IN RE: BP p.l.c. SECURITIES LITIGATION, MDL No. 10-md-2185
BP p.l.c., et al. Defendants. ALAMEDA COUNTY EMPLOYEES' RETIREMENT ASSOCIATION, et al., Plaintiffs,
AMENDED MEMORANDUM AND ORDER
KEITH P. ELLISON, District Judge.
Pending before the Court is Defendants' Consolidated Motion to Dismiss Plaintiffs' Complaints. (Doc. No. 46.) Having reviewed the motion, Plaintiffs' response (Doc. No. 55), Defendants' reply (Doc. No. 63), and all papers in support thereof, the Court finds that Defendants' motion (Doc. No. 46) must be GRANTED IN PART and DENIED IN PART.
This case is part of a "first tranche" of securities fraud actions filed against various BP companies and executives that are advanced mostly under state law. Plaintiffs seek to hold Defendants responsible for financial harm caused by BP's falling stock prices after the Deepwater Horizon explosion on April 20, 2010 and the resulting 87-day oil spill in deepwater Gulf of Mexico. Plaintiffs contend that Defendants materially misrepresented the worth of BP's stock prior to and immediately following the disaster. They believe Defendants should compensate them for their financial losses following the alleged correction of BP's stock price.
The Court has written at length regarding the events of April 20, 2010. A putative class action grounded in U.S. federal securities law (the "Class Action") is also pending before the Court, and three separate motions to dismiss have been resolved by written order in that action. A more extensive description of the factual allegations regarding BP's checkered safety record and the tragic events leading up to the Deepwater Horizon explosion may be found in two of the Court's prior orders. See In re BP p.l.c. Securities Litig. (" BP I "), 843 F.Supp.2d 712, 724-25, 741-42 (S.D. Tex. 2012); In re BP p.l.c. Securities Litig. (" BP II "), 852 F.Supp.2d 767, 775-78 (S.D. Tex. 2012).
This action both overlaps substantially with, and deviates from, the Class Action. Most importantly, Plaintiffs in this case seek compensation for losses caused by drops in the price of BP's Ordinary Shares-listed and sold only on the London Stock Exchange ("LSE")-as well as for drops in the price of BP's American Depositary Shares ("ADSs")-listed and sold on the New York Stock Exchange ("NYSE"). In the Class Action, the Court held that U.S. federal securities laws do not provide relief for losses experienced on foreign exchanges. BP I, 843 F.Supp.2d at 796. Consequently, to recover the full range of their losses from both types of financial instruments, Plaintiffs in this case bring both federal and state law claims.
Plaintiffs' First Amended Consolidated Complaint (the "Complaint") is very similar to the Second Consolidated Amended Class Action Complaint (the "Class Action Complaint") in the Class Action. It alleges that a series of public statements-in press releases, regulatory filings, and news reports-were misleading. One important distinction between the Complaint and the Class Action Complaint is that the Complaint includes more specific allegations of Plaintiffs' diligence in researching BP, assessing whether to invest, and then making investments. Specifically, the Complaint contains allegations about particular investment advisors used by the various plaintiffs; what those investment advisors reviewed; and how at least one of them- [REDACTED] representing Alameda County-met with BP officials face-to-face to discuss concerns about. [REDACTED] Statements from seven face-to-face meetings with [REDACTED] are included in the Complaint as alleged misrepresentations.
The Complaint also expounds upon Defendants' alleged campaign, post-disaster, to promote and perpetuate the notion that the amount of oil spilling into the Gulf each day was approximately 5, 000 barrels, and not 70, 000 barrels as reported by other observers of the tragedy. To this end, the Complaint incorporates an additional twelve alleged public misstatements from April and May 2010 which are not found in the Class Action Complaint. Plaintiffs have also included copious detail regarding data and estimates generated within BP that contradicted the post-spill public statements, as well as developments in the criminal and civil enforcement case against BP and its executives and employees in which some liability for misleading the U.S. government and the public has been admitted.
A. The Parties
The plaintiffs are: Alameda County Employees' Retirement Association ("Alameda County"); Employees' Retirement System of the City of Providence ("Providence"); and State-Boston Retirement System ("State-Boston" and, collectively with Alameda County and Providence, "Plaintiffs"). Plaintiffs are all U.S. public pension funds. Alameda County and State-Boston purchased both Ordinary Shares on the LSE and ADSs on the NYSE. Providence purchased only Ordinary Shares on the LSE. Alameda County and State-Boston's BP holdings date from November 29, 2006; Providence's BP holdings date from October 2, 2009. (Doc. No. 36 (the "Compl."), at ¶¶ 22-24.)
The defendants are: BP p.l.c., BP America, Inc., and BP Exploration & Production, Inc. and seven of BP's present and former officers and directors. BP p.l.c. ("BP" or the "Company") is a U.K. corporation with its principal executive offices located in London, England. (Compl. ¶ 25.) BP America, Inc. ("BP America") and BP Exploration & Production, Inc. ("BP E&P"), both wholly-owned subsidiaries of BP, are Delaware corporations with their principal places of business in Houston, Texas. ( Id. ¶¶ 26-27.)
The seven individual defendants were directors and officers of one or more of the corporate defendants prior to and during the Deepwater Horizon spill. They are Anthony B. Hayward, executive director from 2003 to November 2010 and Chief Executive Officer ("CEO") at BP from May 2007 to October 2010; Douglas Suttles, Chief Operating Officer for BP E&P from January 2009 to at least January 2011; Andrew G. Inglis, executive director and Chief Executive of Exploration and Production at BP from 2007 to October 2010; Robert Malone, Chairman and President of BP America from July 2006 to February 2009; David Rainey, BP America's Vice President of Exploration for the Gulf of Mexico; H. Lamar McKay, the Chairman and President of BP America since January 2009; and Robert Dudley, executive director of BP since April 2009 and its Group Chief Executive since October 2010 (collectively, the "Individual Defendants"). (Compl. ¶¶ 29-35.)
