Shareholders Can’t Sue BP in Texas

HOUSTON (CN) - The English High Court is a more appropriate forum for a shareholder class action that makes claims based on British law against the directors of BP, a federal judge ruled.

Shareholders filed suit last year against current and former directors of BP and its U.S. subsidiary for alleged breaches of their fiduciary duties. They say the directors engaged in a pattern of disregard for the safety of BP's operations, leading to a string of safety violations spanning 20 years that culminated in the Deepwater Horizon explosion in the Gulf of Mexico.

Executives' singular focus on the bottom line led to multiple felony convictions, multimillion dollar fines and government-imposed penalties against BP, according to the complaint.

The shareholders cited the United Kingdom Companies Act of 2006, which explains fiduciary duties that officers and directors owe English companies. At BP, the directors allegedly acted outside of their authority by letting the company engage in unlawful conduct. By letting BP engage in dangerous activities without necessary safety precautions, they also did not exercise independent judgment and due care, according to the complaint.

BP and its officials moved to dismiss the case based on three arguments: first, that the shareholders lack standing to sue derivatively because they did not get permission from the English High Court to continue the suit; second, under the doctrines of forum non conveniens and international comity; and third, that the court lacks personal jurisdiction over the individual defendants.

On Thursday, U.S. District Judge Keith Ellison granted the defendants' motion to dismiss based on forum non conveniens. This doctrine allows federal judges to decline jurisdiction if the moving party establishes that the interests of justice, and convenience to the parties and court, dictate the case should be tried in another forum.

"Because this derivative lawsuit involves the internal governance of an English corporation, the convenience of the parties and the interests of justice favor England as a more convenient forum," Ellison wrote.

The lawsuit also "calls for an inquiry into the knowledge and actions of BP's directors, the lion's share of the relevant documents and the majority of the individual defendants are located in England," according to the 31-page decision.

English law governs this dispute, and the Southern District of Texas would be faced with the task of interpreting a still-new and evolving foreign law if the case were allowed to continue stateside.

Follow @cam_langford

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit