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BP ERISA: What Effect Do These Lawsuits Have on Employee Benefits Plans?

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Montgomery, ALAlthough the oil well may be drying up, legal fallout from the BP oil spill, including lawsuits regarding BP employee benefits, show no signs of slowing down. Lawsuits have been filed on behalf of participants in BP benefits plans, alleging their plan assets were invested in BP when it was not prudent to do so. Meanwhile, a number of lawsuits have been filed against BP concerning the Gulf of Mexico oil spill.

Alabama Attorney General Troy King filed two lawsuits in August to ensure that BP keeps its word that about paying legitimate claims. According to the Montgomery Advertiser on 8/30/10, King alleges that BP hired lawyers and experts to avoid paying out some claims. The lawsuit could reportedly be dropped if BP fulfills its financial obligations to Alabama.

With so much of the US focused on the Gulf of Mexico oil spill, a release of toxic chemicals at a BP refinery went largely unnoticed until residents nearby became ill. The New York Times reported on8/29/10 that approximately 538,000 pounds of toxic chemicals were released from a refinery in Texas City. Instead of shutting down the refinery, BP chose to attempt to burn off the released chemicals, but many were still released into the air, including benzene, carbon monoxide and nitrogen oxide.

Citizens and local officials were not informed about the release of toxic gases until after the situation was over, although many children experienced respiratory problems. Now residents have filed a $10 billion class-action lawsuit against BP.

A state investigation determined that BP failed to properly maintain its equipment, which caused the equipment malfunction that allowed the gas to be released. Texas Attorney General Greg Abbott filed a lawsuit against BP seeking approximately $600,000 in fines.

Fund managers now face lawsuits from investors who allege their assets were invested in BP stock when it was not prudent to do so, a violation of the Employee Retirement Income Security Act (ERISA). If fund managers knew that BP had safety problems or a history of safety issues, BP could have been an imprudent investment for plan assets.

Some reports indicate that BP has lost over half its market value because of the Deepwater Horizon oil rig explosion and subsequent oil spill. Whether or not these recent lawsuits will have an impact on BP employee benefits plan lawsuits remains to be seen.


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