In re BP Shareholder Derivative Litig.

• Decision Date: 15 September 2011
• Docket Number: MDL NO.: 10-md-2185,CIVIL ACTION NO.: 4:10-cv-3447
• Parties: IN RE BP SHAREHOLDER DERIVATIVE LITIGATION
• Court: U.S. District Court — Southern District of Texas

IN RE BP SHAREHOLDER DERIVATIVE LITIGATION

MDL NO.: 10-md-2185

CIVIL ACTION NO.: 4:10-cv-3447

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

Dated: September 15, 2011

MEMORANDUM AND ORDER

Pending before the Court is the Motion to Dismiss the Verified Consolidated Amended Shareholder Derivative Complaint ("Motion") of nominal defendant BP, p.l.c. ("BP")¹ and the individual defendants² (collectively, "Defendants"). (Doc. No. 90.)³Having considered the parties' arguments and the applicable law, the Court finds that Defendants' Motion should be granted.

I. BACKGROUND

This is a purported shareholder derivative action⁴ brought on behalf of nominal defendant BP to recover damages and other relief from various current and former officers and directors of BP and BP's United States subsidiary for alleged breaches oftheir fiduciary duties.⁵ In their Consolidated Amended Complaint ("Complaint"), Plaintiffs allege that the individual defendants engaged in a pattern of disregard for the safety of BP's energy exploration operations, which led to a series of safety violations spanning two decades. These violations culminated in the devastating Deepwater Horizon explosion and subsequent oil spill in the Gulf of Mexico.

Specifically, Plaintiffs assert, "The job of a corporate board of directors of any major oil company, first and foremost, is . . . to act in good faith to ensure that the company's business is conducted safely and lawfully. This derivative action arises from the deliberate decision of BP's board of directors . . . to ignore its mandate." (Compl. ¶ 2, Doc. No. 81.) Indeed, Plaintiffs contend that, over the years, "Defendants learned about numerous dangerous incidents, accidents and near-misses involving BP's oil exploration, refinery and pipeline operations," but took no corrective action. (Id. ¶ 7.) The individual defendants were aware, Plaintiffs allege, that their failure to address the company's inadequate process safety increased the risk of the disasters that ultimately followed. Plaintiffs assert that the individual defendants were informed of these issues, but consciously disregarded them. As such, they failed to appreciate that this pattern of serious operational incidents "could be traced directly back to BP's culture and strategy of promoting budget cuts over adequate maintenance and safety processes." (Id. ¶ 8.) Nor did they appreciate that these management decisions continued to put the financial and reputational good of the company in jeopardy. (Id. ¶ 10.) The individual defendants'singular focus on BP's bottom line, Plaintiffs maintain, has been catastrophic for the company, resulting in "multiple disasters with deadly consequences throughout BP's operations, multiple felony convictions, and multiple multi-million dollar fines and other penalties imposed by regulators." (Id. ¶ 5.)

Based on the individual defendants' alleged long-term pattern of wrongdoing, Plaintiffs have brought various claims for breach of fiduciary duty. Specifically, Plaintiffs allege that the individual defendants: (1) acted ultra vires and caused BP to engage in unlawful conduct, and (2) failed to exercise independent judgment and due care by allowing BP to engage in dangerous activities without adequate process safety.⁶ (Id. ¶¶ 247-72.) These obligations are derived from the recently enacted United Kingdom ("U.K.") Companies Act of 2006 (the "Companies Act"), which governs the fiduciary duties that officers and directors owe English companies. Plaintiffs seek to recover damages on behalf of BP for the substantial harm the company allegedly sustained as a result of the individual defendants' unlawful conduct and failure to exercise independent judgment and/or due care. (Id. ¶¶ 252, 259, 265, 271.)

Defendants have moved to dismiss the Complaint under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(6), and 23.1, contending that: (1) Plaintiffs lack standing to sue derivatively because they have failed to secure permission from the English High Court to continue the suit, or alternatively, because they failed first to make a demand on the BP Board of Directors before bringing the suit; (2) under the doctrines of forum non conveniens and international comity, the Court should refrain from exercising jurisdiction; and (3) the Court lacks personal jurisdiction over the individualdefendants.

