A federal judge in New York on Tuesday dismissed a lawsuit from investors who alleged top executives of Transocean Ltd. misled shareholders about safety problems in the months leading up to a catastrophic oil well blowout in the Gulf of Mexico.
On Tuesday, U.S. District Judge Naomi Reice Buchwald threw out a class-action suit against Transocean. The Swiss company leased the Deepwater Horizon rig to BP PLC to drill a deep-sea well off the Louisiana coast. The well blew out in April 2010, killing 11 workers, destroying the rig and causing the nation's worst offshore oil disaster.
Buchwald ruled Transocean did not mislead investors about problems with blowout preventers, human errors and equipment problems. Investors alleged company CEO Steven Newman concealed information about safety problems with Transocean's fleet of drilling rigs. The suit also named former CEO Robert Long as a defendant.
The judge said it was "difficult to discern" from the plaintiffs' lawsuit which "specific misrepresentations or omissions" the suit intended to bring under securities laws. The lead plaintiff was Danica Pension, a European pension fund based in Denmark. The lead lawyer for the plaintiffs did not immediately return messages seeking comment on Tuesday.
Transocean said in a statement that it was pleased with the ruling.
The plaintiffs focused on comments Newman made at three investor conference calls between August 2009 and July 2010.
In a conference call on Aug. 5, 2009, Newman told investors "a couple of human error incidents on drill floors" and a "handful of BOP (blowout preventer) problems" were anomalies that were not systemic. He said the problems were being taken care of "so they don't happen again." Newman was speaking of issues Transocean faced in the second quarter of 2009.
Newman again assured investors on Feb. 24, 2010, that the company was taking care of a few problems with equipment failures and human error.
The plaintiffs alleged that Transocean "was suffering from company-wide failures in safety and preventative maintenance" when Newman made these statements, the ruling said.
The plaintiffs charged that Newman again misled investors during a May 28, 2010 conference call when he said the Deepwater Horizon's blowout preventer was tested every week and was shown to be working properly shortly before the April blowout. Also, Newman told investors that the rig's safety equipment was working properly.
But the plaintiffs alleged that Newman's statements were misleading because the blowout preventer was tested at pressure levels lower than what it would be expected to operate in if there was a blowout. Buchwald said those tests were approved by federal offshore regulators _ the Minerals Management Service _ and that Newman had no obligation to "second-guess" regulators.
The judge ruled that Transocean disclosed safety concerns "to the market at various points in time." Buchwald noted that in April 2009, the company did not give executives safety-related bonuses due to two offshore deaths in 2008 and reported in the Beacon, its corporate magazine, in the fall of 2009 that it had hired Lloyd's Register "to conduct a major global evaluation" of safety processes and culture, the ruling said.
"The announcement of a third-party audit of the company's safety practices undercuts any notion that there was `an intent to deceive' the market," Buchwald wrote.