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Maeve Investment Company Ltd. Partnership v. Teekay Corp.

United States District Court, W.D. Washington, Seattle

November 7, 2017

MAEVE INVESTMENT COMPANY LTD. PARTNERSHIP, Plaintiff,
v.
TEEKAY CORP., et al., Defendants.

          ORDER ON MOTION TO DISMISS AMENDED COMPLAINT

          MARSHA J. PECHMAN UNITED STATES DISTRICT JUDGE

         The above-entitled Court, having received and reviewed:

1. Defendants' Motion to Dismiss Amended Class Action Complaint (Dkt. No. 75);
2. Defendants' Request for Judicial Notice (Dkt. No. 77);
3. Plaintiff's Opposition to Defendants' Motion to Dismiss Amended Class Action Complaint (Dkt. No. 80);
4. Defendants' Reply in Support of Motion to Dismiss Amended Class Action Complaint (Dkt. No. 84);

         all attached declarations, exhibits, and relevant portions of the court records; and having heard oral argument, rules as follows:

IT IS ORDERED that the request for judicial notice is GRANTED.
IT IS FURTHER ORDERED that the motion to dismiss is GRANTED; the amended complaint is DISMISSED with prejudice.

         Background [1]

         Defendant Teekay Corporation (“Teekay”) is a provider of international crude oil and gas marine transportation services (¶ 2) whose primary assets are two “daughter companies:” Teekay LNG Partners L.P. (“TGP”) and Teekay Offshore Partners L.P. (“TOO”). ¶¶ 61-62. Teekay, as the general partner in the daughter companies, receives cash distributions from them which it passes on to shareholders as dividend payments. ¶¶ 2, 29, 33, 61-62.

         The daughter companies have three means of financing capital projects: (1) issuing equity, (2) borrowing from institutions, or (3) utilizing the cash generated by their own operations. ¶ 52. At the outset of the class period in this litigation (February 2015), Teekay identified a backlog of approximately $7 billion in vessel construction and other capital projects. ¶ 83.

         In September 2014, Teekay announced the approval of a new dividend policy whereby it planned to increase its annualized cash dividend by approximately 75 to 80 percent above its current rate (¶ 75), and that it expected to further increase its dividend payment by “approximately 20% per annum for the next three years.” ¶¶ 76-77. It reiterated that intention in February of 2015, stating that it would implement that plan following the sale of a floating platform to TOO, and anticipated future dividend increases. ¶ 80.

         On June 30, 2015, Teekay declared a quarterly cash dividend which reflected the increase it had previously announced, payable on July 31, 2015. ¶¶ 87-88, 117. The company's second quarter earnings announcement on August 6, 2015 stated its target to further increase the dividend, and that intention was repeated on the investors' call the next day. ¶ 89. It was noted that funding on the daughter companies' capital projects was not yet complete, that some equity would have to be raised to that end, and that “the majority of the remaining capital expenditure is able to be funded with attractively-priced debt financing.” ¶ 94.

         In November 2015, Teekay announced the third quarter financial results, which were then discussed in an investors' call. ¶¶ 132-135. Despite the fact that the value of TGP and TOO shares had been declining steadily since late 2014, on November 15 and 18, 2015 Teekay stated that it was “targeting” future dividend increases over the next three years. ¶¶ 134, 138.

         However, on December 16, 2015, Teekay announced that it would reduce its quarterly dividend beginning in the fourth quarter of 2015. ¶ 101. On the investors' call the following day, the company advised that TGP and TOO “require[d] capital to fund their growth” and therefore Teekay intended to “reallocate [the daughter companies' cash distributions] to pay equity installments on committed growth projects.” ¶ 103. Teekay's share price plummeted 58% that day. ¶¶ 109, 149.

         Plaintiffs have filed a class action lawsuit against Defendants, asserting a fraud claim under § 10(b) of the Securities Exchange Act of 1934 (“SEA”), 15 U.S.C. § 78j(b) (“§ 10(b)”) and Securities and Exchange Rule 10b-5, 17 C.F.R. § 240.10b-5 (“Rule 10b-5”), as well as a claim for ...


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