# IN RE EQT CORPORATION SECURITIES LITIGATION

> District Court, W.D. Pennsylvania · December 2, 2020

URL: https://www.frixlaw.com/law-library/cases/10416100

## Case

- **Court:** District Court, W.D. Pennsylvania
- **Decided:** December 2, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10416100

## How later opinions describe it (automated extraction)

- discussing the Third Circuit’s recognition of the core operations doctrine in Avaya, and pointing to the Avaya court’s citation to Metzler Investment GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1068 (9th Cir.2008

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

)
)
In re EQT Corporation Securities Litigation ) 2:19-cv-00754-RJC
)

)
) Judge Robert J. Colville
)
)

OPINION
Robert J. Colville, United States District Judge
Before the Court is the Motion to Dismiss the First Amended Class Action Complaint (ECF
No. 95) filed by Defendants EQT Corporation (“EQT”), Steven T. Schlotterbeck
(“Schlotterbeck”), Robert J. McNally (“McNally”), David L. Porges (“Porges”), David E.
Schlosser, Jr. (“Schlosser”) (collectively, the “Officer Defendants”), and Jimmi Sue Smith
(“Smith”), James E. Rohr (“Rohr”), Vicky A. Bailey (“Baily”), Philip G. Behrman (“Behrman”),
Kenneth M. Burke (“Burke”), A. Bray Cary, Jr. (“Cary”), Margaret K. Dorman (“Dorman”),
Stephen A. Thorington (“Thorington”), Lee T. Todd, Jr. (“Todd”), Christine J. Toretti (“Toretti”),
Daniel J. Rice IV (“Rice”), and Robert F. Vagt (“Vagt”) (collectively, the “Signer Defendants”).1
Defendants assert that each of the nine Counts set forth in the First Amended Complaint (the
“Complaint”) (ECF No. 85) filed by Lead Plaintiffs the Government of Guam Retirement Fund
(“Guam”), the Northeast Carpenters Annuity Fund, and the Northeast Carpenters Pension Fund
(collectively, “Northeast Carpenters”)2 and Plaintiff Cambridge Retirement System
(“Cambridge”) (collectively, “Plaintiffs”) should be dismissed with prejudice. This Court has

1 The Court shall refer to EQT, the Officer Defendants, and the Signer Defendants collectively as “Defendants.”
2 The Court shall refer to Guam and Northeast Carpenters collectively as “Lead Plaintiffs.”
jurisdiction in this matter pursuant to 28 U.S.C. §§ 1331 and 1337. Defendants’ Motion has been
fully briefed, and is ripe for disposition.
I. Factual Background & Procedural History
In this putative class action, Plaintiffs’ Complaint sets forth the following allegations
relevant to Defendants’ Motion to Dismiss:

EQT is a natural-gas-production company whose primary operations are in the
Appalachian Basin and throughout Pennsylvania, West Virginia, and Ohio. Compl. ¶ 2, ECF No.
85. EQT claims to be the largest producer of natural gas in the United States based on average
daily sales volume. Id. In Western Pennsylvania, EQT drills and completes natural-gas wells
through the process of hydraulic fracturing in the Marcellus Shale deposit. Id. at ¶ 39. The Officer
Defendants occupied positions within EQT which provided them with “the power and authority to
control the contents of EQT’s reports to the SEC and investors, press releases, and presentations
to securities analysts, money and portfolio managers, and institutional investors.”3 Id. at ¶ 38.
Each of the Signer Defendants either: (1) was the Chief Accounting Officer or a director of EQT,

signed the Registration Statement (defined below) and permitted his or her name to be used in
solicitations contained in the Registration Statement; or (2) was the CEO of Rice Energy Inc.
(“Rice”) or a director of Rice who “was named in the Registration Statement, with his written
consent, as a person who would become a director of EQT upon the closing of the Acquisition,”
and who “permitted his name to be used in solicitations contained in the Registration Statement.”
Id. at ¶ ¶480-491.

3 More specifically: (1) Schlotterbeck was EQT’s President and CEO from March 1, 2017, until March 14, 2018,
Compl. ¶ 34, ECF No. 85; (2) McNally was EQT’s Senior Vice President and CFO from March 2016 to November
2018 and became EQT’s President and CEO on November 12, 2018, id. at ¶ 35; (3) Porges was EQT’s Chairman and
CEO from 2011 through February 2017, its Executive Chairman from March 2017 through February 2018, and its
Chairman from March 1, 2018, to March 14, 2018, when he replaced Schlotterbeck as Interim President and CEO
until November 12, 2018, id. at ¶ 36; and (4) Schlosser was EQT’s Senior Vice President and President, Exploration
and Production, from March 2017 through October 24, 2018, id. at ¶ 37.
Guam is a defined benefit pension plan that purchased shares of EQT common stock during
the relevant Class Period (defined below). Compl. ¶ 29, ECF No. 85. Northeast Carpenters are
pension and benefit funds that purchased shares of EQT common stock during the Class Period
and held shares of EQT stock on September 25, 2017, the record date for EQT shareholders to vote
on the Acquisition (defined below). Id. at ¶ 30. Cambridge is a contributory retirement system

which:
[P]urchased shares of EQT stock during the Class Period; held shares of EQT stock
on September 25, 2017, the record date for EQT shareholders to vote on the
Acquisition; held shares of Rice stock on September 21, 2017, the record date for
Rice shareholders to vote on the Acquisition; held Rice stock on November 13,
2017, the closing date of the Acquisition[;] and acquired EQT stock in exchange
for its Rice stock in the Acquisition[.]

Id. at ¶ 31.

On June 19, 2017, EQT announced that it had entered into an agreement to acquire rival
gas producer Rice for $6.7 billion4 (the “Acquisition”). Id. at ¶ 3. Schlotterbeck, EQT’s then-
President and CEO, cited substantial synergies, defined by Plaintiffs as “the benefit derived from
the combined value and performance of two companies exceeding the sum of the separate
individual parts,” id. at ¶ 3 n.1, that the Acquisition would purportedly generate as justification for
the proposed merger, id. at ¶ 3. More specifically, EQT issued a press release on June 19, 2017
asserting that, “by combining EQT’s and Rice’s contiguous acreage, EQT could drill natural-gas

4 Plaintiffs describe the consideration exchanged in the Acquisition as follows:

Rice shareholders would receive 0.37 of a share of EQT common stock and $5.30 in cash in
exchange for each share of Rice common stock they held (other than shares of Rice common stock
held by EQT or certain of its subsidiaries, shares held by Rice in treasury, or shares for which
appraisal was properly demanded under Delaware law). The Acquisition consideration amounted
to $5.4 billion in EQT stock and $1.3 billion in cash.

Compl. ¶ 55, ECF No. 85.
wells with longer laterals,”5 which EQT claimed would “generate cost savings and synergies
amounting to at least $2.5 billion from the economies of scale that would result from drilling longer
wells from the same well pads.”6 Compl. ¶ 57, ECF No. 85. Defendants asserted that these
synergies and costs savings would be attained by drilling 1,200 wells at an average lateral length
of 12,000 feet, and further by reducing its total number of well pads from 199 to 99. Id. at ¶ 66.

EQT also held an investor conference call and presentation on June 19, 2017, and Schlotterbeck
sent an email to all EQT employees, further touting the same purported benefits of EQT’s potential
acquisition of Rice. Id. at ¶¶ 60-65.
On July 3, 2017, investor JANA Partners LLC (“JANA”) disclosed that it had acquired a
nearly 6% equity stake in EQT, and further stated that it opposed the Acquisition and disputed
EQT’s proffered bases supporting the Acquisition. Compl. ¶ 8, ECF No. 85. More specifically,
JANA asserted that the potential synergies cited by EQT were “grossly exaggerated,” and that
EQT’s purported drilling plan was unattainable because EQT and Rice did not possess enough
contiguous undrilled acreage to allow for the increase in lateral length cited by Defendants as a

basis for the Acquisition. Id. at ¶ 121. On July 5, 2017, JANA sent a letter to EQT’s Board which
set forth materially similar opposition to the Acquisition, and also filed this letter with SEC. Id. at
¶ 122. On July 27, 2017, Defendants filed a combined registration statement on Form S-4,

5 In Defendants’ Brief in Support of their Motion to Dismiss, Defendants define lateral wells and describe the benefit
of drilling longer lateral wells as follows:

Lateral wells, which run parallel to the ground as deep as 10,000 feet below the surface, are the only
way to produce natural gas efficiently from shale formations such as the Marcellus. Longer laterals
allow for greater efficiency, because they allow more natural gas to be extracted from the same well,
reducing the cost per unit of natural gas.

Br. in Supp. 1 n. 2 (internal citations to the Complaint omitted).
6 Planning and drilling multiple wells on a single well pad, “which is the area cleared for a drilling rig to work on a
plot of land designated for natural-gas extraction,” is a way in which gas companies attempt to achieve economies of
scale. Compl. ¶ 49, ECF No. 85.
prospectus, and joint proxy statement/prospectus (together, the “Registration Statement”) with the
SEC in connection with the Acquisition. Id. at ¶ 67. The Registration Statement set forth several
representations respecting the potential benefits of the Acquisition that were consistent with EQT’s
June 19, 2017 representations discussed above, and effectively denied JANA’s objections to the
Acquisition.7 Id. at ¶¶ 69-71; 216-223.

JANA continued to publicly oppose the Acquisition through the sending and filing of
letters, as well as the filing of proxy materials in opposition to the Acquisition with the SEC,8
consistently citing the impossibility of EQT’s claimed synergy drilling plan of 1,200 wells with
12,000 feet in average lateral length, and EQT consistently and repeatedly publicly denied any of
the criticisms raised by JANA. Id. at ¶¶ 124-47; 237. Prior to the Acquisition, Rice and EQT
formed an integration team that ultimately dissolved in July or August 2017 over disagreements
regarding the attainability of EQT’s projected synergies and future operations plans. Id. at ¶¶ 92-
93. Also prior to the Acquisition, EQT experienced operational difficulties in drilling ultra-long
laterals, including the allegedly undisclosed collapse of two 18,000 foot-plus lateral wells. Id. at

¶¶ 95-99, 279. On November 9, 2017, majorities of EQT and Rice shareholders ultimately voted
in favor of the Acquisition, and the Acquisition closed on November 13, 2017. Id. at ¶ 152.