B. Alleged Public Misrepresentations
As noted above, the alleged public misrepresentations included in the Complaint are largely the same as the misrepresentations at issue in the Class Action. The statements began in January 2007 and continued through May 2010, after the Deepwater Horizon explosion. The alleged public misrepresentations can be divided into three broad categories: (1) statements regarding BP's safety reform efforts following a fatal explosion at the Company's Texas City refinery in 2005; (2) statements regarding BP's ability to respond to an oil spill in deepwater; and
(3) statements regarding the amount of oil spilling from the Macondo well after the Deepwater Horizon collapsed.
1. BP's safety reform efforts
On March 23, 2005, an explosion at BP's Texas City refinery killed 15 people and injured approximately 170 others. (Compl. ¶ 57.) The catastrophe-one in a long string of safety missteps, as catalogued in the Complaint-prompted BP, on recommendation from the U.S. Chemical Safety Board ("CSB"), to commission an independent panel of experts to review its safety culture and procedures and recommend improvements. ( Id. ¶¶ 61-62.) This panel-led by former U.S. Secretary of State James Baker, III and known as the "Baker Panel"-issued a report in January 2007 (the "Baker Report") criticizing BP for emphasizing personal safety (i.e., occupational safety such as slip and falls) over process safety. ( Id. ¶ 72.) The Baker Report set out ten recommendations and urged BP to implement them expeditiously:
RECOMMENDATION # 1 - PROCESS SAFETY LEADERSHIP - The Board of Directors of BP p.l.c., BP's executive management (including its Group Chief Executive), and other members of BP's corporate management must provide effective leadership on and establish appropriate goals for process safety. Those individuals must demonstrate their commitment to process safety by articulating a clear message on the importance of process safety and matching that message both with the policies they adopt and the actions they take.
RECOMMENDATION # 2 - INTEGRATED AND COMPREHENSIVE PROCESS SAFETY MANAGEMENT SYSTEM - BP should establish and implement an integrated and comprehensive process safety management system that systematically and continuously identifies, reduces, and manages process safety risks at its U.S. refineries.
RECOMMENDATION # 3 - PROCESS SAFETY KNOWLEDGE AND EXPERTISE - BP should develop and implement a system to ensure that its executive management, its refining line management above the refinery level, and all U.S. refining personnel, including managers, supervisors, workers, and contractors, possess an appropriate level of process safety knowledge and expertise.
RECOMMENDATION # 4 - PROCESS SAFETY CULTURE - BP should involve the relevant stakeholders to develop a positive, trusting, and open process safety culture within each U.S. refinery.
RECOMMENDATION # 5 - CLEARLY DEFINED EXPECTATIONS AND ACCOUNTABILITY FOR PROCESS SAFETY - BP should clearly define expectations and strengthen accountability for process safety performance at all levels in executive management and in the refining managerial and supervisory reporting line.
RECOMMENDATION # 6 - SUPPORT FOR LINE MANAGEMENT - BP should provide more effective and better coordinated process safety support for the U.S. refining line organization.
RECOMMENDATION # 7 - LEADING AND LAGGING PERFORMANCE INDICATORS FOR PROCESS SAFETY - BP should develop, implement, maintain, and periodically update an integrated set of leading and lagging performance indicators for more effectively monitoring the process safety performance of the U.S. refineries by BP's refining line management, executive management (including the Group Chief Executive), and the Board of Directors.
RECOMMENDATION # 8 - PROCESS SAFETY AUDITING - BP should establish and implement an effective system to audit process safety performance at its U.S. refineries.
RECOMMENDATION # 9 - BOARD MONITORING - BP's Board should monitor the implementation of the recommendations of the Panel... and the ongoing process safety performance of BP's U.S. refineries. The Board should, for a period of at least five calendar years, engage an independent monitor to report annually to the Board on BP's progress in implementing the Panel's recommendations.... The Board should also report publicly on the progress of such implementation and on BP's ongoing process safety performance.
RECOMMENDATION # 10 - INDUSTRY LEADER - BP should use the lessons learned from the Texas City tragedy and from the Panel's report to transform the company into a recognized industry leader in process safety management. The Panel believes that these recommendations... can help bring about sustainable improvements in process safety performance at all BP U.S. refineries.
( Id. ¶ 74.)
Plaintiffs allege that Defendants embraced the Baker Panel's recommendation to "articulat[e] a clear message on the importance of process safety, " but failed to match that message with policies and actions. (Compl. ¶ 76.) Despite this, BP's purported progress on the Baker Report roadmap was a common refrain in public statements after January 2007. The following statements fall into this category of alleged misrepresentation:
A press release issued January 16, 2007, announcing the release of the Baker Report, stated: "BP already has taken a number of actions which align with the recommendations of the [Baker Panel] and will, after a more thorough review, develop plans... for applying lessons learned elsewhere." ( Id. ¶ 331.)
In a press release issued October 25, 2007, announcing the resolution of law enforcement investigations into Texas City and an oil spill in Prudhoe Bay, Alaska, Malone stated: "In the months and years since these violations occurred, we have made real progress in the areas of process safety performance and risk management. " ( Id. ¶ 341.)
