On April 20, 2007, a Notice of Appeal was filed as to the Order and Judgment in favor of the defendants as well as the Order denying the Motion to Alter Judgment. The appeal is pending in the Second Circuit Court of Appeals.
On September 7, 2006, the plaintiffs filed a motion to Alter Judgment to Grant Leave to Amend the Complaint and Other Relief. On March 23, 2007, the Court entered a ruling denying the motion to alter judgment.
According to a press release dated August 22, 2006, Star Gas Partners, L.P. ("Star Gas" or "Company") announced that the United States District Court for the District of Connecticut granted the motions of Star Gas, its general partner, former officers, directors and underwriters to dismiss with prejudice a consolidated class action complaint alleging violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. Several securities class actions had been filed within days of a drop in the trading price of Star Gas common units after the Company's October 18, 2004 announcement that it was suspending the quarterly distributions to its common unitholders and might have to seek to restructure its debts under the protection of the bankruptcy courts due to record heating oil prices and customer attrition. The Class Action Complaint alleged that numerous statements by the Company about its business made in SEC filings, press releases and conference calls were fraudulent. In dismissing the Complaint, District Judge Janet Bond Arterton specifically held that the plaintiffs failed to allege that Star Gas made any false or misleading statements.
As summarized by the Company’s FORM 10-Q for the quarterly period ended December 31, 2005, on or about October 21, 2004, a purported class action lawsuit on behalf of a purported class of unitholders was filed against the Partnership and various subsidiaries and officers and directors in the United States District Court of the District of Connecticut entitled Carter v. Star Gas Partners, L.P., et al, No. 3:04-cv-01766-IBA, et al. Subsequently, 16 additional class action complaints, alleging the same or substantially similar claims, were filed in the same district court. The class actions have been consolidated into one action entitled In re Star Gas Securities Litigation, No 3:04cv1766 (JBA). On February 23, 2005, the Court consolidated the Class Action Complaints and heard argument on motions for the appointment of lead plaintiff. On April 8, 2005, the Court appointed the lead plaintiff. Pursuant to the Court’s order, the lead plaintiff filed a consolidated amended complaint on June 20, 2005 (the “Consolidated Amended Complaint”). The Consolidated Amended Complaint added claims arising out of two registration statements and the same transactions under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 as well as certain allegations concerning the Partnership’s hedging practices. On September 23, 2005, defendants filed motions to dismiss the Consolidated Amended Complaint for failure to state a claim under the federal securities laws and failure to satisfy the applicable pleading requirements of the Private Securities Litigation Reform Act of 1995 or PSLRA, and the Federal Rules of Civil Procedure. Plaintiffs filed their response to defendants’ motions to dismiss on or about November 23, 2005 and defendants filed their reply briefs on December 20, 2005. The motion is now pending decision by the Court.
The original complaint alleges that during the Class Period, defendants caused Star Gas's shares to trade at artificially inflated levels through the issuance of false and misleading statements. As a result of this inflation, Star Gas was able to complete a secondary public offering of 1.3 million common units and two note offerings totaling $65 million, raising net proceeds of $95 million during the Class Period. The true facts, which were known by each of the defendants but concealed from the investing public during the Class Period, were as follows: (a) that the Company was experiencing massive delays in the centralization of its dispatch system and causing its customers to flee to competitors; (b) that the Company's Petro heating oil division's business process improvement program was faltering and not generating the benefits claimed by defendants; (c) that contrary to defendants' earlier indications, the Company was not able to increase or even maintain profit margins in its heating oil segment; (d) that the Company's second quarter 2004 claimed profit margins were an aberration and not indicative of the Company's success or ability to pass on the heating oil price increase because the Company had earlier acquired heating oil (sold in the second quarter) at a much lower basis; and (e) that as a result, defendants were facing imminent bankruptcy and would no longer be able to service the Company's debt, all of which would halt the Company's ability to maintain the Company's credit rating and/or obtain future financing.
The complaint further alleges that on October 18, 2004, TheStreet.com issued an article, entitled "Stocks In Motion: Star Gas," which stated: "Earnings at Star Gas' heating oil unit are expected to decline substantially, the company said, which will not permit it to meet the borrowing conditions under its working capital line. Star is currently in talks with lenders to modify conditions and other terms that would allow its business unit to operate through the winter. If lenders do not agree, however, to offer modified terms, Star said it could be forced to seek alternative financing on 'extremely disadvantageous' terms or even be forced to seek bankruptcy protection." On this news, Star Gas's stock dropped to $4.32 per share from a closing price of $21.60 on the previous trading day.
On September 30, 2010, the Court Granted the Defendants' motion for a Mandatory Rule 11 Inquiry and Mandatory Fee Shifting.