Nickerson v. American Electric Power Company, Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

DIANA NICKERSON, et al.,

Plaintiffs, :

Case No. 2:20-cv-4243

v.

Judge Sarah D. Morrison

Magistrate Judge Elizabeth A.

Preston Deavers

AMERICAN ELECTRIC POWER

COMPANY, INC., et al., :

Defendants.

OPINION AND ORDER

Defendant American Electric Power Company, Inc. is a public company

traded on the New York Stock Exchange. Plaintiffs purchased AEP stock between

April 25, 2019, and July 24, 2020 (the “Class Period”). They sued under the

Securities Exchange Act of 1934, alleging that AEP and two executives, Defendants

Nicholas Akins and Brian Tierney, made material misrepresentations and

omissions during the Class Period pertaining to AEP’s involvement in a specific

piece of Ohio legislation—the now-infamous House Bill 6. In Plaintiffs’ view,

Defendants’ statements artificially inflated the company’s stock price, which fell

after the extent of Defendants’ efforts to pass HB 6 were revealed in The Columbus

Dispatch. The matter is now before the Court for consideration of Defendants’

Motion to Dismiss Plaintiffs’ Amended Complaint. Because the Amended Complaint

fails to plead any actionable misrepresentations or omissions, the Motion is

GRANTED.

I. BACKGROUND

This action was first filed on August 20, 2020. (ECF No. 1.) Nearly seven

months later, Plaintiffs filed the operative Amended Complaint for Violations of the

Federal Securities Laws. (Am. Compl., ECF No. 28.) Defendants then filed a Motion

to Dismiss Plaintiffs’ Amended Complaint. (Mot., ECF No. 29.) Plaintiffs have

responded (Resp., ECF No. 30) and Defendants filed their reply (Reply, ECF No.

31). The parties appeared for oral argument on November 23, 2021. (See ECF No.

37.) The Motion is now ripe for consideration.

All well-pled factual allegations in the Amended Complaint are considered as

true for purposes of the Motion to Dismiss. See Gavitt v. Born, 835 F.3d 623, 639–40

(6th Cir. 2016). The following summary draws from the allegations in that Amended

Complaint, the documents integral to and incorporated therein, and certain other

documents which are subject to judicial notice.

A. AEP and the OVEC Plants

AEP is a public utility holding company that, through its subsidiaries,

provides electricity across large swaths of the country. (Am. Compl., ¶ 27.) “AEP is

one of America’s largest generators of electricity, owning or operating about 24,000

megawatts of generating capacity in the United States.” (Id.)

AEP is a part-owner of the Ohio Valley Electric Corporation (“OVEC”), which

operates two coal-fired electricity generation plants along the Ohio River (the

“OVEC Plants”). (Id., ¶ 29.) The OVEC Plants are not profitable, having sold

electricity at a loss since 2012. (Id., ¶ 40.) As of 2019, “OVEC had approximately

$1.3 billion of debt . . . and reported only $3 million in net income for the year.” (Id.)

OVEC’s poor financial position posed a problem for AEP, its largest

shareholder. (Id., ¶ 30.) Under the Inter-Company Power Agreement (the “ICPA”)

governing OVEC ownership, OVEC owners are entitled to receive and obligated to

pay for all OVEC generation capacity through 2040 in proportion to their

participation ratios. (Id.) In other words, without some alternative agreement

among the OVEC owners, AEP would carry a large portion of the cost of operating

the unprofitable plants for decades into the future. (Id., ¶¶ 41–42.)

As early as 2013, AEP began pursuing a solution to this problem. (Id., ¶ 43.)

AEP first sought cost recovery from the Public1 Utilities Commission of Ohio

(“PUCO”). (Id., ¶¶ 43–44.) When that effort faltered in 2016, AEP was forced to

record a $2.3 billion impairment charge. (Id., ¶ 45–46.) While the legal challenges

stemming from AEP’s application to the PUCO were ongoing, Mr. Akins publicly

declared:

[W]e [(AEP)] are looking for permanent support of the [agreement] that

provides OVEC generation to AEP Ohio customers. The PUCO has

previously approved our recovery of these costs, but we need to fortify

this through legislation.

(Id., ¶ 50.) And so, AEP turned to the legislature.

House Bill 239 was introduced in the Ohio General Assembly in May 2017.

(Id., ¶ 52.) “As introduced, HB239 would provide nearly $256.6 million in subsidies

to the OVEC Plants to be recovered annually from ratepayers for the 24-year period

of 2017–2040.” (Id.) The bill died in committee. (Id.)

1 The Amended Complaint incorrectly identifies this body as the Political

Utilities Commission of Ohio. (Am. Compl., ¶ 35.) Whether a Freudian slip or an

intentional aspersion, the Court will use the Commission’s proper name.

In Plaintiffs’ view, “AEP’s only option” at that point was to “secretly funnel[]”

hundreds of thousands of dollars in “dark money” to then-Speaker of the Ohio

House of Representatives Larry Householder as bribe payments for passing

legislation that included cost recovery for the OVEC Plants. (Id., ¶¶ 53, 61.)

B. House Bill 6

HB 6 was first introduced in the Ohio House of Representatives on April 12,

2019. (Resp. Ex. 1, ¶ 111, ECF No. 30-2.)

HB 6 creates the Ohio Clean Air Program, which allows nuclear or solar

clean air resources to apply to be certified clean air resources, and

therefore, eligible for a subsidy of $9 per megawatt hour produced. In

order to pay for the subsidy, the Ohio Air Quality Development

Authority, which is tasked with administering the Ohio Clean Air

Program, will institute and collect a monthly fixed charge to all

residential, commercial, industrial, and large consumers. The fixed fee

is projected to produce $140 million annually for the first year, then

$200 million annually thereafter.

(Id.) By the time the bill was signed into law on July 23, 2019, it provided for OVEC

cost recovery through 2030. (Allen Decl. Ex. 2, PAGEID # 619, ECF No. 29-4.)

C. Federal Charges

HB 6 has since become synonymous with scandal. Larry Householder, Jeffrey

Longstreth, Neil Clark, Matthew Borges, Juan Cespedes, and Generation Now were

all indicted by a federal grand jury on racketeering and corruption charges related

to its passage. (Id., ¶¶ 1, 249. See also Am. Compl., ¶ 1; United States v.

Householder, No. 1:20-cr-00077-TSB (S.D. Ohio, filed on July 30, 2020).) Mr.

Longstreth, Mr. Cespedes, and Generation Now have all pled guilty. (Am. Compl.,

¶¶ 76–78.)

An Affidavit filed in the criminal case describes the basis for the charges as

follows:

[F]rom March 2017 to March 2020, [the criminal defendants, known as

“Householder’s Enterprise,”] received approximately $60 million from

[FirstEnergy Corp.2] entities, paid through Generation Now and

controlled by Householder and the Enterprise. In exchange for

payments from [FirstEnergy], Householder’s Enterprise helped pass

House Bill 6, legislation described by an Enterprise member as a billion-

dollar “bailout” that saved from closure two failing nuclear power plants

in Ohio affiliated with [FirstEnergy]. The Enterprise then worked to

corruptly ensure that HB 6 went into effect by defeating a ballot

initiative. To achieve these ends, and to conceal the scheme,

Householder’s Enterprise passed money received from [FirstEnergy]

affiliates through multiple entities that it controlled [including

Generation Now and Coalition for Growth & Opportunity].

