United States District Court, S.D. Texas, Houston Division
IN RE BP P.L.C. SECURITIES LITIGATION This document relates to: IN RE BP ERISA LITIGATION Civil Action No. 4:10-cv-4214
MEMORANDUM AND ORDER
KEITH P. ELLISON UNITED STATES DISTRICT JUDGE.
the Court is ERISA Plaintiffs' Motion for Leave to File
an Amended Complaint. (Dkt. 232 (the “Motion”).)
Defendants oppose the Motion, arguing that Plaintiffs'
proposed amended complaint fails to state a claim, and that
leave to amend should therefore be denied as futile. (Dkt.
235.) The Court agrees. Plaintiffs' Motion must be
far from the first time that Defendants have challenged
Plaintiffs' pleadings in the course of this nearly
seven-year-old litigation. In March of 2012, the Court
granted Defendants' motion to dismiss Plaintiffs'
First Consolidated ERISA Complaint, holding that Plaintiffs
had failed to adequately rebut the so-called
“Moench presumption of
prudence.” Later that year, Plaintiffs filed a motion
for leave to amend, but the Court denied the motion because
the proposed amendments would have been futile in light of
the Moench presumption. Plaintiffs timely appealed
to the Fifth Circuit.
turned out, however, that these motion-to-dismiss proceedings
were largely for naught. While this case was pending appeal,
the Supreme Court scuttled the Moench presumption
and created a new framework for evaluating claims against
certain ERISA fiduciaries. See Fifth Third Bancorp v.
Dudenhoeffer, 134 S.Ct. 2459, 2466-67 (2014).
Accordingly, the Fifth Circuit vacated this Court's order
denying leave to amend and remanded the matter for
reconsideration in light of Dudenhoeffer. (Dkt.
147.) On remand, this Court granted Plaintiffs' motion
for leave to amend their complaint, but did so with some
concern-Dudenhoeffer proved challenging to apply.
(See Dkt. 170 at 23-30.) Given the uncertainty
surrounding the governing legal standard, at Defendants'
request, the Court certified the issue for interlocutory
appeal to the Fifth Circuit. (Dkt. 178.) In certifying the
matter, the Court noted that “if Defendants are correct
in their interpretation of Dudenhoeffer”-and
the Fifth Circuit has since confirmed that they were-
“then none of Plaintiffs' prudence claims would
survive a motion to dismiss.” (Id. at 4.)
meantime, this Court declined to stay proceedings pending the
interlocutory appeal, and Plaintiffs filed an amended
complaint. The amended complaint asserted two general
theories of liability (the “Prudence Claims” and
“Monitoring Claims, ” respectively): (i) that the
“Insider Defendants” and “Corporate
Defendants” breached their duties of prudence and
loyalty by permitting BP's 401(k) Plan (the
“Plan”) participants to invest in the BP Stock
Fund at an artificially inflated price; and (ii) that
numerous defendants breached their duties to adequately
monitor the fiduciaries whom they appointed. (Dkt. 173 at 89,
93.) Defendants moved for partial dismissal, which the Court
granted. (Dkt. 212.) The Court's order dismissed the
Prudence Claims against the Corporate Defendants and the
Insider Defendants, with the exceptions of Insider Defendants
McKay, Shaw and Dupree, and further dismissed the Monitoring
Claims in their entirety. (Id. at 30; see
also Dkt. 223 at 2 n.5.) This ruling left
Plaintiffs' complaint on unstable ground. Only the
Prudence Claims against McKay, Shaw, and Dupree remained, and
those claims were the subject of Defendants' pending
several rounds of briefing,  the Fifth Circuit held that this
Court erred in granting Plaintiffs' motion for leave to
amend the Prudence Claims; the proposed amended complaint
failed to plead sufficient factual allegations to state a
claim, and leave therefore should have been denied as futile.
The Fifth Circuit accordingly reversed the judgment of this
Court and remanded the matter for further proceedings.
Whitley v. BP, P.L.C., 838 F.3d 523, 529 (5th Cir.
2016). As a result of this ruling, Plaintiffs were left
without a single viable claim.
now move for leave to file another amended complaint,
attaching a proposed amended complaint that purportedly cures
the deficiencies identified by the Fifth
Circuit. (Dkt. 232, Ex. A (the proposed
“TAC”).) Plaintiffs have substantially bolstered
the TAC with specific factual allegations, expressly weighed
the “harm” and “good” of each
proposed alternative, and even taken the unconventional
approach of appending two expert reports to the proposed
pleadings to show the bases for their factual allegations.
Defendants maintain that the TAC fails to state a claim and
that leave to amend should once again be denied as futile.
move for leave to amend their complaint under Rule 15(a)(2)
of the Federal Rules of Civil Procedure. “Rule 15(a)
declares that leave to amend ‘shall be freely given
when justice so requires'; this mandate is to be
heeded.” Foman v. Davis, 371 U.S. 178, 182
(1962). Accordingly, district courts in the Fifth Circuit
“must entertain a presumption in favor of granting
parties leave to amend.” Mayeaux v. Louisiana
Health Service and Indem. Co., 376 F.3d 420, 425 (5th
Cir. 2004). Leave to amend may be denied, however, in the
case of “undue delay, bad faith or dilatory motive on
the part of the movant, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the
opposing party, [or] futility of amendment.” Wimm
v. Jack Eckerd Corp., 3 F.3d 137, 139 (5th Cir. 1993).
is shown by amendments which “advance[e] a claim or
defense that is legally insufficient on its face, or . . .
fail[ ] to include allegations to cure defects in the
original pleading.” 6 Charles A. Wright, Arthur R.
