HOUSTON (CN) — BP said it agreed to pay $175 million to settle class-action claims that it misled investors about the size of its 2010 oil spill in the Gulf of Mexico.
BP announced the settlement late Thursday, two days after U.S. District Judge Keith Ellison pared down some of the investors' claims but declined to grant BP a wholesale dismissal.
The settlement is by no means a done deal, as it must be presented to Ellison and go through a lengthy process in which Ellison will decide if it's fair to all the class members.
Ellison approved the class action after federal lawsuits from Oregon, Ohio, California and dozens in Houston were consolidated to streamline the investors' claims that BP had violated the Securities and Exchange Act.
The litigation stems from the Deepwater Horizon oil rig explosion on April 20, 2010, that released nearly from 5 million of barrels of oil into the Gulf of Mexico from BP's Macondo well, and public statements BP executives Douglas Suttles and Anthony Hayward made about how much oil was spewing from the well in the immediate aftermath of the explosion that killed 11 workers.
Class member investors accused BP directors of publicly lowballing the rate of the oil spill to prevent share prices from hitting a level that accurately reflected the spill's size.
BP shares on the New York Stock Exchange fell from above $60 in the days before the explosion to $27.32 on June 29, 2010. By New Year's Eve Day in 2010, the stock had rebounded to $44.17.
Suttles estimated the well was leaking 1,000 to 5,000 barrels of oil per day at three news conferences in the 10 days following the explosion, and Hayward said the same in an interview with a Houston Chronicle reporter on May 5, 2010, when BP's own estimates said the flow could be as high as 100,000 barrels per day, the class claims.
In his May 31 ruling, Ellison dismissed some "falsity and scienter" claims against Suttles, finding that the class could not establish Suttles' press conference were intentionally misleading because Suttles was merely giving his opinion about the best spill estimates.
A plaintiff must prove a defendant had knowledge they were doing something wrong to establish scienter.
Ellison declined to probe Hayward's statements to the Houston Chronicle for falsity and scienter because "plaintiffs have failed to establish loss causation for any of the stock drops that followed Hayward's statement," he wrote in a 70-page order.
But the judge declined to dismiss the class action, finding there were fact issues that should be hashed out during a trial.
If approved, the proposed settlement makes a trial unnecessary.
Suttles retired from BP in January 2011, and Hayward resigned as the London-based company's CEO in October 2010.
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