Avalon Holdings, Inc. et al v. BP, PLC et al

Filing 183

MEMORANDUM AND ORDER denying 163 MOTION for Reconsideration (Signed by Judge Keith P Ellison) Parties notified.(arrivera, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re: BP p.l.c. Securities Litigation

January 20, 2018
David J. Bradley, Clerk

No. 4:10-MD-2185

This document relates to:
Alameda County Emp. Retirement Assoc. v. BP p.l.c.

No. 4:12-cv-01256 (cons.)

Avalon Holdings Inc. v. BP p.l.c.

No. 4:12-cv-03715

South Yorkshire Pensions Authority v. BP p.l.c.

No. 4:12-cv-02362 (cons.)

Mondrian Global Equity Fund, L.P. v. BP p.l.c.

No. 4:12-cv-03621

Stichting Pensionenfonds Metaal en Techniek v. BP p.l.c.

No. 4:13-cv-00069

HESTA Super Fund v. BP p.l.c.

No. 4:13-cv-00129

New York City Employees’ Retirement System v. BP p.l.c.

No. 4:13-cv-01393

Nova Scotia Health Employees’ Pension Plan v. BP p.l.c.

No. 4:13-cv-03397

Ark. Teacher Retirement System v. BP p.l.c.

No. 4:14-cv-00457

The Bank of America Pension Plan v. BP p.l.c.

No. 4:14-cv-01418

Deka Investment GmbH v. BP p.l.c.

No. 4:14-cv-01073

DiNapoli v. BP p.l.c.

No. 4:14-cv-01083

IBM United Kingdom Pension Trust Limited v. BP p.l.c.

No. 4:14-cv-01279

Merseyside Pension Fund v. BP p.l.c.

No. 4:14-cv-01281

Pension Reserves Inv. Mgmt. Bd. of Mass. v. BP p.l.c.

No. 4:14-cv-01084

Universities Superannuation Scheme Ltd. v. BP p.l.c.

No. 4:14-cv-01280

Virginia Retirement System v. BP p.l.c.

No. 4:14-cv-01085

Washington State Investment Board v. BP p.l.c

No. 4:14-cv-00980
Honorable Keith P. Ellison

MEMORANDUM AND ORDER
Before the Court are Defendant Robert Malone’s Motion for Reconsideration (Dkt. No.
1584) and Plaintiffs’ Cross Motion for Reconsideration (Dkt. No. 1587). The parties request
reconsideration of the Court’s June 30, 2017 Order (Dkt. No. 1581) (“Order”). Mr. Malone
requests reconsideration of the Court’s denial of his motion to dismiss Plaintiffs’ claims based on
his April 7, 2007 statement in BP Magazine. (Dkt. No. 1584 at 3.) Plaintiffs request
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reconsideration of the Court’s dismissal of claims based upon statements in the 2006 Annual
Review and a statement by Mr. Malone in BP Magazine. (Dkt. No. 1587 at 13.) Upon reviewing
the submissions of the parties and the applicable law, the Court finds that the motions for
reconsideration should be denied.
I.

LEGAL STANDARD
The Federal Rules of Civil Procedure do not specifically provide for motions for

reconsideration. Shepherd v. Internat’l Paper Co., 372 F.3d 326, 328 n. 1 (5th Cir. 2004).
Reconsideration motions are generally analyzed under the standards for motions to alter or
amend judgment under Rule 59(e) or motions for relief from a judgment or order under Rule
60(b). Id. (citing Hamilton Plaintiffs v. Williams Plaintiffs, 147 F.3d 367, 371 n. 10 (5th Cir.
1998)). If a motion for reconsideration is filed no later than twenty-eight days after the judgment
or order of which the party complains, it is considered a Rule 59(e) motion. See id., Fed. R. Civ.
P. 59(e). The parties filed their reconsideration motions within twenty-eight days of entry of the
Court’s order, so the Court analyzes the motions under Rule 59(e).
A motion under Rule 59(e) “calls into question the correctness of a judgment.” Templet v.
HydroChem Inc., 367 F.3d 473, 478–79 (5th Cir. 2004) (citing In re Transtexas Gas Corp., 303
F.3d 571, 581 (5th Cir. 2002)). Relief under Rule 59(e) is appropriate where the motion clearly
establishes either a manifest error of law or fact or presents newly discovered evidence. Ross v.
Marshall, 426 F.3d 745, 763 (5th Cir. 2005). Relief is also appropriate when there has been an
intervening change in the controlling law. Schiller v. Physicians Resource Group Inc., 342 F.3d
563, 567 (5th Cir. 2003). Motions under Rule 59(e) “cannot be used to raise arguments which
could, and should, have been made before the judgment issued.” Id. A motion for reconsideration
“is not the proper vehicle for rehashing evidence, legal theories, or arguments that could have

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been offered or raised before the entry of judgment.” Templet, 367 F.3d at 478-79 (citing Simon
v. United States, 891 F.2d 1154, 1159 (5th Cir.1990)); Sooter v. Siemens Indus., Inc., No. 4:14CV-3637, 2015 WL 1540161, at *2 (S.D. Tex. Apr. 7, 2015). Reconsideration under Rule 59(e)
is an extraordinary remedy that courts should use sparingly. Templet, 367 F.3d at 479.
II.