Householder’s Enterprise then used the bribe payments to further the

goals of the Enterprise, which include: (1) obtaining, preserving, and

expanding Householder’s political power in the State of Ohio through

the receipt and use of secret payments; (2) enriching and benefitting the

enterprise, its members, and associates; and (3) concealing, and

protecting purposes (1) and (2) from public exposure and possible

criminal prosecution.

(Resp. Ex. 1, ¶ 9.) Mr. Longstreth admitted that Generation Now was used “as a

mechanism to receive undisclosed donations to benefit HOUSEHOLDER and to

advance HOUSEHOLDER’s efforts to become Speaker of the Ohio House of

Representatives.” (Am. Compl., ¶ 76.) Mr. Cespedes further admitted to

orchestrating payments to Generation Now “in return for specific official action by

Householder relating to the passage and preservation of” HB 6 and to defeat the

subsequent ballot initiative seeking its repeal. (Id., ¶ 77.)

2 Although identified by the pseudonym “Company A” in the Affidavit,

FirstEnergy Corp. has since acknowledged its role in a Deferred Prosecution

Agreement entered into with the United States Attorney’s Office for the Southern

District of Ohio. United States v. FirstEnergy Corp., 1:21-cr-00086-TSB (S.D. Ohio,

filed on July 22, 2021).

D. AEP Lobbying

While HB 6 made its way through the General Assembly, AEP deployed

significant resources advocating for the bill to include certain favorable provisions.

AEP’s Vice President of External Affairs, Tom Froehle, provided interested party

testimony on the bill’s initial draft on April 23, 2019 (Allen Decl. Ex. 18, ECF No.

29-20), sent a letter to the Ohio House expressing AEP’s support for the then-

current draft on May 22, 2019 (Allen Decl. Ex. 19, ECF No. 29-21), and provided

written testimony to the Ohio Senate advocating re-inclusion of OVEC cost recovery

into the bill on June 27, 2019 (Allen Decl. Ex. 6, ECF No. 29-8). In addition, all ten

lobbyists employed by AEP from January through August 2019 filed statements

disclosing “active advocacy” on HB 6 during that period. (Allen Decl. Ex. 14, ECF

No. 29-16; Ex. 15, ECF No. 29-17; Ex. 16, ECF No. 29-18; Ex. 17, ECF No. 29-19.)

AEP also contributed to Empowering Ohio’s Economy (“EOE”), a “social

welfare” organization exempt from tax under 26 U.S.C. § 501(c)(4). (Am. Compl.,

¶ 56.) Between 2015 and 2020, AEP contributed nearly $9 million to the

organization. (Id.) AEP was the sole contributor to EOE and both Mr. Froehle and

James B. Hadden (“an attorney who represented AEP in the past”) served on its

Board of Directors. (Id., ¶¶ 7, 56.) Notably, EOE contributed $200,000 to Coalition

for Growth & Opportunity and $100,000 to Generation Now in 2017; $50,000 to

Generation Now in 2018; and $550,000 to Generation Now in 2019. (Id., ¶ 57.) AEP

did not publicly disclose its contributions to EOE before July 2020. 3 (Id., ¶¶ 13, 83.)

3 Neither the Tax Code nor the Treasury Regulations establish an affirmative

right for a 501(c)(4) contributor to remain anonymous. But, as a matter of practice,

E. Alleged False or Misleading Statements and Omissions

Plaintiffs allege that Defendants made the following “materially false and

misleading statements” during the Class Period:

1. Q1 19 Earnings Call

On the April 25, 2019 AEP earnings call, Mr. Tierney stated:

Mr. Tierney’s Prepared Remarks

Now to the Ohio clean air fund legislation. The company is supportive of

the Ohio House leadership’s focus and efforts on addressing key energy

policy issues that have plagued the state for years. In order for the

legislation to benefit all Ohio customers, there are certain issues that must

be addressed.

First, an elimination of the renewable portfolio standard should be

replaced with the opportunity for utilities to voluntarily develop economic

renewable resources in the state. In addition, contracts entered into under

the existing renewable portfolio standard must be grandfathered so as to

not punish utilities who are compliant with Ohio law.

Second, in regards to energy efficiency. AEP is concerned about a rapid

elimination of EE programs that have benefited our customers for many

years. In lieu of immediate elimination of EE programs, previously

approved plans should be phased out over the next several years. We look

forward to working with lawmakers during the process to achieve a

balanced energy bill that provides benefits to all Ohio customers.

(Id., ¶ 54.)

the structure affords contributors with a level of privacy. Before May 27, 2020, all

501(c)(4) organizations were required to report to the IRS contribution amounts,

along with names and addresses of substantial (> $5,000) contributors, on the Form

990, Schedule B, see 26 C.F.R. § 1.6033-2(a)(2)(ii)(f), but the Scheduled B was not

made public. (As of May 27, 2020, 501(c)(4) organizations are no longer required to

report substantial contributors’ names and addresses.) Nonetheless, 501(c)(4)

organizations are one of a number of groups referred to in the campaign finance

realm as “dark money” groups. See Daniel P. Tokaji & Renata E. B. Strause, The

New Soft Money: Outside Spending in Congressional Elections, at 51 (2014),

archived at http://perma.cc/7HNN-S2LX.

Response to Analyst Questions

Analyst:

And then with respect to the Ohio legislation, previously, you guys, I think,

had concerns about AEP utility ratepayers paying for other companies’

nuclear plants. How do you guys feel about HB 6 as it currently stands? I

mean I know you raised a couple of the issues in your prepared remarks

this morning. Can you just give a little more color on that?

Mr. Tierney:

So we think if there’s a full package where all of Ohio customers can

benefit, then it’s a worthy effort. If it’s just a bailout for one company or

another, it’s not as beneficial to all Ohio customers. So there needs to be a

full package of things that get addressed. And energy efficiency, the

renewable portfolio standard, ability of utilities to invest in renewables

going forward are all important things that need to be in the bill. And if

they’re not, it’s not as beneficial for ratepayers in the state.

(Id., ¶ 55.)

Plaintiffs allege that Mr. Tierney “concealed that the primary driver for

AEP’s lack of support for HB6 (as introduced in the House on April 12, 2019) was

the lack of any cost-recovery provision governing AEP’s own coal-fired plants.” (Id.,

¶ 56.) In other words, that AEP “was not concerned about ‘a bailout for one

company’ . . . provided that it too was included in that bailout.” (Id.) Plaintiffs

further allege that Mr. Tierney “concealed that Defendants were violating AEP’s

own policy [on Corporate Political Contributions] to secure cost-recovery for its coal-

fired plants” by making “substantial contributions to Householder’s criminal

enterprise . . . through its EOE non-profit[.]” (Id.)

