Shareholder Derivative Suit Closely Follows Utility’s Indictment on Federal Charges Following September 2010 Pipeline Explosion

In what has become a typical play for plaintiffs’ lawyers following investigations of high profile incidents, an investor filed suit yesterday against current and former officers and directors of a utility for breach of fiduciary duty, alleging the defendants harmed the company by creating a corporate culture that “emphasized profits over customer safety” and contributed to a pipeline explosion in September 2010 that killed 8 people, injured 58 others, and damaged or destroyed more than 100 homes.

The derivative action was filed three weeks after a federal grand jury returned a 12-count indictment against the utility alleging multiple violations of the Natural Gas Pipeline Safety Act of 1968 stemming from the pipeline explosion, and one day after the utility was arraigned on these charges.  The indictment alleges that the utility knowingly and willfully violated the Pipeline Safety Act and its regulations between 2003 and 2010, including by failing to identify and evaluate threats to its transmission pipelines, violating pipeline “integrity management” practices and failing to address recordkeeping deficiencies with its natural gas pipelines despite knowledge that their records were inaccurate or incomplete.