Court OKs One BP Shareholder Class Action But Denies Another

By | September 8, 2015

BP Plc must face institutional investors’ claims for more than $2.5 billion in market losses caused by the plunge in share prices after the 2010 Gulf of Mexico oil spill, a federal appeals court ruled.

The U.S. Court of Appeals in New Orleans on Tuesday upheld a Houston trial judge’s decision that investors can sue as a group, or class, for losses on shares they bought during the weeks immediately after the start of the worst offshore spill in U.S. history, before the magnitude of the disaster was known.

The court also upheld a decision blocking investors who bought shares before the spill from seeking damages for their market losses. Those shareholders claimed they were deceived by company promises that BP had completed necessary safety reforms in the wake of a 2005 fatal accident at a Texas refinery.

The judges rejected BP’s argument that the investors who bought after the spill didn’t meet the legal test for suing as a class. The court said the investors’ method for calculating their losses was sufficient for this stage of the litigation.

BP shares plunged about 40 percent in the weeks after the spill began, a time when shareholders contend BP’s senior management was publicly downplaying the severity of the spill to prop up the stock price.

BP agreed in 2012 to pay $525 million to resolve allegations by federal regulators that it lied about the size of the spill. London-based BP has also agreed to pay a $4 billion criminal fine tied to the explosion, which killed 11 workers, as well as more than $11 billion to resolve private spill-damage claims, and an additional $18.7 billion to resolve pollution claims by federal, state and local government entities.

The company’s total pre-tax charge for spill response, clean-up and damages so far was $54.6 billion, according to the company’s July 28 earnings release.

The shareholder class action, which is being heard separately from spill-damage claims consolidated in New Orleans federal court, is limited to investors who bought BP American Depository Receipts, or ADRs, on the New York Stock Exchange from April 26, 2010, to May 28, 2010. After that point, the investors’ claim, the full severity of the spill was publicly known. The class claims are set to go before a Houston federal jury in January.

BP also faces additional rounds of claims by more than 100 foreign pension funds that lost hundreds of millions of dollars on BP ordinary shares purchased on European stock exchanges during the same period after the spill. No trial date has been set for these claims, which will be tried in the U.S. under English law.

Geoff Morrell, a spokesman for BP, applauded the ruling denying class-action status to investors who bought shares for more than two years before the spill and said BP disagrees with the rest of the ruling. The company will vigorously defend against “meritless” claims by investors who bought shares during a 33-day window after the spill, he said in an e-mailed statement.

The case is Ludlow vs. BP Plc, 14-20420, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

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