2. 2019 Corporate Accountability Report

On May 9, 2019, AEP published its annual Corporate Accountability Report,

which included the following:

Lobbying and Political Contributions

* * *

The investments needed to modernize the power grid are in the billions of

dollars, and the stakes have never been higher. To understand the

policies and regulations that could affect our business, we

participate in a number of organizations, lobby on our customers’

behalf and contribute to political candidates, where allowed by

law.

Each year, AEP publicly discloses lobbying activities and political

contributions. We also annually report on the portions of membership

dues paid to organizations such as the U.S. Chamber of Commerce and

Edison Electric Institute (EEI) that go toward lobbying. We post our

lobbying policy online and we discuss political contributions annually with

AEP’s Board of Directors’ Committee on Directors and Corporate

Governance.

* * *

We believe in transparency and active participation in public

debate. Our experience is that open, candid discussion and a good-

faith attempt to reach common ground is the best way to do

business.

(Id., ¶ 58) (emphasis in original).

In Plaintiffs’ view, these statements “were materially false and misleading

when made.” (Id., ¶ 59.) Plaintiffs allege that, by “secretly contributing $900,000 to

Householder’s criminal enterprise, which funded Householder and political

candidates aligned with Householder who would support HB6[,]” AEP was not

transparent about its political contributions—and was not engaging in that conduct

for the stated purpose of “understand[ing] the policies and regulations that could

affect [its] business[.]” (Id.)

3. Q2 19 10-Q

AEP filed its 10-Q for the second quarter of 2019 on July 25, 2019. It stated,

in part:

In July 2019, clean energy legislation which offers incentives for power-

generating facilities with zero- or reduced carbon emissions was signed

into law by the Ohio Governor. The clean energy legislation phases out

current energy efficiency and renewable mandates after 2020 and 2026,

respectively. The bill also provides for the recovery of existing renewable

energy contracts on a bypassable basis through 2032 and includes a

provision for recovery of certain legacy generation resources which will be

allocated to all electric distribution utilities on a non-bypassable basis.

Management is analyzing the impact of this legislation and at this

time cannot estimate the impact on results of operations, cash

flows or financial condition.

(Id., ¶ 60) (emphasis in original).

Plaintiffs allege that these statements were materially false and misleading.

(Id., ¶ 61.) First, because “AEP, in fact, was able to estimate the impact of the

legislation on its financial results, at least with respect to coal-fired cost recovery”

and that “[d]ocuments uncovered in governmental investigations demonstrate that

AEP actually calculated how HB6 would impact AEP’s financial performance[.]”(Id.)

And second, because the statements “created the misleading impression that AEP

was not behind HB6’s cost-recovery provisions, when in fact it was a driving force of

the amendment that brought coal-fired cost recovery into HB6.” (Id.)

4. Q2 19 Earnings Call

AEP held its second quarter earnings call on the same day the 10-Q was filed.

Mr. Akins gave the following prepared remarks on that call:

Now onto the next hot issue, the Ohio House Bill 6 legislation.

Governor DeWine earlier this week signed legislation that will provide

support to the nuclear units in Ohio as well as support for the OVEC

generating units. While the legislation phases out the RPS mandate after

2026, it still provides benefits for the recovery of existing renewable

contracts until 2032 and provides additional support for solar projects that

have already received signing approval, including our 400 megawatts of

proposed solar project, which can also collect from the same clean energy

fund as the nuclear units.

So to reiterate, as far as AEP is concerned, we see positives from

this legislation for us, namely recovery of OVEC collected – that’s

collected on a statewide basis through 2030. Secondly, recovery of our

existing renewable contracts entered into to comply with previous

legislation and approved by the P[U]CO. The opportunity for AEP Ohio to

enter into bilateral contracts with certain customers. This one is an

important issue for AEP as we have had specific requests from various

customers for AEP Ohio to be the provider of renewable resources in

addition to being the wires provider.

And fourth, the ability for solar projects that have siting board approval

to access the $20 million of the clean air funds, which includes the 400

megawatts of solar that we now have before the P[U]CO. The access to

these funds make these particular projects even more beneficial for

customers and, as you recall, the request for these projects include a $6

million per year debt equivalency rider to maintain AEP Ohio’s capital

structure.

And finally, the net impact of HB 6 will provide headroom to our rate

payers, which will enable potential additional distribution investments to

improve the customer experience and grid reliability.

AEP does believe in the importance of nuclear generation as a part of the

portfolio of this country and the State of Ohio. We congratulate Speaker

Householder; Senate President Obhof; Governor DeWine;

Lieutenant Governor Husted and Chairman Randazzo, along with

many other members of the Ohio legislature in balancing the interest of a

need for a balanced portfolio, employment and economic development

issues and customer benefits.

(Id., ¶ 62) (emphasis in original).

Plaintiffs allege that these statements “were misleading and omitted

material information.” (Id., ¶ 63.) Specifically, they “created the impression that the

legislation was drafted and passed pursuant to a legitimate process when, in truth,

the process was corrupted and designed to benefit AEP and other energy companies

to the detriment of ratepayers.” (Id.) Plaintiffs further allege that the statements

“created the false impression that AEP was merely a distant beneficiary of the bill,

when, in truth, AEP was actively involved in getting the bill passed[.]” (Id.)

5. AEP Regulatory Newsletter

The next month, AEP published a regulatory newsletter, which included the

following:

What is Ohio’s HB 6?

When initially introduced, the purpose of the legislation was for all Ohio

electricity customers to pay to keep open Lake County’s Perry and Ottawa

County’s Davis-Besse nuclear plants, owned by FirstEnergy Solutions

(FES), a subsidiary of FirstEnergy Corp. However, the goal of the

legislation expanded to support additional renewable energy

resources while eliminating certain utility energy efficiency

activities and renewable portfolio compliance standards. The

expansion to HB 6 came with the expectation that distribution charges

would be reduced by eliminating the energy efficiency rider charge while

promoting clean air resources.

On July 24, 2019, Ohio Governor Mike DeWine signed into law HB 6 . This

law creates the Nuclear Generation Fund and the Renewable Generation

Fund, to be administered by the Ohio Air Quality Development Authority.

These funds allow for a “qualifying nuclear resource” or a “qualifying

renewable resource” to be eligible for participation in the programs for one

or more program years, as determined by the Authority.

* * *

What are the details of each provision in HB 6?

* * *

Renewable Funding Opportunity

HB 6 supports eligible solar facilities over 50MW that already have siting

certification as of June 2019. AEP Ohio has two eligible solar

renewable facilities located in Highland County. These are the

Willowbrook project (100MW) and the Hecate project (300MW).

Through the renewable funding opportunity, a $9 per MWh credit

is paid to project owners of eligible solar facilities for a total of $20

million annually, which covers about 1,000MW of solar. This credit

is assessed from the $20 million renewable portion of the Clean Air Fund

as described above.