DEFENDANT MALONE’S MOTION FOR RECONSIDERATION
A. Request for Reconsideration of 2007 Statement
In its June 30 Order, the Court denied Defendants’ motion to dismiss Plaintiffs’ claims

based on one of Mr. Malone’s April 7, 2007 statements in BP Magazine. Doc. No. 1581 at 26.
The statement at issue (hereinafter “2007 Statement”) is the following: “This year, we’ll
complete a large fibre optic system in the Gulf to connect all of our deepwater fields to shore
with a high-fidelity data network. This network will significantly improve safety and operations
efficiency.” Doc. No. 1361 (Alameda Compl.) at ¶ 359(c). Defendants ask that the Court dismiss
the claims against Mr. Malone that are based on the 2007 Statement because Plaintiffs did not
allege sufficient facts to support a conclusion that the statement was false or that Mr. Malone had
the requisite scienter.
Mr. Malone has not met the high standard for reconsideration.

Reconsideration is

appropriate when there is newly discovered evidence, there has been an intervening change in
the law, or the motion clearly establishes either a manifest error of law or fact. Ross v. Marshall,
426 F.3d 745, 763 (5th Cir. 2005); Schiller, 342 F.3d at 567. Mr. Malone has neither put forth
new evidence nor cited to an intervening change in law, so the Court has re-examined its order to
determine whether the Order contains a “manifest error of law or fact.”
The Court finds that it has not made a manifest error of law or fact with regard to falsity
or scienter. Plaintiffs have alleged that Defendants, including Mr. Malone, knew or recklessly

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disregarded the fact that BP’s process safety procedures did not adequately address known risks
of deepwater drilling and misrepresented concrete steps purportedly being taken to increase
safety at offshore sites. Doc. No. 1361 at ¶¶ 127, 360.
Mr. Malone also argues that the claims based on the alleged misstatement should be
dismissed because Plaintiffs cannot demonstrate loss causation. Doc. No. 1584 at 4. The parties
dispute when the fiber optic network was completed, so it would be premature to dismiss on this
basis. Additionally, this was not raised in the original briefing on the motion to dismiss. Motions
for reconsideration “cannot be used to raise arguments which could, and should, have been made
before the judgment issued.” Sooter v. Siemens Indus., Inc., No. 4:14-CV-3637, 2015 WL
1540161, at *2 (S.D. Tex. Apr. 7, 2015) (quoting Ross, 426 F.3d at 763). Similarly, Defendants’
arguments regarding the statute of repose were not raised in the original briefing.
B. Request for Clarification of Ruling on Section 20(a) Claims
Defendants ask the Court to clarify its ruling on Section 20(a) claims against Mr. Malone
and other individual Defendants. Defendants raised their Section 20(a) arguments in the briefing
on the motion to dismiss, and the Court will clarify its analysis here.
Section 20(a) of the Exchange Act establishes secondary liability for persons who control
others who violate Section 10(b). Plaintiffs must show that there was an underlying securities
fraud violation and prove that the controlling person against whom the Section 20(a) claim has
been brought had actual power over the controlled person and induced or participated in the
alleged violation. In re BP p.l.c. Sec. Litig., 922 F. Supp. 2d 600, 639 (S.D. Tex. 2013); Dennis v.
General Imaging, Inc., 918 F.2d 496, 509 (5th Cir.1990). Section 20(a) claims are subject only to
the pleading requirements of Rule 8. In re BP p.l.c. Sec. Litig., 922 F. Supp. 2d at 640. A
plaintiff must plead facts indicating that defendants not directly involved in the making of

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actionable misrepresentations nonetheless “had the requisite power to directly or indirectly
control or influence corporate policy.” G.A. Thompson & Co. Inc. v. Partridge, 636 F.2d 945,
958 (5th Cir. 1981). Allegations that defendants participated in the day-to-day operations of a
company, without additional allegations of specific knowledge or facts demonstrating control,
are insufficient to sustain a Section 20(a) claim. In re BP p.l.c. Securities Litigation, 843 F. Supp.
2d 712, 792 (S.D. Tex. 2012).
The Court was silent regarding Defendants’ request for dismissal of the Section 20(a)
claims against individual defendants. The Court clarifies that it finds that Plaintiffs have not
adequately pled that Mr. Malone, Mr. Browne, Mr. Svanberg, and Mr. Castell had the power to
control or influence policy. The Court dismisses the Section 20(a) claims based on controlling
person liability against these individuals.
III.

