, joint operators, or investors with respect to its foreign operations to share in the developm ent costs of its North Sea and Eastern Mediterranean oil and gas properties. Although it is generally recognized that the reserves and operations of ATP's foreign affiliates have significant value, ATP has not yet been able to com plete a transaction with any parties that will bring in enough financing to com plete the construction of the necessary infrastructure to start generating new production from these foreign deepwater operations. Despite ATP's best efforts, it was unable to overcom e th e im pact of the m oratoria when ongoing project construction costs, declining oil prices and less than anticipated production put it in the untenable position of running out of cash before it could com plete the Clipper Wells project and generate the revenues necessary to begin rem edying its situation. In the period leading up to the Petition Date, ATP found itself facing a severe liquidity crisis, with a cash position of less than $ 10 m illion and a substantial backlog of trade payables and am ounts due under overriding royalties and net profit interests totaling, in the aggregate, over [$ 170 ] m illion, along with substantial paym ents due on the Second Lien Notes later this fall. ATP's in ability to m ake current paym ents on m any of its obligations have resulted in a num ber of notices of default and lawsuits from its creditors, with som e seeking prejudgm ent relief (such as tem porary restraining orders or writs of sequestration) that could further restrict the Com pany's short-term cash flow and liquidity.48 48 Id. at 34-35. 14 When asked at the First Day Hearings whether "ATP [had] the liquidity and revenues at that tim e to absorb a lengthy m oratorium ," Reese responded "No. We could not." Testim ony at the First Day Hearings further revealed that ATP had retained Mayer Brown LLP to advise the com pany on a potential bankruptcy no later than the last week of J une 20 12, and it hired J efferies & Co. "in the m iddle of J uly" 20 12 for the purpose of "addressing and considering DIP [debtor in possession] financing."49 As the bankruptcy action has progressed, legal proceedings both inside and outside the bankruptcy reveal num erous creditors seeking rem edies against ATP for unpaid obligations. Plaintiffs' Consolidated Class Action Com plaint lists 21 different vendors and service providers that have sued ATP for unpaid invoices dating back as far as 20 0 7 and totaling m ore than $ 63.3 m illion.50 In the m ajority of these lawsuits, however, the goods and services for which ATP failed to pay do not predate early 20 12. Moreover, plaintiffs allege that ATP had to renegotiate paym ent schedules to som e of its vendors,51 and the com plaint fails to indicate whether paym ents to these 21 vendors 49 Id. at 36. 50 Id. at 42-47. 51 Id. at 48. 15 actually were overdue at the tim e ATP filed for bankruptcy, or whether they were am ong the paym ents ATP was able to renegotiate. Additionally, both before and during the class period, ATP sold ORRIs and NPIs to various investors and vendors. Plaintiffs allege that ATP's m anagem ent began withholding paym ents from som e of the interest holders in order to preserve cash.52 At the bankruptcy hearing, Reese testified that he, Bulm ahn, Tate, and Godwin collectively would have m ade the decision not to distribute these funds.53 Plaintiffs allege that ATP failed to m ake approxim ately $ 23.2 m illion in ORRI and NPI paym ents to five interest holders between April and August 20 12.54 On August 5, 20 13, Brian Neim an filed a class action com plaint in the Southern District of Texas asserting that defendants violated Section 10 (b) of the Securities Exchange Act of 1934. Shortly thereafter, Brian Stackhouse filed a sim ilar com plaint in the Southern District of Texas. In addition, Thom as Mansfield filed a Section 10 (b) class action com plaint against defendants in the Eastern District of Louisiana. The actions were transferred to the Eastern 52 Id. at 48-49. 53 Id. at 51. 54 Id. at 53. 16 District of Louisiana and consolidated,55 and the Court appointed Neim an, Kruse, and the Moshe Issac Foundation as Lead Plaintiffs.56 Lead Plaintiffs filed their First Am ended Consolidated Class Action Com plaint on February 18, 20 14, in which they identified 27 different statem ents they contend were false or m isleading because the statem ents failed to disclose ATP's well perform ance issues and liquidity problem s.57 After the Court dism issed plaintiffs' First Am ended Com plaint without prejudice, plaintiffs filed their Second Am ended Com plaint realleging that defendants: (a) failed to disclose the effects of the m oratoria on ATP in the Registration Statem ent and the com pany's Form s 10 -K and 10 -Q, in violation of Item 30 3(a) of Regulation S-K; (b) failed to disclose at the Septem ber 12, 20 11 Rodm an Renshaw Global Investm ent Conference and in Reese's Septem ber 29, 20 11 interview with Bloom berg News that Well 941 # 4 was no longer producing the announced 7,0 0 0 Boe per day; (c) falsely stated in various SEC filings, earnings calls, and conferences that ATP's liquidity was "strong" or "sound" and that the com pany could continue to m eets its obligations for the next twelve m onths despite the fact that (1) Well 941 # 4 was underperform ing, (2) ATP lacked funds to com plete the Clipper pipeline project to access the revenue stream it expected from the wells' production, and (3) ATP was running out of cash, forcing the com pany to negotiate delayed paym ents to certain vendors, delay routine m aintenance, and withhold ORRI and NPI paym ents from investors; 55 R. Docs. 77, 78, 10 5. 56 R. Doc. 129. 57 R. Doc. 173. 17 (d) m isleadingly projected that ATP would com plete the Clipper Wells pipeline in the third quarter of 20 12 and touted the wells' plentiful reserves despite knowing that ATP lacked the funds to com plete the pipeline project; and (e) m isled investors about the reasons behind Matt McCarroll's J une 7, 20 12 resignation from his position as ATP's CEO.58 Defendants now m ove to dism iss the Second Am ended Com plaint, asserting that plaintiffs' allegations fail to m eet the heightened pleading requirem ents under the Private Securities Litigation Reform Act.59 II. STAN D ARD To survive a Rule 12(b)(6) m otion to dism iss, the plaintiff m ust plead enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 0 9) (quoting Bell Atl. Corp. v. Tw om bly , 550 U.S. 544, 570 (20 0 7)). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged.” Id. A court m ust accept all well-pleaded facts as true and m ust draw all reasonable inferences in favor of the plaintiff. Lorm and v. U.S. Unw ired, Inc., 565 F.3d 228, 239 (5th Cir. 20 0 9). 58 R. Doc. 234 at 9-11. 59 R. Doc. 221-1. 18 A legally sufficient com plaint need not contain detailed factual allegations, but it m ust go beyond labels, legal conclusions, or form ulaic recitations of the elem ents of a cause of action. Id. In other words, the face of the com plaint m ust contain enough factual m atter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiff’s claim . Lorm and, 565 F.3d at 257. If there are insufficient factual allegations to raise a right to relief above the speculative level, or if it is apparent from the face of the com plaint that there is an insuperable bar to relief, the Court m ust dism iss the claim . Tw om bly , 550 U.S. at 555. In reviewing a m otion to dism iss, the Court is lim ited to the com plaint, its proper attachm ents, docum ents incorporated into the com plaint by reference, and m atters of which the Court m ay take judicial notice. See Randall D. W olcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 20 11). In securities cases, courts m ay take judicial notice of the contents of public disclosure docum ents that are filed with the SEC as required by law; however, "these docum ents m ay be considered only for the purpose of determining what statem ents they contain, and not for proving the truth of their contents." In re Franklin Bank Corp. Sec. Litig., 782 F. Supp. 2d 364, 384-85 (S.D. Tex. 20 11) (citing Lovelace v. Softw are Spectrum , Inc., 78 F.3d 10 15, 10 18 & n.1 (5th Cir. 1996)). 19 III. D ISCU SSION A. Se ctio n 10 ( b) To survive a m otion for dism issal, plaintiffs m ust allege facts entitling them to relief for their substantive cause of action. Section 10 (b) of the Securities Exchange Act of 1934 m akes it unlawful for a person to: use or em ploy, in connection with the purchase or sale of any security . . . any m anipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Com m ission m ay prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). Rule 10 b– 5 m akes it unlawful for any person, directly or indirectly, to: m ake any untrue statem ent of m aterial fact or to om it to state a m aterial fact necessary in order to m ake the statem ents m ade, in the light of the circum stances under which they were m ade, not m isleading . . . in connection with the purchase or sale of any security. 17 C.F.R. § 240 .10 b– 5. Accordingly, to state a claim under Section 10 (b) and Rule 10 b-5, a plaintiff m ust adequately allege, in connection with the purchase or sale of securities, "(1) a m isstatem ent or an om ission (2) of m aterial fact (3) m ade with scienter (4) on which plaintiff relied (5) that proxim ately caused [the plaintiff's] injury." Nathenson v. Zonagen Inc., 267 F.3d 40 0 , 40 6-0 7 (5th Cir. 20 0 1) (citing Tuchm an v. DSC Com m c'ns, 14 F.3d 10 61, 10 67 (5th Cir. 1994)). "A 'm aterial fact' is one which a reasonable investor would consider significant 20 in the decision whether to invest, such that it alters the 'total m ix' of inform ation available about the proposed investm ent." Krim v. BancTexas Grp., Inc., 989 F.2d 1435, 1445 (5th Cir. 1993). A fact is not m aterial if "a reasonable investor viewing the inform ation in context would not have considered the investm ent significantly m ore risky as a result." Id. at 1446. A plaintiff asserting a claim for securities fraud m ust also plead his claim in accordance with the particularity requirem ents of Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), 15 U.S.C. § 78u-4. The relevant provision of the PSLRA provides: In any private action arising under this title in which the plaintiff alleges that the defendant (A) m ade an untrue statem ent of a m aterial fact; or (B) om itted to state a m aterial fact necessary in order to m ake the statem ents m ade, in the light of the circum stances in which they were m ade, not m isleading; the com plaint shall specify each statem ent alleged to have been m isleading, the reason or reasons why the statem ent is m isleading, and, if an allegation regarding the statem ent or om ission is m ade on inform ation and belief, the com plaint shall state with particularity all facts on which that belief is form ed. 15 U.S.C. § 78u-4(b)(1). The Fifth Circuit has held that the PSLRA's pleading requirem ent "incorporates, at a m inim um , the pleading standard for fraud actions under Federal Rule of Civil Procedure 9(b)." Plotkin v. IP Axess Inc., 40 7 F.3d 690 , 696 (5th Cir. 20 0 5) (citing Rosenzw eig v. Azurix Corp., 332 21 F.3d 854, 865 (5th Cir. 20 0 3)); ABC Arbitrage Plaintiffs Grp. v. Tchuruk, 291 F.3d 336, 349-50 (5th Cir. 20 0 2) ("[W]e have observed that '[t]he effect of the PSLRA in this respect is to at a m inim um , incorporate the standard for pleading fraud under Fed.R.Civ.P. 9(b).'"(quoting Nathenson, 267 F.3d at 412)). To satisfy Rule 9(b), a plaintiff m ust specify each allegedly fraudulent statem ent, the speaker, when and where the statem ent was m ade, and why the statem ent was false or m isleading. Fin. Acquisition Partners LP v. Blackw ell, 440 F.3d 278, 287 (5th Cir. 20 0 6); Plotkin, 40 7 F.3d at 696. This heightened pleading standard serves an im portant screening function in securities fraud suits. It "provides defendants with fair notice of the plaintiffs' claim s, protects defendants from harm to their reputation and goodwill, reduces the num ber of strike suits, and prevents plaintiffs from filing baseless claim s and then attem pting to discover unknown wrongs." Melder v. Morris, 27 F.3d 10 97, 110 0 (5th Cir. 1994) (quoting Tuchm an, 14 F.3d at 10 67). In the Fifth Circuit,"the required state of m ind for scienter is an intent to deceive, m anipulate, defraud or severe recklessness." Ow ens v. Jastrow , 789 F.3d 529, 535-36 (5th Cir. 20 15) (quoting Lorm and, 565 F.3d at 251). Severe recklessness, for purposes of Section 10 (b)'s scienter elem ent, is lim ited to those highly unreasonable om issions or representations that involve not m erely sim ple or even inexcusable negligence, but an extrem e departure from the standards of ordinary care, and that present 22 a danger of m isleading buyers or sellers which is either known to the defendant or so obvious that the defendant m ust have been aware of it. Nathenson, 267 F.3d at 40 8 (quoting Broad v. Rockw ell, 642 F.2d 929, 961-62 (5th Cir. 1981)). The PSLRA also requires that a plaintiff "state with particularity facts giving rise to a strong inference" of scienter with respect to each allegedly false or m isleading statem ent. 15 U.S.C. § 78u-4(b)(2). This requirem ent "alters the usual contours of a Rule 12(b)(6) ruling." Lorm and, 565 F.3d at 239. Instead of drawing all reasonable inferences in the plaintiff's favor, the Court "m ust take into account plausible inferences opposing as well as supporting a strong inference of scienter." Id. This includes any "nonculpable explanations for the defendant's conduct." Cent. Laborers' Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546, 551 (5th Cir. 20 0 7). "The inference of scienter m ust ultim ately be 'cogent and com pelling,' not m erely 'reasonable' or 'perm issible,'" in light of other explanations. Lorm and, 565 F.3d at 239; see also Cent. Laborers', 497 F.3d at 551. In other words, a reasonable person m ust find the inference of scienter to be "at least as com pelling as any opposing inference one could draw from the facts alleged." Cent. Laborers', 497 F.3d at 551. In reviewing a plaintiff's scienter allegations, a court m ust "assess all the allegations holistically," not in isolation. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 30 8, 326 (20 0 7). 23 A plaintiff m ay satisfy the heightened pleading requirem ent by alleging facts showing a m otive to com m it fraud and a clear opportunity to do so, or by identifying circum stances indicating conscious or reckless behavior by defendants, so long as the totality of allegations raises a strong inference of fraudulent intent. See Tuchm an, 14 F.3d at 10 68. Although the stronginference pleading standard does not license courts to resolve disputed facts at the m otion to dism iss stage, it does perm it the court to "engage in som e weighing of the allegations to determ ine whether the inferences toward scienter are strong or weak." Cent. Laborers', 497 F.3d at 551 (quoting Rosenzw eig, 332 F.3d at 867). When a com plaint fails to plead scienter in conform ity with the PSLRA, the court m ust dism iss it. 15 U.S.C. § 78u– 4(b)(3)(A). Finally, the PSLRA's "safe-harbor" provision protects defendants from liability for certain projections, statem ents of future econom ic perform ance, and statem ents of plans or objectives for future operations. 