OVEC Statewide Recovery

The Ohio Valley Electric Corporation (OVEC) and the Indiana-Kentucky

Electric Corporation (IKEC) are generating stations originally built in the

1950s and provided electric power for the U.S. Department of Energy’s

uranium enrichment facilities then near Portsmouth, Ohio. Today, OVEC

and IKEC own two coal power plants; Kyger Creek Generating Station

(1.1GW) in Cheshire, Ohio and Clifty Creek Generating Station (1.3GW)

in Madison, Indiana. Under HB 6, OVEC and IKEC will receive subsidies

to support their coal-fired power plants.

Effective January 1, 2020, distribution customers throughout Ohio

will incur a non-bypassable charge, called the Purchased Power

Agreement (PPA) Rider. The rider for residential customers is $1.50

per month. Commercial and industrial customers’ monthly charge

is $1,500 for this rider. The PPA Rider will begin in 2021 and will be

reviewed by the Commission every three years to determine continuation

of the rider, which is to end December 31, 2030.

Reduced Renewable Portfolio Standards

In 2008, the State of Ohio established their Renewable Portfolio Standards

(RPS) policy. This policy required providers selling electricity to

consumers to provide a specific percentage of that supply from renewable

sources. Currently, the RPS policy states 12.5% of your electricity must

come from renewable energy sources by 2027, with 0.5% required to be

solar.

HB 6 reduces the RPS target for utilities and competitive retail

energy suppliers to 8.5%, and the solar portion is eliminated by

December 31, 2026. This means that most Ohio customers will see a price

reduction by the elimination of RPS requirements effective January 1,

2027. However, an AEP Ohio customer should read the section

below on the AEP Ohio bypassable renewable legacy charge, as you

will continue to receive this charge through 2032.

(Id., ¶ 65) (emphasis in original).

Potential Referendum on Ohio HB 6

Groups are forming a campaign to add a referendum on the November

2020 ballot to repeal HB 6. Opponents include environmental groups

opposed to the elimination of energy efficiency programs and developers of

natural gas-fired power plants opposed to the subsidy for nuclear

generation. These groups are circulating a petition, seeking 1,000

signatures from registered Ohio voters in hopes of adding a referendum to

the 2020 election.

The petition was approved by the Ohio Attorney General David Yost on

August 29, 2019. The next step opponents will take is to obtain

approximately 266,000 additional signatures to place the petition

on the November 2020 ballot for a vote. Finally, a majority vote is

needed to approve the petition for the repeal of HB 6.

Meanwhile FES [FirstEnergy Solutions Corp., now Energy Harbor

Corp.] filed a challenge to the petition with the Supreme Court of

Ohio on September 4, stating HB 6 is a tax and tax laws are exempt

from referendums.

This petition process will take a long time before being resolved and may

create market uncertainty for everyone at each step of the process. This

uncertainty may impact energy supply plans and strategies for all

involved.

(Id., ¶ 66) (emphasis in original).

Plaintiffs allege that the statements in AEP’s regulatory newsletter were

“materially false and misleading” because they “concealed that AEP was a driving

force behind the coal-fired cost recovery provisions in HB6, including its

involvement with Householder associates, its contributions to Householder to

support passage of HB6, and its contributions to fund opposition to the

referendum.” (Id., ¶ 67–68.)

6. Q3 19 10-Q and 2019 10-K

AEP’s third quarter 2019 10-Q filing stated:

In July 2019, clean energy legislation which offers incentives for power-

generating facilities with zero or reduced carbon emissions was signed into

law by the Ohio Governor. The clean energy legislation phases out current

energy efficiency and renewable mandates no later than 2020 and after

2026, respectively. The bill provides for the recovery of existing renewable

energy contracts on a bypassable basis through 2032. The clean energy

legislation also includes a provision for recovery of OVEC costs

through 2030 which will be allocated to all electric distribution

utilities on a non-bypassable basis. OPCo’s Inter-Company Power

Agreement for OVEC terminates in June 2040. To the extent that OPCo

is unable to recover the costs of renewable energy contracts on a

bypassable basis by the end of 2032, recover costs of OVEC after 2030 or

fully recover energy efficiency costs through 2020 it could reduce future

net income and cash flows and impact financial condition.

(Id., ¶ 69) (emphasis in original). Similarly, AEP’s 10-K filed for 2019 stated:

In January 2020, provisions enacted as part of Ohio Am. Sub. H.B.

6 went into effect that replace the PPA rider and enable OPCo to

continue recovering the net cost associated with the ICPA [Inter-

Company Power Agreement], including any additional contractual

entitlement received as a result of the FirstEnergy Solutions (FES)

bankruptcy, through 2030.

(Id., ¶ 70) (emphasis in original).

Plaintiffs broadly allege that the statements in the Q3 19 10-Q and 2019 10-K

“were materially false and misleading when made” because “Defendants

fraudulently concealed that: (a) AEP was actively involved in funding the passage

and defense of HB6 through its EOE non-profit, which allowed AEP to advance its

political interests and advocate for HB6 in the dark; (b) between 2017 and 2019

AEP secretly funneled through its dark money alter ego EOE $900,000 to

Generation Now and Coalition to fund the passage of HB6, including contributions

to political candidates aligned with Householder; (c) EOE’s contributions to

Generation Now increased ten-fold from $50,000 in 2018 to $550,000 in 2019, the

year HB6 became law, which clearly linked AEP’s contributions to HB6’s coal-fired

cost recovery amendments; and (d) these contributions violated AEP’s internal

policy” regarding Corporate Political Contributions. (Id., ¶ 71.)

7. 2020 Corporate Accountability Report

Finally, AEP published its 2020 Corporate Accountability Report on May 20,

2020. That release included the following:

At AEP, we never have been more certain of our responsibility to a

sustainable future for our customers, communities and employees. We will

continue to take steps to reduce our carbon footprint, to empower

customers and to value and develop our workforce. Together, our energy

and future are truly boundless.

* * *

Public Policy & Issue Management

Similar to other companies, AEP has a public policy strategy that seeks to

inform decisions made by Congress, the Federal Energy Regulatory

Commission (FERC), North American Electric Reliability Corporation

(NERC), state legislatures and regulatory commissions, and Regional

Transmission Organizations (RTOs).

AEP’s Policy Advisory Team (PAT), consisting of senior executives across

all business functions and departments, considers policy options on issues

of relevance to the company and supports internal policy analysis and

debate. This approach ensures that AEP is speaking with one voice and

that all employees with external contacts are clear on our policy positions

and objectives. Since its inception in May 2017, the PAT has reviewed

more than two dozen issues, including 13 in 2019.

* * *

Climate & Lobbying

Some stakeholders are asking AEP whether our lobbying practices and the

policy positions taken by trade organizations to which we belong are in

alignment with the Paris Climate Agreement. We believe in

transparency and active participation in public policy

development, regardless of the issue or position. Moreover, AEP is a

respected and sought-after voice when it comes to energy policy-related

matters in the U.S.

