Avalon Holdings, Inc. v. BP p.l.c. (In re BP p.l.c. Sec. Litig.)

Decision Date30 September 2014
Docket NumberCiv. Act. No. 4:12–cv–3715,MDL No. 10–md–2185
Citation109 F.Supp.3d 946
Parties In re: BP p.l.c. Securities Litigation Avalon Holdings, Inc., et al. v. BP p.l.c., et al.
CourtU.S. District Court — Southern District of Texas


Pending before the Court is Defendants' Amended Second Tranche Consolidated Motion to Dismiss. (Doc. Nos.57, 62.)1 Having reviewed the original motion (Doc. No. 31), the amended motion, Plaintiffs' response (Doc. Nos.74, 77), Defendants' reply (Doc. Nos.83, 84), and all arguments and papers in support thereof, the Court finds that Defendants' amended motion (Doc. Nos.57, 62) must be GRANTED IN PART and DENIED IN PART .

A. The securities fraud cases involved in MDL 21852

This action is one of ten actions comprising the "second tranche" of individual investor securities fraud actions filed against BP p.l.c. and related entities and individuals in Multidistrict Litigation No. 2185.

With some rare deviations—the significance of which is disputed—the allegations asserted in the second tranche cases track the allegations asserted in the first tranche cases and in the separate class action brought pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). That is, the second tranche plaintiffs also seek to hold Defendants responsible for financial harm caused by BP's falling stock prices after the Deepwater Horizon explosion on April 20, 2010 and the resulting 87–day oil spill in deepwater Gulf of Mexico.3 Plaintiffs contend that Defendants materially misrepresented the worth of BP's stock prior to and immediately following the disaster. They believe Defendants should compensate them for their financial losses following the alleged correction of BP's stock price.

The second tranche actions, like the first tranche actions, differ from the parallel Exchange Act class action ("Class Action") in one very significant way. Whereas all of the actions allege that Defendants made misrepresentations which distorted the public's perception of BP's risk profile and downplayed the magnitude of the post-explosion oil spill, only the individual investor actions seek recovery for the diminution in value of BP's Ordinary Shares on the London Stock Exchange ("LSE"). This is because the Court dismissed such claims in the Class Action, finding that the U.S. federal securities laws do not provide relief for losses experienced on foreign exchanges. In re BP p.l.c. Sec. Litig. ("BP I "), 843 F.Supp.2d 712, 793–96 (S.D.Tex.2012). Recovery in the Class Action has thus been limited to losses associated with the drop in value of BP's American Depository Shares ("ADSs"), which are listed and sold on the New York Stock Exchange ("NYSE"). In order to recover their Ordinary Share-related losses, various individual investors—including those involved in the instant action—have filed independent lawsuits, which have been aggregated with the Class Action and with each other due to their extensive factual and legal similarities.4

B. Overlap between the first tranche and second tranche cases

All ten actions in the second tranche were filed in or removed to federal court between August 2012 and November 2013. Defendants first moved to dismiss eight of the second tranche cases—including this one—in May 2013. (Doc. No. 31.) At that time, a consolidated motion to dismiss was pending in the first tranche cases. In the interest of efficiency, the Court suspended briefing on the second tranche motion to dismiss until the first tranche motion to dismiss was resolved. (Doc. No. 45 (the "Suspension Order").)

The first tranche orders issued on September 30, 2013, and were amended on December 5, 2013 and April 7, 2014. (Doc. Nos. 672–74, 678–79, 706 [10–md–2185]; Doc. No. 92 [12–cv–1837].) They decided many issues that had been raised in the original second tranche motion to dismiss. Most importantly, the first tranche orders resolved that: (1) English law would govern the individual investors' Ordinary Share-related claims, and (2) England was not a more convenient forum for the individual investors' English law claims. Based on these and other rulings on the first tranche motion to dismiss, the parties involved in the second tranche cases entered into a detailed stipulation, which the Court signed on December 10, 2013 with slight modification. (Doc. No. 59 (the "Conforming Stip.").)

In addition to resolving by implication many of the issues raised in the original second tranche motion to dismiss, the first tranche orders reset the clock on briefing that motion. The parties agreed to fold two newly-filed individual investor actions into the second tranche as briefing recommenced, bringing the total number of affected cases from eight to ten. As permitted by the Suspension Order, Defendants then filed an amended consolidated motion to dismiss the second tranche cases. (Doc. Nos.57, 62.) The motion was fully briefed, and the Court heard argument on July 25, 2014.

A. The parties

Plaintiffs in Avalon Holdings, Inc. et al. v. BP p.l.c. et al . are 41 institutional investors from around the world. According to Defendants, the "Avalon Plaintiffs" or "Plaintiffs" consist of:

• Six public domestic funds;
• Eight public foreign funds;
• Eight private domestic funds; and
• Nineteen private foreign funds.

