On interlocutory appeal, the U.S. Fifth Circuit Court of Appeals reversed the denial of BP’s Rule 12 Motion to Dismiss the Amended Complaint of BP pension plan stockholders for breach of fiduciary duty.
“In Fifth Third, the Supreme Court stated that the plaintiff’s proposed alternative must be one that ‘a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.‘ But here the district court stated that it could not determine, ‘on the basis of the pleadings alone, that no prudent fiduciary would have concluded that [the alternatives] would do more good than harm’ (second emphasis added). These statements are not equivalent. Under the Supreme Court’s formulation, the plaintiff bears the significant burden of proposing an alternative course of action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it….
“In their amended complaint, the stockholders state that their proposed alternatives ‘(a) could have been done without violating the securities laws or any other laws; (b) should have been done to fulfill Defendants’ fiduciary obligations under ERISA; and (c) would not have been more likely to harm the BP Stock Fund than to help it.’ Aside from these conclusory statements, the stockholders do not specifically allege, for each proposed alternative, that a prudent fiduciary could not have concluded that the alternative would do more harm than good, nor do they offer facts that would support such an allegation….
“The amended complaint states that BP’s stock was overvalued prior to the Deepwater Horizon explosion due to ‘numerous undisclosed safety breaches’ known only to insiders. In other words, the stockholders theorize that BP stock was overpriced because BP had a greater risk exposure to potential accidents than was known to the market. Based on this fact alone, it does not seem reasonable to say that a prudent fiduciary at that time could not have concluded that (1) disclosure of such information to the public or (2) freezing trades of BP stock—both of which would likely lower the stock price—would do more harm than good. In fact, it seems that a prudent fiduciary could very easily conclude that such actions would do more harm than good.”
Whitley v. BP plc, No.15–20282, 2016 WL 5387678 (5th Cir. Sept. 26, 2016).