BP 2013 Annual Report Download - page 268

and former officers and directors seeking damages for alleged losses
those funds suffered because of their purchases of BP ordinary shares
and, in two cases, ADSs. The funds assert various state law and federal
law claims. From July 2012 to November 2013, 14 additional cases were
filed in Texas state and federal courts (later consolidated into 11 actions)
by pension or investment funds or advisers against BP entities and
current and former officers and directors, asserting state law and other
claims and seeking damages for alleged losses that those funds suffered
because of their purchases of BP ordinary shares and/or ADSs, and one
case was filed in New York federal court by funds that purchased BP
ordinary shares and ADSs, asserting state and federal law claims. All of
the cases have been transferred to federal court in Houston and, with the
exception of one case that has been stayed, the judge presiding over
MDL 2185. One case was voluntarily dismissed on 9 May 2013. On
3 October 2013, the judge granted in part and denied in part the
defendants’ motion to dismiss three of the remaining 14 cases. A subset
of the claims was dismissed. The judge held that English law governs the
plaintiffs’ remaining claims (with the exception of the federal law claims
based on purchases of ADSs and a potential claim under Ohio state law
against BP p.l.c. by certain Ohio funds). On 11 December 2013,
defendants moved to dismiss 10 of the remaining cases and answered
the complaints in two others. On 5 December 2013, the Ohio funds filed
an amended complaint withdrawing their English law claim and asserting
only a claim under Ohio state law. On 6 January 2014, BP moved to
dismiss that case.
Canadian class action
On 20 July 2012, a BP entity received an amended statement of claim for
an action in Alberta, Canada, filed by three plaintiffs seeking to assert
claims under Canadian law against BP on behalf of a class of Canadian
residents who allegedly suffered losses because of their purchase of BP
ordinary shares and ADSs. This case was dismissed on jurisdictional
grounds on 14 November 2012. On 15 November 2012, one of the
plaintiffs re-filed a statement of claim against BP in Ontario, Canada,
seeking to assert the same claims under Canadian law against BP on
behalf of a class of Canadian residents. BP moved to dismiss that action
for lack of jurisdiction, and on 9 October 2013 the Ontario court denied
BP’s motion. On 7 November 2013, BP filed a notice of appeal from that
decision, and filed its papers on that appeal on 19 December 2013;
argument is scheduled for 24 June 2014.
Dividend-related proceedings
On 5 July 2012, the district court in MDL 2185 issued a decision granting
BP’s motion to dismiss, for lack of personal jurisdiction, the lawsuit
against BP p.l.c. for cancelling its dividend payment in June 2010. On
10 August 2012, the plaintiffs filed an amended complaint, which BP
moved to dismiss on 9 October 2012. On 12 April 2013, the court
granted BP’s motion and dismissed the lawsuit for lack of personal
jurisdiction and on the alternative grounds of failure to state a claim and
that the courts of England are the more appropriate forum for the
litigation. On 16 June 2013, the court granted the plaintiff’s motion to
amend its decision so as to eliminate the alternative grounds for
dismissal. On 22 November 2013, the plaintiffs filed a new and
substantially identical action against BP p.l.c. in federal court in New York,
which was transferred to the judge presiding over MDL 2185. BP p.l.c.
moved to dismiss that new action on 19 February 2014.
ERISA
On 30 March 2012, the district court in MDL 2185 issued a decision
granting the defendants’ motions to dismiss the ERISA case related to
BP share funds in several employee benefit savings plans. On 11 April
2012, the plaintiffs requested leave to file an amended complaint, which
was denied on 27 August 2012. Final judgment dismissing the case was
entered on 4 September 2012 and, on 25 September 2012, the plaintiffs
filed a notice of appeal to the Fifth Circuit. That appeal was fully briefed
as of 21 June 2013 and oral argument was held on 4 November 2013,
but no ruling has yet been issued.