7 EQT amended the Registration Statement on September 8, 2017 and September 29, 2017, and the SEC declared the
Registration Statement effective on October 12, 2017. Compl. ¶ 67, ECF No. 85.
8 Part of JANA’s objection to the Acquisition dealt with EQT’s management compensation scheme, specifically that:

EQT’s management had an inappropriate incentive to push the Acquisition regardless of whether it
was beneficial to EQT shareholders because management’s incentive compensation was based in
large part on natural-gas production growth, which could be achieved by any means including
acquisitions and was not measured on a per-share basis, so that stock-for-stock acquisitions like the
Acquisition of Rice would increase management’s compensation regardless of whether they
benefited shareholders on a per-share basis.

Compl. ¶ 128, ECF No. 85. JANA ultimately withdrew its proxy-solicitation materials after “EQT agreed to revise
the management-compensation scheme that JANA had criticized as providing inappropriate incentives for
management based on the Acquisition, and to accelerate consideration of possible transactions to address the ‘sum-
of-the-parts’ undervaluation that JANA argued affected the Company’s stock price.” Id. at ¶ 148.
Plaintiffs assert that, following the Acquisition, EQT was unable to drill longer laterals in
a cost-efficient manner and that it did not achieve the claimed synergies cited as a basis for the
Acquisition. Compl. ¶ 153, ECF No. 85. Despite this, EQT and the Officer Defendants stated that
the Acquisition was exceeding expectations, and expressed confidence that EQT was “on track”
to achieve and exceed the synergies described as a basis for the Acquisition. Id. at ¶ 156. EQT

continued to experience increased costs and difficulties in its lateral drilling operations, and
refused to incorporate Rice’s proffered best practices, instead opting to utilize its own purportedly
outdated and ineffective methods. Id. at ¶¶ 157-63. Following the Acquisition and up until mid-
to late 2018, EQT did not publicly reveal these increased costs and operational issues, and instead:
(1) portrayed the Acquisition and EQT’s ongoing operations and financial results as successful;
(2) understated and hid increased operating and development costs from investors; and (3)
capitalized rather than expensed the cost of treatment and disposal of all of its produced water.9
Id. at ¶¶ 164-94.
On October 25, 2018, EQT held an investor and analyst conference call, wherein EQT

disclosed negative financial results for EQT’s third quarter. Compl. ¶ 332, ECF No. 85.
Specifically, EQT revealed that: (1) EQT “ was increasing well-development capital expenditures
for 2018 by $300 million, or 14%, based on costs that ‘represent primarily onetime events that
were driven by pace of activity, ultra-long lateral learning curve[,] and some service cost

9 Plaintiffs explain:

[P]roduced water is the water that comes back out of the well along with the natural gas. The
treatment and disposal of produced water is a material cost for well development and operations.
The produced water is contaminated both by the chemicals the drilling company used to
hydraulically fracture the shale and by the chemical properties of the formation underground. This
produced water is expensive for the operator to treat and dispose of.

Compl. ¶ 185, ECF No. 85. Plaintiffs assert that “[d]isposed produced water should not be capitalized as an asset.”
Id. at ¶ 186.
increases[;]’” (2) EQT had reported a quarterly net loss attributable to EQT of $40 million; (3)
EQT’s 2018 costs were higher than had been initially anticipated. Id. at ¶¶ 332-37. Following this
news, EQT’s shares fell from a close of $40.46 per share on October 24, 2018 to $35.34 on October
25, 2018, and eventually fell to as low as $31.00 per share over the next several days. Id. at ¶ 338.
On December 10, 2018, Toby and Derek Rice, two of the founders of Rice, and their

executive team (collectively, the “Rice Team”) sent a letter to the EQT Board and released a
presentation which took issue with EQT’s stock-price performance and set forth “the Rice Team’s
plan for improving EQT’s operations and generating free cash flow per year above EQT’s then-
current plan.” Compl. ¶ 341, ECF No. 85. In response to the Rice Team’s representations in this
letter and presentation, EQT asserted that the Rice Team’s plan for more efficient operations and
well drillings, which were based in part on Rice’s costs before the Acquisition, see id. at ¶ 18, were
not applicable to EQT or repeatable because EQT had a much larger asset base and geographical
footprint than Rice at the time of the Acquisition. Id. at ¶¶ 342-43. On February 5, 2019, the Rice
Team released another public presentation and hosted an investor call which set forth a plan for

revamping EQT by appointing Toby Rice as EQT’s new chief executive and implementing Rice’s
strategies and best practices to improve operations, and further disclosed that EQT had repeatedly
refused to adopt Rice’s best practices when approached by Rice employees and that EQT had
understated and erroneously adjusted well costs. Id. at ¶¶ 344-48. That same day, EQT issued a
statement generally denying the Rice Team’s analysis. Id. at ¶ 351. Following the February 5,
2019 disclosures, EQT’s stock price fell 3.5%. Id. at ¶ 349.
On June 17, 2019, the Rice Team filed proxy materials, including a presentation, with the
SEC which asserted that:
(i) EQT failed to achieve the benefits of the Acquisition; (ii) EQT did not seek and
had not achieved the synergies and cost savings that were the purported rationale
of the Acquisition; (iii) EQT failed to adopt Rice’s best practices; (iv) EQT was
excluding more than $300 million in costs it capitalized from its well costs; and (v)
EQT leadership “lacks credibility and has misled shareholders.”

Compl. ¶ 354, ECF No. 85. More specifically, Plaintiffs assert that the presentation disclosed:
(i) “EQT [] failed to acknowledge its inability to achieve 90%+ of the merger
synergies”; (ii) EQT use[d] “Misleading math” to exclude “more than $300 million
in costs it capitalizes from its well costs”; (iii) the EQT leadership “lacks credibility
and has misled shareholders”; and (iv) EQT “consistently misled shareholders,”
including through EQT’s claim during the second quarter of 2018 that EQT was
achieving the synergies from the Acquisition when, in fact, in the third quarter of
2018, EQT disclosed the $300 million capital expense miss and 5% production
volume miss.

Id. at ¶ 22 (emphasis omitted). On June 18, 2019, the Rice Team issued a press release concerning
its June 17 investor presentation, and EQT issued a statement denying the claims set forth in the
presentation. Id. at ¶ 367-68. On June 19, 2019, EQT’s stock price fell 5% from $15.96 to $15.06.
Id. at ¶ 369. On July 9 and 10, 2019, investors voted to give Board and executive control of EQT
to the Rice Team. Id. at ¶ 371.
The timeframe at issue in this case (the “Class Period”) is June 19, 2017, the date that EQT
announced the Acquisition, through June 17, 2019, the date that the Rice Team filed proxy
materials with the SEC. Compl. ¶1, ECF No. 85. Plaintiffs bring this action on behalf of
themselves and on behalf of:
(i) all persons who purchased the common stock of EQT during the Class Period
and were damaged thereby; (ii) all EQT shareholders who held EQT shares as of
the record date of September 25, 2017 and were entitled to vote with respect to the
Acquisition at the November 9, 2017 special meeting of EQT shareholders and
were damaged thereby; (iii) all Rice shareholders who held Rice shares as of the
record date of September 21, 2017 and were entitled to vote with respect to the
Acquisition at the November 9, 2017 special meeting of Rice shareholders and were
damaged thereby; and (iv) all persons who acquired the common stock of EQT in
exchange for their shares of Rice common stock in connection with the Acquisition
and were damaged thereby (the “Class”).
Id. at ¶ 598. Plaintiffs assert that Plaintiffs and other members of the class suffered economic loss
under the federal securities laws as a result of Defendants’ purported material misrepresentations
and omissions in connection with the Acquisition because they purchased EQT stock, which
Plaintiffs allege had its value artificially inflated by said misrepresentations and omissions and
then experienced a precipitous drop in value following disclosure of Defendants’ purported

material misrepresentations and omissions, during the Class Period. Id. at ¶ 372.
Generally, Plaintiffs’ assertions of materially false and misleading statements and/or
omissions made by Defendants can be broken down as follows: (1) statements and omissions at
the time of the announcement of the Acquisition, see Compl. ¶¶ 196-213, ECF No. 85; (2)
statements and omissions in the Registration Statement, see id. at ¶¶ 214-24; (3) statements and
omissions that occurred in the timeframe between the initial filing of the Registration Statement
and the November 13, 2017 closing on the Acquisition, see id.at ¶¶ 225-63; (4) statements and
omissions made following the Acquisition respecting EQT’s post-Acquisition operations and costs
and EQT’s purported realization of the synergies and benefits that served as the basis for the

Acquisition, see id. at ¶¶ 264-307; and (5) statements and omissions following the Acquisition
with respect to EQT’s financial performance/condition, see id. at ¶¶ 308-30.
Plaintiffs argue that, in making the statements discussed above, Defendants knowingly or
recklessly made materially false and misleading statements and/or omitted material facts because
the synergies cited as a basis for the Acquisition were impossible to achieve due to the fact that
EQT and Rice lacked the combined undrilled acreage, and the capability, to achieve these
synergies. Br. in Opp’n 1, ECF No. 102. Plaintiffs further argue that Defendants knowingly or
recklessly made materially false and misleading statements and/or omitted material facts when,
following the Acquisition, Defendants hid operational issues and rising costs from investors and
instead incorrectly informed shareholders that EQT was “combining best practices,” “ahead of
schedule for achieving our capital synergies,” and “well on track to deliver and exceed” the $2.5
billion of “base” synergies. Id.
On September 19, 2019, the Honorable Maureen P. Kelly, to whom this case was originally
assigned, entered an Order: (i) appointing Guam and Northeast Carpenters as Lead Plaintiffs; (ii)

appointing Bernstein Litowitz Berger & Grossmann LLP and Cohen Milstein Sellers & Toll
PLLC as Lead Counsel; (iii) ordering that, pursuant to Rule 42(a), any subsequently filed,
removed, or transferred actions that are related to the claims asserted in this action are consolidated
for all purposes; and (iv) ordering that this action be captioned In re EQT Corporation Securities
Litigation and maintained under Master File No. 2:-19-cv-00754-MPK.10 Order 2, ECF No. 35.
Plaintiffs filed the Complaint on December 6, 2019, setting forth claims for violations of federal
securities laws, and specifically violations of: Sections 10(b), 14(a), 20A, and 20(a) of the
Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. §§ 78j(b), 78t-1, 78n(a), and
78t(a)), SEC Rules 10b-5 and 14a-9 (17 C.F.R. §§ 240.10b-5 and 240.14a-9), and Sections 11,

12(a)(2), and 15 of the Securities Act of 1933 (the “Securities Act”) (15 U.S.C. §§ 77k, 77l, and
77o). Compl. ¶ 25, ECF No. 85. Defendants filed their Motion to Dismiss, along with a Brief in
Support (ECF No. 96) and a Declaration in Support (ECF No. 97), on January 21, 2020. This
matter was reassigned to the undersigned on February 21, 2020. On March 6, 2020, Plaintiffs filed
a Brief in Opposition (ECF No. 102) to Defendants’ Motion and a Declaration in Support of
Plaintiffs’ Opposition (ECF No. 103). Defendants filed a Reply (ECF No. 108) on March 26,
2020.

