BP Wins U.S. Dismissal of Some Investors' Derivative Spill Suits

By Margaret Cronin Fisk and Allen Johnson Jr. – Sep 16, 2011 12:01 AM ET

BP Plc (BP/) convinced a federal judge that it shouldn’t have to face some lawsuits in the U.S. brought by institutional investors on behalf of the company over last year’s Gulf of Mexico drilling-rig explosion and oil spill.

U.S. District Judge Keith P. Ellison in Houston agreed with BP’s arguments that the claims should be filed in U.K. courts because the company is based in London. Ellison said he may reverse this dismissal if English courts “refuse to accept jurisdiction” for reasons other than the plaintiffs’ failure to comply with procedural requirements.

“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 said yesterday in a 31-page decision.

Investors sued BP claiming that the company’s management and board caused the spill by knowingly putting profits ahead of safety. The Deepwater Horizon rig exploded in April 2010 while drilling a BP well off the Louisiana coast, killing 11 and spilling more than 4.1 million barrels of oil.

The investors’ suits, so-called derivative claims brought on behalf of the company, are combined with other shareholder actions before Ellison in Houston. Lawsuits seeking money for economic and personal injuries from the spill are consolidated before a different U.S. judge in New Orleans.

“The primary concern of this derivative litigation is the internal affairs of an English corporation, and the suit seeks to recover damages for the benefit of BP only,” Ellison said in his ruling. “English law governs this dispute and will determine whether the individual defendants breached their fiduciary duties and harmed BP in the process.”

BP spokesmen Scott Dean and Daren Beaudo didn’t immediately return phone or e-mail messages seeking comment after regular business hours. Mark Lebovitch and Lewis Kahn, investor attorneys, didn’t immediately return calls seeking comment.

The case is In re BP Shareholder Derivative Litigation, 4:10-cv-03447, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net