More than six years after the devastating Deepwater Horizon oil spill, a group of BP, P.L.C. shareholders are still trying to get their day in court.
In Whitley v. BP, PLC, No. 15-20282 (5th Cir. 2016), the Fifth Circuit Court of Appeals threw out an amended complaint brought by the shareholders based on a recent U.S. Supreme Court decision, Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014).
The plaintiffs are investors in the BP Stock Fund, an employee stock ownership plan comprised of BP stock. The plan is governed by the Employee Retirement Income Security Act, which imposes strict fiduciary duties on those who manage such plans. After the 2010 Deepwater Horizon catastrophe in the Gulf of Mexico and subsequent decline in BP’s stock price, the investors filed suit alleging that the plan fiduciaries breached their duties of prudence and loyalty by allowing the plans to acquire and hold overvalued BP stock; their duty to provide adequate investment information to plan participants; and their duty to monitor those responsible for managing the fund.
The federal district court dismissed the claims under the “presumption of fiduciary prudence” standard of Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995). While the shareholders’ appeal was pending, the Supreme Court issued Fifth Third, holding there was no such presumption of prudence under ERISA. Instead, the Court held that “…a plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.”
The Fifth Circuit then remanded the case for reconsideration in light of Fifth Third. The shareholders filed an amended complaint alleging, under Fifth Third, that the fiduciaries possessed unfavorable inside information about BP and could have taken alternative actions including freezing, limiting, or restricting company stock purchases; and disclosing unfavorable information to the public. The district court granted their motion to amend. Continue reading