10 Following reassignment to the undersigned, this case is now maintained under Master File No. 2:19-cv-00754-RJC.
II. Legal Standard
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
legal sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In
deciding a motion to dismiss, the court is not opining on whether the plaintiff will likely prevail
on the merits; rather, when considering a motion to dismiss, the court accepts as true all well-pled

factual allegations in the complaint and views them in a light most favorable to the plaintiff. U.S.
Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). While a complaint does not need
detailed factual allegations to survive a Rule 12(b)(6) motion to dismiss, a complaint must provide
more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A
“formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v.
Allain, 478 U.S. 265, 286 (1986)).
“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.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007)). “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.” Iqbal, 556 U.S. at
678 (citing Twombly, 550 U.S. at 556). The Supreme Court of the United States has explained:
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.’”

Id. (quoting Twombly, 550 U.S. at 556) (internal citations omitted).
The United States Court of Appeals for the Third Circuit instructs that “a court reviewing
the sufficiency of a complaint must take three steps.” Connelly v. Lane Constr. Corp., 809 F.3d
780, 787 (3d Cir. 2016). The court explained:
First, it must “tak[e] note of the elements [the] plaintiff must plead to state a claim.”
Iqbal, 556 U.S. at 675. Second, it should identify allegations that, “because they
are no more than conclusions, are not entitled to the assumption of truth.” Id. at
679; see also Burtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011)
(“Mere restatements of the elements of a claim are not entitled to the assumption of
truth.” Finally, “[w]hen there are well-pleaded factual allegations, [the] court
should assume their veracity and then determine whether they plausibly give rise
to an entitlement to relief.” Iqbal, 556 U.S. at 679.

Connelly, 809 F.3d at 787. “Determining whether a complaint states a plausible claim for relief
will . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679 (internal citations omitted).
In addition to reviewing the facts contained in the complaint, a court may consider “matters
of public record, orders, exhibits attached to the complaint and items appearing in the record of
the case.” Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994).
When a document integral to or relied upon in the complaint is included, the court may also
consider that document. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
1997).
“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The United States Court of Appeals for the
Third Circuit has explained:
Pursuant to Rule 9(b), a plaintiff alleging fraud must state the circumstances of the
alleged fraud with sufficient particularity to place the defendant on notice of the
“precise misconduct with which [it is] charged.” Lum v. Bank of America, 361 F.3d
217, 223–224 (3d Cir.2004). To satisfy this standard, the plaintiff must plead or
allege the date, time and place of the alleged fraud or otherwise inject precision or
some measure of substantiation into a fraud allegation.
Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007).
III. Discussion
In the Complaint, Plaintiffs assert the following claims: (1) Count I asserts claims for
violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5 against EQT and the Officer
Defendants; (2) Count II asserts a claim for violation of Section 20A of the Exchange Act against

Porges; (3) Count III asserts claims for violations of Section 20(a) of the Exchange Act against the
Officer Defendants; (4) Count IV asserts claims for violations of Section 14(a) of the Exchange
Act and SEC Rule 14a-9 against EQT, the Officer Defendants, and the Signer Defendants on behalf
of EQT shareholders who were entitled to vote on the Acquisition; (5) Count V asserts claims for
violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against EQT, the Officer
Defendants, and the Signer Defendants on behalf of Rice shareholders who were entitled to vote
on the Acquisition; (6) Count VI asserts claims for violations of Section 20(a) of the Exchange
Act against the Officer Defendants; (7) Count VII asserts claims for violations of Section 11 of the
Securities Act against EQT, the Officer Defendants, and the Signer Defendants; (8) Count VIII

asserts a claim for violations of Section 12(a)(2) of the Securities Act against EQT; (9) Count IX
asserts claims for violations of Section 15 of the Securities Act against the Officer Defendants.11
Plaintiffs describe their claims as follows:
Plaintiffs bring two different sets of claims on behalf of purchasers of EQT’s and
Rice’s securities during the Class Period. Counts I, II, and III assert securities-
fraud and insider-trading and related control-person claims under Sections 10(b),
20A, and 20(a) of the Exchange Act and SEC Rule 10b-5 against EQT and the
Officer Defendants (defined below). Counts IV, V, and VI assert proxy

11 Counts I and III are brought by all Plaintiffs. Count II is seemingly brought by only Northeast Carpenters. See
Compl. ¶¶ 467, 471-72, ECF No. 85. Counts IV, V, and VI are brought by Cambridge “on behalf of shareholders of
EQT and Rice who held EQT or Rice shares as of the record dates of September 25, 2017, and September 21, 2017,
respectively, and were entitled to vote at an EQT or Rice special meeting on November 9, 2017 with respect to EQT’s
acquisition of Rice, which closed on November 13, 2017.” Id. at ¶ 1. Counts IV and VI are also brought by Northeast
Carpenters on behalf of the relevant shareholders of EQT. Id. Counts VII, VIII, and IX are brought by Cambridge
on behalf of all persons who acquired EQT common stock in exchange for their shares of Rice common stock in
EQT’s acquisition of Rice. Id.
misstatement and related control-person claims under Sections 14(a) and 20(a) of
the Exchange Act. Counts VII, VIII, and IX assert strict liability, negligence, and
control-person causes of action against those Defendants who are statutorily
responsible under Sections 11, 12(a)(2) and 15 of the Securities Act for materially
untrue statements and misleading omissions in the prospectus and registration
statement (and documents incorporated by reference in the registration statement)
for the Acquisition.

Compl. ¶ 24, ECF No. 85.

Defendants argue that each of these claims should be dismissed with prejudice. Defendants
assert that Count I, which asserts violations of Section 10(b) of the Exchange Act, should be
dismissed because: (1) Plaintiffs’ claims do not meet the exacting pleading standards of the Private
Securities Litigation Reform Act (“PSLRA”), Br. in Supp. 2, ECF No. 96; (2) Plaintiffs do not
sufficiently allege that any of the purported misrepresentations at issue, both pre- and post-
Acquisition, were false or misleading when made, id.;12 (3) Plaintiffs have not adequately alleged
that EQT or the Officer Defendants acted with scienter, id. at 3; and (4) Plaintiffs do not
sufficiently allege loss causation, id.
Defendants further argue that Counts IV, V, VII, and VIII, which arise under Sections 11
and 12(a)(2) of the Securities Act and Section 14(a) of the Exchange Act, should be dismissed
because: (1) the allegedly false or misleading statements set forth in Registration Materials filed
in connection with the Acquisition were not false or misleading at the time they were made, id.;
and (2) the claims set forth at these Counts are time-barred because “Plaintiffs should have known
about the facts giving rise to these claims no later than October 2017, when JANA publicly raised
the same concerns with the [Acquisition] that now form the basis of Plaintiffs’ Complaint,” id. at

12 More specifically, Defendants aver that: (1) most of the alleged misstatements merely reflect disagreement with
EQT’s pre-Acquisition synergy projections; (2) Plaintiffs fail to allege with sufficient particularity any erroneous
accounting or financial guidance, or any additional disclosures that Defendants were required to make; (3) the
purported misstatements are inactionable forward-looking statements, statements of opinion, or corporate optimism
that were made when all of the alleged facts that purportedly rendered these statements false were known to the market;
and (4) some of the alleged misstatements were not made by Defendants. Br. in Supp. 2-3, ECF No. 96.
4. Defendants argue that Counts III, VI, and IX, which assert that the Officer Defendants violated
Section 20(a) of the Exchange Act and Section 15 of the Securities Act, and Count II, which asserts
that Porges violated Section 20A of the Exchange Act, should be dismissed because they are based
on the same primary violations of Sections 11 and 12(a)(2) of the Securities Act and Sections 10(b)
and 14(a) of the Exchange Act that Defendants argue should be dismissed for the reasons set forth

above. Id.
A. Plaintiffs’ Claims for Violations of Section 10(b) of the Exchange Act (Count I)
The Supreme Court of the United States has explained that Section 10(b) of the Exchange
Act makes it:
“unlawful for any person, directly or indirectly, by the use of any means or
instrumentality of interstate commerce or of the mails, or of any facility of any
national securities exchange ..... [t]o 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 Commission may prescribe as
necessary or appropriate in the public interest or for the protection of investors.”

Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, 552 U.S. 148, 156 (2008) (quoting 15 U.S.C. § 78j).
Securities and Exchange Commission Rule 10b-5 further provides that it is unlawful for any
person, directly or indirectly:
(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would
operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security.

