A federal judge has ruled that BP Plc’s U.S. investors can’t pursue as a group claims that the company inflated its shares with misleading statements before and after the Gulf of Mexico oil spill. U.S. District Judge Keith P. Ellison ruled, citing a recent Supreme Court decision. Shareholders sought permission to sue in two groups, the larger including all buyers of BP’s American depositary receipts from Nov. 8, 2007, to May 28, 2010. The second subgroup would cover about 900,000 individual investors, who purchased BP ADRs from March 4, 2009, to April 20, 2010, the date BP’s Macondo well blew out, triggering the biggest U.S. offshore oil spill. Judge Ellison denied the investors’ request for class status. Ellison had earlier set a trial date for August 2014.
Judge Ellison ruled that the investors failed to show that their damages could be calculated on a class-wide basis in a way that was consistent with their legal theory on BP’s culpability. If they could’ve done so, he said, he’d have been “inclined” to give the investors permission to sue as a class. Judge Ellison said in his ruling:
Because the court’s ruling is based in large part on a recent Supreme Court decision that — in this court’s opinion — has appreciably changed the landscape for class certification. Investors should be given a second attempt to establish the elements necessary for class action treatment.
Judge Ellison gave lawyers for the investors 30 days to revise their motion and supplement it. He said he declined to certify the class based on the high court’s ruling in a case involving Comcast, in which investors weren’t allowed to sue as a group because the court found a disconnect between the investors’ class-wide damages model and the company’s liability.
The investors, led by New York and Ohio pension funds, sued London-based BP and certain of its officers in 2010, alleging violations of U.S. securities laws. The investors also claimed BP publicly proclaimed a commitment to improving safety while cutting budgets and rejecting employee concerns. BP disputed the investors’ claims and opposed certifying them as a class. The investors said their ADRs:
were artificially inflated as a result of defendants’ dissemination of materially false and misleading statements and material omissions. All suffered losses when the truth surrounding those misstatements and material omissions was revealed to the market and BP’s stock price declined.
BP shares fell about 40 percent in the weeks after the explosion. The shares haven’t fully recovered from the drop, which eliminated billions of dollars in market value. In March 2013, Judge Ellison refused to dismiss the bulk of the investors’ securities-fraud claims. He previously limited participation in the litigation to investors who bought shares on U.S. stock exchanges.
Several U.S. pension funds sought to get around Judge Ellison’s March 13 ruling by suing under state securities laws. Judge Ellison, in his recent ruling, said that three of the funds, led by Alameda County Employees’ Retirement Association, can pursue deceit claims for losses on their ordinary shares under English law. BP agreed in 2012 to pay $525 million to settle a U.S. Securities and Exchange Commission claim that the company underestimated the size of the spill.
BP also pleaded guilty to a felony count of obstruction of Congress related to its spill-size estimate. The plea was part of a $4 billion settlement of criminal charges brought by the U.S. against BP over the incident. The company also pleaded guilty to 11 felony counts related to the rig workers’ deaths and two misdemeanor environmental-law violations.
Source: Insurance Journal
