US court: BP must face class-action suit

09 September 2015, News Wires – A US appeals court said BP, which in July reached a $18.7 billion settlement of federal, state and local claims over the 2010 Gulf of Mexico oil spill, must face one of two proposed class-action lawsuits claiming that the oil company defrauded shareholders over the disaster, according to reports.

bp logoThe 5th US Circuit Court of Appeals in New Orleans said investors who bought BP’s American depositary shares in a 33-day period soon after the spill may pursue group claims that BP initially “lowballed” the oil flow rate, and that the share price tumbled as the crisis’ magnitude became known.

Wire service Reuters reported that Circuit Judge Patrick Higginbotham, writing for a 3-0 panel, said the issue of whether revelations of the spill’s severity were linked to earlier BP misrepresentations was “undeniably common to the class, and is susceptible of a class-wide answer.”

The court also said investors who bought BP shares in the two and a half years before the spill, and said the company “lulled” them into believing its ability to manage safety issues was better than it was, cannot sue as a group, Reuters reported.

Higginbotham said some of these investors might have bought the stock even knowing of the risk. These investors may still sue London-based BP individually.

Tuesday’s decision upheld May 2014 rulings by US District Judge Keith Ellison in Houston, which both sides appealed.

The decision could boost BP’s costs over the April 20, 2010 explosion of the Deepwater Horizon rig and subsequent spill. As of late July, BP had taken $54.6 billion of pre-tax charges.

It can be easier for investors to recover more money at lower cost by suing as a group.

Russell Post, a lawyer for many plaintiffs, was quoted by Reuters as saying: “We are disappointed with the decision, which we believe erects additional hurdles to class certification that the Supreme Court does not require.”

BP spokesman Geoff Morrell said the company will continue to defend against the plaintiffs’ “meritless” securities claims, according to Reuters.

The certified class period runs from April 26 to May 28, 2010. BP’s ADS price fell 37% from the start through the first trading day after it ended.

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