17 C.F.R. § 240.10b-5. To state a claim for private securities fraud pursuant to Section 10(b), 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.”
Stoneridge, 552 U.S. at 157.
“[P]laintiffs alleging securities fraud pursuant to the [the Exchange Act] must also comply
with the heightened pleading requirements of the PSLRA.” California Pub. Employees’ Ret. Sys.

v. Chubb Corp., 394 F.3d 126, 144 (3d Cir. 2004). Under the PSLRA, a securities fraud claim
brought pursuant to the Exchange Act must “specify each statement alleged to have been
misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding
the statement or omission is made on information and belief, the complaint shall state with
particularity all facts on which that belief is formed.” 15 U.S.C. § 78u–4(b)(1). In enacting the
PSLRA, Congress intended to “substantially heighten” the existing pleading requirements, and the
“particularity described in § 78u–4(b)(1) extends that of Rule 9(b) and requires plaintiffs to set
forth the details of allegedly fraudulent statements or omissions, including who was involved,
where the events took place, when the events took place, and why any statements were

misleading.” In re Rockefeller Ctr. Properties, Inc. Sec. Litig., 311 F.3d 198, 217 (3d Cir. 2002).
In the present case, Defendants argue that Plaintiffs fail to sufficiently allege facts
supporting: (1) any material misrepresentation or omission; (2) scienter; or (3) loss causation. Br.
in Supp. 11, ECF No. 96.
1. Misrepresentations or Omissions
Defendants argue that Plaintiffs’ Section 10(b) claims should be dismissed for a failure to
allege a misrepresentation or omission for the following reasons: (1) Plaintiffs fail to allege how
any of the purported misrepresentations at issue were false or misleading when made; (2) most of
the challenged statements constitute inactionable forward-looking statements, corporate optimism,
or statements of opinion; (3) the alleged misrepresentations were made when all of the alleged
facts that purportedly rendered these statements false were known to the market; (4) the Complaint
does not allege sufficient facts to support a finding of an omission; and (5) some the challenged
statements were not made by Defendants. Br. in Supp. 11, ECF No. 96.
Plaintiffs argue that Defendants knowingly or recklessly made materially false and

misleading statements and/or omitted material facts in advance of the Acquisition because EQT
and Rice lacked the combined undrilled acreage, and the capability, to achieve the synergies cited
as a basis for the Acquisition through the drilling of 1,200 wells at an average length of 12,000
feet and a reduction of its well pads from 199 to 99. Br. in Opp’n 1; 3-4, ECF No. 102. Plaintiffs
further argue that EQT and the Officer Defendants knowingly or recklessly made materially false
and misleading statements and/or omitted material facts when, following the Acquisition, EQT
and the Officer Defendants hid operational issues and rising costs from investors and instead
incorrectly informed shareholders that EQT was “combining best practices,” “ahead of schedule
for achieving our capital synergies,” and “well on track to deliver and exceed” the $2.5 billion of

“base” synergies. Id. Plaintiffs also assert a Section 10(b) claim for accounting fraud based upon
EQT’s statements respecting its financial results and guidance following the Acquisition. Id. at
20.
a. Pre-Acquisition Representations Respecting EQT’s Ability to Drill 1,200
Wells at an Average Length of 12,000 Feet
Plaintiffs’ assertions of false statements made pre-Acquisition rely on EQT’s and the
Officer Defendants’ repeated assertions that the Acquisition would enable EQT to drill
approximately 1,200 wells at an average lateral length of 12,000 feet. Br. in Opp’n 11, ECF No.
102. Plaintiffs assert that these statements were false and misleading statements of present fact
because it was impossible to drill 1,200 wells of 12,000 average lateral feet as there was not enough
combined, previously undrilled EQT and Rice acreage to support EQT’s claims. Id. EQT and the
Officer Defendants repeatedly made assertions respecting EQT’s ability to drill approximately
1,200 wells at an average length of 12,000 feet should the Acquisition occur, including: (1) in
citing the drilling of such wells as a fundamental basis for the potential synergies that could be

generated as a result of the Acquisition at the time of announcing the Acquisition, Compl. ¶ 66,
ECF No. 85; (2) in the Registration Statement, id. at ¶ 219; and (3) in emphatically denying
JANA’s assertions that the drilling of such wells would be impossible given the amount of
undrilled, contiguous acreage possessed by EQT and Rice, id. at ¶¶ 226-30; 237; 251-54.
Defendants assert that Plaintiffs cannot state a Section 10(b) claim which relies on EQT’s
or the Officer Defendants’ statements regarding EQT’s plan of drilling 1,200 wells at an average
length of 12,000 feet because any such statements were forward-looking due to the fact that the
wells had not been drilled yet, and because these statements relied on EQT’s assumption that it
could address the issue of any non-contiguous acreage with “well-path adjustments, smaller bolt-

on acquisitions, and tactical fill-ins.” Reply 6, ECF No. 108 (quoting Compl. ¶ 237, ECF No. 85).
Defendants further argue that Plaintiffs’ Section 10(b) claims cannot rely on statements that EQT
would be able to drill 1,200 wells at an average length of 12,000 feet following the Acquisition
because JANA repeatedly publicly stated that the drilling of such wells would be impossible, and
that such information was known to the market and thus cannot form the basis of a Section 10(b)
claim. Br. in Opp’n 27, ECF No. 96.
With respect to “forward-looking statements,” the United States Court of Appeals for the
Third Circuit has explained:
The term “forward-looking statement” is broadly defined in the statute to include
statements “containing a projection of revenues, income (including income loss),
earnings (including earnings loss) per share, capital expenditures, dividends, capital
structure, or other financial items”; statements of “the plans and objectives of
management for future operations, including plans or objectives relating to the
products or services of the issuer”; or statements of “future economic performance,
including any such statement contained in a discussion and analysis of financial
condition by the management or in the results of operations included pursuant to
the rules and regulations of the Commission.” 15 U.S.C. § 78u–5(i)(1)(A)–(C).
Further, forward-looking statements include “any statement of the assumptions
underlying or relating to any statement described” in the definition. § 78u–
5(i)(1)(D).

Institutional Inv’rs Grp. v. Avaya, Inc., 564 F.3d 242, 255 (3d Cir. 2009). With respect to falsity
of forward-looking statements, the Third Circuit has explained:
To adequately state a claim under the federal securities laws, it is not enough merely
to identify a forward-looking statement and assert as a general matter that the
statement was made without a reasonable basis. Instead, plaintiffs bear the burden
of “plead[ing] factual allegations, not hypotheticals, sufficient to reasonably allow
the inference” that the forecast was made with either (1) an inadequate
consideration of the available data or (2) the use of unsound forecasting
methodology.

Burlington, 114 F.3d at 1429 (quoting Glassman v. Computervision Corp., 90 F.3d 617, 628-29
(1st Cir.1996)).
“In addition to establishing a heightened pleading standard, the PSLRA provides a so-
called ‘safe harbor’ that immunizes certain ‘forward-looking’ statements from § 10(b) liability.”
OFI Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481, 490 (3d Cir. 2016). “[A]ny forward-
looking statement is protected if it is either accompanied by ‘substantive and tailored’ cautionary
statements or if the plaintiff fails to show ‘actual knowledge of falsehood.’” OFI, 834 F.3d at 491.
A cautionary statement must be “‘extensive yet specific’ to prevent a reasonable investor from
relying on specific projections.” Howard v. Arconic Inc., 395 F. Supp. 3d 516, 554 (W.D. Pa.
2019) (quoting Semerenko v. Cendant Corp., 223 F.3d 165, 182 (3d Cir. 2000)). Further:
The bespeaks caution doctrine, which overlaps with, but is not supplanted by, the
PSLRA safe harbor, provides that when:
[F]orecasts, opinions or projections are accompanied by
meaningful cautionary statements, the forward-looking statements
will not form the basis for a securities fraud claim if those statements
did not affect the ‘total mix’ of information ... provided investors.
In other words, cautionary language, if sufficient, renders the
alleged omissions or misrepresentations immaterial as a matter of
law.

Howard v. Arconic Inc., 395 F. Supp. 3d 516, 554 (W.D. Pa. 2019) (quoting In re Donald J. Trump
Casino Sec. Litig.-Taj Mahal Litig., 7 F.3d 357, 369 n.11 (3d Cir. 1993)).
A mixed statement of present fact and future projection, however, is not entitled to the
PSLRA safe harbor. Avaya, 564 F.3d at 255. In describing this principle, the Third Circuit in
Avaya discussed relevant caselaw from other Circuits:
In [Makor Issues & Rights, Ltd. v. Tellabs Inc. (Tellabs II), 513 F.3d 702 (7th
Cir.2008)], defendants stated that sales of their product were “still going strong.”
513 F.3d at 705. The Seventh Circuit interpreted the communication as “saying
both that current sales were strong and that they would continue to be so, at least
for a time, since the statement would be misleading if Tellabs knew that its sales
were about to collapse.” Id. Accordingly, defendants were not entitled to “a safe
harbor with regard to the statement’s representation concerning current sales.” Id.
In [In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187, 213 (1st Cir.2005)],
defendants had asserted that the company “has on hand and has access to sufficient
sources of funds to meet its anticipated ... needs.” 414 F.3d at 207. Even though
“the statement includes a reference to anticipated future needs for funds,” the First
Circuit found a portion of defendants’ assertion to be a statement of present fact
ineligible for the Safe Harbor provision. Id. at 212. “[T]he alleged falsehood was
in the fact that the statement claimed that the Company had access to ample cash at
a time when the Company was suffering a dire cash shortage. The claim was not
that the Company was understating its future cash needs.” Id. at 213.

Id. The Third Circuit distinguished these cases from the situation presented in Avaya, finding that
the statements that “[Avaya’s] first quarter results position us to meet our goals for the year” and
that “we are on track to meet our goals for the year, even though there were some aspects to our
performance that are below our expectations and that we are working on to improve,” id. at 254,
could not “meaningfully be distinguished from the future projection of which they are a part,” id.
at 255. The Third Circuit explained:
Here, however, the assertions of current fact are too vague to be actionable. These
statements do not justify the financial projections in terms of any particular aspect
of the company’s current situation; they say only that, whatever that situation is, it
makes the future projection attainable. Such an assertion is necessarily implicit in
every future projection.

