Mayhall Fondren Blaize

Business litigation: BP will pay investors for false reports

Investors may use class action litigation to pursue collective claims against a company for falsely representing facts that would impact the value of its stock. This may involve publicly minimizing the damage that the company suffered in a losing business transaction or crisis. In the case of the BP oil spill of 2010, investors filed class action business litigation alleging that BP lied about the seriousness of the spill. In the face of the false information, investors in Louisiana and elsewhere saw the stock prices plummet dramatically.

BP and plaintiffs announced a settlement of the litigation for the sum of $175 million to be paid to investors. The plaintiffs had sought 2.5 billion in damages, but recent rulings by the trial court would have limited the scope of the claims that could be asserted at trial. The settlement will complete another major open matter still lingering from the disaster.

BP already entered into a settlement with the SEC in 2012 for $525 million in which BP was charged with underestimating the extent of the damage. The company pleaded guilty also to a felony count of obstruction of Congress on the issue of giving false spill estimates. The settlement with the shareholders would likely have been substantially more massive, therefore, if the court had not made its recent limiting evidentiary ruling.

Due to geographical proximity, the 2010 disaster has had widespread impact on the economic and environmental interests of Louisiana and its citizens. The impact included, directly and indirectly, numerous business litigation matters, with some of them still unresolved. The settlement doesn't include other securities related claims, according to BP. The breadth of the damage by BP, including the impact of false reports minimizing the spill in the weeks afterwards, is so broad that it will take some time to assess when the company is approaching true closure on the damages claims that still exist.

Source:, "BP Agrees to Pay $175M to Settle Claims It Hid Spill Size", Margaret Cronin Fisk and Laurel Brubaker Calkins, June 6, 2016

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