15 U.S.C. § 78u5(I). More specifically, the PSLRA's safe-harbor provision states that a defendant shall not be liable with respect to any forward-looking statem ent, whether written or oral, if and to the extent that (A) the forward-looking statem ent is- 24 (i) identified as a forward-looking statem ent, and is accompanied by meaningful cautionary language identifying im portant factors that could cause actual results to differ m aterially from those in the forward-looking statem ent; or (ii) im m aterial; or (B) the plaintiff fails to prove that the forward-looking statem ent(i) if m ade by a natural person, was m ade with actual knowledge by that person that the statem ent was false or m isleading . . . . 15 U.S.C. § 78u-5(c)(1). Because this provision is disjunctive, parts (A) and (B) m ust be considered separately. See Southland Sec. Corp. v. IN Spire Ins. Solutions, Inc., 365 F.3d 353, 372 (5th Cir. 20 0 4) ("The safe harbor has two independent prongs: one focusing on the defendant's cautionary statem ents and the other on the defendant's state of m ind."); 60 Slay ton v. Am . Exp. Co., 60 4 F.3d 758, 766 (2d Cir. 20 10 ) ("The safe harbor is written in the disjunctive; that is, a defendant is not liable if the forward-looking statem ent is identified and accom panied by m eaningful cautionary language or is im m aterial or the plaintiff fails to prove that it was m ade with actual knowledge that it was false or m isleading."). Thus, under the first prong of the 60 Any suggestion to the contrary in Lorm and v. US Unw ired, Inc., 565 F.3d 228, 244 (5th Cir. 20 0 9), conflicts with the Fifth Circuit's earlier holding in Southland and does not bind this Court. Rios v. City of Del Rio, 444 F.3d 417, 425 n.8 (5th Cir. 20 0 6) ("[W]here two previous holdings or lines of precedent conflict the earlier opinion controls and is the binding precedent in this circuit . . . ."). 25 statutory safe-harbor, there is no liability if, and to the extent that, the statem ent is identified as a forward looking statem ent, and is accom panied by m eaningful cautionary language.61 A cautionary statem ent is "m eaningful" if it provides "substantive com pany-specific warnings based on a realistic description of the risks applicable to the particular circum stances, not m erely a boilerplate litany of generally applicable risk factors." Southland, 365 F.3d at 372. "Although a defendant is under no duty to disclose every fact or assum ption underlying a prediction, he m ust disclose m aterial, firm -specific adverse facts that affect the validity or plausibility of that prediction." Lorm and, F.3d at 249. Under the second prong, a defendant avoids liability if the plaintiff fails to prove that the statem ent was m ade with actual knowledge that the statem ent was false or m isleading. 15 U.S.C. § 78u-5(c)(1)(B). Because the second-prong places the burden of proof on the plaintiff, the PSLRA effectively requires plaintiffs to prove actual knowledge--not just recklessness--in the 61 Oral statem ents can qualify for the safe harbor if (1) the statem ent is accom panied by a cautionary statem ent that the "particular" oral statem ent is forward-looking and that actual results could differ m aterially (essentially a form ality as to the form of the statem ent); (2) the statem ent is accom panied by an oral statem ent that additional inform ation could cause actual results to differ m aterially is contained in a readily-available written docum ent; (3) the statem ent identifies the docum ent or portion thereof containing the additional inform ation; and (4) the identified docum ent itself contains appropriate cautionary language. 15 U.S.C. § 78u-5(c)(2). 26 case of every forward-looking statem ent. See In re Anadarko, 957 F. Supp. 2d 80 6, 831 n.13 (S.D. Tex. 20 13) ("If the statem ents are covered by the statutory 'safe harbor' provision, Plaintiffs would be required to show intent to deceive, and not m erely recklessness.") (citing Nathenson, 267 F.3d at 40 9). Accordingly, for each predictive statem ent, plaintiffs m ust plead specific facts giving rise to a strong inference that the defendant responsible for the forward-looking statem ent actually knew that the prediction was false. See Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 130 9, 1324 n.14 (20 11) ("Under the PSLRA, if the alleged m isstatem ent or om ission is a 'forwardlooking statem ent,' the required level of scienter is 'actual knowledge.'"). B. Plain tiffs ' Claim s The Second Am ended Com plaint alleges that defendants are liable for seventeen different false or m isleading statem ents m ade between Decem ber 20 10 and J une 20 12.62 These allegedly false and m isleading statem ents can be grouped into five categories: (1) defendants failed to disclose the effects of the m oratoria on ATP in the Registration Statem ent and the com pany's Form s 10 -K and 10 -Q, in violation of Item 30 3(a) of Regulation S-K; (2) defendants failed to disclose at the Septem ber 12, 20 11 Rodm an Renshaw Global Investm ent Conference and in Reese's Septem ber 29, 20 11 interview with Bloom berg News that Well 941 # 4 was no longer producing the announced 7,0 0 0 Boe per day; 62 R. Doc. 214 at 3. 27 (3) defendants falsely stated in various SEC filings, earnings calls, and conferences that ATP's liquidity was "strong" and "sound" and that the com pany could continue to m eets its obligations for the next twelve m onths despite the fact that (1) Well 941 # 4 was underperform ing, (2) ATP lacked the funds to com plete the Clipper pipeline in order to access the revenue stream it expected from the wells' production, and (3) ATP was running out of cash, forcing the com pany to negotiate delayed paym ents to certain vendors, delay routine m aintenance, and withhold ORRI and NPI paym ents from investors; (4) defendants m isleadingly projected that ATP would com plete the Clipper Wells pipeline in the third quarter of 20 12 and touted the wells' plentiful reserves despite knowing that ATP lacked the funds to com plete the pipeline project; and (5) defendants m isled investors about the reasons behind Matt McCarroll's J une 7, 20 12 resignation from his position as ATP's CEO.63 The Court will address each category of allegedly false or m isleading statem ents in turn. 1. Allegations that Defendants Failed to Disclose the Effects of the Moratoria on ATP Plaintiffs allege that ATP's Decem ber 16, 20 10 Registration Statem ent, March 16, 20 11 10 -K Filing, and Form s 10 -Q covering the first, second, and third quarters of 20 11 violated Item 30 3 of Regulation S-K by failing to disclose "the true, negative, and severe effects of the m oratoria on ATP's liquidity and ability to m eet its current obligations, and that [the m oratoria] 63 R. Doc. 234 at 9-11. 28 was likely to m aterially im pact liquidity and results of operations going forward."64 Item 30 3 of Regulation S-K requires the authors of certain corporate statem ents to disclose any known trends, events, or uncertainties that are (1) reasonably likely to result in a m aterial increase or decrease in liquidity, or (2) reasonably expected to have a m aterially unfavorable im pact on revenues or incom e from operations. 17 C.F.R. § 229.30 3. These disclosures m ust appear in the non-financial portions of registration statem ents and prospectuses, as well as in annual and quarterly reports filed on Form s 10 -K and 10 -Q, respectively, with the discussion to "focus specifically on m aterial events and uncertainties known to m anagem ent that would cause reported financial inform ation not to necessarily be indicative of future operating results or of future financial condition." Id. § 229.30 3(a), Instruction 3. The duty to disclose arises only when the "trend, dem and, com m itm ent, event or uncertainty is both [1] presently known to m anagem ent and [2] reasonably likely to have m aterial effects on the registrant's financial condition or results of operations." Managem ent's Discussion and Analysis of Financial Condition 64 R. Doc. 214 at 66, 70 , 73, 76, 89. Defendant Tate did not sign any of these docum ents, so any alleged falsehoods contained within these docum ents m ay not be attributed to him . Bulm ahn, Reese, and Godwin each signed the Registration Statem ent and the Form s 10 -K. Only Reese signed the Form s 10 -Q, but both Bulm ahn and Reese certified them pursuant to the Exchange Act an d the Sarbanes-Oxley Act. 29 and Results of Operations, Exchange Act Release No. 26,831, Investm ent Com pany Act Release No. 16, 961, 43 SEC Docket 1330 (May 18, 1989). Because Item 30 3 creates an affirm ative obligation to disclose certain inform ation, liability under the provision is not tied to any particular statem ents contained in the relevant SEC filing; rather, liability exists when a defendant fails to disclose inform ation covered by Item 30 3. Thus, although plaintiffs characterize several of the statem ent contained in the Registration Statem ent, Form 10 -K, and Form s 10 -Q as m isleading, plaintiffs m ake scant allegations regarding inform ation ATP allegedly failed to disclose in these docum ents. With respect to the Registration Statem ent and Prospectus,65 plaintiffs state only that defendants failed to disclose that, at the tim e the Registration Statement was declared effective, defendants "knew that ATP had inadequate liquidity and that their proposed drilling program would not proceed in 20 10 ."66 With respect to the 20 10 Form 10 -K and the Form s 10 -Q for the first, second and third quarters of 20 11, plaintiffs allege that ATP "failed to disclose the true, negative, and severe effects of the m oratoria on ATP's liquidity and ability to m eet its current obligations, and that [the 65 For all practical purposes, the Registration Statem ent and Prospectus contain the sam e inform ation and are interchangeable. 66 R. Doc. 214 at 66. 30 m oratoria] was likely to m aterially im pact liquidity and results of operations going forward."67 As the Court held in its order dism issing plaintiffs' First Am ended Com plaint, the very inform ation that plaintiffs claim is om itted is actually disclosed in ATP's SEC disclosures in plain English throughout the Class Period. Indeed, to the extent that the m oratoria constituted a "known trend" that was likely to have a m aterial im pact on ATP's liquidity and revenues, ATP discussed the BP Oil Spill and the resulting m oratoria in great depth in the Prospectus.68 The Prospectus provided the following disclosures regarding the m oratoria's current im pact on ATP: We have ongoing and planned drilling operations in the deepwater Gulf of Mexico, som e of which were perm itted prior to April 20 , 20 10 , and som e of which are not yet perm itted. Such perm its, am ong other required approvals, are necessary prior to com m encem ent of offshore drilling operations. Moratorium II has caused us to delay the third and fourth wells scheduled at our Telem ark Hub and, even though Moratorium II has been lifted, any delays in the resum ption of the perm itting process m ay result in delays in our drilling operations scheduled in 20 11 at our Gom ez Hub. During J une 20 10 , we agreed to term inate a contract for services of a drilling rig as a result of Moratorium I. Under our term ination agreem ent, we obtained a full release of our obligations under the contract and incurred net costs of $ 8.7 m illion reflected as contract term ination costs on our Septem ber 30 , 20 10 statem ent of operations . . . . 67 Id. at 70 , 73, 76, 89. 68 R. Doc. 221-2 at 30 -31. 31 The size of our operations and our capital expenditure budget lim its the num ber of properties that we can develop in any given year. Com plications in the developm ent of any single m ajor well or infrastructure installation m ay result in a m aterial adverse effect on our financial condition and results of operations. For instance, production delays are occurring resulting from Moratorium I and Moratorium II as described above in the first risk factor under "Risks Related to Our Business."69 With respect to the m oratoria's potential future im pact on ATP's revenues and liquidity, the Prospectus warned: Th e U .S. go ve rn m e n tal an d re gu la to ry re s p o n s e to th e D e e p w ate r H o rizo n d rillin g rig accid e n t an d re s u ltin g o il s p ill co u ld h ave a p ro lo n ge d an d m ate rial ad ve rs e im p act o n o u r Gu lf o f Me xico o p e ratio n s . . . . Although Moratorium II has been lifted, we cannot predict with certainty when perm its will be granted under the new requirem ents . . . . We project a substantial increase in production over the next year as developm ent wells are brought to production. Absent alternative funding sources, achieving our projected production growth is necessary to provide the cash flow required to fund our capital plan and m eet our existing obligations, both over the next twelve m onths and on a longer term basis. Our ability to execute our plan depends, in part, on our ability to continue drilling for and producing hydrocarbons in the Gulf of Mexico. Our plan is currently based on obtaining necessary drilling perm its, and successfully achieving com m ercial production form existing wells presently scheduled to com m ence during the rem ainder of 20 10 and 20 11. Delays from difficulties receiving necessary perm its, reduced access to equipm ent and services, or bad weather, could have a m aterial adverse effect on our financial position, results of operations and cash flows. In addition to the risks associated with achieving our projected production growth, additional regulatory requirem ents and increased costs for which funding m ust be secured, or a negative change in com m odity prices and operating cost levels, could also have a material 69 Id. at 33. 32 adverse effect on our financial position, results of operations and cash flows. While we are pursuing various other sources of funding, there is no assurance that the alternative sources will be available should any of the above risks or uncertainties m aterialize. If w e are n o t able to ge n e rate s u fficie n t fu n d s fro m o u r o p e ratio n s an d o th e r fin an cin g s o u rce s , w e m ay n o t be able to fin an ce o u r p lan n e d d e ve lo p m e n t activity, acqu is itio n s o r s e rvice o u r d e bt. We have historically needed and will continue to need substantial am ounts of cash to fund our capital expenditure and working capital requirem ents . . . . D e lays in th e d e ve lo pm e n t o f o r pro d u ctio n cu rtailm e n t at o u r m ate rial p ro p e rtie s in clu d in g at o u r Te le m ark H u b m ay ad ve rs e ly affe ct o u r fin an cial p o s itio n an d re s u lts o f o p e ratio n s . 