At the Houston Forum on November 8, 2007, Hayward stated: " We continue to implement the roadmap provided to ourselves and the industry by the excellent work of the Baker Panel. BP remains absolutely committed to taking these lessons and becoming a world leader in process safety." ( Id. ¶ 343.)
In the 2007 Annual Review, dated February 22, 2008, Hayward stated: "When I took over as group chief executive, the immediate task was to restore the integrity and the efficiency of BP's operations. I set out three priorities: safety, people and performance. " ( Id. ¶ 345.)
At the 2008 Strategy Presentation conducted via teleconference on February 27, 2008, and again at the 2008 Annual General Meeting held April 17, 2008, Hayward stated: " [O]ur intense focus on process safety continues. We are making good progress in addressing the recommendations of the Baker Panel [.]" ( Id. ¶¶ 347, 349.)
At the HRH Prince of Wales's 3rd Annual Accounting for Sustainability Forum on December 17, 2008, Hayward stated: "BP had a number of high-profile safety lapses in recent years, notably at our Texas City refinery, where there was a tragic and unacceptable loss of life.... We opened ourselves up to scrutiny... [a]nd we have continuously reported progress against a response plan and against an independent external report. " ( Id. ¶ 352.)
BP's 2009 Annual Report filed March 5, 2010 and signed by Hayward, stated: " Following the tragic incident at the Texas City refinery in 2005 the [Safety, Ethics, and Environment Assurance] committee has observed a number of key developments .... Throughout this time the group chief executive has made safety the number one priority." ( Id. ¶ 379.)
During a March 23, 2010 speech at the Peterson Institute for International Economics, Hayward stated: " That tragic accident [i.e., Texas City] has changed in a profound and fundamental way our approach to safety and operations integrity - providing a safe working environment is a paramount responsibility, and our first and foremost priority. " ( Id. ¶ 383.)
According to Plaintiffs, the above statements were false and misleading because BP had not, in fact, instituted the safety reforms advocated by the Baker Panel. ( E.g., Compl. ¶ 332.) They claim that BP's abject failure to make any progress on the above recommendations was made tragically clear when a series of process safety failures led to the April 20, 2010 blowout on the Deepwater Horizon. According to Plaintiffs, the events leading up to April 20, 2010 demonstrate that BP-despite public attestations of reform and progress-continued to suffer from a misguided focus on occupational safety over process safety; lacked adequate and consistent process safety procedures; and had engaged in short-sighted, cost-driven decision-making which compromised its ability to maintain safe operations and resulted in an unreasonable risk of catastrophic failures. ( Id. ¶¶ 11-12, 117-18, 246, 259-60, 262, 264.) Importantly, these same issues were raised in the Baker Report and in other investigations conducted regarding the Texas City and Prudhoe Bay disasters. ( Id. ¶¶ 64, 72.)
In addition to the above statements regarding BP's "progress" on the Baker Report roadmap, Plaintiffs allege that Defendants also misrepresented the scope and implementation of BP's Operating Management System ("OMS")-the cornerstone of BP's safety reform efforts. OMS was a response to the second recommendation of the Baker Panel: "BP should establish and implement an integrated and comprehensive process safety management system that systematically and continuously identifies, reduces, and manages process safety risks[.]" (Compl. ¶ 77.) Defendants touted OMS in a variety of public settings, repeatedly updating on its roll-out and reach:
BP's 2006 Sustainability Report, dated May 9, 2007, stated: "The OMS is a comprehensive system that covers all aspects of our operations.... The new OMS will apply to all operations by the end of 2010.... Each site will have its own local OMS, based on a consistent group-wide framework[.]" ( Id. ¶ 333.)
On a July 24, 2007 conference call with analysts and investors, Hayward stated: "We are also in the early days of establishing a new way of operating in BP - with the progressive rollout of a common group-wide Operating Management System. " ( Id. ¶ 337.)
At the Sanford Bernstein 4th Annual Strategic Decisions Conference on September 25, 2007, Inglis stated: "One aspect of our focus on safe and reliable operations... is our new standardized [OMS]. This will provide a blueprint for safety and all aspects of operations throughout BP. " ( Id. ¶ 339.)
A press release issued October 25, 2007 stated: "BP America is in the midst of a comprehensive effort to improve its safety culture and to strengthen and standardize process safety and risk management programs at all BP-operated facilities." ( Id. ¶ 341.)
At the 2008 Strategy Presentation conducted via teleconference on February 27, 2008, and again at the 2008 Annual General Meeting held April 17, 2008, Hayward stated: " [O]ur intense focus on process safety continues. We... have begun to implement a new Operating Management System across all of BP's operations. " ( Id. ¶¶ 347, 349.)
In the 2008 Annual Review dated February 24, 2009, Hayward stated: " The BP [OMS] turns the principle of safe and reliable operations into reality by governing how every BP project, site, operation and facility is managed. " ( Id. ¶ 355.)
BP's 2008 Annual Report, filed March 4, 2009 and signed by Hayward, stated: "We continue to implement our new [OMS], a framework for operations across BP that is integral to improving safety and operating performance in every site. When fully implemented, OMS will be the single framework within which we will operate[.]" ( Id. ¶ 358.) Elsewhere, the Report stated: "All operated businesses plan to transition to OMS by the end of 2010." ( Id. )
In the 2008 Sustainability Review released April 16, 2009, Hayward stated: "You can see a similar balanced approach in our new [OMS], which is to be implemented at each BP site. " ( Id. ¶ 370.)
