The victims of the 2010 Deepwater Horizon oil spill are numerous, and industry giant BP has faced its fair share of lawsuits related to the incident. One group that hasn’t been mentioned though, are BP employees holding company stock who lost money as a result of the incident. But now, after an appeals court ruling, they will have their day in court.
On July 15, a three-judge panel of the 5th U.S. Circuit Court of Appeals unanimously ruled to re-open the case of four BP employees who felt they were deceived into buying and holding BP stock before and after the disaster as part of a company retirement savings plan. The panel has ordered U.S. District Judge Keith Ellison to take another look at the claims.
The employees, whose suit was originally dismissed in 2011, claim that BP misled them in respect to the safety controls in place to prevent this type of disaster. The employees also claim that the controllers of the retirement savings plans did not protect their interests by selling BP stock and taking other actions to protect investors.
The reversal comes in light of the Supreme Court’s June decision in Dudenhoeffer v. Fifth Third Bancorp. In that case, the question at hand was the Moench assumption, which says that an Employee Retirement Income Security Act (ERISA) fiduciary’s decision to keep investing in company stock is subject to a “presumption of prudence.”
As a result of the case, the Supreme Court dispatched with the Moench assumption and ruled that, as the BP case decision states, “ERISA fiduciaries managing a plan invested in company stock are subject to the same duty of prudence as any other ERISA fiduciary.”
Since the Moench assumption was the entire basis for the district court’s dismissal in 2011, the 5th Circuit found reason to reopen the case. However, BP believes that the plaintiffs do not satisfy these new standards either, with a company spokesman saying, “The Fifth Circuit today remanded the ERISA case to the district court in light of new pleading standards set forth by the Supreme Court. BP does not believe the plaintiffs satisfy these new standards and intends to renew its motion to dismiss in the district court.”