The U.S. District Court for the Southern District of Texas had dismissed Whitley v. BP Plc on the grounds that the plaintiffs had not overcome the “presumption of prudence” standard, as established in Moench v. Robertson, relating to investment in company stock. The district court also denied the plaintiffs’ request to amend their complaint.
Following plaintiffs’ appeal to the 5th U.S. Circuit Court of Appeals, the Moench standard was impacted by a U.S. Supreme Court ruling in the separate case of Dudenhoeffer v. Fifth Third Bancorp. This June 2014 ruling dispatched Moench and held 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.” The Supreme Court ruling also set a standard for pleadings in stock drop cases. The 5th Circuit vacated the district court ruling and remanded the case back to that court for reconsideration in light of Dudenhoeffer.
Former BP Plc employee Ralph Whitley filed suit against the oil company in June 2010 (see “Ex-Employee Sues BP Over Plan Losses”). The suit alleged that since the defendants (which include: BP Plc; BP America, Inc.; Anthony Hayward; Andy Inglis; Carl Henric Svanberg; and State Street Bank and Trust Company) were fiduciaries of the company’s retirement plans under the Employee Retirement Income Security Act (ERISA), they should have known that the BP Stock Fund, which consisted of BP American Depository Shares, was no longer a prudent investment due to its decreasing value after the 2010 Deepwater Horizon oil spill. The suit alleged that the defendants breached their fiduciary duty by not taking action to remedy this situation (i.e., dropping the stock fund from the plan investment menu).
The 5th Circuit‘s ruling in Whitley v. BP Plc is here.