We report on our public policy positions, annual lobbying and

political contributions, policy on political contributions and trade

association memberships. We post our lobbying policy online and have

consistently acknowledged our intent to participate actively in the political

process and in lobbying activities at the national, state and local levels. At

AEP, we must consider a number of factors when engaging in this arena,

as public policy develops through negotiation and compromise. While

many divergent issues are of importance to us, we cannot invest all of our

efforts to focus on a single issue. We are obligated to deliver safe, reliable,

affordable and secure electricity to all of our customers, and we develop

our public policy positions with that in mind.

(Id., ¶ 72) (emphasis in original).

Here, Plaintiffs reiterate their allegation that AEP was not transparent

about “its involvement in the HB6 legislation, its opposition to the referendum, and

certainly did not disclose the dark money contributions that it made to (and

through) EOE.” (Id., ¶ 73.)

F. Columbus Dispatch Article

On Saturday, July 25, 2020, The Columbus Dispatch published an article

titled Columbus Utility Giant AEP Funded Dark Money Spending in HB 6

Campaign.4 Plaintiffs allege that, through this article, “Defendants’ prior

misrepresentations and fraudulent conduct were revealed and became apparent to

the market[.]” (Am. Compl., ¶ 95.) The article is reproduced here in full, with

emphasis as reflected in the Amended Complaint:

A dark-money group wholly funded by House Bill 6 beneficiary

and Columbus utility giant American Electric Power contributed

4 The article was published on the front page of the paper’s July 26, 2020

print edition under the headline To Boost H.B. 6, AEP Gave 350K in ‘Dark Money’.

$350,000 toward the campaigns now at the center of a

racketeering and bribery case that ensnared House Speaker

Larry Householder, an investigation by The Dispatch finds.

Empowering Ohio’s Economy Inc., a nonprofit operated solely

with AEP funds, gave $150,000 to Generation Now, another dark-

money group that received $60 million from FirstEnergy-related

interests to ensure passage and survival of a $1 billion ratepayer bailout

of a subsidiary’s pair of nuclear power plants.

Empowering Ohio also gave $200,000 to the Coalition for Opportunity

& Growth, which is related to a similarly named political action

committee that spent $1 million in the 2018 campaigns of Householder-

favored Republican candidates to help ensure that he had their votes to

become speaker.

An affidavit filed by an FBI agent in the racketeering case details

spending of $350,000 by an unidentified “interest group that was

funded exclusively by $13 million from another energy company

that supported HB 6.”

A source close to the investigation confirmed to The Dispatch

that the energy company is American Electric Power, a publicly

traded company that serves 5.5 million customers in 11 states and

earned $2.1 billion last year.

The “social welfare” nonprofit is not required to disclose its donors or the

source of its funding.

The board of Empowering Ohio’s Economy – which approved the H.B. 6-

related spending – includes AEP’s top lobbyist, one of Republican

Householder’s predecessors as House speaker, a former congressman

and a friend of Republican Gov. Mike DeWine.

AEP spokesman Scott Blake said the utility has not been contacted by

investigators “and none of the wrongful conduct in the criminal

complaint involves AEP or its subsidiaries. Neither AEP nor any of its

subsidiaries made any contributions to Generation Now.”

The utility gives to a variety of social welfare nonprofits, including

Empowering Ohio’s Economy, to support its mission of promoting

economic and business development and education programs, he said.

AEP does not comment on specific contributions or amounts, he added.

“These contributions were done appropriately, and we have every reason

to believe that the organizations we support have acted in a lawful and

ethical manner,” Blake added.

AEP benefited from the passage of House Bill 6 with its six-year-

plus extension through 2030 of a monthly surcharge of up to $1.50

on Ohio electricity customers. The fee generates about $50 million

a year to subsidize a pair of old coal-burning power plants it

partly owns in a consortium with other utilities.

The plants – Kyger Creek near Cheshire, Ohio, and Clifty Creek near

Madison, Indiana – were built in the mid-1950s to supply electricity to

the former uranium-enrichment plant near Piketon, Ohio. AEP owns

the biggest stake in the coal plants at 43% and buys about 60% of

the electricity generated by the plants.

The board of directors of Empowering Ohio’s Economy includes Thomas

Froehle, vice president of external affairs for AEP – its top lobbyist. He

testified before the General Assembly in support of House Bill 6. AEP

registered 23 lobbyists to work the 132 lawmakers to pass the legislation

last year.

A message seeking comment was left with Froehle. AEP confirmed he

remains a board member.

Other board members include former Republican House Speaker Jo Ann

Davidson; former U.S. Rep. David Hobson, R-Springfield; and J.B.

Hadden, a lawyer who has represented AEP and a friend to DeWine.

Hadden, president of the nonprofit’s board, was treasurer of DeWine’s

2014 attorney general re-election campaign.

“I don’t know what they were up to,” Hadden said of Generation Now

and Coalition for Opportunity & Growth, adding he did not recall which

board member sought the funding. He said he never discussed the

matter with DeWine.

While he did not have access to records, Hadden disputed the nonprofit

received $13 million in funding as listed in the FBI affidavit. The group’s

IRS filings show it received $8 million total in 2015 and 2016, with no

contributions in 2017–18. It listed a year-end cash balance of nearly $3.9

million in 2018. Prior IRS tax forms, and the 2019 filing, are not

available online.

The group’s address is listed as the Downtown office of Davidson, who

serves as secretary-treasurer. A working telephone number for Hobson

could not be located. Board members receive no compensation.

The Coalition for Opportunity & Growth, the independent-

expenditure political action committee which received $200,000

from the AEP dark-money group in 2017, the dark-money

Coalition & Opportunity PAC that backed Householder

candidates and Generation Now all were incorporated by Eric

Lycan, a lawyer and Republican consultant in Lexington, Kentucky.

While not identified in the affidavit, the Coalition for Opportunity &

Growth cash went largely unused until early this year, when it went out

to support Householder-blessed candidates in the GOP primary, the FBI

affidavit said.

It was laundered through the related PAC to conceal its

association with Generation Now, the FBI affidavit states:

“Generation Now had generated negative media publicity in 2019

and candidates expressed concern to Householder about their

association with it.”

The FBI affidavit said FirstEnergy interests provided $390,000 to the

group, which paid $54,000 to Generation Now, $191,000 to a media-

placement firm, $200,000 to a public relations firm and $100,000 to JPL

& Associates, a firm controlled by Jeff Longstreth, Householder’s top

political aide. Longstreth is among those arrested and facing up to 20

years in prison if convicted in the H.B. 6 case.

Despite those amounts, the Coalition for Opportunity & Growth

reported spending only $102,835 in its filings with the Federal Election

Commission.

Empowering Ohio’s Economy spent $3.7 million between 2016 and 2018

on a variety of charitable and civic endeavors. Its biggest expenditure of

$750,000 went to the host committee of the Republican National

Convention in Cleveland in 2016.

It also gave $300,000 to the Capitol Square Foundation, of which

Davidson is a board member and which benefits the Statehouse, and

$250,000 to Two Paths America, a nonprofit created amid former GOP

Gov. John Kasich’s 2016 presidential run to promote his positions.

