SEATTLE (CN) – A decision is now pending after BP Exploration Alaska asked the 9th Circuit to dismiss the securities class action against the company. BP argued that the class cannot prove that BP intentionally lied about substandard maintenance that caused oil production at Prudhoe Bay to shut down.
The company sought relief on appeal after U.S. District Judge Marsha Pechman dismissed the class’s claims as to all of the alleged fraudulent or misleading statements in the original complaint except for BP’s quarterly filings with the Securities and Exchange Commission made in connection with the company’s obligations under the Prudhoe Bay Royalty Trust.
In one of those filings, Pechman found that BP represented that it complied with Alaska’s “prudent operator” standard.
At a hearing before the 9th Circuit on Monday, BP’s attorney, Richard Pepperman, claimed the statement was a “promise of future performance” and not a representation. Since the statement was attached to a third-party filing, Pepperman said BP was not the responsible party.
Judge M. Margaret McKeown told Pepperman: “I’m more sympathetic, at least initially, to the first argument that it’s really a downstream promise – that it’s not a current representation or warranty – although my mind is open on that.”
The judge then asked Pepperman to explain why the trust agreement said BP would be responsible for all of the SEC filings. Pepperman said this related only to Prudhoe Bay production information.
Pepperman also argued that the plaintiffs did not prove that “someone who was substantially involved with the SEC statement” knew the statement was reckless or false.
Judge Raymond Fisher interrupted: “The bigger the corporation, the more insulated it is.”
Thomas Dubbs, representing the class, argued that it was “clear”
BP was responsible for the statement.
“To try to push this down the road of ‘this is a problem of third parties,’ aiders and abettors, all that road – that’s a dead end,” Dubbs said. He also claimed that “one or more senior officers at BP” knew the statement was misleading.
In his rebuttal, Pepperman said, “When you’re dealing with statements that are just excerpts of long legal documents attached to SEC filings, you can’t assume that senior management was aware of those statements.”