In re BP P.L.C. Derivative Litigation

Shareholders (plaintiffs) of B.P. p.l.c. (BP) brought a derivative suit in federal court in New York against BP and various BP-affiliated companies and individuals (affiliates) (collectively, defendants), accusing BP and the affiliates of engaging in self-dealing. BP and the affiliates, which had minimal contacts with New York, moved to dismiss the complaint for failure to state a claim. BP and the affiliates argued, among other things, that New York’s choice-of-law principles dictated what substantive law governed the shareholders’ suit. Per BP and the affiliates, pursuant to New York’s internal-affairs doctrine, the substantive law of the United Kingdom (UK), BP’s incorporation jurisdiction, applied because the suit concerned the relationship between BP and its shareholders. BP and the affiliates further argued that UK law barred derivative suits except in limited circumstances not present here. In response, the shareholders cited the public-policy exception to the internal-affairs doctrine and argued that their complaint stated a claim under UK law because the UK permitted derivative suits if the wrongdoers engaged in self-dealing and had voting control over the company. The shareholders also contended that the UK’s recent enactment of the Companies Act of 2006, which generally permitted derivative actions, reflected the UK’s belief that its prior restrictive approach to derivative litigation was unfair and violated public policy. BP countered that (1) the public-policy exception was inapplicable because BP had minimal contacts with New York, (2) the self-dealing exception to the UK bar against derivative suits was inapplicable because the alleged wrongdoers did not have voting control over BP, and (3) the act was not retroactive and thus did not apply to the shareholders’ suit.