Think the BP oil spill is the Gulf States' problem? Think again. Last week New York began considering a lawsuit against BP. Not for oil contaminating its beaches, but for the huge hit its state and city of New York pension funds have taken since the price of BP stock dove after the spill.
According to the New York Daily News the state pension funds lost $30 million due to the loss in value of BP shares since the explosion that created the spill on April 20. The state fund, a $133 billion concern, holds 17.5 million shares of BP. New York City's five pension funds are valued at about $100 billion. Those funds hold $110 million in BP stock, Sharon Lee, a spokeswoman for city Controller John Liu told the News.
CBS6 News reports that the state pension funds are considering a civil action, possibly seeking class action status. Since the funds are a separate unity from the state, the suit would not be brought by ubiquitous New York AG Andrew Cuomo, but by private legal representation.
The New York pension funds would seek damages to compensate for their loss under a shareholder suit. Like other suits against corporations, the shareholder suit against Merck for its actions surrounding the drug Vioxx for instance, the shareholders (in this case the pension funds) would contend that the negligent acts of the company were the direct cause of their loss in share price. In this case, they might argue that any negligence on the part of BP which caused the explosion and/or spill was also the cause of the loss in value of the shares held by the funds. Drawing a direct line of causation from company acts, to loss in share value, is just one of the hurdles the possible plaintiffs could face in court.
Other pension funds have taken hits as well. The News reports that Florida officials also have said they have lost $67 million. But, there is one state with not just wisdom from hindsight, but foresight. It seems that New Jersey was one state who saw it coming, or if not, at least got very, very lucky. The pension funds in the Garden State sold their BP stock before the spill. They are up $5.5 million.
- New York mulling lawsuit against BP over lost millions in state and city pension funds (New York Daily News)
- Fact Finder: New York investigating suit against BP (CBS6 News)
- Court Reinstates Shareholder Suit Over Vioxx (FindLaw's Common Law Blog)
- $624 million: BoA-Countrywide Settles Investor Suit (FindLaw's Decided Blog)
- Employment Law Newsletter (provided by Kilgore & Kilgore)