Id. The Third Circuit further explained that “[t]he ‘on track’ and ‘position us’ language here,
however, does not advert to a particular current fact such as cash on hand, but expresses only
defendants’ continuing comfort with the earlier, October annual projection, which they were then
reiterating; that is, it amounts in essence to a reaffirmation of that projection.” Id. at 256.
Plaintiffs have identified several statements by Defendants, most notably in the
Registration Statement, representing that the Acquisition would enable EQT to achieve synergies
by increasing its inventory in Washington and Greene Counties from “approximately 775
undeveloped locations with an average of 8,000’ lateral to approximately 1,200 undeveloped
drilling locations with an average of 12,000’ lateral.” Compl. ¶¶ 70-71, ECF No. 85. Plaintiffs
challenge the assertion of present fact that EQT and Rice possessed enough undrilled, contiguous
acreage that, when combined with undrilled acreage available for well-path adjustments, smaller
bolt-on acquisitions, and tactical fill-ins, would allow for the drilling of 1,200 wells at an average
length of 12,000 feet. Id. at ¶ 77-84. Plaintiffs assert that there was simply not enough available,
contiguous, undrilled acreage, even taking into account tactical fill-ins, to allow Defendants to
make such a claim. Id. at ¶ 238. Plaintiffs assert that Defendants knew or recklessly disregarded
the fact that it was impossible, based on the then-known geography and drilling history of the
combined acreage, for EQT to deliver 1,200 wells at an average length of 12,000 feet. Id. at ¶
233.13

13 See also Compl. ¶ 81 (“Plaintiffs, in consultation with an oil and gas industry expert, calculated that only 519 wells
with lateral lengths ranging from 6,064 feet to 16,000 feet, an average lateral length of 11,465 feet, . . . were feasible.”).
While the plan to drill additional wells at longer lengths and the synergies that such wells
would purportedly generate are clearly forward-looking operational plans and financial
projections, the Court finds that the amount of acreage possessed by EQT and Rice, as well as the
amount of available, undrilled acreage that could be used for “well-path adjustments, smaller bolt-
on acquisitions, and tactical fill-ins” possessed by third-parties, were knowable, quantifiable facts

at the time Defendants made their representations respecting the fact that the combination of EQT’s
and Rice’s acreage would result in EQT’s ability to drill approximately 1,200 wells at an average
length of 12,000 feet. In this case, Plaintiffs allege that Defendants justified their future projected
operations of drilling 1,200 wells at an average length of 12,000 feet in terms of a specific and
particular aspect of EQT’s (and Rice’s) current situation, i.e. the amount of undrilled acreage they
possessed and the availability of undrilled “tactical fill-ins.” Defendants clearly disagree with
Plaintiffs’ assertion that it was impossible to drill 1,200 wells at an average length of 12,000 feet
based upon then-known geography and drilling history, but whether there existed sufficient
acreage to support Defendants’ representations at the time Defendants made these representations

results in a genuine issue of material, present fact that will ultimately be resolved through
discovery.
Defendants also assert a truth-on-the-market defense in arguing that JANA’s public
challenges to EQT’s representations informed the market of the exact misrepresentations Plaintiffs
now assert in support of their Section 10(b) claim, and that such representations thus do not
constitute misrepresentations. “A motion to dismiss may be granted if ‘the company’s SEC filings
or other documents disclose the very information necessary to make their public statements not
misleading.’” In re Discovery Labs. Sec. Litig., No. 06-1820, 2006 WL 3227767, at *11 (E.D. Pa.
Nov. 1, 2006) (quoting Winer Family Trust v. Queen, 2004 WL 2203709 at *4 (E.D.Pa. Sept. 27,
2004)). The Court notes, however, that “[t]ruth-on-the-market analysis is intensely fact specific
and thus seldom appropriate at the pleading stage.” Payne v. DeLuca, 433 F. Supp. 2d 547, 559
(W.D. Pa. 2006) (citing Ganino v. Citizens Utils. Co., 228 F.3d 154, 167 (2d Cir. 2000)); see also
Berry v. Valence Tech., Inc., 175 F.3d 699, 704 (9th Cir. 1999) (in addressing a motion for
summary judgment and determining whether a negative article would have led a reasonable

investor to investigate the possibility of fraud, thus triggering the running of the statute of
limitations on a Section 10(b) claim, the Ninth Circuit considered the nature and specificity of the
article, the market reaction to the article, other press coverage following the article’s publication,
and the nature and degree of denials issued by the defendants).
The Court cannot resolve Defendants’ intensely fact-specific truth-on-the-market defense
at this juncture. As will be discussed in further detail below, the Court finds that JANA’s assertions
respecting the impossibility of the drilling of 1,200 wells at an average length of 12,000 feet, and
EQT’s and the Officer Defendants’ consistent assertions to the contrary, create an issue of fact as
to EQT’s and the Officer Defendants’ knowledge respecting the amount of available, undrilled

acreage when they repeatedly stated that EQT’s and Rice’s combined acreage would allow for the
drilling of 1,200 wells at an average length of 12,000 feet. The Court notes that JANA’s specific
and pointed public statements regarding the impossibility of this drilling plan, i.e. the exact fact
that allegedly renders Defendants’ statements with respect to the same false, also tend to establish
that some information regarding the purported impossibility of EQT’s drilling plan was publicly
available and accessible to investors.
Plaintiffs have, however, also alleged that, following JANA’s publication of its opposition
to the Acquisition: (1) EQT’s stock price actually increased, Compl. ¶ 140, ECF No. 84; (2)
analysts and proxy advisory firms expressed confidence in EQT’s representations and skepticism
with respect to JANA’s criticisms, id. at ¶¶ 123; 125-26; 129; 13; 139; 149-51; and (3) EQT and
the Officer Defendants emphatically denied JANA’s assertions, id. at ¶¶ 226-30; 237; 251-54. The
Court finds that the above allegations create a genuine issue of material fact as to the market’s
knowledge respecting the assertions set forth in JANA’s opposition to the Acquisition, and
whether “such corrective information had been conveyed to the public ‘with a degree of intensity

and credibility sufficient to counter-balance effectively any misleading information created by’ the
alleged misstatements.” In re Merck & Co., Inc. Sec., Derivative, & ERISA Litig., No. CIV.A. 05-
1151 SRC, 2011 WL 3444199, at *35 (D.N.J. Aug. 8, 2011) (quoting In re Apple Computer Sec.
Litig., 886 F.2d 1109, 1116 (9th Cir.1989)).
The Court further notes that Plaintiffs have also sufficiently alleged that the Officer
Defendants and Signer Defendants, each of whom is alleged to have signed the Registration
Statement and/or permitted their names to be used in solicitations contained in the Registration
Statement, see Compl. ¶¶ 34-36; 480-91, ECF No. 85, with the exception of Schlosser, who is
alleged to have made statements respecting EQT’s ability to drill laterals which would average

12,000 feet, see id. at ¶ 227, made the pre-Acquisition statements discussed above.
b. Post-Acquisition Representations Respecting EQT’s Drilling Operations
and Captured Synergies
Defendants further assert that Plaintiffs’ Section 10(b) claims should be dismissed to the
extent that they rely on statements respecting EQT’s post-Acquisition drilling operations and
captured synergies, arguing that such statements were not false or misleading when made, and that
any such statements constitute inactionable forward-looking statements, corporate optimism, or
statements of opinion. Br. in Supp. 11, ECF No. 96. Plaintiffs assert that EQT and the Officer
Defendants consistently represented publicly that post-Acquisition drilling operations were
proving exceptionally successful and that EQT was achieving the synergies cited as a basis for the
Acquisition, but that EQT had, in actuality, experienced numerous well collapses and rising costs
that rendered any such representations false and misleading. Br. in Opp’n 18, ECF No. 102.
Vague and non-specific statements of corporate optimism have been held to be not
actionable because they constitute mere puffery “on which reasonable investors would not have

relied.” In re Aetna, Inc. Sec. Litig., 617 F.3d 272, 284 (3d Cir. 2010); see also Burlington, 114
F.3d at 1428 n.14. “Opinions are only actionable under the securities laws if they are not honestly
believed and lack a reasonable basis.” City of Edinburgh Council v. Pfizer, Inc., 754 F.3d 159,
170 (3d Cir. 2014) (citing In re Merck & Co., Inc. Sec., Derivative & “ERISA” Litig., 543 F.3d
150, 166 (3d Cir.2008); Kleinman v. Elan Corp., plc, 706 F.3d 145, 153 (2d Cir.2013)).
To the extent Plaintiffs’ Section 10(b) claims rely on post-Acquisition statements
respecting the ongoing success of drilling operations and the synergies that EQT had captured
following the Acquisition, the Court finds that the statements relied upon by Plaintiff, while often
surrounded by statements of puffery, corporate optimism, opinions, and forward-looking

statements, also contain several assertions of present, material fact, and further finds that Plaintiffs
have adequately pled that such statements were false and misleading when made. Specifically,
following the Acquisition, Schlosser represented during EQT’s February 15, 2018 earnings call
that EQT had “hit the ground running with our increased lateral lengths,” that “we are combining
best practices and have already captured value,” and that “development cost continued to improve
as we lengthened laterals.” Compl. ¶ 269, ECF No. 85. On that same call, Schlosser further
represented that “we’ve hit the ground running and have started capturing the various synergies
related to the [Acquisition]” and that EQT was “ahead of schedule for achieving our capital
synergies.” Id. at ¶ 272. These clear and specific statements set forth matters of present fact,
specifically that EQT was successfully drilling longer lateral wells, that EQT had worked with
Rice to combine the companies’ best practices, that EQT had captured some of the value and
synergies that had been cited as a basis for Acquisition, and that the drilling of longer laterals had
already resulted in decreased costs. During that same call, Schlotterbeck stated, and McNally
confirmed, that EQT was “at or a little bit ahead of the plan that delivered on” the General and

Administrative synergy cited as one of the two primary bases for the Acquisition. Id. at ¶ 275.
Defendant Schlosser made similar statements respecting EQT’s successful drilling efforts
during EQT’s April 26, 2018 first-quarter earnings conference call, and stated that a drilling
process was “already showing significant returns.” Compl. ¶ 284, ECF No. 85. During a July 26,
2018 second-quarter 2018 earnings conference call, Schlosser represented that EQT “[continues]
to realize capital synergies from the Rice acquisition as we develop our large contiguous acreage
position,” “[o]n an activity level, the second quarter was the highest in EQT history, with the
company operating as many as 15 rigs and 12 frac crews,” and that EQT “[expects] Q2 to be the
high point for CapEx this year and reiterate our full year guidance of $2.2 billion for well

development.” Id. at ¶ 293. These are, similarly, statements of present fact regarding EQT’s
purportedly successful drilling operations and EQT’s realization of synergies.
Further, Plaintiffs have set forth allegations which tend to contradict EQT’s and the Officer
Defendants’ statements regarding synergies captured following the Acquisition, as well as their
statements portraying EQT’s post-Acquisition drilling operations as successful. Plaintiffs assert
that, after the Acquisition, EQT experienced significant cost overruns and problems in drilling
ultra-long laterals, and that it refused to incorporate the best practices of Rice. Compl. ¶ 157, ECF
No. 85. 14