BP's 2009 Annual Review, dated February 26, 2010, stated: "A key enabler for [safe, reliable and compliant operations] is the BP operating management system (OMS), which provides a common framework for all BP operations.... OMS enables each site to focus on the most important risks in its own operations and sets out procedures on how to manage them in accordance with the group-wide framework. " ( Id. ¶ 377.)
BP's 2009 Annual Report, filed March 5, 2010 and signed by Hayward, stated: "A key enabler for [safe, reliable and compliant operations] is the BP [OMS], which provides a common framework for all BP operations, designed to achieve consistency and continuous improvement in safety and efficiency. " ( Id. ¶ 379.) Elsewhere, it stated: " BP's [OMS], which provides a single operating framework for all BP operations, is a key part of continuing to drive a rigorous approach to safe operations." ( Id. ) It also stated: "Following the tragic incident at the Texas City refinery in 2005, the SEEAC committee has observed a number of key developments, including... development of a group-wide operating management system (OMS) which is being progressively adopted by all operating sites ..." ( Id. )
At the Howard Weil Energy Conference on March 22, 2010, Inglis stated: " Safety and operational integrity underpins everything we do, and we are now in the final phase of rolling out our operating management system that provides a single, consistent framework for our operations, covering all areas from personal and process safety to environmental performance. " ( Id. ¶ 381.)
BP's 2009 Sustainability Review dated April 15, 2010, stated: " BP's [OMS] provides a single framework for all BP operations to follow, covering all areas from process safety, to personal health, to environmental performance. Providing an integrated and consistent way of working, the OMS helps ensure that a rigorous approach to safe operations continues to be taken. Its principles and processes are designed to simplify the organization, improve productivity, enable consistent execution and focus BP on performance." ( Id. ¶ 387.)
BP's 2009 Sustainability Report, dated April 15, 2010, stated: " BP continues to implement its [OMS], a cornerstone of achieving safe, reliable and responsible operations at every BP operation. " ( Id. ¶ 390.)
The above statements are alleged to be misleading because they repeatedly emphasized the all-encompassing, consistent nature of OMS, without disclosing that it was not designed to and would not apply to project sites owned by contractors. (Compl. ¶¶ 93-97.) This was a significant carve-out to OMS-six out of seven offshore drilling units in the Gulf of Mexico in early 2010 were owned by contractors, including, notably, the Transocean-owned Deepwater Horizon. ( Id. ¶ 93.)
Multiple statements regarding the pace of the OMS roll-out in the Gulf of Mexico are also alleged to have been misleading. These include the following:
In the 2008 Annual Review, dated February 24, 2009, BP stated: "During the year we began migrating to the new BP OMS, which has an increased focus on process safety and continuous improvement. The majority of our operations in North America Gas, the Gulf of Mexico, Colombia and the Endicott field in Alaska all completed the migration to the OMS in 2008. " (Compl. ¶ 354.)
The 2008 Annual Report, filed March 4, 2009 and signed by Hayward, stated: " Eight sites completed the transition to OMS in 2008... [including] the Gulf of Mexico [.]" ( Id. ¶ 358.)
In the 2009 Sustainability Review, dated April 15, 2010, Hayward stated: " Having been initially introduced at eight sites in 2008, the OMS rollout extended to 70 sites by the end of 2009... This means implementation is 80% complete. " ( Id. ¶ 385.)
Plaintiffs claim that the statements were misleading because they touted full implementation of OMS in the Gulf of Mexico before full implementation had actually been achieved. ( Id. ¶¶ 100-07.)
Finally, Plaintiffs allege that at least two misrepresentations were made regarding BP's receptiveness to safety concerns raised by its employees and its treatment of safety whistleblowers. Like the representations regarding OMS, the statements about employee feedback and non-retaliation were relevant to one of the recommendations of the Baker Report: Recommendation # 4, which encouraged BP to "involve the relevant stakeholders to develop a positive, trusting, and open process safety culture[.]" (Compl. ¶ 74.) The alleged misstatements in this category include:
On May 16, 2007, in testimony before a House subcommittee, Malone stated: "I continue to meet with employees to reinforce my expectations of them: that they must ensure that our operations are safe, that they understand they have both a right and responsibility to shut down any process they feel is unsafe or operationally unsound, and that they are encouraged to raise concerns on any issue. " ( Id. ¶ 335.) Malone further stated: " BP does not tolerate retaliation against workers who raise safety concerns. " ( Id. )
On December 17, 2008, during a speech at the HRH Prince of Wales's 3rd Annual Accounting for Sustainability Forum, Hayward stated that BP's "high profile safety lapses" provided "a huge opportunity to learn and improve the way we operate. We opened ourselves up to scrutiny - and we listened more to our front-line operations people - who, of course, really know what is going on on the ground. " ( Id. ¶ 352.)
Plaintiffs claim that these statements were false because safety concerns raised by BP employees were, at best, ignored. At worst, safety whistleblowers were marginalized, retaliated against, and even terminated. ( Id. ¶¶ 187-201.)
2. BP's oil spill prevention and response capabilities
Defendants are also alleged to have misrepresented BP's ability to prevent and to respond to an oil spill in deepwater, both to the U.S. government and to investors. Most of the alleged misstatements in this category are found in the Regional Oil Spill Response Plan ("OSRP")-last updated in June 2009 and covering the entire Gulf of Mexico region-and the Initial Exploration Plan ("IEP") for the Macondo well, submitted March 10, 2009. (Compl. ¶¶ 227, 229.) Both documents were filed with the U.S. Department of the Interior's Minerals Management Service ("MMS") and made publicly available. ( Id. ¶¶ 360, 372.) The alleged misstatements found in the documents include:
The IEP stated: " BP Exploration & Production Inc. has the capability to respond, to the maximum extent practicable, to a worst-case discharge, " which BP estimated at 162, 000 barrels of oil per day. ( Id. ¶¶ 360, 363.)
