A judge has called a halt to a lawsuit BP shareholders filed in Alaska against company board members and executives in the wake of the Deepwater Horizon disaster.
In a 12-page ruling signed Aug. 15, Alaska Superior Court Judge Sharon Gleason stayed the case pending resolution of a similar suit in federal court in Texas.
The ruling was a victory for the BP directors and executives, whose lawyers had sought the stay.
The Alaska case began on May 20, 2010, when lawyers for Jeffrey Pickett, a shareholder and Alaska resident, filed a “shareholder derivative” lawsuit on behalf of BP against the board as well as Tony Hayward, the company’s former chief executive, and John Minge, the current president of BP Exploration (Alaska) Inc. Other shareholders filed two more suits, and these were rolled into the Pickett case.
The shareholders alleged negligence and gross mismanagement in connection with the Deepwater Horizon blowout in the Gulf of Mexico, pipeline leaks and other problems in BP’s North Slope operations, and the deadly explosion at BP’s Texas City refinery in 2005.
Sorting out multiple cases
“A derivative suit, by its very nature, is not about an alleged injury to individual shareholders or to a certain group of shareholders — it is about an alleged injury to the corporation,” Gleason wrote in her Aug. 15 ruling. “As the Alaska Supreme Court has recognized, the purpose of a shareholder derivative suit is to obtain compensation for the corporation from a wrongdoer, and, in so doing, make each shareholder whole.”
The question before the judge was whether the Alaska case should proceed, or whether it should go on hold pending the outcome of a comparable case in federal court in Texas.
Gleason noted that following the Deepwater Horizon disaster, BP shareholders filed derivative suits in state courts in Louisiana, Delaware, Texas and Alaska. All the derivative cases in the other states have been stayed.
In the federal courts, a number of shareholder derivative suits have been consolidated under U.S. District Judge Keith P. Ellison of Houston, who is overseeing securities law cases filed against BP in the wake of Deepwater Horizon, Gleason’s ruling notes. Meantime, federal Judge Carl J. Barbier of New Orleans is presiding over a separate, massive consolidated case pertaining to the disaster itself and the many wrongful death, personal injury, environmental and economic damages claims that arose.
Gleason’s decision
Lawyers for the BP directors and executives argued that litigating the Alaska derivative suit while also litigating the consolidated federal case in Texas would result in a “huge waste” of resources.
Lawyers for the shareholders countered that the Texas case would not focus sufficiently on their Alaska claims, and that a resolution of the federal case could take years.
But Gleason held that the Texas federal case and the Alaska case were quite similar.
“The federal derivative action includes a number of allegations related to incidents in Alaska,” she wrote. “And there is no indication in the record that the federal court would fail to ‘appropriately address’ the alleged shortcomings of BP’s officers and directors in Alaska.”
She added that the defendants would “undoubtedly face considerably greater expenses if required to simultaneously litigate what are substantially the same derivative claims in two separate forums.”
Gleason concluded: “The court agrees with the defendants that a stay of this matter pending resolution of the federal derivative action will promote judicial economy and better allow for an orderly resolution of BP shareholders’ derivative claims.”