14 The Court notes that Plaintiffs cite to several statements from confidential sources in alleging the difficulties
experienced by EQT with respect to its drilling operations and increased costs. See Compl. ¶¶ 158-63; 169-73, ECF
EQT submitted, in July of 2018, a non-public request for a proposal (“Request for
Proposal”) from a third-party operations-management consulting firm to “develop a plan for
consistent and efficient supply chain and logistics management.” Compl. ¶ 166, ECF No. 85. The
Request for Proposal stated that EQT was currently operating in a “’siloed’ fashion, with each
operational group focused on their operations and logistics, with little consideration given to

overall efficiency,” and that EQT’s then-model “caused significant nonproductive time and
expense” and “increase[d] the likelihood of both safety and environmental incidents.” Id. It
further stated that EQT “may not currently have the right skill sets internally to effectuate this
undertaking.” Id. The Request for Proposal further notes that EQT’s “ineffective structure was
not as visible until the [Acquisition] concentrated our activity.” Id.
Further, during EQT’s October 25, 2018 investor and analyst conference call, EQT
disclosed that EQT “ was increasing well-development capital expenditures for 2018 by $300
million, or 14%, based on costs that ‘represent primarily onetime events that were driven by pace
of activity, ultra-long lateral learning curve and some service cost increases’” and stated that EQT

had yet “to drill longer laterals at the cost profile we originally anticipated.” Compl. ¶ 333, ECF
No. 85. With respect to this October 25, 2018 conference call, Plaintiffs further explain:
As newly-appointed Executive Vice President of Production Erin
Centofanti admitted during EQT’s third quarter October 25, 2018 earnings call,
purported “weather events” and “midstream delays” that occurred in the “first
quarter” disrupted the Company’s schedule and caused increased capital
expenditures. Centofanti also admitted, while failing to disclose that EQT had also
lost several costly drilling assemblies, that “[t]he first 6 months of 2018 represented
a tight market for Appalachian frac crews, resulting in higher pricing” and “[t]he
same phenomenon was present in our water hauling operations, where increased

No. 85. Evaluating allegations derived from confidential sources requires “an examination of the detail provided by
the confidential sources, the sources’ basis of knowledge, the reliability of the sources, the corroborative nature of
other facts alleged, including from other sources, the coherence and plausibility of the allegations, and similar indicia.”
Chubb, 394 F.3d at 147. Even without consideration of these statements, some of which meet the threshold set forth
in Chubb, the Court would find that Plaintiffs have sufficiently pled that the above statements regarding post-
Acquisition drilling successes and captured synergies were false and misleading when made for the reasons discussed
below.
demand for trucks, a shortage of qualified drivers and new safety requirements for
all haulers increased water hauling costs.” These increased costs were present “the
first 6 months of 2018,” but EQT only disclosed them in the third quarter of 2018,
at the same time EQT belatedly raised its 2018 well development capital
expenditure amount by $300 million.

Id. at ¶ 174.
The Rice Team’s February 5, 2019 public presentation and investor call further asserted
that EQT had repeatedly refused to adopt Rice’s best practices when approached by Rice
employees, and that EQT had previously understated and erroneously adjusted well costs
downwards in attempt to normalize its costs. Compl. ¶¶ 344-48, ECF No. 85. The Rice Team’s
April 26, 2019 preliminary proxy statement to the SEC provided:
In 2017, EQT justified the Merger based on delivering $1.9 billion in well cost
synergies, $2.5 billion of base synergies and $7.5 billion of potential all-in
synergies. The key thesis underpinning the cost synergies possible through the
Merger was the opportunity to develop longer laterals, as combining EQT’s and
Rice Energy’s acreage positions would enable longer lateral development that, if
done effectively, would result in lower well costs on a per foot basis. EQT’s 2018
guidance suggested budgeted well costs of $900 per foot, yet EQT’s actual results
not only failed to achieve their conservative guidance and begin to take advantage
of the promised Merger synergies through longer lateral development, but instead
produced disastrous results, including (a) posting a loss of $2.4 billion in 2018, or
$8.60 per share, (b) exceeding capital expenditure guidance by over $300 million,
(c) falling short of production guidance and (d) repurchasing $500 million of shares
of Common Stock less than two months before announcing its capital expenditure
overrun and production miss.

Id. at ¶ 352. On June 17, 2019, the Rice Team filed detailed proxy materials with the SEC which
stated that: (1) “EQT did not seek and ha[d] not achieved the synergies and cost savings that were
the purported rationale of the Acquisition,” id. at ¶ 355; (2) “EQT’s drilling costs remain the worst
in the basin,” id.; (3) that EQT had utilized “misleading math” in “excluding more than $300
million in costs it capitalizes from its well costs,” id. at ¶ 358; (4) that EQT did not incorporate
Rice’ well designs or planning into EQT’s wells, id. at ¶ 361; (5) that EQT had put 2018’s capital
budget at risk by drilling as many 18,000-foot laterals “as possible with no experience,” resulting
in “massive operational issues” and “cost overruns” and an estimated $500 million in misallocated
capital, id. at ¶ 362; and (6) EQT had “not been transparent about its performance” and had
“consistently misled shareholders” by, inter alia, stating that the synergies from the Acquisition
were being achieved in the second quarter of 2018 and then disclosing a $300 million capital-
expense miss, a 5% production-volume miss, and a $500 million stock buy-back in the third

quarter, id. at ¶ 363.
The above allegations, if proven, tend to establish that, rather than enjoying successful
drilling operations and achieving the synergies cited as the basis for the Acquisition at the time of
EQT’s statements in February, April, and July of 2018 discussed above, EQT was actually
experiencing significantly increased costs and inefficiencies and significant operational issues. As
such, the above statements tend to suggest that EQT’s and the Officer Defendants’ statements
respecting its drilling successes and captured synergies were simply not true at the time they were
made. Plaintiffs’ allegations respecting EQT’s Request for Proposal and the Rice Team’s proxy
materials, in particular, tend to suggest that EQT’s operational, cost, and efficiency issues were

pervasive and pronounced at the same time that EQT was touting the success of the Acquisition.
Accordingly, the above allegations are sufficient to raise genuine issues of material fact as to
whether EQT’s and the Officer Defendants’ statements respecting post-Acquisition drilling
successes and achieved synergies were false and misleading at the time they were made.
c. Accounting Fraud
Defendants also assert that Plaintiffs’ accounting fraud claims, which rely on allegations
that EQT’s and the Officer Defendants’ statements regarding EQT’s financial results and guidance
were false because EQT allegedly: “(1) ‘improperly capitalized [] the cost of water used during
operations;’ and (2) ‘understat[ed] its development-cost guidance through the omission of specific
costs from its [Authorizations for Expenditure]’ and thereby violat[ed] GAAP,” should be
dismissed because Plaintiffs fail to set forth a misstatement or omission with the requisite
particularity. Br. in Supp. 17, ECF No. 96 (quoting Compl. ¶¶ 309; 321). Plaintiffs assert that
they have stated a Section 10(b) claim with respect to EQT’s statements respecting its financial
results and guidance because:

Plaintiffs identified the approximate amount of the understatements of expenses in
EQT’s financial statements ($300 million), the approximate amount of
understatements of guidance expenses and development costs ($2.4-$3 million per
well), and the accounting principles Defendants violated by capitalizing produced
water (FASCON No. 6, ASC 932, and the IRS’s Oil and Gas Handbook), and
provided context about drilling-industry accounting standards.

Br. in Opp’n 20, ECF No. 102.
The Court agrees that Plaintiffs have sufficiently pled what the unreasonable accounting
processes were, specifically the capitalization, as opposed to expensing, of produced water, have
further described why those processes were not consistent with generally accepted accounting
principles (“GAAP”), and have identified the amount that the unreasonable processes distorted the
data disclosed to the public, specifically by understating its development costs and overstating its
financial prospects. Compl. ¶¶ 168-95, ECF No. 85. “As the Third Circuit has explained, ‘where
plaintiffs allege that defendants distorted certain data disclosed to the public by using unreasonable
accounting practices, we have required plaintiffs to state what the unreasonable practices were and
how they distorted the disclosed data.’” In re Aetna Inc. Sec. Litig., 34 F. Supp. 2d 935, 956 (E.D.
Pa. 1999) (quoting In re Burlington Coat Factory Securities Litig., 114 F.3d at 1417–18)). The
Court finds that Plaintiffs have stated a Section 10(b) claim with respect to EQT’s statements
respecting its financial results and guidance.
2. Scienter
A complaint asserting a claim for violation of Section 10(b) must “‘state with particularity
facts giving rise to a strong inference that the defendant acted with the required state of mind,’
U.S.C. § 78u–4(b)(2)(A), specifically ‘scienter,’ which is defined in this context as a ‘knowing or
reckless’ mental state ‘embracing intent to deceive, manipulate, or defraud.’” OFI, 834 F.3d at
490 (quoting Avaya, 564 F.3d at 252). “A complaint will survive . . . only if a reasonable person

would deem the inference of scienter cogent and at least as compelling as any opposing inference
one could draw from the facts alleged.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S.
308, 324 (2007). The Third Circuit has explained:
But the Supreme Court has made clear that plaintiffs’ allegations of scienter “need
not be irrefutable, i.e., of the ‘smoking-gun’ genre.” Tellabs, 127 S.Ct. at 2510.
Instead, our inquiry is “whether all of the facts alleged, taken collectively, give rise
to a strong inference of scienter.” Id. at 2509. Accordingly, as with all totality-of-
the circumstances tests, our analysis will be case specific. It will ultimately rest not
on the presence or absence of certain types of allegations but on a practical
judgment about whether, accepting the whole factual picture painted by the
Complaint, it is at least as likely as not that defendants acted with scienter.

Avaya, 564 F.3d at 269.
Plaintiffs assert that several allegations collectively support a finding of scienter in the
instant case. Br. in Opp’n 3, ECF No. 102. Specifically, Plaintiffs point to: (1) Schlotterbeck’s
resignation just months after the Acquisition, as well as after the changes made to EQT’s the
management-compensation scheme; (2) EQT’s emphatic denial of JANA’s assertions regarding
the impossibility of the synergies cited by EQT as the basis for the Acquisition; (3) the Rice Team’s
assertions that EQT consistently misled shareholders and based its financial results on
underreported costs and misleading math; and (4) EQT’s purported violations of GAAP and IRS
guidance by understating its expenses, capitalizing costs it needed to expense, and eliminating
expenses from its reported cost guidance. Id.
a. Pre-Acquisition Representations Respecting EQT’s Ability to Drill 1,200
Wells at an Average Length of 12,000 Feet
The Court finds that Plaintiffs have sufficiently alleged scienter with respect to EQT’s and
the Officer Defendants’ pre-Acquisition statements that the amount of undrilled acreage acquired
in the Acquisition would enable EQT to drill approximately 1,200 wells at an average lateral length

of 12,000 feet. A plaintiff can plead a strong inference of scienter where the complaint sufficiently
alleges that the defendants “knew facts or had access to information suggesting that their public
statements were not accurate.” McCullough v. Advest, Inc., 754 F. App’x 109, 113 (3d Cir. 2018)
(quoting Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir. 2000)). As discussed above, JANA raised
consistent opposition to the Acquisition on the basis that the potential synergies cited by EQT were
“grossly exaggerated,” and that EQT’s purported drilling plan was impossible because EQT and
Rice did not possess enough contiguous undrilled acreage to allow for the increase in lateral length
cited by Defendants as a basis for the Acquisition. Compl. ¶¶ 121-48, ECF No. 85. EQT and the
Officer Defendants emphatically denied each of JANA’s assertions, id. at ¶¶ 226-30; 237; 251-54.

The Court finds that JANA’s opposition to the Acquisition, and EQT’s consistent and
specific assertions refuting JANA’s opposition, including in the Registration Statement, provide a
strong inference that EQT and the Officer Defendants were, at least, aware that their statements
respecting the amount of available, undrilled acreage, and whether the same could support the
drilling of 1,200 wells at an average length of 12,000 feet, could potentially be false. See Avaya,
564 F.3d at 269 (“Among the facts alleged by Shareholders, the most powerful evidence of scienter
is the content and context of McGuire’s statements themselves. McGuire did not simply make
statements inconsistent with the existence of widespread and unusual discounting; he explicitly
denied the existence of such discounting in response to repeated questions about pricing by
analysts.” (emphasis added)); see also id. at 270 (“Because of the context (specific analyst queries)
and content (consistent denials of unusual discounting) of McGuire’s statements, the possibility
that McGuire was ignorant is not necessarily exculpatory. Even if McGuire were not aware of the
full extent of the unusual discounting, or the entirety of the other circumstances alleged by
Shareholders, he might be culpable as long as what he knew made obvious the risk that his

confident, unhedged denials of unusual discounting would mislead investors.”).
The Court again notes that Plaintiffs assert that there was simply not enough available,
contiguous, undrilled acreage, even taking into account tactical fill-ins, to support the drilling of
1,200 wells at an average length of 12,000 feet, Compl. ¶ 238, ECF No. 85, and the same will
ultimately be a subject for discovery in this matter. EQT was repeatedly challenged by JANA as
to the feasibility of the drilling of 1,200 wells at an average length of 12,000 feet given the
contiguous undrilled acreage possessed by EQT and Rice, and consistently represented, including
in the Registration Statement filed with the SEC, that it was, in fact, possible to drill such wells.
The synergies cited by EQT as a result of the drilling such wells were a driving motivation for the

Acquisition, and it is clear that EQT’s and the Officer Defendants’ consistent assertions that the
drilling of such wells was possible could mislead investors if such drilling was, in fact, impossible.
This is at least sufficient to plead that EQT and the Officer Defendants knowingly disregarded the
risk that their allegedly false representations respecting the ability to drill 1,200 wells at an average
length of 12,000 feet could mislead investors as to the benefits that would be achieved by way of
the Acquisition.
The Court further notes that natural gas production was EQT’s core business, and EQT’s
and the individual Officer Defendants’ direct and specific responses to the assertions set forth in
JANA’s statements opposing the Acquisition, which were clearly communicated to EQT and the
Officer Defendants given their responses to the same, support application of the core operation
doctrine with respect to the pre-Acquisition statements discussed above. See In re Loewen Grp.
Inc., No. CIV.A. 98-6740, 2004 WL 1853137, at *22 (E.D. Pa. Aug. 18, 2004) “([I]f a plaintiff
pleads alleged fraud concerning the corporation’s core business and the defendant held a position
from which he would have been aware of the true facts and misleading disclosures, scienter is

pleaded sufficiently.”); see also Rahman v. Kid Brands, Inc., 736 F.3d 237, 246-47 (3d Cir. 2013)
(discussing the Third Circuit’s recognition of the core operations doctrine in Avaya, and pointing
to the Avaya court’s citation to Metzler Investment GMBH v. Corinthian Colleges, Inc., 540 F.3d
1049, 1068 (9th Cir.2008), which held that “corporate management’s general awareness of the
day-to-day workings of the company’s business does not establish scienter-at least absent some
additional allegations of specific information conveyed to management and related to fraud.”
(quoting Avaya, 564 F.3d at 270)).
For the reasons discussed above, the Court finds that Plaintiffs have pled scienter
respecting EQT’s and the Officer Defendants’ allegedly false pre-Acquisition statements that the

amount of undrilled acreage acquired in the Acquisition would enable EQT to drill approximately
1,200 wells at an average lateral length of 12,000 feet.
b. Post-Acquisition Representations Respecting EQT’s Drilling Operations
and Captured Synergies
With respect to representations made following the Acquisition respecting EQT’s drilling
operations and capturing of synergies, the Court finds that Plaintiffs have adequately alleged
scienter. As noted above, a plaintiff can plead a strong inference of scienter where the complaint
sufficiently alleges that the defendants “knew facts or had access to information suggesting that
their public statements were not accurate.” McCullough v. Advest, Inc., 754 F. App’x 109, 113
(3d Cir. 2018) (quoting Novak v. Kasaks, 216 F.3d 300, 311 (2d Cir. 2000)). Plaintiffs allegations
respecting EQT’s own statements, specifically in EQT’s Request for Proposal which was
submitted to a third-party consulting firm, provide the Court with a sufficient basis to find that
Plaintiffs have alleged a strong inference of scienter.
As set forth above, EQT submitted, in July of 2018, a non-public Request for Proposal

from a third-party operations-management consulting firm to “develop a plan for consistent and
efficient supply chain and logistics management.” Compl. ¶ 166, ECF No. 85. The Request for
Proposal stated that EQT was currently operating in a “’siloed’ fashion, with each operational
group focused on their operations and logistics, with little consideration given to overall
efficiency,” and that EQT’s then-model “caused significant nonproductive time and expense” and
“increase[d] the likelihood of both safety and environmental incidents.” Id. It further stated that
EQT “may not currently have the right skill sets internally to effectuate this undertaking.” Id. The
Request for Proposal further notes that EQT’s “ineffective structure was not as visible until the
[Acquisition] concentrated our activity.” Id.

During EQT’s February 15, 2018 earnings call, Schlosser represented that EQT had “hit
the ground running with our increased lateral lengths,” that “we are combining best practices and
have already captured value,” and that “development cost continued to improve as we lengthened
laterals.” Compl. ¶ 269, ECF No. 85. On that same call, Schlosser further represented that “we’ve
hit the ground running and have started capturing the various synergies related to the
[Acquisition]” and that EQT was “ahead of schedule for achieving our capital synergies.” Id. at ¶
272. During that same call, Schlotterbeck stated, and McNally confirmed, that EQT was “at or a
little bit ahead of the plan that delivered on” the General and Administrative synergy cited as one
of the two primary bases for the Acquisition. Id. at ¶ 275. Defendant Schlosser made similar
statements respecting EQT’s successful drilling efforts during EQT’s April 26, 2018 first-quarter
earnings conference call, and stated that a drilling process was “already showing significant
returns.” Compl. ¶ 284, ECF No. 85. During a July 26, 2018 second-quarter 2018 earnings
conference call, Schlosser represented that EQT “[continues] to realize capital synergies from the
Rice acquisition as we develop our large contiguous acreage position,” that “[o]n an activity level,

the second quarter was the highest in EQT history, with the company operating as many as 15 rigs
and 12 frac crews,” and that EQT “[expects] Q2 to be the high point for CapEx this year and
reiterate our full year guidance of $2.2 billion for well development.” Id. at ¶ 293.
While EQT’s Request for Proposal does not definitively establish that EQT had not
achieved synergies to date, it does tend to indicate that EQT was experiencing significant
difficulties with respect to efficiency and expenses, and that it was also experiencing significant
operational issues. EQT’s non-public Request for Proposal was submitted in July, 2018, meaning
that it was submitted nearly contemporaneously with the July 26, 2018 second-quarter 2018
earnings conference call wherein Schlosser represented that EQT “[continues] to realize capital

synergies from the Rice acquisition as we develop our large contiguous acreage position,” that
“[o]n an activity level, the second quarter was the highest in EQT history, with the company
operating as many as 15 rigs and 12 frac crews,” and that EQT “[expects] Q2 to be the high point
for CapEx this year and reiterate our full year guidance of $2.2 billion for well development.”
Compl. ¶ 293, ECF No. 85. Further, the Request for Proposal does not indicate exactly how long
EQT had been experiencing the issues outlined in the Request, but does state that EQT’s
“ineffective structure was not as visible until the [Acquisition] concentrated our activity.” Id. at ¶
166. It is clear that information respecting the operational and efficiency issues cited in the
Request for Proposal would be available at the time of the July 26, 2018 earnings call, but the
Court also notes that, given the statement that the issues became visible after the Acquisition closed
on November 13, 2017, it is also entirely possible, and adequately alleged, that EQT knew of the
issues cited in the Request for Proposal in advance of the February and April statements.
Plaintiffs’ allegations with respect to the Request for Proposal tend to show that while EQT
and the Officer Defendants were publicly touting the successes of the Acquisition, EQT was

actually keenly aware that it was experiencing significant operational and financial issues
associated with the Acquisition.15 These are not allegations of “fraud by hindsight,” in that they
do not merely claim that EQT’s and the Officer Defendants’ “statements turned out to be wrong,
and therefore must have been fraudulent.” Avaya, 564 F.3d at 269. Rather, Plaintiffs’ allegations
respecting the statements in EQT’s Request for Proposal tend to suggest that EQT knew of its
substantial operational and financial issues, and that EQT’s and the Officer Defendants’ statements
respecting its drilling successes and captured synergies were knowingly or recklessly false. As
such, the Court finds that EQT’s Request for Proposal, and the statements and information
contained therein respecting the difficulties EQT was experiencing in terms or efficiencies, costs,

and operations, is sufficient to create a strong inference that EQT and the Officer Defendants knew
or recklessly disregarded the risk that their statements regarding operational successes and
captured synergies discussed above were false and/or misleading to investors when made.
c. Accounting Fraud