Miller & Mary Kay Kane, Fed. Prac. and Proc. § 1487
(3d ed.). In other words, Plaintiffs will be denied leave to
amend only if “the amended complaint would fail to
state a claim upon which relief could be granted.”
Stripling v. Jordan Prod. Co., LLC, 234 F.3d 863,
873 (5th Cir. 2000); see also Landavazo v. Toro Co.,
301 Fed.Appx. 333, 337 (5th Cir. 2008) (affirming denial of
leave to amend after determining that “[a] review of
the amended complaint leaves the reader speculating as to
what conduct, even if taken as true, occurred that would give
rise to a right to relief”).
complaint fails to state a claim if it does not
“contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its
face.' ” Ashcroft v. Iqbal, 556 U.S. 662,
678, (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)). The plausibility standard is not akin
to a “probability requirement, ” but asks for
more than a sheer possibility that a defendant has acted
unlawfully. Id. A pleading need not contain detailed
factual allegations, but must set forth more than
“labels and conclusions [or] a formulaic recitation of
the elements of a cause of action.” Twombly,
550 U.S. at 555 (citation omitted).
the Court must decide whether Plaintiffs' proposed
amended pleading states at least one valid claim when viewed
in the light most favorable to Plaintiffs. In making this
determination, the Court will accept the complaint's
well-pleaded facts as true, but will not imbue legal
conclusions with the same assumption of truth.
Iqbal, 556 U.S. at 678 (citation omitted). Nor will
the Court “ ‘strain to find inferences favorable
to the plaintiffs' ” or “accept
‘conclusory allegations [or] unwarranted
deductions.' ” R2 Investments LDC v.
Phillips, 401 F.3d 638, 642 (5th Cir. 2005) (quoting
Southland Secs. Corp. v. INSpire Ins. Solutions,
Inc., 365 F.3d 353, 361 (5th Cir. 2004)). The Court will
confine its analysis to the contents of the TAC; documents
provided by the parties will be disregarded, unless they are
referenced in the TAC and are central to Plaintiffs'
claims. See Collins v. Morgan Stanley Dean Witter,
224 F.3d 496, 498-99 (5th Cir. 2000).
only issue raised in the briefing is whether the TAC
satisfies the standard for pleading an ERISA stock drop claim
against Defendants McKay, Dupree, or Shaw. The Supreme Court
first elucidated the relevant standard two years ago in
Fifth Third Bancorp v. Dudenhoeffer: “To state
a claim for breach of the duty of prudence on the basis of
inside information, a plaintiff must plausibly allege an
alternative action that the defendant could have taken that
would have been consistent with the securities laws and that
a prudent fiduciary in the same circumstances would not have
viewed as more likely to harm the fund than to help
it.”134 S.Ct. 2459, 2472 (2014). But lower
courts found the latter half of the standard challenging to
apply. See, e.g., In re BP p.l.c. Sec.
Litig., 2015 WL 1781727, at *17 (S.D. Tex. Mar. 4,
2015), rev'd and remanded sub nom. Whitley v. BP,
P.L.C., 838 F.3d 523 (5th Cir. 2016); see also
Harris v. Amgen, Inc., 788 F.3d 916, 925 (9th Cir.
2015), cert. granted, judgment rev'd, 136 S.Ct.
758 (2016). If rigidly construed, Dudenhoeffer would
place a burden on plaintiffs that is not often seen at the
pleading stage. See In re BP p.l.c. Sec. Litig.,
2015 WL 1781727, at *17 (“The weighing of harm versus
good is inherently fact-specific and subject to expert
analysis, ” and this is especially true in the
Supreme Court soon returned to the issue in Amgen, Inc.
v. Harris to provide additional guidance, 136 S.Ct. 758
(2016), and the Fifth Circuit subsequently provided guidance
of its own on Defendant's appeal of this Court's
ruling. Whitley v. BP, P.L.C., 838 F.3d 523 (5th
Cir. 2016). In short, the courts confirmed that
Dudenhoeffer imposes precisely this type of
“significant burden” at the pleading stage.
Whitley, 838 F.3d at 529. Plaintiffs must allege
“an alternative course of action so clearly
beneficial that a prudent fiduciary could not
conclude that [the action] would be more likely to harm
the fund than to help it” and “offer facts that
would support such an allegation.” Id. (second
emphasis in original). In other words, a plaintiff must do
more than show that the proposed alternative could have
resulted in a net benefit to the fund; he must
“plausibly allege that no prudent fiduciary
could have” reached the opposite conclusion
(i.e., that the proposed alternative would cause
more harm than good). See Id. (“the district
court recognized that if defendants have correctly read
Dudenhoeffer to require ‘plaintiffs to
plausibly allege that no prudent fiduciary ...