70 The Prospectus's financial statem ent also disclosed that ATP had suffered a net loss of roughly $ 121.4 m illion in the nine m onths ending Septem ber 30 , 20 10 .71 Finally, when referring to the new permitting environm ent that caused the de facto m oratorium that was ongoing when the Registration Statem ent was declared effective, the Prospectus unequivocally stated: New regulations already issued will, and potential future regulations or additional statutory lim itations, if enacted or issued, could, require a change in the way we conduct our business, increase our costs of doing business or ultim ately prohibit us from drilling for or producing hydrocarbons in the Gulf of Mexico.72 70 Id. at 30 -32. 71 Id. at 43. 72 Id. at 31. 33 ATP's later filings repeated these warnings and updated investors as the situation developed, disclosing the costs ATP incurred as a result of the m oratoria, as well as the financing arrangem ents ATP m ade to preserve cash in the absence of revenues from operations. ATP's 20 10 10 -K stated: W e h ave in cu rre d s u bs ta n tial co s ts cau s e d by th e d e e p w ate r d rillin g m o rato riu m s an d s u bs e qu e n t d rillin g p e rm it d e lays . For exam ple, during 20 10 a side-track well operation in 7,0 0 0 feet of water was interrupted when Moratorium I was im posed and work on that project stopped, resulting in the early term ination of a drilling contract. In the course of obtaining a full release from our obligations under the contract, we incurred net costs of $ 8.7 m illion, which are reflected as drilling interruption costs on our Consolidated Statem ents of Operations. Because the necessary drilling perm its were not issued, drilling interruption costs also include $ 14.9 m illion of stand-by costs for a drilling rig and support operations at our Gom ez Hub and Telem ark Hub properties. [ O] u r cas h flo w s w e re s ign ifican tly n e gative ly im p acte d by th e d rillin g m o rato riu m s , as w e in cu rre d th e ad d itio n al co s ts n o te d abo ve an d at th e s am e tim e w e re u n able to p lace o n p ro d u ctio n th re e w e lls d u rin g 2 0 10 th at w e re o rigin ally p art o f th e 2 0 10 d e ve lo p m e n t p ro gram . We funded our 20 10 activities through a com bination of new debt financings, the sale or conveyance of econom ic interests in selected properties and financing arrangem ents with our suppliers. D u rin g th is p e rio d w e fin an ce d s ign ifican t p o rtio n s o f o u r de ve lo pm e n t pro gram w ith tran s actio n s e n te re d in to w ith o u r s u p p lie rs an d th e ir affiliate s . W e h ave co n ve ye d to ce rtain s u p p lie rs n e t p ro fits in te re s ts in o u r Te le m ark H u b, Go m e z H u b, an d Clip p e r o il an d gas p ro p e rtie s in e xch an ge fo r d e ve lo p m e n t s e rvice s . W e h ave als o n e go tiate d w ith ce rtain o th e r ve n d o rs in th e d e ve lo p m e n t o f th e Te le m ark H u b an d Clip p e r to p artially d e fe r p aym e n ts fo r a p e rio d o f tw e lve m o n th s . . . . Th e s e typ e s o f fin an cial arran ge m e n ts p re s e rve 34 o u r cu rre n t cas h an d allo w u s to p ay fro m th e p ro ce e d s o f fu tu re p ro d u ctio n . Our 20 11 developm ent plans in the Gulf of Mexico, as well as our longer term business plan, are dependent on receiving approval for deepwater drilling and other perm its subm itted to the BOEM . . . . [T]here is no assurance that [the perm its] will be received in tim e to benefit our 20 11 results or that perm its will be issued in the future.73 ATP's First Quarter 20 11 Form 10 -Q updated investors regarding the status of perm its and further disclosed ATP's continuing efforts to preserve cash: Our 20 11 developm ent plans in the Gulf of Mexico as well as our longer term business plan are dependent on receiving additional approvals for deepwater drilling and other perm its under applications which have been and will be subm itted to the Bureau of Ocean Energy Managem ent Regulation and Enforcem ent of the Departm ent of the Interior. In the first quarter of 20 11, we received perm its to drill the third well at Telem ark and to com plete drilling of a well at Green Canyon. Drilling of the third well at Telem ark is already underway. Als o , w h ile w e be lie ve w e can s atis fy th e p e rm ittin g re qu ire m e n ts fo r th e ad d itio n a l p lan n e d 2 0 11 w e lls , w h ich w ill allo w u s to s ign ifican tly in cre as e o u r p ro d u ctio n fro m cu rre n t le ve ls , th e re is n o as s u ran ce th at th e y w ill be re ce ive d in tim e to be n e fit o u r 2 0 11 re s u lts o r th at th e p e rm its w ill be is s u e d in th e fu tu re . . . . The size of our operations and our capital expenditures budget lim it the num ber of properties that we can develop in a given year. A substantial portion of our current production is concentrated am ong relatively few wells located offshore in the Gulf of Mexico and in the North Sea, which are characterized by production declines m ore rapid than found in conventional offshore properties. As a result, we are particularly vulnerable to a near-term severe im pact resulting from unanticipated com plications in the developm ent of, or production from , any single m aterial well or infrastructure installation, including lack of sufficient capital, delays in receiving necessary drilling and operations permits, increased regulation, reduced access to equipment and services, m echanical or operation al failures or bad weather. An y 73 R. Doc. 221-5 at 37-38. 35 u n an ticip a te d s ign ifican t d is ru p tio n to , o r d e clin e in , o u r cu rre n t p ro d u ctio n le ve ls o r p ro lo n ge d n e gative ch an ge s in co m m o d ity p rice s o r o p e ratin g co s t le ve ls co u ld h ave a m ate rial ad ve rs e e ffe ct o n o u r fin an cial p o s itio n , re s u lts o f o p e ratio n s an d cas h flo w s an d o u r ability to m e e t o u r co m m itm e n ts as th e y co m e d u e . W e h ave h is to rically o btain e d vario u s o th e r s o u rce s o f fu n d in g to s u p p le m e n t o u r cas h flo w fro m o p e ratio n s an d w e w ill co n tin u e to p u rs u e th e m in th e fu tu re , h o w e ve r, th e re is n o as s u ran ce th at th e s e alte rn ative s o u rce s w ill be available s h o u ld th e s e ris ks an d u n ce rtain tie s m ate rialize . We have been financing a significant portion of our developm ent program with transactions entered into with our suppliers and financial institutions that either defer paym ents to future periods or will be repaid based on production through or from the revenues or net profits generated from future production. W h ile th e s e fin an cin g tran s actio n s h ave e n able d u s to co n tin u e th e d e ve lo p m e n t o f o u r p ro p e rtie s an d p re s e rve cas h , th e y w ill s ign ifican tly bu rd e n th e fu tu re n e t cas h flo w s fro m o u r p ro d u ctio n u n til th e s e o bligatio n s are s atis fie d . 74 The Com pany's Second Quarter 20 11 Form 10 -Q repeated these warnings and discussed the ongoing im pacts of the m oratoria on ATP: Events that occurred in 20 10 and regulations that were enacted in 20 10 and 20 11 have had a m ajor im pact on our operations and ability to m ove forward with developm ent plans. * * * Although Moratorium II has been lifted and we have received two perm its to develop wells at our Telem ark and Clipper properties, we cannot predict with certainty when additional perm its will be granted under the new requirem ents. * 74 * R. Doc. 221-7 at 25. 36 * During the first six m onths of 20 11, we also obtained a significant additional financing and com m itm ents to finance from term loans and other transactions. In the second quarter 20 11, we conveyed dollardenom inated overriding royalty interests and dollar-denom inated overriding royalty interests in the form of net profit interests in the Gom ez Hub and the Telem ark Hub for aggregate net proceeds of $ 70 .3 m illion. These Overrides and NPIs obligate us to deliver a percentage of the proceeds from the future sale of hydrocarbons in the specified proved properties until the purchaser recovers it original investm ent, plus an overall rate of return. In J une 20 11 we also closed a perpetual preferred stock offering that provided net proceeds of $ 123.3 m illion, net of discount, related option contract costs and issuance costs. * * * Drilling interruption costs were $ 1.2 m illion and $ 8.7 m illion in the second quarter of 20 11 and 20 10 , respectively. Th e y co n s is t o f s tan d by co s ts fo r d rillin g o p e ratio n s at o u r Te le m ark an d Go m e z H u bs re s u ltin g fro m th e d e e p w ate r d rillin g m o rato riu m s an d s u bs e qu e n t d rillin g p e rm it d e lays cau s e d by th e Ap ril 2 0 10 Ma co n d o in cid e n t in th e Gu lf o f Me xico . Th e s e co s ts are e xp e cte d to co n tin u e . 75 Finally, ATP's Third Quarter 20 11 Form 10 -Q repeated that the BP Oil spill and the resulting m oratoria "had a m ajor im pact on [ATP's] operations and ability to m ove forward with developm ent plans."76 ATP also stated: Since May 20 10 when the federal governm ent im posed the first of a series of m oratorium s in the Gulf of Mexico, we have faced unparalleled difficulties in obtaining perm its to continue our developm ent program . Prior to the m oratorium s, we anticipated developing and bringing to production three additional wells at our Telem ark Hub and two additional wells at our Gom ez Hub by the end of 20 10 . As of Septem ber 30 , 20 11, we have been able to bring to production two additional wells 75 R. Doc. 221-9 at 26-31. 76 R. Doc. 221-13 at 28. 37 at the Telem ark Hub and the third well has been drilled to total depth . . . . During the third quarter, the two wells planned for the Gom ez Hub were postponed to late 20 12/ early 20 13 as perm its have not yet been received for these two wells. * * * In addition, we have incurred capital and operating costs higher than we expected prim arily due to additional regulations im posed since the deepwater Macondo incident and the requirem ent to sidetrack the two wells. . . . While cash flows were lower than previously projected due to lower than expected production rates, the delays in bringing on new production and higher costs, we continued our developm ent operations by supplem enting our cash flows from operating activities with funds raised through various financing transactions.77 As the foregoing m akes clear, ATP fully inform ed investors of the current im pact, and likely future im pact, of the m oratoria in each of the challenged SEC filings. ATP's SEC filings apprised the m arket that the com pany was facing liquidity issues, that it was negotiating paym ent term s with its vendors, that it was experiencing perm itting delays and increased costs, and that it was selling overriding royalty interests and net profit interests to m ake up for lost incom e and pay for its drilling projects. Plaintiffs' claim that ATP failed to disclose the im pacts of the m oratoria in violation of Item 30 3 is therefore without m erit. In re Progress Energy , Inc. Sec. Litig., 371 F. Supp. 2d 548, 552 (S.D.N.Y.20 0 5) ("[I]t is indisputable that there can be no om ission where the allegedly om itted facts are disclosed.") (internal citation om itted). 77 Id. at 28-29. 38 In response, plaintiffs argue that ATP's disclosures were them selves m isleading and incom plete because ATP did not disclose that it was then unable to m eet its obligations, that ATP was "insolvent or practically insolvent," or that defendants "knew that the ORRI and NPI interests that ATP sold substantially hindered ATP's ability to im prove or even m aintain its financial situation."78 In support of their theory that ATP failed to disclose that it was then unable to m eet its obligations, plaintiffs rely on a statem ent from a confidential witness who states that ATP "routinely delayed m aintenance work in order to m anage its cash flow" and "also stated that putting off paym ents to vendors was another routine way that ATP handled cash shortages."79 As an initial m atter, ATP repeatedly disclosed that it was renegotiating paym ents with vendors in order to preserve cash.80 ATP also 78 R. Doc. 234 at 21. 79 R. Doc. 214 at 23. 80 See, e.g., 20 10 Form 10 -K, R. Doc. 221-5 at 37 ("We have also negotiated with certain other vendors involved in the developm ent of the Telem ark Hub and Clipper to partially delay paym ents for a period of twelve m onths. . . . We have arranged with the fabricator of the floating production facility to defer $ 121.5 m illion of paym ents until 20 11 and the rem ainder until 20 12. These types of financial arrangem ents preserve our current cash and allow us to pay from the proceeds of future production."); 20 11 Second Quarter Form 10 -Q, R. Doc. 221-9 at 13-14 ("In the Gulf of Mexico, in addition to the NPIs exchanged for developm ent services described above, we have negotiated with certain other vendors involved in the developm ent of the Telem ark and Gom ez Hubs to partially defer paym ents over a twelve-m onth period beginning with first production."). 39 fully apprised investors that it had "significant debt, trade payables, and other long-term obligations."81 ATP further disclosed that these debts could "reduce funds available for other purposes" and strain ATP's ability to secure financing "required to fund working capital and capital expenditures and for other general corporate purposes."82 Thus, although ATP did not specifically disclose that it was delaying routine m aintenance to preserve cash, ATP fully disclosed that it was pursuing various options to preserve cash and increase its liquidity. Because ATP fully apprised investors of its intention and efforts to preserve cash, the Court will not read into the securities laws a general obligation to disclose the details of ATP's m aintenance practices. See Kapps v. Torch Offshore, Inc., 379 F.3d 20 7, 212 n.6 (5th Cir. 20 0 4) ("[T]he m ere possession of m aterial nonpublic inform ation does not create a duty to disclose.") (quoting Shaw v. Digital Equip., 82 F.3d 1194, 120 2 (1st Cir. 1996)). With respect to plaintiffs' claim that ATP failed to disclose that it was "in solven t or practically in solven t," plain tiffs fail to allege an y contem poraneous facts supporting their claim that ATP was insolvent or practically insolvent at the tim e ATP subm itted the challenged SEC filings. To support their claim that ATP was insolvent or practically insolvent during the 81 20 10 Form 10 -K, R. Doc. 221-5 at 18. 