In an important step forward for plaintiffs, a Texas federal judge has ruled that investors who purchased BP stock in the United States after an oil rig exploded in the Gulf of Mexico can pursue claims that they were defrauded when the energy company misled them about the scope of the resulting spill.
In a split ruling, the judge certified a class of investors who purchased BP p.l.c.’s American Depositary Shares (ADS) between April 26, 2010 and May 28, 2010. The so-called “post-spill” class bought BP ADS in the weeks following the April 20, 2010 explosion aboard the Deepwater Horizon, which unleashed the worst oil spill in U.S. history.
The Ohio Public Employees Retirement System (OPERS) and the New York State Common Retirement Fund (New York) are co-lead plaintiffs for the class. Berman DeValerio represents OPERS and is court-appointed co-lead counsel.
The May 20, 2014 ruling by the Hon. Keith P. Ellison of the Southern District of Texas was the Court’s second consideration of class certification in the case. On December 6, 2013, Judge Ellison declined to certify a broader class of investors who purchased BP’s ADS from November 8, 2007 through May 28, 2010, finding that plaintiffs had not articulated a class-wide damages methodology consistent with the various theories of liability in the case. Notably, Judge Ellison found that because the Deepwater Horizon explosion marked an “inflection point” in the case, plaintiffs needed to provide different damages methodologies for their pre-spill and post-spill claims.
The court allowed plaintiffs to seek certification of two distinct subclasses: a pre-spill subclass for claims that BP misrepresented improvements in its operational and safety protocols (between November 8, 2007 and April 20, 2010), and a post-spill subclass for claims that BP misrepresented the scope of the spill. Consistent with the court’s December 2013 order, plaintiffs filed a renewed motion for class certification on January 6, 2014, seeking certification of pre-spill and post-spill subclasses and proposing separate damages methodologies for each subclass. Generally speaking, while the post-spill subclass used a straightforward damages methodology common in securities cases, the pre-spill subclass required a more complex methodology to account for the repeated nature of BP’s misrepresentations throughout the nearly two-and-a-half year pre-spill period.
Judge Ellison’s May 20 order found that OPERS and New York had sufficiently presented a class-wide approach to post-spill damages, allowing plaintiff’s post-spill claims to proceed as a class action. But the court rejected the damages methodology proposed by pre-spill investors led by New York and a group of individual investors, finding that their pre-spill model did not sufficiently determine the artificial inflation of BP’s ADS price and was subject to individualized questions regarding BP’s understatement of known risks. Investors who purchased BP ADS between November 7, 2007 and April 20, 2010 are therefore no longer part of the class case against BP. The judge already had dismissed federal securities claims brought by purchasers of BP ordinary shares outside the United States, relying on a 2010 Supreme Court ruling that limits such claims.
The parties are currently engaged in expert discovery. As of the writing of this article, the court had yet to set a trial date or further litigation deadlines for the post-spill case.
The case is In re BP p.l.c. Securities Litigation, No. 10-md-2185 (S.D. Tex.). Judge Ellison’s Memorandum and Order is available by clicking here.
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.