According to a Baker Botts Report, Energy Companies saw an increase in class action securities lawsuits in 2024.
Energy companies faced 15 new federal securities class action complaints in 2024, a spike from recent years, according to a Baker Botts report.
The rise reflects heightened scrutiny following high-profile incidents and market volatility.
Stock price declines often lead to securities litigation, particularly in response to regulatory actions, environmental incidents, construction delays, or market disruptions.
Jim Beha, partner with Baker Botts in New York, noted 219 securities class action complaints against all companies last year—and nearly 7 percent or 15 of those were against energy companies.
“Anytime something happens that makes public companies stock price fall by a meaningful amount, securities plaintiffs look to investigate whether there’s fraud,” Beha said.
According to Baker Botts’ inaugural “Review of Securities Class Action Litigation in the Energy Industries,” many recent securities complaints stemmed from distinct, adverse events unrelated to traditional financial reporting issues.
These events include the landslide at SSR Mining’s facility, regulatory changes impacting solar companies in California, and project delays affecting New Fortress Energy’s LNG operations.
“Overall, the vast majority of the complaints are filed either in the Second Circuit in the Southern District of New York and Manhattan or they’re filed in Northern California … after those first big two, it’s the district courts in Texas that get the most involving the energy companies,” Beha said.
Beha said energy defendants achieved strong litigation outcomes in most cases. In the past decade, 43 percent of energy industry cases were dismissed, and nearly 39 percent settled. None went to trial verdict.
“What we found over the last decade for the energy company cases that have been resolved, … there have been 137 over 10 years— … 59 was a defense victory, and 40 of them settled,” Beha said. “Energy company defendants are winning the vast majority of the cases outright without paying anything to settle…those results are a little bit better than the overall numbers for all securities cases.”
According to the Baker Botts report, settlements involving energy companies had an average value of $18 million in 2024, slightly below the broader securities litigation average. The median time from filing to settlement exceeded four years, consistent with historical patterns.
“There have been, in the last 30 years, maybe 15 trials against all cases,” Beha said.
Beha said a case settled during the third week of trial in Houston, Southern District of Texas. Robbins Geller Rudman & Dowd LLP and co-lead trial counsel from Entwistle & Cappucci secured a $126.3 million recovery for investors in a securities fraud class action against Alta Mesa—a high-profile and now-bankrupt “special purpose acquisition company” or “SPAC.”
The settlement came in the midst of a multi-week jury trial involving Alta Mesa Resources, Inc., certain of its officers, directors, and board members, and the private equity firm Riverstone Holdings.
In addition, the Baker Botts report concluded that pure omissions are not actionable. The Supreme Court confirmed that securities fraud claims must involve affirmative misleading statements; simply staying silent about certain risks is not securities fraud.
Forward-looking statements are still protected. Courts enforce the federal securities law safe harbor for such statements if they include meaningful cautionary language, which provides a strong defense against claims of failing to predict future issues.
Courts often dismiss securities fraud claims based on general statements about safety or ethics, viewing them as puffery. For instance, Hawaiian Electric’s wildfire litigation saw such allegations rejected for being too generalized.
