A Texas federal judge denied class certification for investors facing losses in the aftermath of BP’s Deepwater Horizon rig explosion in 2010, after determining that the investors’ damages calculation was too murky to earn certification in light of a recently bolstered standard from the U.S. Supreme Court.
U.S. District Judge Keith P. Ellison ruled that the event study used to calculate the damages the investors — led by Robert Ludlow along with pension funds in New York and Ohio — proposed was not sufficient to prove that damages could be fairly applied to all members of the proposed classes.
“Plaintiffs have failed to discharge their burden to establish that damages in this case can be measured on a classwide basis consistent with their theories of liability,” Judge Ellison said in his 32-page order.
BP pegged a portion of its arguments against class certification to the U.S. Supreme Court’s March decision in Comcast Corp. v. Behrend, arguing the justices had made very clear that classwide damages must adhere to plaintiffs’ theories of liability, which in this case stem from alleged overstatements by BP and its executives about the company’s disaster readiness leading up to the explosion and subsequent oil spill in the Gulf of Mexico.
Among BP’s arguments to discredit the investors’ proposed damages model was that it did not disaggregate inflation according to the type of misleading statements or risks disclosed by the company, meaning that investors should not receive a measure of damages attributed to misleading statements that could not have possibly influenced stock purchases.
In response, the plaintiffs contended that their study would provide options for the jury to disaggregate inflation by the type of statements if the jury, in fact, determined that the misrepresentations were not part of a single, cohesive fraudulent scheme — an argument that did little to sway Judge Ellison.
“These retorts only crystallize defendants’ point that plaintiffs have failed to meet their burden of showing that damages can be measured on a classwide basis consistent with their theories of liability,” Judge Ellison said. “The court agrees with defendants that Comcast signals a significant shift in the scrutiny required for class certification.”
The judge admitted that the investors may have earned certification from the court in a pre-Comcast universe, but that the new standard required a more thorough damages analysis.
Judge Ellison did note that given how recently the high court handed down the Comcast opinion and the dramatic change the ruling imposed on the class action process, he would allow the investors to refile an amended certification motion within 30 days that addresses the court’s reservations on damages.
The proposed class is defined as anyone who purchased or acquired BP stock on the U.S. market between Nov. 8, 2007, and May 28, 2010. A subclass has also been proposed as anyone who purchased or acquired BP stock on the U.S. market between March 4, 2009, and April 20, 2010.