As discussed below, the Court concludes that the English High Court is a far more appropriate forum for this litigation and, accordingly, exercises its discretion to dismiss Plaintiffs' Complaint on forum non conveniens grounds. It is therefore unnecessary to address Defendants' alternative grounds for dismissal.⁷

II. FORUM NON CONVENIENS LEGAL STANDARD

A federal court sitting in diversity applies the federal law of forum non conveniens in deciding a motion to dismiss in favor of a foreign forum. De Aguilar v. Boeing Co., 11 F.3d 55, 59 (5th Cir. 1993); In re Air Crash Disaster Near New Orleans, La., 821 F.2d 1147, 1159 (5th Cir. 1987) (en banc), vacated on other grounds sub. nom., Pan Am. World Airways, Inc. v. Lopez, 490 U.S. 1032 (1989), reinstated except as to damages by In re Air Crash Disaster Near New Orleans, La., 883 F.2d 17 (5th Cir. 1989) (en banc). The doctrine of forum non conveniens enables a district court, at its discretion, to decline to exercise jurisdiction "if the moving party establishes that the convenience of the parties and the court and the interests of justice indicate that the case should be tried in another forum." Karim v. Finch Shipping Co., Ltd., 265 F.3d 258, 268 (5th Cir. 2001). Indeed, "the ultimate inquiry is where trial will best serve theconvenience of the parties and the ends of justice." Koster v. (American) Lumbermens Mut. Casualty Co., 330 U.S. 518, 527 (1947).

In analyzing whether to dismiss a case on forum non conveniens grounds, a district court first considers whether an available and adequate alternative forum exists. If it does, the court then determines which forum is best suited to the litigation. Karim, 265 F.3d at 268 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n.22, 255 (1981)). In assessing whether an available and adequate alternative forum exists, a district court generally considers the following factors: "(1) amenability of the defendant to service of process and (2) availability of an adequate remedy in the alternative forum." Karim, 265 F.3d at 268; see also Gonzalez v. Chrysler Corp., 301 F.3d 377, 379-80 (5th Cir. 2002), cert. denied, 538 U.S. 1012 (2003); McLennan v. Am. Eurocopter Corp., 245 F.3d 403, 424 (5th Cir. 2001).

"If the court concludes that the foreign forum is both available and adequate, it should then consider all of the relevant factors of private interest, weighing in the balance the relevant deference given the particular plaintiff's initial choice of forum." In re Air Crash, 821 F.2d at 1165. The private interest factors to be considered by the Court relate primarily to the convenience of the litigants. They are:

(1) the relative ease of access to sources of proof;

(2) the availability of compulsory process to secure the attendance of witnesses;

(3) the cost of attendance for willing witnesses; and

(4) all other practical problems that make trial of a case easy, expeditious and inexpensive.

Syndicate 420 at Lloyd's London v. Early American Ins. Co., 796 F.2d 821, 831 (5th Cir. 1986) (citing Piper Aircraft, 454 U.S. at 241).

"If consideration of these private interest factors counsels against dismissal, the district court . . . must weigh numerous public interest factors. If these factors weigh in the moving party's favor, the district court may dismiss the case." Gonzalez, 301 F.3d at 380 (citing Baumgart v. Fairchild Aircraft Corp., 981 F.2d 824, 837 (5th Cir. 1993)); see also In re Air Crash, 821 F.2d at 1165 ("If the district court finds that the private interests do not weigh in favor of the dismissal, it must then consider the public interest factors."); Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1550-51 (5th Cir. 1991) ("[O]nly if the court cannot determine whether such private factors weigh in favor of dismissal is it required to examine the public interest factors at all.").

The public interest factors relevant to the analysis are:

(1) the administrative difficulties flowing from court congestion;

(2) the local interest in having localized controversies decided at home;

(3) the familiarity of the forum with the law that will govern the case;

(4) the avoidance of unnecessary problems of conflict of laws or the application of foreign law; and

(5) the unfairness of burdening citizens in an unrelated forum with jury duty.

Saqui v. Pride Cent. America, LLC, 595 F.3d 206, 214 (5th Cir. 2010) (citing In re Air Crash, 821 F.2d at 1162-63). In cases where the private interest factors do not weigh heavily in favor of the alternative forum, a court may still dismiss an action in light of the relevant public interest considerations. See Piper Aircraft, 454 U.S. at 256 n.23 ("[I]f the balance of conveniences suggests that trial in the chosen forum would be unnecessarily burdensome for the defendant or the court, dismissal is proper."); In re Air Crash, 821 F.2d at 1165-66 (citing Pain v. United Technologies Corp., 637 F.2d 775, 792 (D.C. Cir. 1980), cert. denied, 454 U.S. 1128 (1981)) ("[E]ven when the private conveniences of the litigants are nearly in balance, a trial court has discretion to grant forum non conveniensdismissal upon finding that retention of jurisdiction would be unduly burdensome to the community, that there is little or no public interest in the dispute or that foreign law will predominate if jurisdiction is retained.").

When undertaking the required balancing, "no one private or public interest factor should be given conclusive weight." In re Air Crash, 821 F.2d at 1163. Ordinarily a favorable presumption is applied to the plaintiff's choice of forum. Thus, "unless the balance is strongly in favor of the...