82 Id. 40 relevant periods, plaintiffs rely on an allegation lifted from Rodney Tow's August 15, 20 14 com plaint 83 filed in the bankruptcy proceedings: Shortly after the Oil Spill, as early as May 20 11, ATP began to have problem s with liquidity due to the Oil Spill and foreseeable governm ent response and entered the zone of insolvency, which the Directors and Officers knew.84 Rodney Tow's bankruptcy allegations, filed in an adversarial proceeding m ore than two years after ATP filed for bankruptcy, and m ore than three and a half years after ATP's 20 10 10 -K filing, fail to create a strong inference that defendants knew that ATP was insolvent, or "practically insolvent," when the com pany filed its disclosure statem ents with the SEC. Defendants correctly point out that "fraud cannot be proved by hindsight," Southland, 365 F.3d at 383, and plaintiffs' use of Rodney Tow's allegations, m ade in 20 14 with the benefit of hindsight, is classic fraud-by-hindsight pleading. Indeed, plaintiffs do not challenge the accuracy of ATP's financial disclosures in any of the SEC filings. Nor do plaintiffs provide any factual allegations that ATP withheld financial data or otherwise failed to disclose the required financial inform ation. Item 30 3 im poses a duty to disclose trends only if they are 83 On J une 26, 20 14, ATP's Chapter 11 petition was converted to a Chapter 7 proceeding. Shortly thereafter, the Bankruptcy Court appointed Rodney Tow as bankruptcy trustee. Rodney Tow filed a com plaint against Bulm ahn, Tate, Reese, and Godwin, am ong others, on August 15, 20 14. 84 R. Doc. 214 at 38. 41 "presently known to m anagem ent." Plaintiffs' reference to ATP's August 20 12 bankruptcy, and the bankruptcy trustee's August 20 14 com plaint, do not give rise to an inference that defendants knew that ATP was insolvent, or practically insolvent, when defendants filed the challenged disclosures with the SEC. Southland, 365 F.3d at 383 ("[B]ecause fraud cannot be proved by hindsight, subsequent lawsuits are unpersuasive of scienter, as they do not show what any particular individual knew . . . at the tim e . . . ."). Absent plausible allegations that defendants knew that ATP was insolvent or practically insolvent at the tim e they filed the relevant disclosures with the SEC, plaintiffs have failed to plead that defendants violated Item 30 3. Finally, plaintiffs claim that defendants' disclosures were inadequate under Item 30 3 because the SEC filings failed to disclose that the "ORRI and NPI interests that ATP sold substantially hindered ATP's ability to im prove or even m aintain its financial situation."85 To be clear, plaintiffs do not allege that defendants failed to disclose that ATP sold ORRIs and NPIs to bolster the com pany's short-term liquidity. Instead, plaintiffs allege that defendants failed to disclose the alleged effects of these ORRIs and NPIs. Once again, however, the inform ation that plaintiffs contend ATP om itted in violation of Item 30 3 was disclosed in plain English in the relevant SEC filings. For 85 R. Doc. 234 at 21. 42 exam ple, the 20 11 First Quarter 10 -Q disclosed that while the sale of ORRIs and NPIs "have enabled us to continue the developm ent of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied."86 Similarly, ATP's 20 10 Form 10 -K stated that ATP "cannot provide assurance that our business will generate sufficient cash flow or that future financings will be available to provide sufficient proceeds to m eet these obligations. The inability to m eet our financial obligations and com m itm ents will im pede successful execution of our business strategy and the m aintenance of our econom ic viability."87 In light of the foregoing, it is clear that ATP disclosed the current and likely future im pact of the m oratoria, and plaintiffs have thus failed to plead that ATP om itted this inform ation in violation of Item 30 3. 2. Defendants' Alleged Failure to Disclose Less than Expected Production at ATP's Telem ark Hub On August 24, 20 11, ATP issued a press release announcing the first production from Telem ark's newest well, MC Block 941 # 4, at "an initial rate exceeding 7,0 0 0 Boe per day," and that ATP's com pany-wide production "now 86 R. Doc. 221-7 at 25. 87 R. Doc. 221-5 at 18. 43 exceeds 31,0 0 0 0 Boe per day."88 The press release quoted Bulm ahn stating that We have finally realized the planned m aterial production revenue of this well that has been m uch anticipated for 16 m onths . . . . The greaterthan-a-billion-dollar investm ent at Telem ark reflects ATP's continuing com m itm ent to develop Am erica's energy resources.89 Less than three weeks later, on Septem ber 12, 20 11, Reese gave a speech at the Rodm an Renshaw Global Investm ent Conference ("RRGI Conference") in which he reiterated that ATP's "m ost recent report" set overall production at 31,0 0 0 Boe per day including "the new Telem ark well."90 On Septem ber 29, 20 11, Moody's published a report stating that ATP had a "high likelihood" of restructuring. The sam e day, Bloom berg News published Reese's response to the Moody report stating, in relevant part: Moody's Investor Service this week said ATP shows a "high likelihood" it m ay have to restructure its debt because its cash flow and asset base are insufficient to cover notes m aturing in 20 15. The com pany's $ 1.79 billion in net debt exceeds that of 97 percent of Houston-based ATP's U.S. peers, according to data com plied by Bloom berg. ATP expects to begin production from new wells at its Telem ark field this year, followed by additional output at the Clipper and Gom ez projects in 20 12, Entrada in 20 13 and Cheviot a year later, said Albert L. Reese, ATP's chief financial officer. All of those fields are in the Gulf of Mexico, except Cheviot, which is in the U.K. 88 R. Doc. 214 at 24. 89 Id. at 24-25. 90 Id. at 25. 44 "All of that is before the bonds com e due in 20 15, so I don't know what Moody's is talking about," Reese said today in a telephone interview. "I can't find rum ors or reports, all I can do is continue to deliver on the prom ises we've m ade. Our expectation is that everything is going to be fine."91 On Novem ber 8, 20 11, ATP issued a press release announcing its Third Quarter 20 11 results, in which it disclosed that com pany-wide production was only 24,20 0 Boe per day, in contrast to the 31,0 0 0 Boe per day that was announced in August.92 ATP further disclosed that MC Block 941 # 4 was producing only 3,50 0 Boe per day, in contrast to the 7,0 0 0 Boe per day that was announced in August.93 Lead Plaintiffs allege that Reese's Septem ber 12, 20 11 reiteration of ATP's "m ost recent report"--m eaning the August 24, 20 11 press release--and Reese's Septem ber 29, 20 11 statem ent that "all I can do is continue to deliver on the prom ises we've m ade" were m isleading because data available on the Bureau of Ocean Energy Managem ent's ("BOEM") website indicated that MC Block 941, as a whole, produced only 2,738 Boe per day m ore in Septem ber 20 11 than in J uly 20 11, the last full m onth before Well # 4 began producing.94 91 Id. at 26. 92 Id. at 28. 93 Id. 94 Id. at 27-28. 45 Thus, assum ing production rem ained constant at the other two wells located in MC Block 941, plaintiffs contend that Reese's reiteration of the August 24, 20 11 report and statem ent that ATP will "continue to deliver on the prom ises we've m ade" were m isleading because BOEM's data suggests that MC 941 # 4 produced only 2,738 Boe per day and that ATP's com pany-wide production was only 24,20 0 Boe per day for the m onth of Septem ber.95 A confidential witness, CW4, also states that his staff em ailed weekly production reports to Bulm ahn, Reese, Tate and Godwin and discussed production levels with defendants at weekly production m eetings.96 Plaintiffs bolster CW4's account with the statem ent of yet another confidential witness, CW3, who states that "he saw either weekly or m onthly reports," and that these reports "would have been available to Defendants Bulm ahn, Reese, Godwin, and Tate."97 Plaintiffs further rely on Reese's testim ony in the Bankruptcy proceeding that he was "very, very well inform ed" to support an inference that Reese knew, or was reckless in not knowing, that production at MC 941 # 4 had declined.98 95 Id. 96 Id. at 30 . 97 Id. 98 Id. at 31. 46 As an initial m atter, plaintiffs' reliance on the BOEM data for the proposition that MC 941 # 4 was producing 2,738 Boe per day on Septem ber 12, 20 11 is flawed for two reasons. First, plaintiffs inexplicably assum e that production rem ained constant at the other two wells at MC 941, such that any decline in production from the block cum ulatively m ust have com e from MC 941 # 4 only. Plaintiffs provide no explanation or defense for this assum ption. Second, and m ore im portantly, the BOEM data provides block production on a m onthly basis. Thus, while the BOEM data m ight support plaintiffs' argum ent that production at MC 941 # 4 had declined by the end of Septem ber, it does not support the proposition that production at MC 941 # 4 m ust have declined to 2,738 by Septem ber 12, 20 11, only twelve days into the BOEM's reporting period. Nevertheless, even assum ing that production at MC 941 # 4 had declined significantly by Septem ber 12, 20 11, the Court finds that discussing MC 941 # 4's production rate was not necessary to m ake Reese's Septem ber 12 and Septem ber 29, 20 11 states not m isleading. With respect to Reese's Septem ber 12, 20 11 statem ent at the RGGI Conference, Reese m erely reiterated that in ATP's "m ost recent report, we said 31,0 0 0 barrels that's with the new Telem ark well."99 Reese's restatem ent of the August 24 production levels a 99 Id. at 25. 47 m ere two and a half weeks later does not constitute a false or m isleading statem ent. Reese m erely restated a historical fact, which plaintiffs do not allege to be false. Moreover, Reese explicitly stated that he was referencing ATP's m ost recent report--m eaning the August 24th report--not ATP's current production num bers. Indeed, Reese said nothing about current production from MC 941 # 4 at the RGGI Conference and ATP was under no general obligation to provide weekly updates on the perform ance of each and every one of its wells. Cf. TSC Indus., Inc. v. N orthw ay , Inc., 426 U.S. 438, 448-49 (1976) (warning that disclosure obligations that would "bury the shareholders in an avalanche of trivial inform ation . . . [are] hardly conducive to inform ed decision m aking"); Gallagher v. Abbott Laboratories, 269 F.3d 80 6, 80 9 (7th Cir. 20 0 1) ("Much of plaintiffs' argum ent reads as if firm s have an absolute duty to disclose all inform ation m aterial to stock prices as soon as news com es into their possession. Yet that is not the way the securities laws work. We do not have a system of continuous disclosure."). Thus, Reese's alleged failure to give investors a week-by-week update as to the production rate of specific wells does not render Reese's restatem ent of ATP's August 24, 20 11 production report m isleading. The Court reaches the sam e conclusion regarding plaintiffs' allegation that Reese's Septem ber 29, 20 11 statem ent that "all I can do is continue to 48 deliver on the prom ises we've m ade" was "an im plicit reinforcem ent" of ATP's August 24, 20 11 production report.10 0 Once again, this allegation fails to state a claim because disclosure of the lower production levels was not necessary to m ake Reese's statem ents in the Septem ber 29, 20 11 interview with Bloom berg News not m isleading. His assurances in response to the Moody report focused on ATP's expectation that it would be able to cover its debt based on "production from new w ells at its Telem ark field this year, followed by additional output at the Clipper and Gom ez projects in 20 12, Entrada in 20 13 and Cheviot a year later . . . ."10 1 There is no reference whatsoever to MC 941 # 4 or the previously announced production rate of 31,0 0 0 Boe per day. Thus, Reese's Septem ber 29, 20 11 statem ents did not reinforce, explicitly or im plicitly, the com pany's August 24, 20 11 production report. Instead, Reese's Septem ber 29, 20 11 statem ents appear to be entirely forward-looking, referring only to wells that ATP anticipated bringing to production during the next three years. Accordingly, discussing MC 941 # 4's perform ance was sim ply not necessary in order to m ake Reese's Septem ber 29, 20 11 interview not m isleading. 10 0 Id. at 26. 10 1 Id. 49 Moreover, even if the Septem ber 12 and 29, 20 11 statem ents could be construed as "im plicit reinforcem ents" of the August 24, 20 11 production report, the Court finds that plaintiffs have failed to plead sufficient facts to create an inference that defendants knowingly or recklessly m isled investors. Before turning to the allegations regarding confidential witnesses, the Court briefly addresses plaintiffs' failure to address the Court's concerns regarding the absence of defendants' m otive to com m it securities fraud. The Fifth Circuit has held that "appropriate allegations of m otive and opportunity m ay m eaningfully enhance the strength of the inference of scienter." Southland, 365 F.3d at 368; see also Nathenson, 267 F.3d at 411 (noting that allegations of m otive and opportunity provide "an analytical device for assessing the logical strength of the inferences arising from particularized facts pleaded by a plaintiff to establish the necessary m ental state"). The Second Am ended Complaint is devoid of any allegations regarding defendants' motive to mislead investors. Indeed, defendants have previously represented that they lost approxim ately $ 10 0 m illion as a result of ATP's bankruptcy. Moreover, the Second Am ended Com plaint acknowledges that the inform ation Reese allegedly om itted on Septem ber 12 and Septem ber 29, 20 11 was fully disclosed in ATP's Third Quarter results on Novem ber 8, 20 11.10 2 Nothing in plaintiffs' 10 2 Id. at 28. 50 Second Am ended Com plaint suggests that defendants had anything to gain by misleading investors about the production numbers in September, only to turn around and discuss them candidly in early Novem ber. Id. at 369 (noting that a lack of suspicious sales "underm ines an inference of scienter"). Although failure to plead m otive and intent is not dispositive of a securities fraud claim , a plaintiff m ust nevertheless plead "strong circum stantial evidence" of defendants' "conscious m isbehavior or recklessness." Shields v. City trust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). In other words, "[w]here . . . the plaintiff has not alleged a clear m otive for the alleged m isstatem ents or om issions, the strength of its circum stantial evidence of scienter m ust be correspondingly greater." R2 Invs. LCS v. Phillips, 40 1 F.3d 638, 644 (5th Cir. 20 0 5). Plaintiffs fail to carry this burden. Indeed, plaintiffs attem pt to m ake their case with confidential witnesses's statem ents that the witnesses were "confident" that defendants "had knowledge of the lower production levels at the Telem ark well," that defendants received weekly or m onthly em ail updates regarding well production rates, and that "discussions and decisions about financing occurred entirely at the executive level."10 3 Because these allegations derive from confidential witnesses, they are of lim ited value in balancing the com peting 10 3 Id. at 30 . 