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Reese v. Malone

United States District Court, W.D. Washington, Seattle

April 3, 2015

CLAUDE A REESE et al., Plaintiffs,
v.
ROBERT A MALONE et al., Defendants.

ORDER ON MOTION TO AMEND

MARSHA J. PECHMAN, Chief District Judge.

THIS MATTER comes before the Court on Plaintiffs Claude Reese et al.'s Motion to File a Third Amended Consolidated Class Action Complaint and to Substitute Lead Plaintiffs. (Dkt. No. 217.) Having reviewed the Motion, Defendants' Response (Dkt. No. 222), and Plaintiff's Reply (Dkt. No. 224), the Court hereby GRANTS the Motion to Amend in part and REOPENS a modified lead plaintiff selection process as described below.

Background

This case comes before the Court on remand from the Ninth Circuit, which affirmed in part and reversed in part this Court's dismissal (see Dkt. No. 191) of Plaintiffs' securities fraud claims. (See Dkt. No. 194, 195.)

The statements and events at issue in this case took place largely in 2006, the year of two major oil leaks from BP pipelines in Prudhoe Bay, Alaska. The Ninth Circuit reinstated Plaintiffs' claims with respect to the following statements, largely on the basis that plaintiffs had adequately pled scienter:

1) a statement by Maureen Johnson, BP-Alaska Senior Vice President and Greater Prudhoe Bay Performance Unit Leader, on March 15, 2006 (two weeks after the first spill) regarding the "low manageable corrosion rate" from observations of the pipeline prior to the spill (see Dkt. No. 194 at 17-24)
2) statements by Dr. Johnson in March and May 2006 contrasting conditions at the Western Operating Area ("WOA") pipeline (where the first spill occurred) with conditions at the Eastern Operating Area pipeline (where the August spill would later occur) (see id. at 24-33)
3) statement in the 2005 Annual Report, issued on June 30, 2006, regarding BP management's "belie[f]" that it was in "compliance in all material respects with applicable environmental laws and regulations" (id. at 34-40)

The Ninth Circuit also affirmed this Court's dismissal of claims relating to statements by BP CEO John Browne regarding "world class corrosion monitoring and leak detection systems." (Id. at 33-34.) Plaintiffs did not appeal and thus abandoned claims regarding statements in the 2004 and 2005 Annual Reports about "environmental best practices." (Id. at 13 n.1.)

Plaintiffs now move to amend the complaint a second time by dropping claims whose dismissal was affirmed by the Ninth Circuit or which were abandoned on appeal, reinstating claims based on § 20(a) controlling person liability for primary violations by BP that the Ninth Circuit found actionable, and substituting lead plaintiffs for those who lost standing based on either this Court's original order or the Ninth Circuit opinion. (See Dkt. No. 217.) Plaintiffs' motion to amend for a second time was filed within the Court's deadline for amended pleadings. (See Dkt. No. 215.)

Defendants oppose the motion on the grounds that Plaintiffs abandoned their § 20(a) claim against Mr. Browne by not addressing it on appeal (or, in the alternative, that "amendment" to preserve him as a defendant would be futile) and that Plaintiffs may not substitute lead plaintiffs because the current Lead Plaintiffs have lacked standing for 28 months and that allowing a substitution of lead plaintiffs would permit Plaintiffs' counsel to evade the Private Securities Litigation Reform Act ("PSLRA") lead plaintiff selection process.

Analysis

I. Legal Standard

In deciding a motion to amend that falls after the first amendment as a matter of course but in accordance with the Court's scheduling order, the Court considers a number of factors, including undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to opposing parties, harm to the movant if leave is not granted, and futility of the amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); Martinez v. Newport Beach City, 125 F.3d 777, 785 (9th Cir. 1997). Generally the Court should grant ...


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