SEPTA this week sued BP and its Gulf of Mexico drilling partners, bosses, and affiliates, in an attempt to recover losses on the BP stock in its pension fund since the oil giant's Deepwater Horizon rig blew up April 20, according to Joseph N. DiStefano of the Philadelphia Inquirer.
"We took a big loss with BP," SEPTA general counsel Nicholas Staffieri told me. He figures the $700 million fund lost more than $7.8 million as BP shares fell to $42 from $60 after the explosion, which killed 11 workers and has fouled the Gulf of Mexico.
The suit, in Delaware Chancery Court, claims the companies and their overseers were negligent. "We have a fiduciary duty to protect the taxpayers" who help fund the pension plan, along with SEPTA workers who pay into it and pensioners who draw checks, Staffieri told me. Locally based law firm Chimicles & Tikellis L.L.P. is representing SEPTA.
My colleague Paul Nussbaum wrote in January about another SEPTA shareholder suit, against Goldman Sachs Group Inc. Staffieri told me the transportation authority has sued at least seven others, including Wells Fargo & Co., Level 3 Communications Inc., and Barnes & Noble Inc., in courts around the United States since the stock market collapsed in 2008.
SEPTA has split the cases between Chimicles & Tikellis and the Philadelphia firm Barroway, Topaz, Kessler, Meltzer & Check L.L.P., Staffieri said.
"These are very specialized cases, and these are two major firms in the area" that do shareholder suits, Staffieri said. "We give them access, at times, through my office" to the list of investments SEPTA holds. "And they come back with proposals" about whom to sue.
SEPTA has yet to make any money from these suits. But, Staffieri said, it hasn't cost any money either: The law firms get a percentage of the settlements, if any.
It's not just SEPTA. In 2006, three Pennsylvania state investment funds agreed to collect $23 million from Time Warner Inc. to ease their losses from its unprofitable America Online merger.
Delaware's business-friendly courts attract shareholder lawsuits, including "derivative" suits like the BP action. In those suits, investors sue managers, directors, board members, and affiliated businesses in hopes that their insurers will pay damages to the company, with some of the money returned to shareholders, said Leonard Barrack, whose firm, Barrack, Rodos & Bacine, was a lead counsel in shareholder settlements against Merrill Lynch & Co. Inc. and McKesson Corp.
Fees typically range from 12 percent to 25 percent of settlements, lower when awards top $1 billion, said Sherrie Savett, a partner in Berger & Montague P.C., co-lead counsel in the Time Warner and Merrill Lynch cases.
(This item appeared in the Inquirer May 28, 2010.)
