Texas judge rules BP shareholder pollution suits belong in England

Steve Korris Jun. 28, 2011, 3:11am


HOUSTON – As BP pleads in federal court that shareholder suits over the Deepwater Horizon explosion belong in England, Galveston County District Judge John Ellisor rules that shareholder suits over pollution in Texas City belong in England.

On June 16, Ellisor found that Nancy Goldstein lacked standing to pursue a suit seeking to recover damages from individual BP directors.

Ellisor adopted BP's position that laws of the jurisdiction of its incorporation should govern the action.

On June 20, BP relayed news of its success to U.S. District Judge Keith Ellison of Houston, who presides over Deepwater Horizon suits from many federal courts.

Thomas Taylor, of Andrews Kurth in Houston, enclosed the pleadings from Galveston County, "for the court's convenience."

Goldstein's lawyers, Jeffrey Chambers, Don Jackson and Shashi Patel of Houston, sought to recover losses from illegal conduct of BP directors in Texas City.

She owned 522 American depository shares, each representing six ordinary shares.

She proposed a "double derivative" action, on behalf of BP's American subsidiaries.

Bruce Blefeld, of Vinson and Elkins in Houston, moved to dismiss her suit in March.

He wrote that under the Companies Act of 2006, a shareholder cannot sue derivatively on behalf of an English company without permission from the English High Court.

"The Companies Act also provides that a shareholder can sue derivatively only on behalf of the company in which he or she owns stock," he wrote.

"English law thus prohibits so called double derivative claims brought on behalf of subsidiaries of the company in which a shareholder owns stock," he wrote.

He wrote that the act "does not permit a foreign court to substitute itself for the English High Court and determine whether permission to sue on behalf of an English corporation should be granted."

He wrote that Goldstein couldn't show that individual directors controlled BP.

He wrote that there are more than 18 billion ordinary shares of BP stock outstanding, and no director owns more than one percent.

Goldstein's lawyers answered that Texas has a more significant relationship to BP's violations of environmental and safety laws than England.

"Defendants cannot reasonably dispute that the underlying misconduct in this case substantially impacts Texas," they wrote.

"BP America has its principal place of business in Houston," they wrote.

Goldstein claimed standing under English law and Texas law, and moved to discover records of a BP committee that studied Texas City.

"Defendants' alleged misconduct has wreaked havoc on the Galveston community causing death and substantial injury to workers here," they wrote.

"BP has also poisoned Galveston's ground and air with cancer causing toxic chemicals," they wrote.

In a later brief they argued that applying the law of the place of incorporation could lead to unfair and unintended consequences contrary to the interests of justice in Texas.

They urged Ellisor to refrain from accepting an invitation to "engage in blatant judicial activism on behalf of a foreign entity with a long and sordid history of environmental degradation and disregard for worker safety in Texas."

The punch line didn't work, and Ellisor granted BP's motion.

BP's Taylor notified Ellison of the decision, asking him to copy it and dismiss a class action for holders of ordinary shares.

"England has an obvious interest in adjudicating plaintiffs' English law claims, and plaintiffs cannot contend otherwise," he wrote on June 21.

"In contrast, the United States has little interest in adjudicating English law claims brought against an English company, based on purchases on English and German securities exchanges on behalf of a putative class consisting mostly of non U.S. purchasers," he wrote.

More News