51 inferences of scienter. See Ind. Elec. W orkers', 537 F.3d at 535 (holding that allegations deriving from confidential sources deserve less weight in the court's scienter analysis because "anonym ity frustrates" the court's ability to "weight the strength of plaintiffs' favored inference in com parison to other possible inferences") (internal citation om itted); Higginbotham v. Baxter Intern., Inc., 495 F.3d 753, 757 (7th Cir. 20 0 7) (holding that the district court m ust "discount allegations that the com plaint attributes to five confidential witnesses," and that "[u]sually the discount will be steep"). Plaintiffs also attem pt to bolster these allegations by pointing to defendants' positions in the company and their alleged attendance at weekly production m eetings. Neither of these allegations give rise to a strong inference of scienter. See Fin. Acquisition Partners LP v. Blackw ell, 440 F.3d 278, 287 (5th Cir. 20 0 6) ("Corporate officers are not liable for acts solely because they are officers, even where their day-to-day involvement in the corporation is pleaded.") (em phasis in original); Ind. Elec. W orkers', 537 F.3d at 535 (defendant's "hands-on m anagem ent style . . . coupled with his alleged boast that 'there is nothing in this com pany that I don't know,' are insufficient to support a strong inference of scienter," because "[s]uch statem ents lack specificity about what [defendant] m ay have known, or for that m atter, was reckless not to have known"). Thus, in light of ATP's disclosure and discussion of the Telem ark 52 Hub's production decline in Novem ber 20 11, the Court finds that plaintiffs fail to plead sufficient facts giving rise to a strong inference that defendants knowingly or recklessly m isled investors regarding Telem ark's production in Septem ber 20 11. 3. Defendants' Statem ents Regarding ATP's Liquidity and Ability to Com plete the Clipper Project At various points in the class period, defendants assured investors that ATP's financial position was secure and that its liquidity was "strong" and "sound." On m ultiple occasions, defendants predicted that ATP would be able to continue paying its debts for at least 12 m onths, and they repeatedly rejected any suggestion of bankruptcy. Plaintiffs allege that the following statem ents regarding ATP's financial state were false or m isleading: • J anuary 5, 20 11 Pritchard CapitalPartners Energize Conference, Reese speaking: ATP "[h]as a strong liquidity position" and has "strong liquidity to do everything that we've been talking about."10 4 • March 15, 20 11 Year End 20 10 Conference Call, Bulm ahn speaking: "Through creative, albeit expensive financing, we are now liquid and solvent. . . . Not only have we been surviving during this period of tim e, we have expanded a foundational base to accelerate ATP's strategy into the future."10 5 • March 15, 20 11 Year End 20 10 Confe rence Call, Reese speaking: "[W]e feel very com fortable with our liquidity position for the entire 20 11 as we 10 4 Id. at 66. 10 5 Id. at 68. 53 go into 20 12. That's either with or without perm its from a liquidity standpoint."10 6 • March 16, 20 11 Form 10 -K for 20 10 , signed by Bulm a hn, Reese and Godwin and certified by Bulm ahn and Reese: "Should the perm itting process in the Gulf of Mexico continue to be delayed, we believe we can continue to m eet our existing obligations for at least the next twelve m onths; however, absent alternative funding sources, our ability to do so is dependent on m aintaining existing production levels from our currently producing wells and m aintaining com m odity prices and operating costs near current levels. . . ."10 7 • April 13, 20 11 IPAA Oil & Gas In vestm ent Sym posium , Bulm ahn speaking: "ATP's liquidity is strong . . . Going forward we will be able to m anage leverage and liquidity at levels satisfactory to the m arket . . . . [W]e are presently paying down our debt with NPI paym ents and we have additional strong liquidity."10 8 • May 10 , 20 11 First Quarter 20 11 Form 10 -Q, signed by Reese and certified by Reese and Bulm ahn: "[W]e believe we can continue to m eet our existing obligations for at least the next twelve m onths based on m aintaining existing production levels from our currently producing wells with com m odity prices and operating costs near current level."10 9 • J uly 19, 20 11 Global Hunter Securities Energy Conf rence, Reese e speaking: "We have also done a couple of overrides. The question would be – - we didn't think you needed liquidity; wh[y] did you do that? . . . This literally does nothing m ore than im prove our liquidity. It protects us in the event there are any issues in the Gulf of Mexico this year. And in the longer term , as we begin to see m ore and m ore perm itting becom e 10 6 Id. 10 7 Id. at 69. 10 8 Id. at 71. 10 9 Id. at 72. 54 available, that gives us the ability to m ove forward with other operations."110 • August 9, 20 11 Second Quarter 20 11 Form 10 -Q, sign by Reese and ed certified by Bulm ahn and Reese: "We believe we can continue to m eet our existing obligations for at least the next twelve m onths based on forecasted production levels and the continuation of com m odity sales prices and operating costs near current levels."111 • August 9, 20 11 Earnings Conferenc Call, Bulm ahn speaking: "ATP's e liquidity rem ains strong as we produce our reserves, we are reducing our debt with paym ents to NPI and Override interest holders. . . . I believe we are sound and healthy, and we certainly are not flirting with bankruptcy at all. That I think we certainly are on sound footing and m oving forward well and m aking things happen globally as well."112 • Septem ber 12, 20 11 RRGI Conference, Reese speaking "CapEx will be : within the cash flow of the Com pany. . . . [W]e have got a solid capital position, our debt is m arried with our production program , is m arried with our developm ent program ."113 • Septem ber 29, 20 11 Bloom berg Articl , Reese speaking: "I can't fight e rum ors or reports, all I can do is continue to deliver on the prom ises we've m ade. Our expectation is that everything is going to be fine."114 • Novem ber 9, 20 11 Third Quarter 20 Form 10 -Q, signed by Reese and 11 certified by Bulm ahn and Reese: "We expect these new wells will generate sufficient cash flows to fund subsequent developm ent projects and service our long-term debt and other obligations. We believe we can continue to m eet our existing obligations for at least the next twelve 110 Id. at 74. 111 Id. at 75. 112 Id. at 77. 113 Id. at 82. 114 Id. at 84. 55 m onths based on forecasted production levels and the continuation of com m odity sales prices and operating costs near current levels."115 • Novem ber 9, 20 11 Earnings Conferenc Call, Reese speaking: "I think as e we go into 20 12 we m ay have a little m ore cushion of being able to m aintain such a large cash balance."116 • Novem ber 10 , 20 11 W all Street Journal article, quoting Reese: "[S]uggestions that the com pany is sinking into bankruptcy are 'punitive.' Right now we believe we have com plete control of our destiny and we have no plans to m iss any interest paym ents."117 • J anuary 4, 20 12 Pritchard Capita Partner LLC Energize Conference, l Reese speaking: "But as we look at it today, when you look at liquidity, and this would be first-quarter liquidity, we're looking close to $ 10 0 m illion of additional capacity. . . . And a strong capital position in the fact that m ost of our 20 12 projects are com pletely discretionary. We've got m any levers to pull to either bring in cash or to reduce CapEx. . . .[B]ut what you see is that our entire debt is com pletely covered by our proved reserves."118 • March 15, 20 12 Year-End Form 10 -K for 20 11, signedby Bulm ahn, Reese and Godwin and certified by Bulm ahn and Reese: "We believe we can continue to fund our projected capital expenditures and our existing obligations, including our long-term debt and other long-term obligations, for at least the next twelve m onths."119 • March 16, 20 12 Earnings Conference Call, Bulmahn a Reese speaking: nd 120 "And we continue to expand liquidity. . . ." 115 Id. at 88. 116 Id. at 90 . 117 Id. at 91. 118 Id. at 94. 119 Id. at 10 1. 120 Id. at 10 2-10 3. 56 • April 17, 20 12 IPAA Oil & Gas Inve ent Sym posium , Reese speaking: stm "Growing production and cash flow. We will continue to do that. In doing so, we will continue to pay down som e of the overrides and the net profits interest that we have. . . . Liquidity is sound. I've heard all of the questions and com m ents about the liquidity. We ended first quarter with over $ 20 0 m illion in cash. We have no near-term m aturities or m aintenance financial covenants. They do not begin--m aturity doesn't start until 20 15."121 • May 10 , 20 12 Form 10 -Q for First Quarter 20 12, sig ned by Reese and certified by Bulm ahn and Reese: "[W]e believe we can continue to fund our projected capital expenditures and our existing obligations, including our long-term debt and other obligations, for at least the next twelve m onths."122 Plaintiffs also allege that a num ber of statem ents were false or m isleading because they either projected that the Clipper pipeline would be com plete in the third quarter of 20 12 or touted Clipper's plentiful reserves. Plaintiffs allege that these statem ents were false or m isleading because "ATP . . . lacked the liquidity and cash flow to com plete the pipeline and com m ence production from the Clipper wells."123 More specifically, plaintiffs identify the following allegedly false or m isleading statem ents with respect to the Clipper pipeline: • August 17, 20 11 EnerCom Inc. Oil and Gas Conferenc Bulm ahn e, speaking: "Clipper, you m ay have seen an announcem ent last week, and 121 Id. at 10 4. 122 Id. at 112. 123 Id. at 22. 57 we will go into that a little bit m ore, with follow-ons from Entrada and Green Canyon 37 as we m ove into future years. Basically what we've done is tim ed these assets to m eet our cash-flow--to work within our cash flows and be able to develop them ."124 • Septem ber 12, 20 11 RRGI Conference, Reese speaking "The nine and : ten well, the two wells at Clipper, I think those are pretty decent wells that we will be doing because those will already be com pleted, its just pipeline and a couple other opportunities that we would like - look at."125 • Novem ber 8, 20 11 Press Release for Third Quarter 2 11 Financial 0 Results, Bulm ahn and Reese listed as contact persons: confirm ed reserves at GC 30 0 # 4 and announced flow test results for GC 30 0 # 2 ST # 1 before indicating that "[t]he pipeline lay barge for the Clipper wells is contracted for third quarter 20 12 and will tie in both the GC 30 0 # 4 and # 2 wells to the Murphy Oil operated Front Runner production facility."126 • Novem ber 9, 20 11 Form 10 -Q for Third Quarter 20 11,signed by Reese and certified by Bulm ahn and Reese: "We have also drilled two wells at Clipper--one has been com pleted, and the second is scheduled to be com pleted by the end of 20 11– -with pipeline construction and first production expected in the second half of 20 12."127 • November 9, 20 11 Earnings Conferenc Call, Tate speaking: "The answer e on Clipper is the lay barge is contracted for late in J uly and we have no reason to believe that it won't stay on schedule. It actually could be earlier than that, but that's the schedule that we were working towards. It will take 30 days to 60 days to actually get the pipeline laid and the facilities hooked up. So I would say late third quarter is not an unreasonable tim e for startup at Clipper. Al [Reese] can talk m ore about the potential financing of the pipeline. . . . [Reese speaking:] I think if 124 Id. at 78. 125 Id. at 79. 126 Id. at 85. 127 Id. at 88. 58 you look back in our last several quarters we continue to operate at better than $ 10 0 m illion in cash. As we have m oved through this period of the m oratorium now that the m oratorium is behind us, we have wanted to m aintain as m uch cash as we can to be able to get the next well on at Telem ark [and] to get the Clipper projects done. I think as we go into 20 12 we m ay have a little m ore cushion of being able to m aintain such a large cash balance."128 • J anuary 1, 20 12 Pritchard Capital Partner LLC Ener ize Conference, g Reese speaking: "Between now and 20 15, we expect to have Telem ark in full production, which will be [20 ]12, Clipper in full production which will be [20 ]12, Entrada at full production, which will be 20 13 or 20 14, and then Cheviot at full production beginning som etim e in 20 14, 20 15. . . . Clipper production will com m ence later this year."129 • February 27, 20 12 J P Morgan High Yield & Leveraged Finance Conference, Reese speaking: "[ATP] [p]roduced 24.6 Mboe/ d in 20 11 and expect[s] significant uplift in production in 20 12 with key new wells at Telem ark and Clipper."130 • March 15, 20 12 Year End 20 11 Earni gs Press Release, listing Bulm ahn n and Reese as contacts: "Capital spending for 20 12 includes ongoing expenditures related to ATP's Telem ark Hub described above and the com pletion of the Clipper pipeline targeted for com pletion in late third quarter or early fourth quarter 20 12. Once installed, this pipeline will connect the two Clipper wells to a host platform . . . . ATP expects to fund these projects through cash flow and additional sources of liquidity already announced or planned . . . ."131 • 20 11 Form 10 -K, filed March 15, 20 12, signed by Bu ahn, Reese and lm Godwin and certified by Bulm ahn and Reese: "Later in 20 12, we expect to com plete a pipeline that will bring to production the two wells at our 128 Id. at 89-90 . 129 Id. at 92. 130 Id. at 96. 131 Id. at 97. 59 Clipper project. These two wells were com pleted and tested during 20 11 . . . . We expect with these two new wells and workovers we will be perform ing on existing wells in the first quarter and the two new Clipper wells expected to be placed on production later in the year, we will generate higher operating cash flows in 20 12 than in 20 11."132 • April 17, 20 12 IPAA Oil & Gas Sym p osium , Reese speaking: "And the initial wells at Clipper, these have som e of the highest production rates of any wells we've ever had in the Com pany. And these have been tested again, 16,0 0 0 barrels per day, 62% oil."133 • May 9, 20 12 Press Release for Fi st Quarter 20 12, Bulm ahn and Reese r listed as contacts: "ATP's two wells at Clipper (Green Canyon 30 0 ) are on schedule to begin production in late third quarter or early fourth quarter 20 12. Both wells were drilled and com pleted in 20 11, and ATP has begun preparatory work for the installation of the Clipper pipeline during third quarter 20 12."134 • May 10 , 20 12 Form 10 -Q, signed byReese and certified by Bulm ahn and Reese: "[W]e forecast overall production and operating cash flow growth in 20 12 due to new production from our Clipper property and from projected increases at our Telem ark Hub."135 • May 10 , 20 12 Earnings Conferenc Call, Reese speaking: "[W]e were e very successful in putting together an override forego, excuse m e, for Clipper, $ 10 0 m illion item that is pre-funded and we'll basically pay for the pipeline installation that we're going to have there . . . . [T]he two deepwater wells at Clipper, which are scheduled to begin production in the third quarter, I think those wells will be m aterial to the Com pany's interest."136 132 Id. at 10 1. 