Householder and four others were arrested Tuesday following an FBI

investigation that captured phone calls, text messages and recordings of

meetings centering around the alleged pay-to-play scheme

described by U.S. Attorney Dave DeVillers as the largest public

corruption case in Ohio history.

Randy Ludlow, Columbus Utility Giant AEP Funded Dark Money Spending in HB 6

Campaign, THE COLUMBUS DISPATCH (July 25, 2020, 12:22 PM),

https://www.dispatch.com/story/news/politics/state/2020/07/25/columbus-utility-

giant-aep-funded-dark-money-spending-in-hb-6-campaign/41843419/. (See also Am.

Compl., ¶ 74.)

Plaintiffs allege that the article also contained the following5:

American Electric Power’s political action committee contributed nearly

$672,000 to Ohio politicians and parties between 2016 and mid-2020,

including $17,250 to Householder and $86,792 to the House

Republican’s campaign account.

Empowering Ohio’s Economy spent $162,500 on lobbying between 2016

and 2018, according to its tax filings. The group was not registered

with the state as attempting to influence legislation.

(Am. Compl., ¶ 74.)

On the day following publication of the article, “AEP shares fell $4.67 per

share, or other 5%, to close at $81.16 per share . . . on unusually heavy trading

volume, damaging investors.” (Id., ¶ 75.)

G. Oral Argument

Based only on the Amended Complaint and other written submissions to the

Court, it is unclear whether Plaintiffs’ claims are based on Defendants’ failure to

disclose bribes made in connection with HB 6, or simply a failure to disclose the full

5 On the Court’s review, these statements do not appear in the online or print

editions of The Columbus Dispatch article. However, they do appear in a July 27,

2020 re-publication of the story in Oklahoma Energy Today. See AEP’s Dark Money

Group Contributed to Campaigns of Arrested Ohio Leaders, OKLAHOMA ENERGY

TODAY (July 27, 2020), http://www.okenergytoday.com/2020/07/aeps-dark-money-

group-contributed-to-campaigns-of-arrested-ohio-leaders/.

extent of AEP’s legitimate lobbying efforts on the bill. For example, the Amended

Complaint states, in part:

AEP was operating and advancing its own political interests in its coal-

fired plants by secretly contributing $900,000 to Householder’s criminal

enterprise, which funded Householder and political candidates aligned

with Householder who would support HB6. Thus, at the same time that

they were emphasizing “transparency,” AEP was working through its

dark money alter ego to circumvent its own policy emphasizing that

“‘AEP cannot lawfully make Corporate Political Contributions to

candidates for elected office in . . . Ohio . . . .’”

(Id., ¶ 59.) This paragraph first seems to accuse AEP of the same bribery scheme in

which FirstEnergy engaged—but the second sentence walks that back

substantially, and characterizes the conduct only as a violation of AEP policy.

Similarly, the Amended Complaint repeats the allegation that Defendants:

fraudulently concealed that: (a) AEP was actively involved in funding

the passage and defense of HB6 through its EOE non-profit, which

allowed AEP to advance its political interests and advocate for HB6 in

the dark; (b) between 2017 and 2019 AEP secretly funneled through its

dark money alter ego EOE $900,000 to Generation Now and Coalition

to fund the passage of HB6, including contributions to political

candidates aligned with Householder; (c) EOE’s contributions to

Generation Now increased ten-fold from $50,000 in 2018 to $550,000 in

2019, the year HB6 became law, which clearly linked AEP’s

contributions to HB6’s coal-fired cost recovery amendments; and (d)

these contributions violated AEP’s internal policy stating that “‘AEP

cannot lawfully make Corporate Political Contributions to candidates

for elected office in . . . Ohio[.]’”

(Id., ¶¶ 61, 64, 67, 71, 73.) Items (a)–(c) walk right up to the line accusing AEP of

bribing an elected official; but, again, (d) walks it back to that company policy.

At oral argument, Plaintiffs clarified, in no uncertain terms:

THE COURT: . . . Are you alleging that AEP’s contributions to EOE,

Empowering Ohio’s Economy, that they constituted bribery or are you

saying that it’s . . . AEP’s failure to follow the company policy on

transparency that is the basis for your claim? . . .

MR. ALVAREZ: So for many years, Your Honor, AEP had been trying

to seek a bailout for the two coal-fired plants that it owned. . . . And it

. . . tried to do it by legitimate means. . . . It tried to get . . . subsidies

from the Ohio . . . rate payers. It talked to FERC. It talked to PUCO.

Didn’t happen. So what did it do then? It went through the legislative

means. It tried that, as . . . HB 239, to get the bailout. That didn’t work

either. So there was nothing left for AEP, for Akins or Tierney, to do.

The only thing that they had left to do was a nefarious option: Pay to

play with Householder. And that’s where the bribery comes in. . . .

THE COURT: So you are alleging that AEP engaged in bribery?

MR. ALVAREZ: Yes[.]

(ECF No. 38, 5:21–23.) Accordingly, the Court interprets Plaintiffs’ claims, in its

consideration and analysis, as alleging that Defendants engaged in a scheme of

bribery.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim

with sufficient specificity to “give the defendant fair notice of what the . . . claim is

and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007) (internal quotations omitted). A complaint which falls short of the Rule 8(a)

standard may be dismissed if it fails to state a claim upon which relief can be

granted. Fed. R. Civ. P. 12(b)(6).

To survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to state a claim to relief that is

plausible on its face. A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged. The

plausibility standard is not akin to a probability requirement, but it asks

for more than a sheer possibility that a defendant has acted unlawfully.

Where a complaint pleads facts that are merely consistent with a

defendant’s liability, it stops short of the line between possibility and

plausibility of entitlement to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations and quotations

omitted).

Courts are typically limited to deciding Rule 12(b)(6) motions on the

complaint. When claims are grounded in the Exchange Act, however, a court “may

consider the full text of the SEC filings, prospectus, analysts’ reports and

statements integral to the complaint, even if not attached, without converting the

motion into one for summary judgment under Fed. R. Civ. P. 56.” Bovee v. Coopers

& Lybrand C.P.A., 272 F.3d 356, 360–61 (6th Cir. 2001) (internal quotations

omitted).

A securities fraud claim must satisfy the heightened pleading standards

delineated under Federal Rule of Civil Procedure 9(b) and the Private Securities

Litigation Reform Act of 1995 (“PSLRA”). Pursuant to Rule 9(b), “a party must state

with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P.

9(b). The PSLRA further requires that the plaintiff “specify each statement alleged

to have been misleading, [and] the reason or reasons why the statement is

misleading” and “state with particularity facts giving rise to a strong inference that

the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(1), (2).

