In re BP p.l.c. Securities Litigation—December 2013 Ruling


The judge denied the plaintiffs’ motion for class certification based on the U.S. Supreme Court’s ruling in Comcast v. Behrend in a securities class action.

Retained by Sullivan & Cromwell

Defense counsel retained Cornerstone Research and Professor René M. Stulz of The Ohio State University to address class certification issues and respond to the report of the plaintiffs’ expert in this Rule 10b-5 securities class action.

On December 6, 2013, Judge Keith P. Ellison of the U.S. District Court for the Southern District of Texas, Houston Division, denied the plaintiffs’ motion for class certification based on an application of the U.S. Supreme Court’s ruling in Comcast v. Behrend. The ruling, applying Comcast to a securities class action, followed multiple filings and expert reports from both sides, as well as a hearing.

Judge Ellison ruled that plaintiffs “failed to meet their burden of showing that damages can be measured on a class-wide basis consistent with their theories of liability,” and stated further that “Comcast signals a significant shift in the scrutiny required for class certification.”

The plaintiffs alleged that BP misled investors about its safety procedures and ability to respond to and contain an oil spill. The price of BP’s American Depositary Receipts, which are listed on the New York Stock Exchange, fell by approximately 50 percent in the two months following the spill.

The plaintiffs’ expert filed reports in which he proposed an event study and the constant dollar methodology to calculate damages on a class-wide basis.

Professor Stulz observed that such methods would overstate damages and were inconsistent with the plaintiffs’ liability arguments. Professor Stulz noted that the plaintiffs’ methodology did not determine the amount of inflation caused by any alleged misstatement or type of misstatement, and would allow investors to receive compensation for damages arising from alleged misstatements that could not have influenced their purchases.

In his conclusion, Judge Ellison stated that the plaintiffs had failed to address Professor Stulz’s findings and quoted Professor Stulz to explain why the plaintiffs’ methodology would overcompensate investors.