A consolidated shareholder suit against BP PLC’s current and former directors and officers alleging that lapses in security procedures contributed to the Deepwater Horizon oil spill has been dismissed, with a federal judge in Houston concluding that the case belongs in England.
The suit was a derivative complaint alleging that 17 current and former officers and directors and BP, as a nominal defendant, breached their fiduciary duties when they “engaged in a pattern of disregard for the safety of BP’s energy exploration operations” that culminated in the drilling rig explosion and oil spill in the Gulf of Mexico on April 10, 2010. The case was one of three shareholder actions pending before U.S. District Judge Keith Ellison in multidistrict litigation separate from the massive case pending before U.S. District Judge Carl Barbier in New Orleans. That case involves economic, environmental and cleanup claims against BP and other companies.
The other shareholder cases are a class action filed against BP and several of its executives and an action brought under the U.S. Employee Retirement Income Security Act by BP employees.
“The Court is persuaded that this lawsuit is not intended to redress the devastating impact of the Deepwater Horizon disaster in the United States,” Ellison wrote in granting a motion to dismiss the case on Sept. 15. “Instead, this lawsuit is intended to compensate BP for the financial and reputational harm the company suffered as a result of its high level management’s alleged disregard for the safety of its operations.”
Calls were not returned by Thomas Taylor, a partner in Andrews Kurth in Houston who represents BP as a nominal defendant and all 17 individual defendants; or by Mark Lebovitch, a partner in New York’s Bernstein Litowitz Berger & Grossmann, who is co-lead counsel for the plaintiffs.
In his decision, Ellison listed several reasons why the case belonged instead in England.
First, the derivative claims were brought under the United Kingdom Companies Act of 2006, a relatively new statute with little case law interpreting it. Second, although plaintiffs often are entitled to deference regarding the forum, a derivative action is brought by shareholders on behalf of the company, which, in this case, is based in London. Furthermore, 60 percent of BP’s shareholders are outside the United States.
Third, the majority of the documents involved in the case are located in London.
“Indeed, this is a derivative action involving the internal governance of a company both incorporated and headquartered in England,” wrote Ellison of the Southern District of Texas. “As such, the records documenting the highest management decisions of BP are located there.”
He noted that nine of the individual defendants — a slight majority — live in Europe. The British citizens are Iain Conn, group vice president and board director; Anthony “Tony” Hayward, former chief executive officer of BP and former director; Andy Inglis, former director and chief executive officer of BP E&P; director William Castell; and former directors Douglas Flint and Ian Prosser.
Another defendant, Antony Burgmans, a director, is a Dutch citizen. Peter Sutherland, former board chairman, is a citizen of Ireland. And Carl-Henric Svanberg, chairman of the board, is Swedish.
The Americans are Robert Dudley, BP’s chief executive officer and board member; Byron Grote, BP’s chief financial officer and director; directors Cynthia Carroll and George David; board directors DeAnne Julius and Erroll Davis; H. Lamar McKay, chairman and president of BP America Inc.; and Robert Malone, former chairman and president of BP America.
More important than the facts affecting the private parties in the case, Ellison wrote, was that he would face considerable challenges in managing the derivative action. He would have no way to compel unwilling witnesses who aren’t parties to show up in court, he said. Also, the derivative action would not overlap in discovery with the other two cases in the multidistrict litigation.
“The Court is convinced that this lawsuit represents a substantial burden on the Court’s docket,” he wrote. As a result, he continued, “dismissing this derivative suit, which constitutes one-third of the Court’s MDL cases, would undoubtedly relieve a substantial burden on the Court’s already ample caseload.”
Ellison hinged his decision on the ability of the individual defendants to provide proof, or a stipulation, that all of them would be amenable to litigating in England.
BP has filed motions to dismiss the other shareholder actions. In the class action, shareholders allege that BP’s executives made false and misleading statements about the company’s commitment to safety before the spill. BP has countered that the U.S. Supreme Court’s decision in Morrison v. National Australia Bank prohibits holders of BP’s ordinary shares, which are traded in London and Frankfurt, from bringing claims in U.S. courts.