III. ANALYSIS

A. Count One fails to state a claim for securities fraud.

Section 10(b) of the Exchange Act prohibits the “use or employ, in connection

with the purchase or sale of any security . . . any manipulative or deceptive device

or contrivance in contravention of such rules and regulations as the SEC may

prescribe as necessary or appropriate in the public interest or for the protection of

investors.” 15 U.S.C. § 78j(b). The statute implies a private cause of action to

purchasers of securities. Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552

U.S. 148, 157 (2008). SEC Rule 10b-5 forbids “the making of any ‘untrue statement

of a material fact’ or the omission of any material fact ‘necessary in order to make

the statements made . . . not misleading.’” Dura Pharms., Inc. v. Broudo, 544 U.S.

336, 341 (2005) (quoting 17 C.F.R. § 240.10b-5). Together, § 10(b) and Rule 10b-5

“have the effect of prohibiting the commission of fraud in connection with the sale or

purchase of securities.” In re Sofamor Danek Grp., Inc., 123 F.3d 394, 400 (6th Cir.

1997).

To state a claim for securities fraud, a plaintiff must allege:

(1) a material misrepresentation or omission by the defendant; (2)

scienter; (3) a connection between the misrepresentation or omission

and the purchase or sale of a security; (4) reliance upon the

misrepresentation or omission; (5) economic loss; and (6) loss causation.

Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp., 830 F.3d 376, 383–84

(6th Cir. 2016) (internal quotations omitted). Here, Defendants argue that the

Amended Complaint is deficient for three independent reasons: first, that the

alleged misrepresentations or omissions are not actionable under the PSLRA;

second, that Plaintiffs do not adequately allege that Defendants acted with the

requisite mental state (scienter); and third, that Plaintiffs fail to adequately allege

loss causation. Because Defendants’ first argument is well-taken and dispositive,

the Court need not and does not address scienter or loss causation.

A plaintiff successfully pleads an actionable misrepresentation or omission

when he alleges facts demonstrating: “(1) that a defendant made a statement or

omission that was false or misleading; and (2) that this statement or omission

concerned a material fact.” In re Omnicare, Inc. Sec. Litig. (“Omnicare III”), 769

F.3d 455, 470 (6th Cir. 2014). While seemingly straightforward, courts “must apply

a different analytical framework to cases based on affirmative misrepresentations,

as opposed to omissions” and “different rules apply when the misrepresentation or

omission concerns hard, as opposed to soft, information.” Id.

An actionable misrepresentation is:

an affirmative statement that is misleading or false. When an alleged

misrepresentation concerns hard information—typically historical

information or other factual information that is objectively verifiable—

it is actionable if a plaintiff pleads facts showing that the statement

concerned a material fact and that it was objectively false or misleading.

When an alleged misrepresentation concerns soft information, which

includes predictions and matters of opinion, a plaintiff must additionally

plead facts showing that the statement was made with knowledge of its

falsity[.]

Id. (internal quotations and citations omitted). When reviewing alleged

misrepresentations of “soft information,” the Sixth Circuit first evaluates the

materiality and whether the statement was misleading or false, and saves

subjective inquiry for the scienter analysis. Id. at 471 (citing In re Credit Suisse

First Boston Corp., 431 F.3d 36, 48–49 (1st Cir. 2005), overruled on other grounds

by Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007)).

An actionable omission, on the other hand, is a defendant’s “failure to

disclose information when it had a duty to do so.” Id. “[I]t bears emphasis that

§ 10(b) and Rule 10b-5 do not create an affirmative duty to disclose any and all . . .

information.” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011). Instead,

[a] duty to affirmatively disclose may arise when there is insider

trading, a statute requiring disclosure, or . . . an inaccurate,

incomplete[,] or misleading prior disclosure. To complicate matters

further, when a person or corporation comes into possession of

information that makes a prior statement inaccurate, incomplete, or

misleading, different duties to disclose the new information arise,

perhaps unsurprisingly, depending on whether the new information is

hard or soft. If the new information is hard, then a person or corporation

has a duty to disclose it if it renders a prior disclosure objectively

inaccurate, incomplete, or misleading. If the new information is soft,

then a person or corporation has a duty to disclose it only if [it is]

virtually as certain as hard facts and contradicts the prior statement.

Omnicare III, 769 F.3d at 471. The Sixth Circuit has explained, “the new

information must be so concrete that the defendant must have actually known that

the new information renders the prior statement misleading or false and still did

not disclose it.” Id. “A company is also obligated, once it chooses to speak on a

subject, to do so fully and fairly[.]” Chamberlain v. Reddy Ice Holdings, Inc., 757 F.

Supp. 2d 683, 700 (E.D. Mich. 2010). “Our securities laws therefore require an actor

to provide complete and non-misleading information with respect to the subjects on

which he undertakes to speak.” City of Monroe Emps. Ret. Sys. v. Bridgestone Corp.,

399 F.3d 651, 670 (6th Cir. 2005) (internal quotations omitted).

To be actionable, misrepresentations and omissions must also relate to

material facts. “Misrepresented or omitted facts are material only if a reasonable

investor would have viewed the misrepresentation or omission as ‘having

significantly altered the total mix of information made available.’” In re Sofamor

Danek, 123 F.3d at 400 (quoting Basic Inc. v. Levinson, 485 U.S. 224, 232 (1988)).

Omitted information is immaterial if it is “so obviously unimportant to a reasonable

investor that reasonable minds could not differ on the question of [its]

unimportance.” City of Monroe, 399 F.3d at 680 (internal quotations and emphasis

omitted).

“‘Immaterial statements include vague, soft, puffing statements or obvious

hyperbole’ upon which a reasonable investor would not rely.” In re Ford Motor Co.

Sec. Litig., 381 F.3d 563, 570 (6th Cir. 2004) (quoting In re K–tel Int’l, Inc. Sec.

Litig., 300 F.3d 881, 897 (8th Cir. 2002)). “Courts have consistently found

immaterial a certain kind of rosy affirmation commonly heard from corporate

managers and numbingly familiar to the marketplace—loosely optimistic

statements that are so vague, so lacking in specificity, or so clearly constituting the

opinions of the speaker, that no reasonable investor could find them important.”

Indiana State Dist. Council of Laborers & Hod Carriers Pension and Welfare Fund

v. Omnicare, Inc. (“Omnicare I”), 583 F.3d 935, 944 (6th Cir. 2009). Still, the Sixth

Circuit warns that courts “must tread lightly at the motion-to-dismiss stage,

engaging carefully with the facts of a given case and considering them in their full

context,” when considering materiality. Omnicare III, 769 F.3d at 472.

The Court “undertake[s] a statement-by-statement analysis” according to this

framework. Bondali v. Yum! Brands, Inc., 620 F. App’x 483, 491 (6th Cir. 2015).

1. Q1 19 Earnings Call

Defendants argue that Mr. Tierney’s comments made on the Q1 19 Earnings

Call are not actionable under the PSLRA. For different reasons as to each alleged

deficiency, the Court agrees.

First, Plaintiffs allege that AEP “concealed” the real reason why it withheld

support for the initial draft of HB 6—that it did not include OVEC cost recovery.

But, as even the Amended Complaint makes clear, OVEC cost recovery was a

visible priority for AEP in the decade leading up to HB 6’s introduction. (Am.