133 Id. at 10 3. 134 Id. at 111. 135 Id. 136 Id. 60 In sum , plaintiffs allege that defendants falsely stated that ATP's liquidity was sound, that they believed ATP could continue to m eets its obligations for the next twelve m onths, and that ATP was not "flirting with bankruptcy" when defendants knew, or were reckless in not knowing, that ATP was in a "liquidity crisis" and did not have the liquidity to survive the m oratoria. Sim ilarly, plaintiffs allege that defendants falsely stated that the Clipper wells would be brought to production in the third or fourth quarter of 20 12 when defendants knew, or recklessly did not know, that ATP did not have the liquidity to com plete the Clipper pipeline. Plaintiffs allege that defendants knew, or recklessly did not know, that ATP was "in the zone of insolvency" or was "insolvent or practically insolvent"137 because: (1) Rodney Tow's Bankruptcy Trustee Com plaint, filed August 15, 20 14, alleges that "[s]hortly after the oil spill, as early as May 20 10 , ATP began to have problem s with liquidity . . . and entered the zone of insolvency, which the Directors and Officers knew;"138 (2) several confidential witnesses opine that "ATP had continual liquidity problem s," that ATP renegotiated the term s of its credit service agreem ents to preserve funds,139 and that the "Com pany was overleveraged and was not financially solid;"140 137 R. Doc. 234 at 21. 138 R. Doc. 214 at 38. 139 Id. 140 Id. at 22. 61 (3) according to yet another confidential witness, ATP delayed m aintenance work and negotiated delayed paym ents to vendors to preserve cash; 141 (4) ATP sold ORRIs and NPIs to vendors which substantially ham pered the com pany's ability to generate cash flow; 142 (5) that, "by May 20 12," defendants decided to withhold ORRI and NPI paym ents due third parties in order to preserve cash; 143 (6) ATP's assets turned out to be insufficient to cover its liabilities and, on J une 26, 20 14, ATP's Chapter 11 bankruptcy petition was converted to Chapter 7; 144 and (7) the J udge presiding over the Bankruptcy proceedings stated on J une 26, 20 13 that ATP "filed for bankruptcy far too late."145 As an initial m atter, the projections relating to the Clipper pipeline and defendants' statem ents that "we expect to continue to m eet our obligations for the next twelve m onths" are forward-looking statem ents. As such, each statem ent contains three im plicit assertions of fact that m ay or m ay not be true at the tim e the statem ent is m ade. These include (1) that the speaker genuinely believes the statem ent is accurate; (2) that there is a reasonable basis for that belief; and (3) that the speaker is unaware of any undisclosed 141 Id. at 24. 142 Id. 143 Id. at 50 -51. 144 Id. at 55. 145 Id. 62 facts that would tend to seriously underm ine the accuracy of the statem ent. In re Anadarko Petroleum Corp. Class Action Litig., 957 F. Supp. 2d at 831 (quoting Rubinstein v. Collins, 20 F.3d 160 , 170 (5th Cir. 1994)). At the sam e tim e, however, the forward looking nature of defendants' statem ents renders them subject to the PSLRA's safe harbor provision. Southland, 365 F.3d at 371. The PSLRA's safe harbor protects defendants from liability for certain projections, statem ents of future econom ic perform ance, or statem ents of plans or objectives for future operations. Id. Under the first prong of the statutory safe harbor, there is no liability if, and to the extent that, the statem ent is: (i) "identified as a forward-looking statem ent, and is accom panied by m eaningful cautionary statem ents identifying im portant factors that could cause actual results to differ m aterially from those in the forward-looking statem ent,"146 or (ii) im m aterial. 15 U.S.C. § 78u-5(c)(1)(A). A cautionary statem ent is "m eaningful" if it provides "substantive com panyspecific warnings based on a realistic description of the risks applicable to the 146 Oral statem ents can qualify for the safe harbor if (1) the statem ent is accom panied by a cautionary statem ent that the "particular" oral statem ent is forward-looking and that actual results could differ m aterially; (2) the statem ent is accom panied by an oral statem ent that additional inform ation that could cause actual results to differ m aterially is contained in a readily available written docum ent; (3) the statem ent identifies the docum ent or portion thereof containing the additional inform ation, and (5) the identified docum ent itself contains appropriate cautionary language. 15 U.S.C. § 78u-5(c)(2). 63 particular circum stances, not m erely a boilerplate litany of generally applicable risk factors." Southland, 365 F.3d at 372. "Although a defendant is under no duty to disclose every fact or assum ption underlying a prediction, he m ust disclose m aterial, firm -specific adverse facts that affect the validity or plausibility of that prediction." Lorm and, 565 F.3d at 249. Under the second prong of the PSLRA, a defendant avoids liability if the plaintiff fails to prove that the statem ent was m ade with actual knowledge that the statem ent was false or m isleading. 15 U.S.C. § 78u-(c)(1)(B). Because the second prong places the burden of proof on the plaintiff, the PSLRA effectively requires proof of actual knowledge--not just recklessness--in the case of every forward-looking statem ent. See In re Anadarko, 957 F. Supp. 2d at 831 n.13 ("If the statem ents are covered by the statutory safe harbor provision, Plaintiffs would be required to show intent to deceive, and not m erely recklessness.") (citing N athenson, 267 F.3d at 40 9). Accordingly, for each predictive statem ent, plaintiffs m ust plead specific facts giving rise to a strong inference that the defendant responsible for the statem ent actually knew that at least one of the three im plicit assertions contained in the prediction was false. 64 In addition, several of the statem ents plaintiffs challenge contain statem ents of historical, readily verifiable fact.147 Plaintiffs, however, do not allege that any of defendants' factual statem ents are false. The Second Am ended Com plaint is devoid of any allegations that defendants "cooked the books" or otherwise m isrepresented any of ATP's financial inform ation. Instead, plaintiffs' m ain challenge is to defendants' optim istic assessm ent or interpretation of ATP's financial data. Defendants' optim ism does not render them liable for securities fraud. See Rom bach v. Chang, 355 F.3d 164, 174 (2d Cir. 20 0 4) ("People in charge of an enterprise are not required to take a gloom y, fearful or defeatist view of the future; subject to what current data indicates, they can be expected to be confident about their stewardship and the prospects of the business that they m anage."). Indeed, ATP disclosed its financial data to the public in its Form 10 -K's and Form 10 -Q's, and plaintiffs do not challenge the accuracy of any of these financial disclosures. That plaintiffs do not challenge ATP's financial disclosures weighs against a finding 147 See R. Doc. 214 at 76 ("ATP's liquidity rem ains strong as we produce our reserves, we are reducing our debt with paym ents to NPI and Override interest holders. In fact, because of increased production and higher oil prices, ATP is paying back its debt at an accelerated pace and even had to recognize additional interest expense this quarter."); id. at 92 ("But what you see is that our entire debt is com pletely covered by our proved reserves. And sitting on top of that is the infrastructure, som e m ore proved reserves, as well as the probable reserves. Net debt and total obligations of $ 2.4 billion you'll see a chart in the back in the appendix that lays that out."). 65 of scienter. See Rosenzw eig, 332 F.3d at 868 ("Im portantly, plaintiffs do not allege that [defendant] falsely represented its capital structure, or its debts to Enron. . . . It is difficult to form a 'strong inference' of scienter from the alleged undercapitalization of a com pany where plaintiffs appear to concede that the com pany accurately disclosed its capital structure and financial obligations in its prospectus."); Gissin v. Endres, 739 F. Supp. 2d 488, 511-12 (S.D.N.Y. 20 10 ) (holding that defendant's statem ent that "the com pany continues to m aintain a strong balance sheet" is not actionable when defendant "was . . . sum m arizing [the com pany's] undisputed SEC disclosures"). Finally, m any of the statem ents regarding ATP's liquidity situation are statem ents of opinion. With respect to such statem ents, both parties cite principles articulated in the a recent Suprem e Court opinion, Om nicare, Inc. v. Laborers Dist. Counsel Indus. Pension Fund, 135 S. Ct. 1318 (20 15). There, the Suprem e Court held, in the context of a claim under Section 11 of the Securities Act of 1933 that a statem ent of opinion m ay be actionable in two lim ited circum stances: (1) as an untrue statem ent of m aterial fact, if the opinion is both objectively false and not genuinely believed by the defendant; or (2) as m isleading, if the defendant om its m aterial facts underlying the basis for the opinion and "those facts conflict with what a reasonable investor would take from the statem ent itself." Id. at 1329. It is not clear, however, that the 66 Supreme Court's analysis in Om nicare extends to securities fraud claims under Section 10 (b) of the Securities Act of 1934. Section 11 of the 1933 Act and Section 10 (b) of the 1934 differ in significant ways. For instance, while a Section 11 plaintiff need not plead scienter, reliance, or fraud, Herm an & MacLean v. Huddleston, 459 U.S. 375, 381-82 (1983), scienter is an essential elem ent of a Section 10 (b) cause of action. Nathenson v. Zonagen, Inc., 267 F.3d 40 0 , 40 6-0 7 (5th Cir. 20 0 1) (citing Tuchm an v. DSC Com m c'ns, 14 F.3d 10 61, 10 67 (5th Cir. 1994)). That Om nicare concerned a strict liability statute suggests that the Suprem e Court's reasoning--which contem plates liability for statem ents of opinions that are genuinely held but m isleading to a reasonable investor--does not directly apply to the statute at issue here.148 In addition, as indicated in this opinion, m any of the defendants' statem ents were forward148 Nonetheless, the Court notes that since Om nicare was decided, a num ber of courts have applied Om nicare to securities fraud claim s--often without analyzing the differences in the statutory schem es. See e.g., Nakkhum pum v. Tay lor, 782 F.3d 1142, 1159 (10 th Cir. 20 15) (citing Om nicare in a securities fraud case for the proposition that "an opinion is considered false if the speaker does not actually or reasonably hold that opinion"); Special Situations Fund III QP, L.P. v. Deloitte Touche Tohm atsu CPA, No. 13-CV-10 94, 20 15 WL 1474984, at *14-15 (S.D.N.Y. March 31, 20 15 (applying Om nicare to claim s under Section 10 (b) and Section 18 of the Exchange Act). Other courts have cited Om nicare as instructive or as persuasive authority. See e.g., In re Merck & Co., Inc. Sec., Derivatives & "ERISA" Litig., No. CIV.A 0 5-1151 SRC, 20 15 WL 2250 472, at *11 n.7 (D.N.J . May 13, 20 15) (noting that while "Om nicare, actually, is not directly applicable" to plaintiff's Section 10 (b) claim s, "Om nicare's analysis of its discussion of m isleading opinions is, to som e extent, instructive on the viability of [those] claim s as to the opinion-based" statem ents). 67 looking in nature. Because the opinion statem ents at issue in Om nicare centered on the lawfulness of the issuer's existing contracts, 135 S. Ct. at 1323, the Suprem e Court's decisions did not address or m odify the PLSRA's safe harbor for forward-looking statem ents. Accordingly , the Court will not apply the Om nicare test to defendants' forward-looking statem ents of opinion. With respect to such statem ents, plaintiffs must meet the pleading requirements for forward-looking statements under the PLSRA, as discussed above. In the case of non-forward-looking opinion statem ents, the Court will use Om nicare as guidance and will consider the relevant principles articulated in the Suprem e Court's decision. See In re Merck & Co., Inc. Sec., Derivatives & "ERISA" Litig., No. CIV.A 0 5-1151 SRC, 20 15 WL 2250 472, at *11 n.7 (D.N.J . May 13, 20 15) (noting that while "Om nicare, actually, is not directly applicable" to plaintiff's Section 10 (b) claim s, "Om nicare's analysis of its discussion of m isleading opinions is, to som e extent, instructive on the viability of [those] claim s as to the opinionbased" statem ents). With these principles in m ind, the Court turns to the alleged reasons defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the m oratoria and com plete the Clipper pipeline project. First, plaintiffs cite Rodney Tow's August 14, 20 14 Bankruptcy Trustee complaint for 68 the proposition that ATP entered the "zone of insolvency" as early as May 20 10 , and that the defendants knew this.149 Plaintiffs do not copy any factual allegations from the com plaint, but nevertheless argue that the Court should attach substantial weight to Rodney Tow's allegations because he "had access to all of the Com pany's books and records," which "evidences that [defendants] either knew, or were severely reckless in not knowing, that ATP was in a liquidity crisis in May 20 10 and could not survive the m oratoria."150 The allegations in Rodney Tow's com plaint provide no support for an inference that defendants were aware that ATP was in the "zone of insolvency" during the class period. Untested allegations filed in an adversarial proceeding m ore than two years after ATP filed for bankruptcy, and m ore than three-and-a-half years after the beginning of the class period, provide no insight into what the defendants knew, or recklessly did not know, at any given point in tim e during the class period. Southland, 365 F.3d at 383 ("[B]ecause fraud cannot be proved by hindsight, subsequent lawsuits are unpersuasive of scienter, as they do not show what any particular individual knew . . . at the tim e. . . ."). Moreover, the portions that plaintiffs lifted from Rodney Tow's com plaint fail to provide any factual support for his conclusion that 149 R. Doc. 214 at 38. 