BP Investors Target Management Over Losses Following Oil Spill

10th Jun 2010 22:28

By Isabel Ordonez Of DOW JONES NEWSWIRES HOUSTON (Dow Jones)--The legal onslaught versus BP PLC (BP) over the Gulf of Mexico oil spill is entering a new stage, with lawyers representing U.S. pension funds and other institutional investors lining up to sue the company's management and directors over the plunge in the value of their investments. At least three so-called derivative lawsuits have been filed on behalf of the company's shareholders in recent weeks in state courts. They allege, among other things, that BP's management and directors failed to act in investors' best interests, or failed to meet their fiduciary duties. The main goal of the suits is to recover losses and make BP management and directors liable for monetary damages arising from the spill, plaintiffs' lawyers said. Unlike typical securities class action cases--which are filed directly by investors arguing the company misrepresented information that inflated the company's stock value--derivative lawsuits are brought on behalf of the company's shareholders. They allege management and directors, not the company itself, are at fault. More such lawsuits are likely, with BP's market value now less than half of what it was when the Deepwater Horizon rig burned and sank, unleashing one of the biggest oil leaks in U.S. history. Shareholders' derivatives lawsuits come on top of the hundreds of complaints against BP for environmental damage, economic harm and personal injury. Criminal and civil investigations by the federal government are underway, as well. "It shouldn't be the company and its stockholders who are demanded upon to compel with huge fines from the government and other parties," says Gregory Nespole, attorney at New Orleans-based law firm Wolf Haldenstein Adler Freeman & Herz LLP, which is representing the City of New Orleans Employees' Retirement System. "It should be the people who run the company." The pension fund filed a derivative case on behalf of BP shareholders in a state court in Louisiana last week against officers and directors of the company. It also named as defendants Transocean (RIG), Halliburton Co. (HAL)--which provided cementing services to the broken well--and Cameron International Corp. (CAM), the manufacturer of the well's blowout preventer, which BP initially blamed for the oil spill. BP, Halliburton and Transocean said they won't comment on pending litigation. Cameron didn't return a request for comments. "Our goal is to replenish the money that was lost," said Andrew Busch, spokesman for the Southeastern Pennsylvania Transportation Authority, or SEPTA, which runs Philadelphia's regional public transit and owns BP's American Depositary Shares. SEPTA's pension fund filed a derivative lawsuit in May on behalf of BP's shareholders in a state court in Delaware after it lost an estimated $7.8 million from the decline in BP shares. Although many more groups and individual shareholders are expected to sue BP in the coming months, they are unlikely to be high on BP's priority list of legal fights, says Harry Stansbury, a New Orleans-based security lawyer, who said he isn't currently working on any spill-related cases. BP would focus on the lawsuits the federal government is expected to bring against the company for environmental damages, which could carry huge liability, he said. "The security-type suits, while they are important, probably they can be delayed for months," Stansbury said. "BP is also probably more concerned about the direct actions brought against them for damages in the seafood and tourism industry that need to be addressed pretty quickly." Derivative lawsuits brought on behalf of shareholders generally reach a settlement in which the company, its insurers, directors and officials agree to pay a reduced amount of money from the amount being claimed, Stansbury said. The derivative cases filed recently against BP over the Gulf oil spill also seek changes in BP's corporate governance, such us establishing an environmental and litigation exposure oversight committee and changes to the company's safety procedures. -By Isabel Ordonez, Dow Jones Newswires; 713.547.9207; [email protected] (END) Dow Jones Newswires June 10, 2010 17:28 ET (21:28 GMT)