15 Defendants argue that EQT’s Request for Proposal does not stand for the proposition for which Plaintiffs cite to it,
and further argue that Plaintiffs do not plead that any individual Defendant saw the document. Reply 9 n.23, ECF No.
108. Defendants’ first argument presents a factual issue that cannot be resolved at this juncture. Defendants’ argument
that Plaintiffs fail to plead that any Defendant saw the actual Request for Proposal ignores that it is not the document
itself, but rather what it seemingly represents, i.e. pervasive and company-wide efficiency, cost, and operational issues
that would “require a change in mindset and culture,” Compl. ¶ 166, ECF No. 85, and acknowledgement and
knowledge of the same on EQT’s part such that it privately recognized the need for assistance from a third-party, that
is what supports a strong inference of knowledge or recklessness on the part of EQT and the Officer Defendants.
For the same reasons discussed above with respect to post-Acquisition statements
respecting the success of EQT’s drilling operations and capturing of synergies, the Court finds that
Plaintiffs have sufficiently pled scienter with respect to EQT’s financial results and guidance.
Plaintiffs assert allegations that EQT improperly capitalized, as opposed to expensed, produced
water from April 2018 through October 2018, that it capitalized at least $300 million of operating

costs from April 2018 through April 2019, and that, as a result, EQT’s public filings during this
period understated EQT’s operating expenses, overstated its income, and overstated the value of
its producing properties and its “property, plant, and equipment.” Compl. ¶¶ 308-30, ECF No. 85.
Plaintiffs also allege that EQT was experiencing significantly increased costs and inefficiencies
and significant operational issues as early as the first quarter of 2018. See Compl. ¶¶ 174; 365,
ECF No. 85. Plaintiffs’ allegations respecting EQT’s non-public Request for Proposal tend to
indicate that EQT was aware of rising costs and inefficiencies within EQT which would cast doubt
on the costs, which Plaintiffs assert EQT significantly understated, and financial prospects, which
Plaintiffs assert EQT overstated, reported by EQT. As alleged, this non-public Request for

Proposal seemingly directly contradicts EQT’s statements of encouraging financial results. The
Court finds that the above is sufficient to allege, at least, that EQT’s statements respecting its
financial results and guidance, which allegedly excluded at least $300 million in costs, were made
with knowing disregard for the risk that these statements were false. Accordingly, Plaintiffs have
sufficiently alleged scienter with respect to such statements.
3. Loss Causation
Loss causation requires “a causal connection between the material misrepresentation and
the loss.” Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342, 346 (2005). “[I]n order [t]o establish
loss causation, a plaintiff must allege ... that the subject of the fraudulent statement or omission
was the cause of the actual loss suffered, i.e., that the misstatement or omission concealed
something from the market that, when disclosed, negatively affected the value of the security.”
Nat’l Junior Baseball League v. Pharmanet Dev. Grp. Inc., 720 F. Supp. 2d 517, 559 (D.N.J. 2010)
(quoting In re Intelligroup Securities Litigation, 527 F.Supp.2d 262, 275 (D.N.J. 2007)).
With respect to EQT’s and the Officer Defendants’ pre-Acquisition statements respecting

the feasibility of the drilling of 1,200 wells at an average length of 12,000 feet, the Court finds that
Plaintiffs have alleged loss causation. These additional and longer laterals were the primary basis
for the synergies and efficiencies cited as motive for the Acquisition. On October 25, 2018, EQT
disclosed negative financial results for the three months ending on September 30, 2018, and
explained that EQT was experiencing difficulty drilling the longer laterals that would allow for its
wells to average 12,000 feet. Compl. ¶¶ 332-37. Following these disclosures, EQT’s stock
dropped in value by 13%. Id. at ¶ 338. While EQT did not disclose that it was unequivocally
impossible to drill 1,200 wells at an average length of 12,000 feet, it did disclose that it had not
achieved the same to date and that it was experiencing legitimate difficulty in attempting to drill

such wells, thus casting doubt on the feasibility of the drilling of 1,200 wells at an average length
of 12,000 feet. Following this new, EQT’s stock dropped in value. Accordingly, the Court finds
that Plaintiffs have sufficiently set forth facts which support a disclosure of misstatement which
negatively affected the value of a security with respect to Defendants’ pre-Acquisition statements.
With respect to EQT’s representations as to post-Acquisition drilling successes and
captured synergies and alleged accounting fraud, the Court finds that Plaintiffs have adequately
pled loss causation with respect to the three alleged corrective disclosures (EQT’s October 25,
2018 investor and analyst conference call, the Rice Team’s February 5, 2019 public presentation
and investor call, and the Rice Team’s June 17, 2019 proxy materials) at issue. Plaintiffs have
alleged that EQT’s October 25, 2018 investor and analyst conference call revealed previously
undisclosed increased costs, inefficiencies, and operational issues that were present as early as the
first quarter of 2018, see Compl. ¶¶ 174; 333, ECF No. 85, and have further alleged a drop in
EQT’s stock value by 13%, id. at ¶ 338. These disclosures tend to contradict EQT’s statements
discussed above respecting post-Acquisition drilling successes and captured synergies, and

Plaintiffs have thus pled loss causation with respect to their Section 10(b) claim for post-
Acquisition statements respecting drilling successes and captured synergies.
Further, the Rice Team’s February 5, 2019 public presentation and investor call and the
Rice Team’s June 17, 2019 proxy materials filed with the SEC asserted that EQT had previously
understated and erroneously adjusted well costs downwards in an attempt to normalize its costs,
id. at ¶¶ 344-48, and that EQT had utilized “misleading math” in “excluding more than $300
million in costs it capitalizes from its well costs,” id. at ¶ 358. Plaintiffs have alleged that EQT’s
stock price fell 3.5% following the February 5, 2019 disclosure, id. at ¶ 349, and that EQT’s stock
price fell by 5% by June 19, 2019 following the filing of the Rice Team’s proxy materials after the
market closed on June 17, 2019, id. at ¶ 387.16 Plaintiffs have thus sufficiently alleged that the

disclosure of EQT’s allegedly improper accounting practices negatively impacted EQT’s stock
value. The Court further notes that the Rice Team’s June 17, 2019 proxy materials also asserted
that “EQT did not seek and ha[d] not achieved the synergies and cost savings that were the
purported rationale of the Acquisition,” id. at ¶ 355, and that EQT had put 2018’s capital budget
at risk by drilling as many 18,000-foot laterals “as possible with no experience,” resulting in

16 While the Court acknowledges Defendants’ argument that EQT’s stock price actually increased by approximately
0.7% from June 17, 2019 to June 18, 2019, see Br. in Supp. 43-44, ECF No. 96, the Court agrees with Plaintiffs that
the subsequent and immediate significant drop of 5% just a day later on June 19, 2019 raises factual issues as to
whether this drop was caused by some other cause or is merely reflective of the market taking time to digest the
voluminous proxy materials filed by Rice, see Br. in Opp’n 44 n.59, ECF No. 102.
“massive operational issues” and “cost overruns” and an estimated $500 million in misallocated
capital, id. at ¶ 362. Thus, Plaintiffs’ allegations respecting the Rice Team’s June 17, 2019 proxy
materials also set forth loss causation with respect to EQT’s post-Acquisition statements as to
drilling successes and captured synergies. For all of the reasons discussed above, the Court finds
that Plaintiffs have pled loss causation as to the three alleged corrective disclosures.

B. Plaintiffs’ Claims for Violations of Sections 11 and 12(a)(2) of the Securities Act
and Section 14(a) of the Exchange Act
Defendants assert that Plaintiffs’ claims for violations of Sections 11 and 12(a)(2) of the
Securities Act (Counts VII and VIII, respectively) and Section 14(a) of the Exchange Act (Counts
IV and V), which are predicated on alleged material misrepresentations set forth in the Registration
Statement that was filed with the SEC in connection with the Acquisition, fail for the same reasons
discussed above with respect to Count I, and further because they are time-barred. Br. in Supp. 3-
4, ECF No. 96.
For the same reasons the Court found that Plaintiffs have sufficiently set forth a Section

10(b) claim based upon EQT’s and the Officer Defendants’ allegedly false pre-Acquisition
statements, including in the Registration Statement, Compl. ¶ 70, ECF No. 85, the Court finds that
Plaintiffs have sufficiently set forth claims under Sections 11 and 12(a)(2) of the Securities Act
and Section 14(a) of the Exchange Act. Defendants’ arguments respecting the viability of these
claims are materially identical to those raised as to Count I, see Br. in Supp. 44-48, ECF No. 96,
and the Court thus rejects those arguments for the same reasons discussed above. The Court further
rejects, at this juncture, Defendants’ argument that Plaintiffs’ Sections 11 and 12(a)(2) of the
Securities Act and Section 14(a) of the Exchange Act claims are time-barred for the same reasons
that this Court rejected Defendants’ arguments respecting their truth-on-the-market defense, as set
forth above.
C. Plaintiffs’ Claims for Violations of § 15 of the Securities Act and §§ 20(a) and 20A
of the Exchange Act
Defendants argue that Plaintiffs’ claims under Section 15 of the Securities Act (Count IX)

and Sections 20(a) and 20A of the Exchange Act (Counts II, III, and VI) should be dismissed
because they are based on the primary violations of Sections 11 and 12(a)(2) of the Securities Act
and Sections 10(b) and 14(a) of the Exchange Act discussed above, and because Plaintiffs fail to
adequately plead any primary violation of federal securities law. Br. in Supp. 50, ECF No. 96.
Because this Court found that Plaintiffs have stated claims under both the Exchange Act and the
Securities Act for the reasons discussed above, the Court summarily rejects Defendants’ arguments
respecting Plaintiffs’ claims under Section 15 of the Securities Act (Count IX) and Sections 20(a)
and 20A of the Exchange Act (Counts II, III, and VI).
IV. Conclusion

For the reasons discussed above, Defendants’ Motion to Dismiss the First Amended Class
Action Complaint is denied. An appropriate Order of Court follows.
BY THE COURT:

s/Robert J. Colville_______
Robert J. Colville
United States District Judge

DATED: December 2, 2020
cc/ecf: All counsel of record

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10416100. Public record. Not legal advice.