150 Id. 69 defendants knew ATP was in the zone of insolvency as early as May 20 10 . If Rodney Tow's access to ATP's books and records provided a factual basis for his allegations, why didn't plaintiffs copy the factual allegations as well? Absent any factual allegations to support his claim that defendants knew that ATP was in the "zone of insolvency" as early as May 20 10 , Rodney Tow's August 14, 20 14 Bankruptcy Trustee com plaint fails to provide an inference that defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the m oratoria or com plete the Clipper pipeline. Next, plaintiffs allege that defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the m oratoria and com plete the Clipper pipeline project because several confidential witnesses who worked for ATP believed that ATP was in a "liquidity crisis" during the class period. In essence, plaintiffs allege that defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the m oratoria and com plete the Clipper project because other ATP em ployees believed that ATP was in financial trouble.151 This is insufficient. Om nicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318, 1332 (20 15) ("As we have explained, an investor cannot state a claim by alleging only that the opinion was wrong."). 151 See, e.g., R. Doc. 214 at 22 ("CW3 thought the Com pany was overleveraged and was not financially solid. . . . CW3 believed that ATP was having serious liquidity problem s."); id. at 31 ("CW6 com pared ATP's strategy of accruing so m uch debt to gam bling in a Las Vegas casino."). 70 Plaintiffs and the confidential witnesses's bald assertion that "liquidity was not strong" does not dem onstrate that ATP was "in the zone of insolvency", nor do they speak to the state of m ind of any particular defendant. That som e of ATP's em ployees disagreed, perhaps even reasonably so, with defendants regarding ATP's ability to continue operating and com plete the Clipper pipeline does not give rise to an in ference that defendants knew, or were reckless in not knowing, that ATP would eventually fail. See Shurkin v. Golden State Vintners Inc., 471 F. Supp. 2d 998, 10 17 (N.D. Cal. 20 0 6) ("Furtherm ore, as for the C[onfidential] W[intness] accounts, at best Plaintiff m akes allegations that several GSV em ployees disagreed with the business decisions and financial reports of GSV upper m anagem ent. [These allegations] fail to establish that the statem ents in the Decem ber 23 Proxy Statem ent were false or that the officers who provided [the statem ents] . . . knew it to be false or were deliberately reckless in providing the inform ation."). Indeed, the Second Am ended Com plaint alleges that confidential witness # 1 attended m eetings where Bulm ahn "would state that ATP was tight on funds and in a bind, but that everything was okay."152 confidential witnesses Although plaintiffs allege that several disagreed with Bulm ahn's assurances, this disagreem ent does not give rise to an inference that defendants knew or 152 Id. at 48. 71 recklessly did not know that ATP lacked the liquidity to com plete the Clipper pipeline or survive the m oratoria. Instead, confidential witness # 1's account of Bulm ahn's assurances supports an inference that defendants rem ained optim istic about ATP's future notwithstanding the liquidity crunch caused by the m oratoria. See Shields, 25 F.3d at 1129 ("[M]isguided optim ism is not a cause of action, and does not support an inference of fraud."). Plaintiffs also allege that defendants knew or recklessly did not know that ATP lacked sufficient liquidity to finish the Clipper pipeline or survive the m oratoria because, throughout the class period, ATP delayed routine m aintenance projects and was "forced" to negotiate delayed paym ents with som e of its vendors. This allegation fails to give rise to an inference that defendants knew or recklessly did not know that ATP lacked sufficient liquidity for several reasons. First, defendants cannot be liable for failing to disclose ATP's efforts to delay paym ents because the com pany repeatedly disclosed that it was engaging in negotiations, and would continue to engage in negotiations, with vendors to delay paym ents.153 Second, rather than dem onstrating defendants' knowledge that ATP was destined to fail, ATP's 153 See, e.g., 20 10 Form 10 -K, R. Doc. 221-5 at 37 ("We have also negotiated with certain other vendors involved in the developm ent of the Telem ark Hub and Clipper to partially defer paym ents for a period of twelve m onths."); 20 12 First Quarter 10 -Q, R. Doc. 221-23 ("In certain cases, we will also continue to work with certain vendors to extend out the tim ing of certain paym ents to preserve cash."). 72 efforts to delay paym ent m ost naturally gives rise to an inference that defendants believed they could stave off bankruptcy and com plete the Clipper pipeline by finding ways to preserve cash. See Nakkhum pun v. Tay lor, Civ. A. No. 12-10 38, 20 13 WL 54460 81, at *10 (D. Colo. Sept. 30 , 20 13), aff'd in part and rev'd in part by Nakkhum pun v. Tay lor, 782 F.3d 1142 (10 th Cir. 20 15) (rather than demonstrating defendants' knowledge that their company was not "in a far better financial situation," m ore com pelling inference is that defendants viewed decisions to delay paying vendors, sell assets, and raise capital through equity offering to avoid bankruptcy as "contributing to an im proving financial situation"). If defendants knew that ATP was destined to fail, why bother negotiating with vendors to defer paym ent? Sim ilarly, if defendants knew that ATP would not have the liquidity to finish the Clipper pipeline, why delay routine maintenance to preserve cash? In sum, defendants fully disclosed that ATP was negotiating with vendors and m aking every effort to preserve cash, and such disclosures weigh against an inference of scienter. Ow ens, 789 F.3d at 540 ("Even as to those alleged m isstatem ents that occurred after the 'red flags' were apparent, the red flags were disclosed to the public, which negates the inference that defendants acted with scienter."). Thus, the Court finds that ATP's efforts to preserve cash weigh against, rather than for, an inference of scienter. 73 Plaintiffs' allegation that defendants knew or recklessly disregarded ATP's "liquidity crisis" because ATP was "forced" to sell ORRIs and NPIs to vendors fails to create an inference of scienter for the sam e reason. First, defendants fully disclosed the ATP was engaging in such transactions in an effort to increase liquidity.154 Defendants also disclosed that these transactions placed significant burdens on ATP's future cash flows.155 Moreover, that ATP engaged in such transactions to increase liquidity and preserve cash weighs against an inference that defendants knew that ATP lacked sufficient liquidity to survive the moratoria or fund the Clipper pipeline. Indeed, ATP explicitly stated that it entered into these transactions for the express purpose of preserving cash in order to fund the Clipper pipeline and 154 See, e.g., Year 20 10 Form 10 -K, R. Doc. 221-5 at 37-38 ("We have conveyed to certain suppliers net profit interests in our Telem ark Hub, Gom ez Hub, and Clipper oil and gas properties in exchange for developm ent services. . . . These types of financial arrangem ents preserve our current cash and allow us to pay from the proceeds of future production."); 20 11 First Quarter Form 10 -Q, R. Doc. 221-7 at 25 ("We have been financing a significant portion of our developm ent program with transactions entered into with our suppliers and financial institutions that . . . will be repaid based on production through or from the revenues or net profits generated from future production."). 155 Id. at 25 ("While these financing transactions have enabled us to continue the developm ent of our properties and preserve cash, they will significantly burden the future net cash flows from our production until these obligations are satisfied."). 74 other capital expenditures.156 Once again, if defendants knew that ATP lacked the liquidity to survive the m oratoria or finish the Clipper pipeline, why sell NPIs and ORRIs in an effort to bolster the com pany's liquidity? Thus, the Court finds that ATP's sale of ORRIs and NPIs weighs against an inference that defendants knew, or recklessly did not know, that ATP lacked the liquidity to survive the m oratoria or finish the Clipper pipeline. See Ow ens, 789 F.3d at 539 ("The desire to raise capital in the norm al course of business does not support a strong inference of scienter because virtually all corporate insiders share this goal."). Next, plaintiffs allege that "by May 20 12" defendants decided to withhold ORRI and NPI paym ents due third parties in order to preserve cash. Plaintiffs base this claim on Reese's testim ony in the bankruptcy proceedings: Q: Turning to the NPI/ ORRI issue, were a lot of these - weren't som e of these NPIs given to vendors? Reese: The - in 20 0 9, I believe, yes. There were som e given to vendors. That would have been the Diam ond Override. I think we refer to it as the Bristow Override, and Airlog and those. Those are the only ones that were true vendors. 156 Form 10 -Q for First Quarter 20 12, R. Doc. 221-23 at 34 ("As discussed, we have conveyed to certain vendors and investors NPIs and Overrides in our Telem ark Hub, Gom ez Hub and Clipper oil and gas properties in exchange for developm ent services, equipm ent and cash. . . . These arrangem ents allow us to m atch our developm ent cost cash flows with those from production. During the first quarter of 20 12, we sold for an aggregate $ 185.0 m illion certain Overrides in our Gom ez Hub and Clipper property, which is currently being developed."). 75 * * * Q: Wasn't it true you were default well in advance of this bankruptcy in som e of these NPIs and overrides? Reese: Yes. We had failed to m ake som e paym ents. * * * Q: And I believe that the May production proceeds attributable to our net revenue interests were not distributed to us; is that correct? Reese: I believe that is correct. Q: That's the am ount that should have been distributed on J uly 31 [20 12]? Reese: That's what I was trying to think - Yes, that would be correct. * * * Q: Co-m ingled. And then it is ultim ately distributed to the parties who are entitled to receive it? Reese: Yes, it is. Q: Except that on J uly 31st it did not? Reese: Correct.157 Reese further testified that he, Bulm ahn, Tate, and Godwin would have m ade the decision to withhold ORRI and NPI paym ents.158 Plaintiffs thus allege that "ATP's financial position had becom e so dire during the Class Period that by 157 R. Doc. 214 at 49-50 . 158 Id. 76 May 20 12, Defendants Bulm ahn, Reese, Tate and Godwin m ade the desperate knowing decision to unlawfully retain ORRI and NPI owed to third parties. . . ."159 Plaintiffs' allegation that defendants had already decided to withhold ORRI paym ent "by May 20 12" is not supported by the m aterial it cites, as plaintiffs point to no ORRI on which paym ent was expected that had gone unpaid by May 10 , 20 12.160 Although Reese adm its that defendants did withhold ORRI paym ents, the testim ony plaintiffs cite indicates that defendants did not withhold any ORRI paym ents until J uly 31, 20 12, m ore than two m onths after the last statem ents plaintiffs allege to be false or m isleading. That defendants elected to withhold an ORRI paym ent in J uly does not dem onstrate that defendants knew in May that ATP would not have the liquidity to survive the m oratoria or com plete the Clipper pipeline. See Plotkin, 40 7 F.3d at 698 ("We subscribe to the rule that a Plaintiff cannot charge Defendants with intentionally m isleading their investors about facts Defendants m ay have becom e aware of after m aking allegedly m isleading 159 Id. at 51. 160 May 10 , 20 12 is the date ATP released its 20 12 First Quarter results. Defendants' statem ents in the May 10 , 20 12 Form 10 -Q and in a May 10 , 20 12 earnings conference call are the last statem ents challenged by plaintiffs regarding ATP's liquidity or ability to com plete the Clipper pipeline. 77 statements to the public."); Lorm and, 565 F.3d at 254 (defining im perm issible fraud-by-hindsight pleading as an attem pt to plead "earlier knowledge based only on the situation that later cam e to pass") (quoting Rodriguez-Ortiz v. Margo Caribe, Inc., 490 F.3d 92, 95 (1st Cir. 20 0 7)). This is especially true as plaintiffs do not dispute the accuracy of Reese's bankruptcy testim ony that "ATP's cash position as of March 31, 20 12 was about $ 224 m illion, and at J une 30 , 20 12, it was about $ 25 to $ 30 m illion."161 Nor do plaintiffs dispute the accuracy of Bulm ahn's statem ent in a May 10 , 20 12 earnings conference call that "we have not m issed an interest paym ent on our debt [and] [w]e have m ade every paym ent, including the m ost recent $ 90 m illion paym ent on May 1."162 Thus, the Court finds that the m ost natural and com pelling inference from Reese's bankruptcy testim ony regarding the withheld ORRI paym ents is that defendants decided to withhold the paym ents som etim e in J uly after ATP's cash position had dwindled to $ 25 or $ 30 m illion. Plaintiffs have not alleged any contem poraneous facts that would support a com peting inference. Because "fraud cannot be proved by hindsight, Southland, 365 F.3d at 383, the Court finds that defendants' alleged decision to withhold ORRI paym ents does not support an inference that defendan ts knew, or recklessly did not know, 161 Id. at 37. 162 Id. at 112. 78 that ATP lacked the liquidity to survive the m oratoria or com plete the Clipper project at the tim e they m ade the challenged statem ents. See Keeney v. Larkin, 30 6 F. Supp. 2d 522, 534 (D. Md. 20 0 3) ("Here, Keeney does not allege any facts to dem onstrate that Defendants knew they would not be able to m ake the October bond interest paym ent at the tim e of the May disclosure. Accordingly, these allegations are exam ples of 'fraud by hindsight' and do not m eet the pleading requirem ents of Rule 9(b)."). Finally, plaintiffs point to ATP's August 14, 20 12 bankruptcy and various developm ents in the bankruptcy proceeding as evidence that defendants m ust have known that ATP was doom ed to run out of m oney before it com pleted the Clipper pipeline. First, plaintiffs quote the bankruptcy judge's J une 23, 20 13 statem ent that "we had a debtor [ATP] that filed bankruptcy far too late."163 Second, plaintiffs allege that ATP had wholly encum bered the value of its assets and, after all of ATP's assets were sold, outstanding obligations totaled approxim ately $ 2 billion.164 Third, plaintiffs point to Reese's testim ony in the bankruptcy proceedings that indicated that only $ 20 m illion had been spent 163 Id. at 32. 164 Id. at 55. 