Compl., ¶¶ 40–52.) For example, Mr. Akins stated publicly in 2017 that the

company was “looking for permanent support of the PPA that provides OVEC

generation to AEP Ohio customers.” (Id., ¶ 50.) That same year, AEP supported

legislation that “would provide nearly $256.6 million in subsidies to the OVEC

Plants” over the remaining term of the ICPA. (Id., ¶ 52.) As a result, Mr. Tierney’s

express reference to OVEC cost recovery on the Q1 19 Earnings Call would not have

significantly altered the total mix of information then available to investors. In

other words, the alleged omission was not material.

As to the allegation that AEP “concealed” that it was bribing Speaker

Householder to obtain OVEC cost recovery, Mr. Tierney’s comments on the Q1 19

Earnings Calls were “too generic and innocuous” to be actionable on that basis. In re

TransDigm Grp., Inc. Sec. Litig., 440 F. Supp. 3d 740, 767 (N.D. Ohio 2020). The

Court simply does not accept the notion that such “vague and generic” statements

created any impression that could, or would, have misled a reasonable investor to

believe that AEP was not engaged in the criminal bribery scheme that Plaintiffs

allege. Id., citing, inter alia, Zaluski v. United Am. Healthcare Corp., 527 F.3d 564,

573–74 (6th Cir. 2008) and City of Monroe, 399 F.3d at 671. Nor does the Court find

that those statements gave rise to a duty to disclose any such scheme. Id. See also

In re Sofamor Danek, 123 F. 3d at 402 (explaining that “[t]he legality of

[defendant’s] support for [a] non-profit foundation . . . was a matter of opinion—‘soft

information’”) (internal quotation and citation omitted).

2. Q2 19 10-Q

The Q2 19 10-Q and Q2 Earnings Call are similarly inactionable under the

PSLRA. The Q2 19 10-Q set out a factual explanation of HB 6 and a generic

statement that management “is analyzing the impact” of the newly passed

legislation. On the Q2 Earnings Call, Mr. Akins described the bill, highlighted five

“positives from th[e] legislation for [AEP],” and “congratulate[d]” Speaker

Householder and others for its passage. None of these statements misrepresents or

omits material information.

Plaintiffs allege that the Q2 19 10-Q was false and misleading because AEP

had in fact calculated the impact of OVEC cost recovery on its business and “thus

created the misleading impression that AEP was not behind HB6’s cost recovery

provisions.” (Am. Compl., ¶ 61.) But no reasonable investor would draw such an

impression from the mere deferral of an opinion on how a piece of legislation

impacting more than 30 separate provisions of the Ohio Revised Code governing a

company’s core business and signed into law only two days prior would impact a

company’s operations or financial position. (See ECF No. 29-9.) Plaintiffs similarly

allege that the Q2 Earnings Call “created the false impression that AEP was merely

a distant beneficiary of the bill when, in truth, AEP was actively involved in getting

the bill passed[.]” (Id., ¶ 63.) Contrary to Plaintiffs’ allegations, AEP lobbied on HB

6—and the OVEC cost recovery provision—in broad daylight. As noted in the

Amended Complaint, AEP’s Vice President of External Affairs testified in favor of

that provision shortly before the bill passed. (See id., ¶ 90(c).)

Plaintiffs further allege that Defendants “fraudulently concealed” bribery and

corruption in the Q2 19 10-Q and Q2 Earnings Call. As above, statements so vague,

generic, and innocuous as those identified did not create any impression about the

legitimacy of AEP’s lobbying activities on HB 6 or a duty to disclose the alleged

illegitimate ones. In re TransDigm, 440 F. Supp. 3d at 767.

3. Regulatory Newsletter, Q3 19 10-Q, and 2019 10-K

The allegedly offensive statements made in AEP’s Regulatory Newsletter, Q3

19 10-Q, and 2019 10-K “can be cast aside with little fanfare[.]” Bondali, 620 F.

App’x at 491. They simply describe the provisions of HB 6 as signed into law and, in

the case of the regulatory newsletter, the repeal referendum efforts underway.

There is no allegation that the descriptions are factually inaccurate. Accordingly,

the statements are neither false nor misleading. See id. (concluding that defendant

“did not commit any misstatement by simply explaining that because sales were

lower, projections would be lower”).

4. Corporate Accountability Reports

Finally, Defendants argue that the Corporate Accountability Reports are

“textbook” puffery, inactionable under the PSLRA. The Court agrees. The

statements excerpted contain corporate-speak “so banal and ubiquitous” that a

reasonable investor would rely no more on their content than on a glossy brochure

of toothy grins and erect thumbs. See Omnicare I, 583 F.3d at 944. See also In re

TransDigm, 440 F. Supp. 3d at 764 (finding statements about “value,” “strength,”

and “quality” to be “[un]tethered to any kind of objective standard” and “so lacking

in specificity that no reasonable investor could have found them important in the

‘total mix’ of information”). Plaintiffs argue that their reference to a “belief in

transparency” and “public[] disclos[ure of] lobbying activities and political

contributions” imposed an obligation on AEP to disclose its contributions to EOE.

(See Resp., 10–13.) In context, however, those statements are more akin to “a

declaration of corporate aspirations,” which cannot form the basis of a claim under

the PSLRA. Bondali, 520 F. App’x at 490 (finding that corporate policy on food

safety was not actionable because it was “a statement of aspiration made in

[defendant’s] corporate Code of Conduct rather than an assertion of objective fact”).

Defendants’ motion to dismiss Count One is GRANTED.

B. Count Two fails to state a claim for control person liability.

In Count Two of the Amended Complaint, Plaintiffs assert a claim against

the Individual Defendants under Section 20(a) of the Exchange Act. To plead such a

claim, the plaintiff must allege facts “demonstrating that the defendant controlled

another person who committed an underlying violation of the [Exchange] Act, and

that the defendant culpably participated in that underlying violation.” In re

Transdigm, 440 F. Supp. 3d at 773 (internal quotations and emphasis omitted).

Because Plaintiffs failed to plead a primary violation of the Exchange Act, Count

Two must also be dismissed. Id.

Defendants’ motion to dismiss Count Two is GRANTED.

C. The Amended Complaint will be dismissed with prejudice.

Under Sixth Circuit precedent, “allowing repeated filing of amended

complaints would frustrate the purpose of the PSLRA.” Miller v. Champion Enters.,

346 F.3d 660, 690 (6th Cir. 2003). Plaintiffs did not move for leave to further amend

their Amended Complaint in the event that the Court rules in Defendants’ favor.

Accordingly, its dismissal is with prejudice.

IV. CONCLUSION

For the reasons set forth above, Defendants’ Motion to Dismiss Plaintiffs’

Amended Complaint (ECF No. 29) is GRANTED. Plaintiffs’ Amended Complaint is

DISMISSED with prejudice. The Clerk is DIRECTED to TERMINATE this

case from the docket record of the United States District Court for the Southern

District of Ohio.

IT IS SO ORDERED.

/s/ Sarah D. Morrison

SARAH D. MORRISON

UNITED STATES DISTRICT JUDGE