In Re: BP P.L.C. Securities , 575 F. App'x 341 ( 2014 )

Case: 12-20670 Document: 00512698795 Page: 1 Date Filed: 07/15/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 15, 2014
No. 12-20670
Lyle W. Cayce
Clerk
RALPH WHITLEY, Individually and on behalf of others similarly situated;
CHARIS MOULE, on behalf of herself and all others similarly situated; SYED
ARSHADULLAH; DAVID HUMPHRIES, on behalf of himself and all others
similarly situated; JERRY T. MCGUIRE; EDWARD F. MINEMAN, on behalf
of himself and all others similarly situated; MAUREEN S. RIELY, Individually
and on behalf of the BP Employee Savings Plan, BP Capital Accumulation
Plan, BP Partnership Savings Plan, BP DirectSave Plan, and on behalf of all
others similarly situated; THOMAS P. SOESMAN, Individually and on behalf
of all others similarly situated; FRANKIE RAMIREZ,
Plaintiffs - Appellants
v.
BP, P.L.C.; BP AMERICA, INCORPORATED; ANTHONY HAYWARD; ANDY
INGLIS; CARL HENRIC SVANBERG; STATE STREET BANK & TRUST
COMPANY; ET AL,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC 4:10-CV-4214
Before STEWART, Chief Judge, and DeMOSS and CLEMENT, Circuit Judges.
PER CURIAM:*
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 12-20670 Document: 00512698795 Page: 2 Date Filed: 07/15/2014
No. 12-20670
This case arises from a drop in the stock price of BP p.l.c. (“BP”).
Plaintiffs-Appellants are participants in four employee investments and
savings plans (the “Plans”) sponsored by BP North America, Inc., a subsidiary
of BP. The Plans are regulated by the Employee Retirement Income Security
Act (“ERISA”). One of the investment options available under each Plan is the
BP Stock Fund, which consists entirely of BP American Depository Shares
(“BP Shares”) plus a small amount of cash and other short-term positions.
During the time period covered by the complaint, the BP Stock Fund comprised
approximately one-third of each of the Plans’ assets.
After the Deepwater Horizon disaster, BP’s share price declined
substantially. As a result, the Plans sustained major losses. Plaintiffs filed
suit on June 24, 2010, alleging that Defendants are fiduciaries of the Plans
under ERISA and that they knew or should have known, based on a variety of
sources, that BP Shares were not a prudent investment. Plaintiffs claim that
Defendants failed to take appropriate action based on the information
available to them and thereby breached their fiduciary duty. Plaintiffs
additionally assert that Defendants engaged in misrepresentations and
omissions of material information in their capacity as ERISA fiduciaries.
On July 26, 2011, Defendants moved to dismiss the complaint for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6). Defendants
argued that because the documents governing the Plans list the BP Stock Fund
as a “core investment,” the Plans qualify as “eligible individual account plan[s]”
or “EIAPs” under 29 U.S.C. § 1107(d)(3). In line with the case law prevailing
in the Fifth Circuit at the time, Defendants asserted that an ERISA fiduciary’s
decision to keep an EIAP invested in company stock is entitled to a
“presumption of prudence,” sometimes referred to as the Moench presumption.
See Kirshbaum v. Reliant Energy, Inc., 526 F.3d 243, 254 (5th Cir. 2008); see
also Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995). The district court agreed
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Case: 12-20670 Document: 00512698795 Page: 3 Date Filed: 07/15/2014
No. 12-20670
and granted the motion to dismiss on the ground that Plaintiffs had failed to
plead facts that, if proven, would overcome the Moench presumption. The
district court later denied Plaintiffs’ motion to file an amended complaint,
partly on the ground that the newly added allegations would not overcome the
presumption.
Plaintiffs appealed the district court’s dismissal of their complaint and
the denial of their motion to file an amended complaint. Shortly after oral
argument of this appeal, the Supreme Court granted certiorari in Dudenhoeffer
v. Fifth Third Bancorp, 692 F.3d 410 (6th Cir. 2012), cert. granted, 134 S. Ct.
822 (2013). On June 25, 2014, the Court issued a unanimous opinion
dispatching with the Moench presumption and holding that ERISA fiduciaries
managing a plan invested in company stock are subject to the same duty of
prudence as any other ERISA fiduciary, “except that they need not diversify
the fund’s assets.” Fifth Third Bancorp v. Dudenhoeffer, No. 12-751, slip op.
at 1-2 (U.S. June 25, 2014); see also 29 U.S.C. § 1104(a)(2). Because the district
court applied the Moench presumption in granting Defendants’ motion to
dismiss and denying Plaintiffs’ motion to amend, we VACATE the judgment of
the district court and REMAND for reconsideration of those motions in light of
Dudenhoeffer.
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