79 toward the Clipper project and that Reese had known "for about a year" that the project would cost approxim ately $ 150 m illion.165 As an initial m atter, ATP's August 20 12 bankruptcy does not provide grounds for an inference that defendants knew that ATP lacked the liquidity to survive the m oratoria or finish the Clipper pipeline by the end of 20 12. Although ATP's August 20 12 bankruptcy dem onstrates that defendants were ultim ately wrong regarding ATP's ability to survive the m oratoria and finance the Clipper pipeline, it does not tend to show that defendants were aware of undisclosed facts that underm ined their statem ents at the tim e such statem ents were m ade. Shields, 25 F.3d at 1129 ("This technique is sufficient to allege that defendants were wrong; but m isguided optim ism is not a cause of action, and does not support an inference of fraud."). Plaintiffs cannot sim ply point to ATP's eventual dem ise and cry fraud because defendants failed to predict the com pany's collapse. See Novak v. Kasaks, 216 F.3d 30 0 , 30 9 (2d Cir. 20 0 0 ) ("Allegations that defendants should have anticipated future events and m ade certain disclosures earlier than they actually did do not suffice to m ake out a claim of securities fraud."); Rom bach, 355 F.3d at 176 (affirm ing district court's rejection of claim that defendant "faced a liquidity crisis" because "[p]laintiffs do not allege facts and circum stances that would 165 Id. at 36. 80 support an inference that defendants knew of specific facts that are contrary to their public statem ents"). Plaintiffs' reliance on Reese's and the bankruptcy judge's statem ents during the bankruptcy proceedings likewise fail to create an inference that, at the tim e defendants m ade the challenged statem ents, defendants were aware, or were recklessly unaware, of undisclosed facts that rendered the statem ents false or m isleading. See Hutchinson v. Perez, Civ. A. No. 10 73, 20 12 WL 5451258, at *5 (S.D.N.Y. Nov. 8, 20 12) ("While these [bankruptcy] declarations show that the com pany's financial position was increasingly precarious during the Class Period, they do not . . . show that Defendants had knowledge of or access to contradictory facts."). Plaintiffs attem pt to circum vent the prohibition on pleading fraud by hindsight by citing the Fifth Circuit's statem ent in Plotkin v. IP Axess, Inc. that "the fact that a business files for bankruptcy on 'Day Two,' m ay, under the right surrounding circum stances, provide grounds for inferring that the business was perform ing poorly on 'Day One.'" Id. at 698. In Plotkin, the Fifth Circuit held that even though the plaintiff relied on events that postdated the allegedly m isleading press releases, the events "are so tem porally connected that they shed light on the financial condition of the com panies at the tim e of the announcem ents and bolstered [plaintiff's] suspicion that, at the tim e AGPI and Lynxus entered into contracts with Ipaxess, those com panies 81 could not perform their obligations." Id. at 697-98. The Court went on to note that "[f]urther discovery m ay refute the inferences, but it is not unwarranted to infer that when a com pany's big deal collapses so fast, som ething was am iss at the outset." Id. Here, ATP filed for bankruptcy in August 20 12, and plaintiffs allege that the Com pany's bankruptcy dem onstrates that, contrary to defendants' representations, ATP was in the "zone of insolvency" as early as May 20 10 . Thus, "Day Two" is August 17, 20 12 and "Day One" is May 20 10 . ATP's bankruptcy and the alleged "zone of insolvency" are not "so tem porally connected" so as to warrant a departure from the general prohibition on pleading fraud by hindsight. More im portantly, the "right surrounding circum stances" are not present here such that ATP's bankruptcy on August 17, 20 12 m ight support an inference that ATP was in peril at all tim es during the Class Period. ATP's liquidity was fluid throughout the Class Period, and plaintiffs acknowledge that defendants repeatedly engaged in a variety of financing transactions throughout the Class Period to increase ATP's cash on hand. Indeed, the Second Am ended Com plaint quotes Reese's bankruptcy testim ony that ATP had approxim ately $ 224 m illion in cash as of March 31, 20 12, a m ere four-and-a-half m onths before ATP filed for bankruptcy.166 That ATP ultim ately ran out of m oney in 166 R. Doc. 214 at 37. 82 August 20 12 does not provide grounds for an inference that defendants knew this would be the case during the Class Period. See Podraza v. W hiting, _ _ F.3d _ _ , 20 15 WL 3824936, at *10 (8th Cir. J une 22, 20 15) (affirm ing district court's conclusion that "the allegations here are largely prem ised upon hindsight" and that "[i]n the absence of specific facts showing Defendants knew of [the Com pany's] im pending bankruptcy . . . the stronger inference is one of nonfraudulent intent"). Plaintiffs' final allegation is that a report authored in August or Septem ber 20 12 by petroleum engineer Netherland Sewell dem onstrates that ATP had wholly encum bered the value of its assets and that "ATP's assets were far less valuable than had been publicly disclosed."167 The Court fails to see how a third party report, prepared after ATP filed for bankruptcy, provides any inference that defendants were aware of undisclosed facts that tended to underm ine their statem ents during the class period. AIG Global Sec. Lending Corp. v. Banc of Am . Sec. LLC, 254 F. Supp. 2d 373, 386-87 (S.D.N.Y. 20 0 3) ("Indeed, reliance on a third party report issued two m onths after the [corporation's] bankruptcy undercuts any assertion that it could be a basis to judge the m aterial truthfulness of accounts balances before [the com pany] declared bankruptcy, and constitutes inactionable fraud by hindsight."). The 167 Id. at 57. 83 difference between ATP's valuation in its 20 11 Form 10 -K, published March 15, 20 12, and Netherland Sewell's valuation, prepared som etim e in August or Septem ber 20 12, further fails to provide an inference of knowing or reckless deceit because, according to plaintiffs, ATP's March 15 valuation was not prepared by defendants, but instead by a third party, Collarini Associates. Accordingly, the Court finds that the difference between Collarini Associates valuation and Netherland Sewell's valuation of ATP's assets does not provide grounds for an inference that defendants knowingly or recklessly m isled investors. In sum , the Court has cum ulatively evaluated all of plaintiffs' allegations and finds that plaintiffs fail to plead contem poraneous facts giving rise to a com pelling inference that defendants knowingly or recklessly misled investors regarding ATP's liquidity or ability to com plete the Clipper pipeline. 4. Matt McCarroll's Tenure as CEO Plaintiffs' final claim is that defendants knowingly or recklessly m isled investors regarding Matt McCarroll's brief tenure as ATP's CEO.168 On J une 1, 20 12, ATP issued a press release announcing that Matt McCarroll "has joined ATP as Chief Executive Officer."169 The press release further stated that 168 Id. at 113. 169 Id. at 114. 84 "Matt's com m itm ent to ATP has already been shown by his purchase today of 1,0 0 0 ,0 0 0 shares of our com m on stock directly from ATP at m arket price."170 The press release listed Reese and Bulm ahn as the contact persons on the press release. The Form 8-K to which the press release was attached was filed with the SEC on J une 8, 20 12 and was signed by Reese. Plaintiffs allege that the press release was m isleading because defendants knew, or were severely reckless in not knowing, that ATP and Matt McCarroll had not yet agreed upon an em ploym ent agreem ent.171 Less than a week later, on J une 7, 20 12, ATP issued a second press release which stated: On J une 1, 20 12, ATP Oil and Gas Corporation announced that Mr. Matt McCarroll replaced Mr. T. Paul Bulm ahn as Chief Executive Officer of the com pany. Mr. Bulm ahn continues to serve as Chairm an and also in the newly created position of Executive Chairm an of ATP. However, as of today, J une 7, 20 12, the com pany announced that it was unable to reach a m utually agreeable em ploym ent agreem ent with Mr. McCarroll and effective today he has subm itted his resignation. In conjunction with his resignation, the previously announced purchase of shares from the com pany by Mr. McCarroll m entioned in the J une 1, 20 12 press release was rescinded.172 Plaintiffs contend that this press release was also m isleading because, according to plaintiffs, the "true reason for Mr. McCarroll's departure was that 170 Id. 171 Id. 172 Id. 85 ATP's finances were a disaster, and that Mr. McCarroll wanted to begin restructuring im m ediately but the ATP Board, including Defendant Bulm ahn, would not agree."173 In support of their position, plaintiffs cite a J une 26, 20 13 article published in the Houston Business Journal in which McCarroll is quoted as saying "I went there knowing it was a turnaround situation, but not realizing until I got there how bad things were. I recom m ended to the board they start restructuring im m ediately, and they weren't willing to do it."174 The Court finds that plaintiffs have failed to plead the existence of an actionable m isstatem ent or om ission with respect to either press release. Under the securities laws, "a defendant is not required to disclose all known inform ation, but only inform ation that is necessary to m ake other statem ents not m isleading." Kapps v. Torch Offshore, Inc., 379 F.3d 20 7, 212 N.6 (5th Cir. 20 0 4) (quoting Craftm atic Securities Litigation v. Kraftsow , 890 F.2d 628, 640 (3d Cir. 1989)). Although plaintiffs fault defendants for the J une 1 statem ent that McCarroll "has joined ATP as Chief Executive Officer," that statem ent was accurate and com plete. Plaintiffs' com plaint indicates that McCarroll was in fact engaged to serve as ATP's CEO and that he served in that capacity for a period of tim e. This is evidenced by McCarroll's purchase of one 173 Id. 174 Id. 86 m illion shares of ATP stock, his recom m endation to the board that the com pany restructure, and his subm ission of a "resignation," effective J une 7, 20 12. "[A]lleged m isstatem ents and om issions m ust be considered in the full context in which they were m ade." W illiam L. Thorp Revocable Trust v. Am eritas Inv. Corp., 57 F. Supp. 3d 50 8, 520 (E.D.N.C. 20 14) (citing Gasner v. Bd. of Sup'rs of the Cty . of Dinw iddie, Va., 10 3 F.3d 351, 358 (4th Cir. 1996)). Given the context here--a press release announcing that McCarroll "had joined ATP"--defendants were not required to disclose all of the details of McCarroll's em ploym ent situation in order to avoid conveying a m isleading im pression. Thus, the J une 1, 20 12 press release does not contain an actionable m isstatem ent. As for the J une 7, 20 12 announcem ent of McCarroll's resignation, that statem ent was not m isleading because it was evident that there had been a parting of ways. The press release m ade clear that McCarroll had "subm itted his resignation" after less than one week on the job and that he had rescinded his purchase of one m illions shares of ATP stock. Although plaintiffs take issue with the characterization that the parties were "unable to reach a m utually agreeable em ploym ent agreem ent," that statem ent adequately conveyed that there was an area of disagreement between McCarroll and ATP's m anagem ent. Moreover, according to plaintiffs' com plaint, ATP's stock price 87 decreased by $ 0 .53, or 9%, from the previous day's closing price on the news of McCarroll's departure,175 suggesting that the m arket took ATP's inability to reach an em ploym ent agreem ent with McCarroll as an unfavorable sign. For these reasons, the Court finds that plaintiffs have not alleged facts that dem onstrate that defendants had a duty to provide any m ore detail on the reason for McCarroll's departure. Accordingly, the Court finds that, viewed holistically, plaintiffs' allegations fail to give rise to a com pelling inference that defendants knowingly or recklessly m isled investors about the effects of the m oratoria, production levels at the Telem ark Hub, or ATP's liquidity and its ability to com plete the Clipper project. The Court also finds that plaintiffs have failed to plead that defendants m ade any actionable m isstatem ent or om ission regarding Matt McCarroll's tenure as ATP's CEO. Thus, the Court finds that plaintiffs have failed to plead violations of the Section 10 (b) of the Securities Exchange Act of 1934. It is true that ATP's financial position deteriorated rapidly after the issuance of the May 10 , 20 12 Form 10 -Q for the First Quarter of 20 12, which gives plaintiffs' hindsight argum ent som e appeal with respect to statem ents m ade during May 20 12. The relevant financial statem ents from this period 175 Id. at 115. 88 revealed an extrem ely leveraged, and increasingly cash poor com pany. They also m ake clear that by the end of J uly 20 12, the bottom had fallen out, leaving ATP in an untenable financial position. If defendants' May 20 12 statem ents were to be judged on a recklessness standard, the Court m ay well have reached a different result. But because defendan ts' statements in May 20 12 concerning ATP's liquidity and its ability to com plete the Clipper pipeline were forwardlooking in nature, the standard is actual knowledge. See Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 130 9, 1324 n.14 (20 11) ("Under the PSLRA, if the alleged m isstatem ent or om ission is a 'forward-looking statem ent,' the required level of scienter is 'actual knowledge.'"). Plaintiffs' allegations are sim ply not sufficient to dem onstrate that defendants actually knew that the outcom e they envisioned would not actually com e to pass. Indeed, m any of plaintiffs' claim s--including the allegation that defendants continued to borrow m oney in J une 20 12, even after McCarroll advised the board of the need to restructure--suggest that defendants did not know that ATP was doom ed, notwithstanding the com pany's m ounting difficulties. That defendants m isjudged the gravity of ATP's peril does not m ean that they actually knew that ATP would not survive or that they intended to defraud the public. 89 B. Se ctio n 2 0 ( a) Claim Section 20 (a), codified at 15 U.S.C. § 78t(a), provides: "Every person who, directly or indirectly, controls any person liable under any provision of this chapter . . . shall also be liable jointly and severally with and to the sam e extent as such controlled person . . . ." 15 U.S.C. § 78t(a); see also Tarica v. McDerm ott Int'l, Inc., CIV.A.99-3831, 20 0 0 WL 1346895 (E.D. La. Sept. 19, 20 0 0 ). Control person liability under section 20 (a) requires an underlying violation of the Exchange Act. See R2 Inv. LDC v. Phillips, 40 1 F.3d 638, 641 (5th Cir. 20 0 5). Here, defendants do not dispute their status as control persons. Nevertheless, because the Court finds that plaintiffs fail to allege an Exchange Act violation, plaintiffs' Rule 20 (a) claim likewise fails. IV. CON CLU SION For the foregoing reasons, and for the reasons stated in the Court's Novem ber 21, 20 14 Order and Reasons dism issing plaintiffs' First Am ended Com plaint, the Court GRANTS defendants' m otion to dism iss plaintiffs' Exchange Act and Section 20 (a) claim s with prejudice. New Orleans, Louisiana, this 23rd day of Novem ber, 20 15. _______________________________ SARAH S. VANCE UNITED STATES DISTRICT J UDGE 90

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