Fifth Circuit Dismisses ESOP Stock Drop Suit

Chelsea Ashbrook McCarthy is a Partner in the Chicago office

On September 26, 2016, the U.S. Court of Appeals for the Fifth Circuit issued its decision in Whitley v. BP, P.L.C.. The Fifth Circuit reversed the lower court's ruling that allowed the plaintiffs' amended complaint to stand. The amended complaint alleged claims against the fiduciaries of an employee stock ownership plan (ESOP) of BP p.l.c., a publicly traded company. The Fifth Circuit held that the amended complaint did not plausibly state a claim against the plan fiduciaries.

Plaintiffs were investors in the BP stock fund, an ESOP comprised primarily of BP stock. In April 2010, the BP-leased Deepwater Horizon offshore drilling rig exploded and an oil spill in the Gulf of Mexico followed. Thereafter, BP's stock price significantly declined in value. Plaintiffs filed suit.