The IEP also stated: " In the event of an unanticipated blowout resulting in an oil spill, it is unlikely to have an impact based on the industry wide standards for using proven equipment and technology for such responses, implementation of BP's Regional Oil Spill Response Plan which address available equipment and personnel, techniques for containment and recovery and removal of the oil spill. " ( Id. ¶ 360.) It also stated: "An accidental oil spill from the proposed activities could cause impacts to beaches. However, due to the distance to shore (48 miles) and the response capabilities that would be implemented, no significant adverse impacts are expected. Both the historical spill data and the combined trajectory/risk calculations referenced in the publication OCS EIS/EA MMS 2002-052 indicate there is little risk of contact or impact to the coastline and associated environmental resources. " ( Id. ¶ 361.)
The OSRP estimated the " TOTAL WORST CASE DISCHARGE " scenarios in the Gulf of Mexico at between 28, 033 barrels and 250, 000 barrels of oil per day. ( Id. ¶ 372.)
The OSRP also stated that BP and its subcontractors could recover approximately 491, 721 barrels of oil per day (or more than 20.6 million gallons) in the event of an oil spill in the Gulf. ( Id. ) It stated that BP and its subcontractors " maintain the necessary spill containment and recovery equipment to respond effectively to spills. " ( Id. )
In addition to the alleged misrepresentations in the OSRP and IEP, Plaintiffs include 2 other public statements which addressed BP's spill prevention technologies and promoted BP's ability to deal with any adverse consequences from their deepwater activities:
On November 19, 2009, Rainey testified before a Senate Committee and gave "[e]xamples of the technologies which have helped to reduce accidental releases, " including " [b]lowout preventer technology which includes redundant systems and controls " and " BP's fiber optic network in the U.S. Gulf of Mexico which allows us to monitor well pressures in real time, both at the facility and in our offices in Houston. " ( Id. ¶ 375.) He also testified: "While our intent is to prevent all accidental discharges, we conduct regular emergency drills with local, state, and federal agencies. All of our production facilities have contingency plans that identify the procedures, response equipment, and key personnel needed for responding to incidents. " ( Id. )
BP's 2009 Sustainability Report, dated April 15, 2010, stated: " [W]e seek to ensure an infrastructure is in place to deal effectively with spills and their impacts. Our operating facilities have the capacity and resources to respond to spill incidents and we participate in industry and international forums to coordinate contingency planning and emergency response. " ( Id. ¶ 389.)
Rainey's testimony regarding "technologies which have helped to reduce accidental releases" is alleged to be false because the blow-out preventers used in the Gulf of Mexico- including on the Deepwater Horizon-did not have safety redundancies such as a second blind shear ram or an acoustical control switch. (Compl. ¶ 376(d)-(e).) Additionally, although Rainey testified that BP could "monitor well pressures in real time, " both offshore and in BP's Houston office, in reality no one in BP's Houston office monitored well pressures from the Macondo well-either prior to or on the night that the well blew. ( Id. ¶ 376(e).)
The falsity of the statements regarding BP's oil spill response capabilities was revealed in April, May, June, and July 2010, when BP proved utterly incapable of counteracting or stopping the oil spill, despite the fact that it was nearly three times less serious than the worst case scenario contemplated in the IEP, and four times less serious than that contemplated in the OSRP. Indeed, several Defendants have since admitted that-in contrast to the self-assured statements in the OSRP and IEP-BP did not have the necessary tools and technologies to counteract an oil spill in deepwater. This includes Suttles, who stated that BP did not have a response plan with "proven equipment and technology" to contain a spill; Hayward, who admitted that BP "did not have the tools you'd want in your tool kit" to stop the leak, and that, after the spill, BP had been "making it up day to day;" Malone, who conceded that BP did not have "individual technologies" for dealing with an oil spill prior to the Deepwater Horizon explosion; and Inglis, who testified that BP had not invested a single dollar in developing methods to contain an oil spill. (Compl. ¶¶ 289, 369(f)-(g), 369(i).)
3. BP's oil spill estimates
Finally, Defendants are alleged to have drastically understated the quantity of oil spilling into the Gulf following the Deepwater Horizon explosion and collapse. According to Plaintiffs, the accuracy of the publicized estimates was important for at least two different reasons. It defined the amount of money BP would owe the U.S. government in fines. (Compl. ¶¶ 211, 436-37.) It also affected how much BP would need to spend in offshore and onshore spill response, as well as the extent of its exposure to liability for private claims and lawsuits. ( Id. ¶ 437.) Because investors were keenly aware of these metrics, continually evaluating the wisdom of any potential or existing investment in BP, it was particularly important for Defendants to be forthcoming and guileless in their public estimates of the spill rate. ( Id. ¶ 213.) In the month following the explosion, these estimates were starkly consistent. As indicated below, they ranged from an early number of 1, 000 barrels per day to a much-repeated "best guess" of 5, 000 barrels per day:
On April 28, during a Unified Command press briefing, Suttles stated that BP's best estimate was that 1, 000 barrels of oil per day were flowing from the well. ( Id. ¶ 399.)
On April 29, Suttles conducted an interview on The Early Show and provided the following estimate: "I think that somewhere between one and five thousand barrels a day is probably the best estimate we have today." ( Id. ¶ 401(a).)
Also on April 29, Suttles conducted an interview on Good Morning America and stated: "I think between one and 5, 000 barrels a day is a reasonable estimate. " ( Id. ¶ 401(b).)
