BP 2011 Annual Report Download - page 162

160 BP Annual Report and Form 20-F 2011
Additional information for shareholders
Legal proceedings
Proceedings relating to the Deepwater Horizon oil spill
BP p.l.c., BP Exploration & Production Inc. (BP E&P) and various other BP
entities (collectively referred to as BP) are among the companies named
as defendants in approximately 600 private civil lawsuits resulting from the
20 April 2010 explosions and fire on the semi-submersible rig Deepwater
Horizon and resulting oil spill (the Incident) and further actions are likely
to be brought. BP E&P is lease operator of Mississippi Canyon, Block
252 in the Gulf of Mexico (Macondo), where the Deepwater Horizon was
deployed at the time of the Incident. The other working interest owners at
the time of the Incident were Anadarko Petroleum Company (Anadarko)
and MOEX Offshore 2007 LLC (MOEX). The Deepwater Horizon,
which was owned and operated by certain affiliates of Transocean Ltd.
(Transocean), sank on 22 April 2010. The pending lawsuits and/or claims
arising from the Incident have been brought in US federal and state courts.
Plaintiffs include individuals, corporations, insurers, and governmental
entities and many of the lawsuits purport to be class actions. The lawsuits
assert, among others, claims for personal injury in connection with the
Incident itself and the response to it, wrongful death, commercial and
economic injury, breach of contract and violations of statutes. The lawsuits
seek various remedies including compensation to injured workers and
families of deceased workers, recovery for commercial losses and property
damage, claims for environmental damage, remediation costs, claims
for unpaid wages, injunctive and declaratory relief, treble damages and
punitive damages. Purported classes of claimants include residents of
the states of Louisiana, Mississippi, Alabama, Florida, Texas, Tennessee,
Kentucky, Georgia and South Carolina, property owners and rental agents,
fishermen and persons dependent on the fishing industry, charter boat
owners and deck hands, marina owners, gasoline distributors, shipping
interests, restaurant and hotel owners, cruise lines and others who are
property and/or business owners alleged to have suffered economic loss.
Among other claims arising from the spill response efforts, lawsuits have
been filed claiming that additional payments are due by BP under certain
Master Vessel Charter Agreements entered into in the course of the
Vessels of Opportunity Program implemented as part of the response to
the Incident.
Shareholder derivative lawsuits related to the Incident have also
been filed in US federal and state courts against various current and
former officers and directors of BP alleging, among other things, breach
of fiduciary duty, gross mismanagement, abuse of control and waste of
corporate assets. On 15 September 2011, the judge in the federal multi-
district litigation proceeding in Houston granted BP’s motion to dismiss the
consolidated shareholder derivative litigation pending there on the grounds
that the courts of England are the appropriate forum for the litigation. On
8 December 2011, a final judgment was entered dismissing the shareholder
derivative case, and on 3 January 2012, one of the derivative plaintiffs filed
a notice of appeal to the US Court of Appeals for the Fifth Circuit.
On 13 February 2012, the judge in the federal multi-district litigation
proceeding in Houston issued two decisions on the defendants’ motions to
dismiss the two consolidated securities fraud complaints filed on behalf of
purported classes of BP ordinary shareholders and ADS holders. In those
decisions the court dismissed all of the claims of the ordinary shareholders,
dismissed the claims of the lead class of ADS holders against most of the
individual defendants while holding that a subset of the claims against two
individual defendants and the corporate defendants could proceed, and
dismissed all of the claims of a smaller purported subclass with leave to
re-plead in 20 days.
Purported class action lawsuits have been filed in US federal courts
against BP entities and various current and former officers and directors
alleging, among other things, securities fraud claims, violations of the
Employee Retirement Income Security Act (ERISA) and contractual and
quasi-contractual claims related to the cancellation of the dividend on
16 June 2010. In addition, BP has been named in several lawsuits alleging
claims under the Racketeer-Influenced and Corrupt Organizations Act
(RICO). In August 2010, many of the lawsuits pending in federal court were
consolidated by the Federal Judicial Panel on Multidistrict Litigation into
two multi-district litigation proceedings, one in federal court in Houston for
the securities, derivative, ERISA and dividend cases and another in federal
court in New Orleans for the remaining cases.
