Shareholders represented by Doyle Lowther LLP and others have filed a stockholder derivative action on behalf of British Petroleum p.l.c. against BP’s directors and certain officers for breaching their fiduciary duties to BP.
The action arises from the catastrophic April 20, 2010 explosion of the Deepwater Horizon oil rig in the Gulf of Mexico.
Eleven crewmembers were killed in the blast. Millions of barrels of oil have gushed from the ruptured oil well. Damage to the fishing industry is estimated to be at least $2.5 billion, and losses to the tourism industry are projected to be at least $3 billion. Since the rig explosion, British Petroleum has lost more than $25 billion in shareholder value.
The Deepwater Horizon explosion, among the worst pollution and environmental disasters ever to befall the United States, is just the latest example of BP and its Board violating environmental regulation and protection laws. Most troubling, according to BP employees, the Deepwater Horizon explosion resulted from weeks of mishaps on the rig, which BP ignored.
Worse, the explosion and oil spill allegedly resulted from BP’s pressure to save money by speeding up the drilling process in an unsafe manner. As one witness explained, just weeks prior to the explosion, “the well’s most vital piece of safety equipment was damaged.” The damage resulted from a rig worker mistakenly engaging the well drill, improperly placing hundreds of tons of pressure on a gasket called an “annular.” The annular allows the well’s blowout preventer to stop explosions like the one that sunk the Deepwater Horizon.
In March 2005, an explosion at a BP refinery in Texas City, Texas killed 15 workers and injured thousands. A subsequent investigation by the United States Chemical Safety and Hazard Investigation Board revealed BP ignored its own safety protocols. After pleading guilty to federal charges, BP was fined upwards of $50 million for failing to correct safety hazards at the Texas plant.
Similarly, in March 2006 a hole in BP’s Prudhoe Bay pipeline leaked more than 200,000 gallons of oil into Alaska’s North Slope. After a Congressional committee found BP failed to seize opportunities to prevent the leak, British Petroleum paid $20 million in fines for the Prudhoe Bay spill.
Following these disasters, BP once again faces huge fines, penalties, waste of corporate resources responding to civil and criminal investigations and enforcement proceedings, increased operating costs due to burdensome requirements and restrictions imposed by regulators, and lost revenues and profits due to operational shutdowns or curtailments, as well as serious harm to BP’s business reputation and goodwill.
All of this arises from BP directors’ and officers’ failure to properly oversee BP’s business, and in particular properly oversee safety, environment, and risk management. The derivative litigation seeks to shift the burden of paying these costs from BP to the directors and officers who allowed British Petroleum to operate in an unsafe manner.