Also on April 29, Suttles conducted an interview with The Today Show and stated: "I actually don't think there's a difference between NOAA's view and our view. I would say the range is 1, 000 to 5, 000 barrels a day. " ( Id. ¶ 401(c).)
A Form 6-K filed with the SEC on April 29 stated: "Efforts continue to stem the flow of oil from the well, currently estimated at up to 5, 000 barrels a day. " ( Id. ¶ 404.)
Another Form 6-K filed with the SEC on April 30 stated: "Efforts to stem the flow of oil from the well, currently estimated at up to 5, 000 barrels a day, are continuing with six remotely-operated vehicles (ROVs) continuing to attempt to activate the flow out preventer (BOP) on the sea bed." ( Id. ¶ 405.)
Also on April 30, the estimate of 5, 000 barrels per day was posted on BP's corporate website. ( Id. ¶ 406.)
A Form 6-K filed with the SEC on May 4, 2010 stated: "[C]urrent estimates by the U.S. National Oceanic and Atmospheric Administration (NOAA) suggest some 5, 000 barrels (210, 000 U.S. gallons) of oil per day are escaping from the well." ( Id. ¶ 414.)
On May 5, Hayward conducted an interview with the Houston Chronicle and stated: " A guesstimate is a guesstimate. And the guesstimate remains 5, 000 barrels a day. " ( Id. ¶ 416.)
On May 14, Suttles conducted an interview with Good Morning America and stated: "[O]urselves and the people from NOAA and others believe that something around 5, 000, that's actually barrels a day, is the best estimate. " ( Id. ¶ 420.)
Also on May 14, Suttles conducted an interview with The Today Show. In response to the question of whether BP had "underplayed" the size of the leak and if the leak could be "more than 5, 000 barrels a day, " Suttles stated: "I don't think it is wildly different than that number... it could be a bit above or below. " ( Id. ¶ 421.)
Also on May 14, BP reasserted the 5, 000-barrels-per-day figure on cnn.com and rejected an external estimate of 70, 000 barrels per day. Dudley stated that the 70, 000-barrels-per-day figure was " not accurate at all " and that it " isn't anywhere I think within the realm of possibility. " ( Id. ¶ 422.)
On May 17, during a Unified Command press briefing, in response to a question of how certain BP was about the 5, 000-barrels-per-day figure, Suttles stated: " [T]hat's our best estimate today. Clearly people are constantly asking that question." ( Id. ¶ 425.)
On May 19, McKay testified before a House committee. In response to the question of whether "5, 000 barrels per day" was the "most accurate" figure for the magnitude of the spill, McKay stated: " That is our best estimate. " ( Id. ¶ 418.) Further, in response to the question of whether an external estimate of 70, 000 barrels per day could be accurate, McKay stated: "It is theoretically possible. I don't think anyone believes it is quite that high that has been working on this. I believe the uncertainty range is around that 5, 000 number, and it could be higher. But if the number you are talking about is 70, 000 barrels a day, I don't know this, but I don't think people that are working with it believe that that is a possibility. " ( Id. )
On May 21, Suttles conducted another interview with Good Morning America. In response to a question of whether BP "deliberately underestimate[d] the size of the spill, " Suttles stated: "I should actually point out that the 5, 000 barrels a day... That was not just BP's estimate. That was the estimate of the Unified Command, including NOAA and the Coast Guard. And that's the best estimate we have. " ( Id. ¶ 427.)
On May 22, Suttles conducted an interview with NPR's "Weekend Edition, " in which he stated: " [T]hose are the techniques we use to give an estimate, and 5, 000 barrels a day was the best estimate we could do. " Suttles also refuted the external estimate of 70, 000 barrels per day: " I've heard those estimates and seen them and I don't believe it's possible that it's anywhere near that number ... since I can't meter it, I can't actually say it couldn't be. But all of our techniques say that that's highly unlikely. " Suttles also stated that the top kill technique- one of BP's failed attempts to stop the spill-would not complicate the situation because " we don't think the rate's anywhere near that high [of 70, 000 barrels per day]. " (Compl. ¶ 430.)
Time has proven the above estimates grossly inadequate. It is currently estimated that between 53, 000 and 62, 000 barrels of oil gushed from the Macondo well each day that the blowout was not contained. (Compl. ¶ 211.) In the 87 days that it took BP to close the well, more than 4.9 million barrels of oil escaped into the Gulf of Mexico. ( Id. ¶¶ 211, 324.) But even more importantly than the test of hindsight, Plaintiffs allege that the publicized estimates from April and May 2010 were contradicted by BP's own internal figures, shared only within a "circle of trust." ( Id. ¶¶ 203-04, 214-15, 219, 409(a), 409(d), 433(a), 433(d)-(i).) They were also contradicted by numerous external estimates of which BP was aware. ( Id. ¶¶ 207, 409(b)-(c), 433(b)-(c).) These figures did not yield a single identifiable consensus; they generally ranged from at least 5, 000 to over 100, 000 barrels per day. ( Id. ¶¶ 203-04, 207, 214-15, 219, 409(a)-(d), 433(a)-(i).) But-with one exception-each belied the 5, 000-barrel per day "best guess" repeated at least fifteen times in the thirty-two days following the disaster.
