After a ruling issued Tuesday by the Dallas Fifth Court of Appeals, one of Texas’s first IPO-related securities class-action lawsuits to be filed in state court has a new venue and far fewer defendants.
In a unanimous ruling, a three-judge panel ruled that a Dallas trial court did not have personal jurisdiction over British chemicals company Venator Materials, four of its executives and four underwriters of Venator’s 2017 IPO, who are all nonresident defendants in the litigation. That determination reversed a lower court’s ruling and removed the defendants from the case.
At the same time, the court of appeals reversed another ruling by Dallas District Judge Dale Tillery that denied the request by another defendant, The Woodlands-based Huntsman Corp., to transfer the case to Montgomery County.
The ruling, in effect, greatly limits both the claims and the defendants that are left for the plaintiffs, Macomb County Employees’ Retirement System of St. Louis, to pursue. Even the remaining defendant, Huntsman, will be able to move the matter closer to its backyard in the greater Houston area.
In its 36-page opinion, the appeals court ruled that the affidavits submitted by the defendants sufficiently established their lack of ties to the state of Texas, which negated “the bases for personal jurisdiction alleged in the [plaintiffs’] operative petition.”
“We conclude that Venator’s alleged violations of the Securities Act are insufficiently connected to Texas and to confer specific jurisdiction over Venator in Texas,” Justice Leslie Osborne wrote in the opinion.
Michael Hurst, one of the lawyers for Venator and the individual defendants, said his clients were “vindicated” by the ruling.
“We’re incredibly appreciative of all the time and effort that the court of appeals took to evaluate the affidavits, the law and the arguments related to the conferral of personal jurisdiction over our clients,” said Hurst, a partner at Lynn Pinker Cox & Hurst in Dallas.
The plaintiffs’ lawyers have yet to respond to a request for comment.
The retirement systems filed their lawsuit last year, claiming that Venator, a spinoff company of Huntsman, improperly downplayed in SEC filings the damage from a fire that destroyed its titanium dioxide plant in Pori, Finland. They argue the misrepresentation caused the Venator stock to plummet to a small fraction of what it was initially worth.
Based in the United Kingdom, Venator is a chemical company focused on titanium dioxide, which causes the whiteness, opacity and brightness in the appearance of everyday products like plastics, paper, and sunscreen when it’s used as a pigment. It was the pigments and additives division of Huntsman until it was spun off in 2017 by way of an IPO.
The August 2017 IPO raised $454 million ($20 per share), and all the proceeds went to Huntsman to help pay down debt. Venator raised another $533 million through a secondary offering (SPO) that commenced in November 2017, selling company stock to the public at an upsized $22.50 per share.
At the time Venator filed for an IPO, it disclosed the financial and operation effects from the January 2017 Pori plant fire in its mandatory filings to the SEC, but the shareholder plaintiffs claim Venator did not disclose as much as it knew.
As a result, the plaintiffs claim, Venator stock plummeted in the following months when the company later announced that the cost estimates to repair the Pori plant were hundreds of millions of dollars greater than originally projected in its IPO and SPO registration statements. In December 2018, three months after Venator announced it was “abandoning the Pori plant entirely,” Venator’s stock fell to $3.65 per share — an 82% drop from the IPO price and 84% from the SPO price, says the plaintiffs’ lawsuit, which was filed last February.
In addition to Hurst, Venator’s legal team includes Andrés Correa, John Christian and David Coale of Lynn Pinker Cox & Hurst and Craig Smyser, Razvan Ungureanu and Eugene Zilberman of the Houston firm Smyser Kaplan & Veselka.
Huntsman’s lawyers are Thad Behrens, Anne Johnson, Daniel Gold, Matt McGee and Billy Marsh of Haynes and Boone and Dick Sayles of Bradley Arant Boult Cummings.
The underwriters’ lawyers are Jeff Tillotson of Tillotson Law and lawyers at Paul, Weiss, Rifkind, Wharton & Garrison.
The plaintiffs’ lawyers are Dallas attorney Joe Kendall of Kendall Law Group and lawyers at California-based Robbins Geller Rudman & Dowd.