On 1 June 2010, the US Department of Justice (DoJ) announced
that it is conducting an investigation into the Incident encompassing
possible violations of US civil or criminal laws. The types of enforcement
action that might be pursued and the nature of the remedies that might
be sought will depend on the judgement and discretion of the prosecutors
and regulatory authorities and their assessment as to whether BP has
violated any applicable laws and its culpability following their investigations.
Such enforcement actions could include criminal proceedings against
BP and/or employees of the group. Prosecutors have broad discretion in
identifying what, if any, charges to pursue, but such charges could include,
among others, criminal environmental, criminal securities, manslaughter
and obstruction-related offences. The United States filed a civil complaint
in the multi-district litigation proceeding in New Orleans against BP E&P
and others on 15 December 2010 (DoJ Action). The complaint seeks a
declaration of liability under the Oil Pollution Act of 1990 (OPA 90) and civil
penalties under the Clean Water Act and sets forth a purported reservation
of rights on behalf of the US to amend the complaint or file additional
complaints seeking various remedies under various US federal laws
and statutes. On 8 December 2011, the US brought a motion for partial
summary judgment seeking, among other things, an order finding that BP,
Transocean, and Anadarko are strictly liable for a civil penalty under Section
311(b) (7)(A) of the Clean Water Act. This motion remains pending.
On 18 February 2011, Transocean filed a third-party complaint
against BP, the US government, and other corporations involved in the
Incident, naming those entities as formal parties in its Limitation of Liability
action pending in federal court in New Orleans.
On 4 April 2011, BP initiated contractual out-of-court dispute
resolution proceedings against Anadarko and MOEX, claiming that
they have breached the parties’ contract by failing to reimburse BP
for their working-interest share of Incident-related costs. On 19 April
2011, Anadarko filed a cross-claim against BP, alleging gross negligence
and 15 other counts under state and federal laws. Anadarko sought a
declaration that it was excused from its contractual obligation to pay
Incident-related costs. Anadarko also sought damages from alleged
economic losses and contribution or indemnity for claims filed against it
by other parties. On 20 May 2011, BP and MOEX announced a settlement
agreement of all claims between them, including a cross-claim brought
by MOEX on 19 April 2011 similar to the Anadarko claim. Under the
settlement agreement, MOEX has paid BP $1.065 billion, which BP has
applied towards the $20-billion Trust and has also agreed to transfer all of
its 10% interest in the MC252 lease to BP. On 17 October 2011, BP and
Anadarko announced that they had reached a final agreement to settle all
claims between the companies related to the Incident, including mutual
releases of all claims between BP and Anadarko that are subject to the
contractual out-of-court dispute resolution proceedings or the federal
multi-district litigation proceeding in New Orleans. Under the settlement
agreement, Anadarko has paid BP $4 billion, which BP has applied towards
the $20-billion Trust, and has also agreed to transfer all of its 25% interest
in the MC252 lease to BP. The settlement agreement also grants Anadarko
the opportunity for a 12.5% participation in certain future recoveries
from third parties and certain insurance proceeds in the event that such
recoveries and proceeds exceed $1.5 billion in aggregate. Any such
payments to Anadarko are capped at a total of $1 billion. BP has agreed to
indemnify Anadarko and MOEX for certain claims arising from the Incident
(excluding civil, criminal or administrative fines and penalties, claims for
punitive damages, and certain other claims). The settlement agreements
with Anadarko and MOEX are not an admission of liability by any party
regarding the Incident.
On 20 April 2011, Transocean filed claims in its Limitation of
Liability action alleging that BP had breached BP America Production
Company’s contract with Transocean Holdings LLC by BP not agreeing
to indemnify Transocean against liability related to the Incident and by not
paying certain invoices. Transocean also asserted claims against BP under
state law, maritime law, and OPA 90 for contribution. On 1 November
2011, Transocean filed a motion for partial summary judgment on certain
claims filed in the Limitation Action and the DoJ Action between BP and
Transocean. Transocean’s motion sought an order which would bar BP’s