C. Alleged Private Misrepresentations
In addition to the above public misrepresentations, Alameda County claims that it received and relied upon a number of private misrepresentations directed specifically to its investment manager, [REDACTED] These statements were made during seven face-to-face meetings in which representatives from BP spoke with representatives from [REDACTED]
The first meeting occurred on November 29, 2006, before the release of the Baker Report. (Compl. ¶ 439(a).) BP's Investor Relations Director, Fergus MacLeod, represented BP. ( Id. ) [REDACTED] entered the meeting with concerns about [REDACTED]. ( Id. ) BP countered these concerns by discussing the multiple independent investigations into its safety practices-including the Baker Panel-and its "on-going" safety reform efforts. ( Id. ) BP informed [REDACTED] that the "recent adverse events" were due to residual competing cultures from legacy companies that BP had acquired. ( Id. ) It emphasized that "BP was determined to learn lessons from Texas City;" that safety spending would be increased; and that steps had already been taken to "rectify [BP's] shortcomings." ( Id. )
[REDACTED] met with BP again on February 7, 2007. (Compl. ¶ 439(b).) Hayward, Dudley, MacLeod, then-CEO Lord Edmund John Philip Browne, and BP executive John Manzoni represented BP. ( Id. ) Once again, the conversation focused on BP's safety issues. BP updated [REDACTED] on the multiple independent investigations into Texas City and Prudhoe Bay. ( Id. ) BP stated that its strategy remained improvement of "safety and performance." ( Id. ) It indicated that "local checks and balances in compliance" had been instituted within the U.S. and that "BP assessed risk on an asset by asset basis and took action to reduce risk, so that risk in its business [was] lower... in an attempt to create a consistent operations system or a BP way.'" ( Id. )
The third meeting occurred on September 17, 2007. (Compl. ¶ 439(c).) MacLeod represented BP. ( Id. ) BP again updated [REDACTED] on developments regarding the Thunder Horse platform; the Prudhoe Bay pipeline spill; and the Texas City explosion. ( Id. ) BP claimed that it had "learned lessons" from Texas City that it would apply to other refineries. ( Id. ) It also spoke about the causes of the Thunder Horse incident, and steps that had been taken to prevent its recurrence. ( Id. ) Finally, BP claimed that, in the Continental United States, "BP had made a 5-year commitment to tight gas drilling and better crews." ( Id. )
BP and [REDACTED] met again on March 8, 2008. (Compl. ¶ 439(d).) BP's CFO, Byron Grote; BP's GVP - Russia, James Dupree; and a BP Investor Relations executive, Peter Hall, represented BP. ( Id. ) [REDACTED] ( Id. ) BP stated-as it did on November 29, 2006-that it would increase funding for safety and that "its cost cutting would not impact [its] ability to conduct safe operations." ( Id. ) Specifically with regard to BP's reorganization efforts, BP assured [REDACTED] that "personnel reductions" would not "repeat the mistakes of the past." ( Id. ) It claimed that reductions would be made to "overhead personnel, " with operational personnel being increased rather than reduced. ( Id. ) [REDACTED] and BP also discussed the Thunder Horse and Atlantis project delays. BP provided some insight into their causes and discussed measures that had been taken in response-such as "putting contingencies in project planning that were more realistic" and "set[ting] up a project academy at MIT" for project engineers to attend. ( Id. )
BP's reorganization and cost cutting efforts were also a topic of conversation at the fifth and sixth meetings. (Compl. ¶¶ 439(e)-(f).) Grote; a BP Investor Relations Manager, Craig Marshall; and the COO of Fuels Value Chains, Tufan Erginbilgic, represented BP at the meeting on March 17, 2009. ( Id. ¶ 439(e).) At that meeting, BP discussed current and projected cost cutting levels. ( Id. ) Grote; Marshall; and BP's CFO of E&P, Ellis Armstrong represented BP at the meeting on March 3, 2010. ( Id. ¶ 439(f).) At that meeting, [REDACTED]. ( Id. ) BP responded by promoting the efficiencies gained from its restructuring and cost cutting efforts. ( Id. )
The last meeting occurred on March 18, 2010. (Compl. ¶ 439(g).) BP's Chairman, Carl-Henric Svanberg, and three members of BP's Board of Directors-De-Anne Julius, William Castell, and Ian Prosser-represented BP. ( Id. ) BP stated that safety continued to be a high priority, and that "BP's standardized processes were being rolled out successfully throughout the company." ( Id. )
Alameda alleges that the above misrepresentations tracked the statements disseminated to the public, reinforcing the false message that BP was improving its process safety procedures as a result of the Texas City explosion and the Baker Report recommendations. ( E.g., Compl. ¶¶ 176, 180.) Alameda also claims that BP's representations regarding its restructuring and cost cutting efforts were misleading because they were not accompanied by a disclosure that those efforts "had impacted and would impact [its] ability to deliver on prior safety representations." ( Id. ¶¶ 439(e)-(f).)
II. PLAINTIFFS' CLAIMS
As noted above, only Alameda County and State-Boston purchased ADSs on the NYSE. Consequently, only Alameda County and State-Boston assert violations of section 10(b) of the Securities and Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 of the Securities and Exchange Commission ("SEC") against the corporate Defendants and the "Individual Fraud Defendants.",  (Compl. ¶¶ 522-27.) They also assert violations of section 20(a) of the Exchange Act against the corporate Defendants and the Individual Fraud Defendants. ( Id. ¶¶ 528-34.)
All Plaintiffs assert common law fraud and common law aiding and abetting fraud claims against the corporate Defendants and the Individual Fraud Defendants. (Compl. ¶¶ 535-46.) Additionally, all Plaintiffs assert common law negligent misrepresentation claims against all Defendants. ( Id. ¶¶ 547-56.)