PLAINTIFFS’ MOTION FOR RECONSIDERATION
Plaintiffs ask the Court to reconsider its dismissal of two misstatements in BP’s 2006

Annual Review, published March 6, 2007, and of one statement by Robert Malone in the 2007
BP Magazine. Plaintiffs do not present newly discovered facts and do not argue that there has
been a change in the law. Rather, Plaintiffs argue that the Court made manifest errors of law and
fact in its Order, such that the decision is subject to reconsideration.
A.

2006 Annual Review Statements

First, Plaintiffs argue that the Court made a manifest error of law when it dismissed
claims based on the BP 2006 Annual Review because Defendants did not challenge the
statements in their opening brief. This argument is unavailing. Defendants did identify the bases
for excluding the statements in their briefing, including Appendix 2 of their opening brief. Doc.
Nos. 1419 at 22, 1419-2.

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Plaintiffs ask the Court to reconsider its dismissal of claims based on the statement: “We
have committed to implement the 10 recommendations from [the Baker] report as part of our
continuing effort to strengthen and standardize process safety management.” Alameda Compl. at
¶ 354(d). Plaintiffs argue that the Court made a manifest error of fact when it stated: “to the
extent that the statements pertain to statements of fact…the statements pertain to pre-Baker
Report conduct.” Order at 25. Plaintiffs explain that this statement is a statement of present
intent, and pertains to activity that was underway after the Baker Report was issued. Plaintiffs
misinterpret the Court’s Order. In its previous order, the Court noted that statements of future
intention were not actionable. The Court found that the phrase “we have committed to” made the
statement one of future intention, not then-present fact. There is thus no error of fact about
whether the activity was underway after the Baker Report was issued.
Plaintiffs ask the Court to reconsider its dismissal of claims based on the statement:
“Worldwide, we have conducted further accident risk assessments of all our major operations
and have begun implementation of a revised integrity management standard that will apply to
every significant asset.” The Court finds that this is a statement of then-present fact.
Nevertheless, the statement is non-actionable, as its allegations are too vague for the Court to
determine falsity. The Court did not make a manifest error of law or fact in finding that this
statement was not an actionable misrepresentation.
The Court takes this opportunity to clarify the applicable pleading standard for the
element of scienter in English deceit claims. The Order stated that Plaintiffs must “meet the
heightened pleading standard of Rule 9(b) by alleging scienter with particularity.” Order at 28.
Plaintiffs’ allegations under English law need not meet the heightened standard of the PSLRA,
but they must meet the heightened standard of Rule 9(b). See Dorsey v. Portfolio Equities, Inc.,

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540 F.3d 333, 341 (5th Cir. 2008); see also Flaherty & Crumine Preferred Income Fund, Inc. v.
TXU Corp., 565 F.3d 200, 213 (5th Cir. 2009) (although “common law fraud claims are not
subject to the heightened ‘strong inference’ of scienter standard imposed by the PSLRA,” those
claims “are still subject to the heightened pleading standard of Rule 9(b).”) Rule 9(b) requires the
“plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the
speaker, state when and where the statements were made, and explain why the statements were
fraudulent.” Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552, 564–65 (5th Cir.
2002) (internal quotations omitted). Rule 9(b) “relaxes the particularity requirement for
conditions of the mind, such as scienter.” Dorsey, 540 F.3d at 339 (quoting Tuchman v. DSC
Commc’ns Corp., 14 F.3d 1061, 1068 (5th Cir. 1994)). Simple allegations that defendants
possess fraudulent intent are insufficient; the plaintiffs must set forth specific facts supporting an
inference of fraud. Id. The Court’s prior findings regarding the sufficiency of Plaintiffs’
allegations of scienter are not changed by the application of this refined Rule 9(b) standard.
B.

2007 BP Magazine Statement Regarding Texas City

Plaintiffs ask the Court to reconsider its dismissal of the following statement: “It’s two
years since the Texas City incident, and many of the actions recommended by the Baker Panel
and expected in the CSB [U.S. Chemical and Safety Hazard Investigation Board] report have
either been taken or are currently under way.” Alameda Compl. at ¶ 359. Plaintiffs argue that the
Court made a manifest error of fact when it concluded that the statement referred only to the
Texas City refinery or refineries, generally, and not offshore drilling operations. See Order at 25.
The statements of then-present fact in Mr. Malone’s statement repeatedly reference the Texas
City refinery, and discuss the BP refinery network. The Court did not make a manifest error of
law or fact in finding that this statement was not an actionable misrepresentation.

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VI.

CONCLUSION
After considering the parties’ filings and the applicable law, the Court holds that

Defendant Robert Malone’s Motion for Reconsideration (Dkt. No. 1584) is DENIED and
Plaintiffs’ Cross Motion for Reconsideration (Dkt. No. 1587) is DENIED.
IT IS SO ORDERED.
Signed this 19th day of January, 2018.

HON. KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE

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