Settlements with the DoJ and SEC
On 1 June 2010, the DoJ announced that it was conducting an
investigation into the Incident encompassing possible violations of
US civil or criminal laws, and subsequently created a unified task force of
federal agencies to investigate the Incident. On 15 November 2012, BP
announced that it reached agreement with the US government, subject
to court approval, to resolve all federal criminal charges and all claims by
the SEC against BP arising from the Deepwater Horizon accident, oil spill
and response.
On 29 January 2013, the US District Court for the Eastern District of
Louisiana accepted BP’s pleas regarding the federal criminal charges, and
BP was sentenced in connection with the criminal plea agreement. BP
pleaded guilty to 11 felony counts of Misconduct or Neglect of Ships
Officers relating to the loss of 11 lives; one misdemeanour count under
the Clean Water Act; one misdemeanour count under the Migratory Bird
Treaty Act; and one felony count of obstruction of Congress.
Pursuant to that sentence, BP will pay $4 billion, including $1,256 million
in criminal fines, in instalments over a period of five years. Under the
terms of the criminal plea agreement, a total of $2,394 million will be paid
to the National Fish & Wildlife Foundation (NFWF) over a period of five
years. In addition, $350 million will be paid to the National Academy of
Sciences (NAS) over a period of five years. BP made its required
payments that were due by 30 March and 29 April 2013 and 29 January
2014, totalling $926 million. The next scheduled payments under the plea
agreement total $595 million and are due by 29 January 2015.
The court also ordered, as previously agreed with the US government,
that BP serve a term of five years’ probation. Pursuant to the terms of
the plea agreement, the court also ordered certain equitable relief,
including additional actions, enforceable by the court, to further enhance
the safety of drilling operations in the Gulf of Mexico. These
requirements relate to BP’s risk management processes, such as third-
party auditing and verification, BP’s oil spill response plan, training, and
well control equipment and processes such as blowout preventers and
cementing. BP has also agreed to maintain a real-time drilling operations
monitoring centre in Houston or another appropriate location. In addition,
BP will undertake several initiatives with academia and regulators to
develop new technologies related to deepwater drilling safety. The
resolution also provides for the appointment of two monitors, both with
terms of up to four years. A process safety monitor will review, and
provide recommendations concerning BPXP’s process safety and risk
management procedures for deepwater drilling in the Gulf of Mexico. An
ethics monitor will review and provide recommendations concerning
BP’s ethics and compliance programme. BP has also agreed to retain an
independent third-party auditor who will review and report to the
probation officer, the DoJ and BP regarding BPXP’s compliance with the
key terms of the plea agreement including the completion of safety and
environmental management systems audits, operational oversight
enhancements, oil spill response training and drills and the
implementation of best practices. Under the plea agreement, BP has also
agreed to co-operate in ongoing criminal actions and investigations,
including prosecutions of four former employees who have been
separately charged.
In its resolution with the SEC, BP has resolved the SEC’s Deepwater
Horizon-related claims against the company under Sections 10(b) and
13(a) of the Securities Exchange Act of 1934 and the associated rules. BP
has agreed to a civil penalty of $525 million, payable in three instalments
over a period of three years, and has consented to the entry of an
injunction prohibiting it from violating certain US securities laws and
regulations. The SEC’s claims are premised on oil flow rate estimates
contained in three reports provided by BP to the SEC during a one-week
period (on 29 and 30 April 2010 and 4 May 2010), within the first 14 days
after the accident. BP’s consent was incorporated in a final judgment and
court order on 10 December 2012, and BP made its first payment of
$175 million on 11 December 2012 and its second payment of
$175 million on 1 August 2013. The final instalment of $175 million, plus
accrued interest, is due on 1 August 2014.
BP’s November 2012 agreement with the US government does not
resolve the DoJ’s civil claims, such as claims for civil penalties under the
Clean Water Act or claims for natural resource damages under OPA 90.
Neither does it resolve the private securities claims pending in
MDL 2185.
US Environmental Protection Agency matters
On 28 November 2012, the US Environmental Protection Agency (EPA)
notified BP that it had temporarily suspended BP p.l.c., BPXP and a
number of other BP subsidiaries from participating in new federal
264 BP Annual Report and Form 20-F 2013