Finally, Plaintiffs bring several state statutory claims. All Plaintiffs bring statutory fraud claims against all Defendants based on the Texas Business & Commerce Code. (Compl. ¶¶ 557-61.) Alameda County also pursues statutory fraud claims against the corporate Defendants and the Individual Fraud Defendants under the California Corporations Code and the California Civil Code. ( Id. ¶¶ 562-74.) Finally, State-Boston charges all Defendants with deceptive and unfair trade practices under Massachusetts law. ( Id. ¶¶ 575-86.)
III. DEFENDANTS' MOTION
Defendants' Motion to Dismiss raises several possible grounds for dismissing part of Plaintiffs' case. The substance of their arguments will be ordered, not as presented in their briefs, but in the sequence in which they are addressed herein.
Defendants argue that several alleged misrepresentations are non-actionable under the Exchange Act for one or more of the following reasons: (1) the statements are too general to be actionable as fraud; (2) the statements are non-actionable opinions or statements of future intention; (3) the statements are not adequately pled as false; or (4) the statements are not adequately alleged to have been made with scienter. (Doc. No. 48 ("Cons. MTD"), at 56-64.)
Defendants argue that English law applies to Plaintiffs' common law and state statutory claims. ( Id. at 9-18.) They identify three available claims under English law: common law deceit; common law negligent misstatement; and statutory securities fraud under the Financial Services and Markets Act 2000 ("FSMA"). They raise the following arguments for dismissal of these three "state law" claims:
º Plaintiffs fail to state a claim for deceit because they have not adequately alleged reliance or intent to induce reliance.
º Plaintiffs fail to state a claim for negligent misrepresentation because they have not adequately alleged reliance or a duty to speak carefully.
º Plaintiffs fail to state a claim for statutory securities fraud because they have not adequately alleged reliance, because the law does not permit recovery for "holder" claims, and because statutory securities fraud cannot be asserted against the Individual Defendants.
( Id. at 18-42.) Alternatively, if the Court decides that Plaintiffs' English law claims survive the above challenges, Defendants argue that they should be dismissed under the doctrine of forum non conveniens. ( Id. at 43-47.)
Alternatively, if the Court decides that the law of any U.S. jurisdiction applies to Plaintiffs' common law and state statutory claims, Defendants argue that such claims are barred by the dormant commerce clause. ( Id. at 47-56.)
IV. LEGAL STANDARD FOR RULE 12(b)(6)
In considering a Rule 12(b)(6) motion to dismiss, the Court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in favor of Plaintiffs. Nathenson v. Zonagen Inc., 267 F.3d 400, 406 (5th Cir. 2001). The Court does not accept as true, however, "conclusory allegations, unwarranted factual inferences, or legal conclusions." Cent. Laborers' Pension Fund v. Integrated Elec. Servs. Inc., 497 F.3d 546, 550 (5th Cir. 2007) (citation omitted) (internal quotation marks omitted).
Because a Rule 12(b)(6) motion attacks the legal sufficiency of the claims, the Court must confine its analysis to the contents of the pleadings, including attachments thereto, with only two exceptions. First, the Fifth Circuit allows the Court to consider certain documents attached to the motion to dismiss. See, e.g., Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000). Such documents must be referenced in the complaint and central to Plaintiffs' claims. Id. (citation omitted); Scanlan v. Texas A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). Second, because this is a securities case, the Court may take judicial notice of the contents of public disclosure documents that the law requires be filed with governmental agencies, such as the SEC, and that are actually filed with those agencies. Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1018 (5th Cir. 1996). However, these documents may be considered only for the purpose of determining what statements they contain, not for proving the truth of their contents. Id.
Regardless of the substantive law that governs Plaintiffs' claims, the Court will apply federal procedural law in this case. Brown v. Miller, 519 F.3d 231, 238 (5th Cir. 2008) ("[F]ederal courts use federal procedure even when applying state law[.]"). Accordingly, the Court must decide if Plaintiffs have stated a claim pursuant to the pleading rules contained in Rule 8 and Rule 9 of the Federal Rules.
A. Rule 8(a) Notice Pleading
The default standard for pleading in federal court is contained in Rule 8(a):
A pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief....
Fed. R. Civ. Pro. 8(a)(2). This standard is commonly referred to as "notice pleading." Under notice pleading requirements, a complaint will survive a motion to dismiss as long as it contains sufficient factual allegations, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. As noted above, the Court is required to accept only well-pleaded factual allegations as true; it does not accept as true "conclusory allegations, unwarranted factual inferences, or legal conclusions." Cent. Laborers', 497 F.3d at 550 (citation omitted) (internal quotation marks omitted).
B. Heightened Pleading under Rule 9(b)
Plaintiffs' allegations of fraud must also meet the stricter standards of Rule 9(b), which provides that, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." Benchmark Elec., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003) (citation omitted) (internal quotation marks omitted). The Fifth Circuit has explained that "Rule 9(b) requires the who, what, when, where, and how' [of the alleged fraud] to be laid out." Id. (quoting Williams v. WMX Techs., Inc., 112 F.3d 175, 179 (5th Cir. 1997)). Insufficiently particular fraud allegations are properly challenged by a Rule 12(b)(6) motion for dismissal for failure to state a claim. United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185 n.8 (5th Cir. 2009); Carter v. Nationwide Prop. and Cas. Ins. Co., 2011 WL 2193385, at *1 (S.D. Tex. June 6, 2011).
Rule 9(b)'s particularity requirement is "supplemental" to the Iqbal requirement that a pleading include facts that, taken as true, "state a claim to relief that is plausible on its face." Grubbs, 565 F.3d at 185. Thus, Rule 9(b) "requires only simple, concise, and direct allegations of the circumstances constituting fraud, which... must make relief ...