In another order, U.S. District Court Judge Keith P. Ellison, who as we stated above is the Texas federal judge overseeing multidistrict securities litigation against BP PLC over the Deepwater Horizon disaster, ruled favorably for the Plaintiffs. The issue before the court involved a question about statutes of repose that the U.S. Supreme Court had been slated to take up last month in a case known as IndyMac. Judge Ellison did dismiss claims against two BP executives. In his order, Judge Ellison denied BP’s motion to dismiss the complaint brought by the Plaintiffs — including the New York City Employees’ Retirement System — on the basis that they had exceeded the five-year statute of repose covering claims based on statements made before April 2008.
BP in its motion argued that the Plaintiffs could not take advantage of the tolling provisions established in American Pipe & Construction Co. v. Utah, a landmark 1974 Supreme Court ruling. In that case, the Supreme Court held that if a class action is filed on time, the statute of limitations is suspended for all class members until the class is denied certification. Recognizing that there was a split of appellate opinions on the question, Judge Ellison relied in his order on the Tenth Circuit’s reading of American Pipe. In that case, the court said the tolling provision applied equally to the Securities Act of 1933’s statute of repose.
The Second Circuit had taken a different view in 2013, when it dismissed a shareholder class action against IndyMac Corp. and other banks over their mortgage-backed securities business. In the BP case, Judge Ellison wrote:
Viewing the filing of a class action as a “prefiling” of all unnamed class members’ claims means that the concern identified by the Second Circuit in IndyMac — that applying American Pipe tolling somehow abridges a defendant’s substantive right to be free from suit after a specific period of time—is illusory. So long as the defendant has fair notice of the type and number of claims that could be asserted against it, which should be required for American Pipe tolling in the first instance, then there is no unfair surprise when a class member assumes responsibility for its own individual claim during the course of the class action, or after class status has been denied.
The Plaintiffs filed their suit against BP in April 2013, alleging that the oil giant and individual executives had made material misrepresentations about the company’s commitment to safety in the run-up to the 2010 Deepwater explosion, as well as its ability to clean up such a spill and the extent of its likely responsibility once the disaster occurred. It was alleged that their misstatements cost Plaintiffs tens of millions of dollars when BP’s stock price plunged in the wake of the disaster. Because of the Supreme Court’s decision to strike its previously granted writ of certiorari to the Public Employees’ Retirement System of Mississippi, this ruling is significant.
Judge Ellison is also dismissing all shareholder claims against David Rainey, BP’s vice president of exploration for the Gulf of Mexico, on the grounds that the Plaintiffs had failed to state viable claims against him under Section 20(a) of the Securities Exchange Act of 1934. The judge also dismissed 20(a) claims against Andrew Inglis, who was chief executive of BP Exploration & Production Inc. between 2007 and 2010, on the same grounds, though other claims against him survived.
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