(Courtesy of the U.S. Coast Guard)
Sullivan & Cromwell continued to chip away at BP plc’s potential liability to investors this week, scuttling the larger of two proposed classes in securities litigation related to the Gulf Coast oil spill.
In a lengthy decision issued on Tuesday, U.S. District Judge Keith Ellison in Houston refused to certify a class of BP shareholders who say the company duped them about its safety record for more than two years leading up to the Deepwater Horizon disaster in April 2010. The judge ruled that plaintiffs counsel at Berman DeValerio and Cohen Milstein Sellers & Toll were unable to show that damages could be calculated on a classwide basis for the group, the so-called “pre-disaster” subclass.
The ruling wasn’t a total loss for Cohen Milstein and Berman DeValerio, however. Ellison did certify a smaller subclass of investors who bought BP American Depository Shares in the weeks after the oil spill and who say BP misled them about the severity of the disaster—the post-disaster subclass. But by refusing to certify the pre-disaster subclass, Ellison sliced BP’s liability in the long-running case by about 80 percent.
Ellison has already given the plaintiffs firms two opportunities to come up with a model for proving classwide damages for the pre-disaster shareholders. Back in December, he denied class cert entirely but gave the plaintiffs leave to try again.
In the wake of the disaster, several shareholders sued BP and its executives, alleging securities fraud. The suits were consolidated before Ellison, who has gradually whittled away at the case. Citing the U.S. Supreme Court’s decision in Morrison v. Australia National Bank, the judge ruled in 2012 that purchasers of ordinary BP shares lack standing because those securities are traded overseas, leaving only claims by purchasers of BP American Depository Shares. The plaintiffs originally alleged more than seventy misstatements by BP, but at this point just four remain in the case.
While the securities litigation is going well for BP, it continues to fight with plaintiffs lawyers pressing spill claims on behalf of Gulf Coast individuals and businesses. BP argues that a court-appointed claims administrator has improperly allowed businesses unaffected by the spill to take part in a comprehensive settlement BP reached in 2012, now valued at $9.2 billion. The U.S. Court of Appeals for the Fifth Circuit issued a stinging rebuke of BP’s argument in March and refused to reconsider that ruling this week, leaving the U.S. Supreme Court as the company’s last hope.
BP is represented in the securities case by Daryl Libow and Richard Pepperman II of Sullivan & Cromwell. Libow declined to comment.