(Doc. Nos. 58–2 and 63–2, at 2–6.)

The "Avalon Defendants" or "Defendants" consist of three corporate entities in the BP family of companies—BP p.l.c.; BP America, Inc.; and BP Exploration & Production, Inc.—as well as eight individual defendants. BP p.l.c. ("BP" or the "Company") is a U.K. corporation with its principal executive offices located in London, England. (Doc. Nos. 25, 92 ("Avalon Compl."), at ¶ 71.) BP America, Inc. ("BP America") and BP Exploration & Production, Inc. ("BP E & P"), both wholly-owned subsidiaries of BP, are Delaware corporations with their principal places of business in Houston, Texas. (Id. ¶¶ 72–73.)

The individual defendants were directors and officers of one or more of the corporate defendants prior to and during the Deepwater Horizon disaster.5 They are Anthony B. Hayward, executive director from 2003 to November 2010 and Chief Executive Officer at BP from May 2007 to October 2010; Douglas Suttles, Chief Operating Officer for BP E & P from January 2009 to at least January 2011; H. Lamar McKay, the Chairman and President of BP America since January 2009; Byron E. Grote, Chief Financial Officer at BP from 2002 through 2011 and director since 2000; Robert Dudley, executive director of BP since April 2009 and its Group Chief Executive since October 2010 (i.e., Mr. Hayward's successor); Lord John Browne, BP's CEO from 1998 until May 2007 (i.e., Mr. Hayward's predecessor); Andrew Inglis, CEO of BP E & P and an executive director of the Company from February 2007 until October 2010; and Peter Sutherland, BP's Chairman from 1997 until 2009 (collectively, the "Individual Defendants"). (Avalon Compl. ¶¶ 74–77, 79, 81–83.)

B. The claims

The Avalon Plaintiffs purchased Ordinary Shares on the LSE between June 30, 2005, and June 1, 2010. (Avalon Compl. ¶ 2.) They allege that Defendants concealed material information and made a series of public misrepresentations regarding "BP's implementation of process safety measures and its ability to respond to a ‘worst case’ oil spill in the Gulf of Mexico region." (Id .) They claim "substantial damages" from the correction in BP's stock price following the revelation of the "truth about BP and its lack of commitment to and implementation of safety processes to avoid preventable incidents." (Id .¶ 24.) They assert English common law deceit claims against all Defendants.6 (Id . ¶¶ 479–89; Conforming Stip. at 3.)

C. Alleged misrepresentations not addressed in prior orders

In the four-plus years that this MDL has been pending, the Court has written at length regarding the fraudulent schemes which Defendants are alleged to have perpetuated both before and after the Deepwater Horizon explosion. See BP I, 843 F.Supp.2d at 727–44, 750–75 ; In re BP p.l.c. Sec. Litig. ("BP II "), 852 F.Supp.2d 767, 778–85, 794–814 (S.D.Tex.2012) ; In re BP p.l.c. Sec. Litig. ("BP III "), 922 F.Supp.2d 600, 608–13, 618–24, 633–35 (S.D.Tex.2013) ; In re BP p.l.c. Sec. Litig. ("BP IV "), 2013 WL 6388408, at *1–2 (S.D.Tex. Dec. 6, 2013) ; Alameda Cnty. Employees' Ret. Ass'n v. BP p.l.c., 2013 WL 6383968, at *3–14 (S.D.Tex. Dec. 5, 2013). The Court will not repeat these narratives here.

Fortunately, previous efforts of parties in the Class Action and the first tranche cases have helped to narrow the issues that must be resolved in the instant motion. There are a total of forty-six alleged misrepresentations included in the Avalon Complaint. Eleven of these statements—and portions of four others—were found deficient in one or more of the Class Action and first tranche cases; the Avalon Plaintiffs have stipulated to the dismissal of their claims based on these statements. (Conforming Stip. at 3–7, 13–14 (dismissing claims based on alleged misrepresentations included in paragraphs 226, 229, 231, 233, 235, 237, 241, 243, 251, 252, 259–60, 272, 275–76, 288, 290–91, and 313 of the Avalon Complaint).) Conversely, in one or more of those other cases, the Court found twenty-four statements—and portions of five others—to be adequately alleged, actionable misrepresentations; Defendants do not again advocate for their dismissal. (Avalon Compl. ¶¶ 241, 243, 245, 247, 249, 253, 256, 270, 279, 282, 284, 286, 300, 302–07, 311, 315–17.)

In addition to the misrepresentations previously addressed by the Court, the Avalon Plaintiffs claim that they were misled by six additional public statements. Five statements predate the Deepwater Horizon explosion and concern the state of BP's safety programs and its efforts in the Gulf of Mexico. These are:

• Statements from BP's 2004 Annual Report, filed on June

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