On December 20, 2021, the United States District Court for the Southern District of Ohio dismissed a putative class action against a public utility company and certain of its executives under the Securities Exchange Act. Nickerson v. Am. Elec. Power Co., No. 2:20-cv-4243 (S.D. Ohio Dec. 20, 2021). Plaintiffs alleged that defendants made various statements regarding prospective energy legislation in Ohio which were misleading because they omitted that the company was actively involved in an alleged lobbying scheme to create that legislation. The Court held that plaintiffs failed to adequately allege any actionable misrepresentations.
The allegations related to the company’s statements regarding an Ohio bill that was designed to provide subsidies to nuclear or solar energy producers based on the power they produced. Slip op. at 4. After the legislation was passed, multiple individuals were indicted on racketeering and corruption charges related to the law’s passage. Id. Plaintiffs alleged that the company retained lobbyists who worked on the legislation and contributed funding to other industry groups involved in the effort. Id. at 6.
With respect to an earnings call in which the company stated it was withholding support from a draft form of the legislation, the Court rejected plaintiffs’ argument that this statement was misleading because it did not disclose that the company was withholding its support because the bill did not include a cost recovery measure that the company sought. Id. at 28-29. The Court emphasized that defendants had been publicly advocating for those terms for several years. Id. Moreover, the Court concluded that the challenged statements were “too generic and innocuous” to create a duty to disclose the bribery scheme alleged by plaintiffs. Id. at 29.
Similarly, the Court rejected plaintiffs’ argument that another earnings call was misleading because it gave the impression that the company had not yet evaluated the impact of the legislation when, in fact, the company helped create it and lobbied for its passage. Id. at 30. The Court again concluded that the challenged statements were “so vague, generic, and innocuous” that they did not create an impression about the company’s lobbying activities. Id. at 31.
In addition, the Court assessed and rejected plaintiffs’ argument that the company’s annual “corporate accountability reports” contained statements that created a duty to disclose lobbying activities, including “[e]ach year, [the company] publicly discloses lobbying activities and political contributions” and “[w]e believe in transparency and active participation in public debate.” Id. at 9. The Court determined that these statements were mere puffery—“corporate-speak so banal and ubiquitous” that a reasonable investor would not rely on them. Id. at 31.
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Nickerson v. Am. Elec. Power Co.