On August 31, 2021, Cohen Milstein and co-counsel on behalf of the City of Detroit Police and Fire Retirement System filed a Verified Amended Shareholder Derivative Complaint for the benefit of nominal defendant NiSource, Inc. (“NiSource”) against certain current and former members of its Board of Directors, (the “Board”) seeking to remedy their breaches of fiduciary duties under Delaware law. 

Case Background

For years, NiSource’s Board consciously ignored “mission critical” compliance risks at NiSource’s highly regulated wholly-owned gas operations, by failing to implement appropriate pipeline safety measures and failing to ensure that all of NiSource’s gas subsidiaries complied with minimum pipeline safety standards under federal and state laws. Despite multiple violations of pipeline safety laws, regulatory fines, and a number of dangerous gas pipeline explosions – all tied to a pattern of compliance failures that were known to the Board – NiSource’s Board breached its non-exculpable fiduciary duties when it failed to heed those warnings and knowingly permitted NiSource’s gas subsidiaries to operate for years in violation of those laws as it sought to prioritize profits over safety.

The Board’s bad-faith actions culminated in a foreseeable and preventable tragic event on September 13, 2018, when NiSource's wholly-owned gas subsidiary, Columbia Gas of Massachusetts (“CMA”), triggered a series of five explosions in Lawrence, Andover, and North Andover, Massachusetts (the “Greater Lawrence Explosions”) causing 141 fires, one fatality and a number of serious injuries, while forcing approximately 30,000 people to evacuate their homes. As U.S. Senator Edward J. Markey said at a Congressional hearing a few months later, “At every step of the process, there was a chance to avoid this disaster. Instead of choosing safety, you chose savings. Instead of choosing to do things the right way, you chose to do things the easy way and the result was disaster.”

The Greater Lawrence Explosions resulted from criminal violations of minimum pipeline safety standards. Due to the Board’s purposeful and conscious failure to oversee the Company’s compliance with pipeline safety standards, the Company has suffered over $1 billion in damages and has been subjected to a multitude of criminal and regulatory sanctions.

On February 26, 2020, NiSource announced an criminal Deferred Prosecution Agreement (“DPA”) with the DOJ, in which CMA pled guilty to knowing and willful violations of federal pipeline safety laws for failing to meet minimum safety standards for at least three years leading up to the Greater Lawrence Explosions, and was required to pay a $53 million fine, the largest criminal fine ever imposed under the federal Pipeline Safety Act. The DPA imposed significant penalties on NiSource and its subsidiaries, including CMA.  NiSource was required to exit the gas pipeline and distribution business in Massachusetts entirely, and was forced to sell CMA at no profit – with NiSource forfeiting any profits on the sale to the government.  NiSource was further required to resolve all civil claims relating to the incident, including claims asserted by the Massachusetts Department of Public Utilities.  CMA was placed on probation for three years subject to certain conditions, including mandatory obligations to implement appropriate minimum safety standards at all of its operating gas subsidiaries.

Similarly, on July 2, 2020, Massachusetts Attorney General Maura Healey announced a $56 million settlement with the Company related to the Greater Lawrence Explosions.

Plaintiffs also allege that prior to the Greater Lawrence Explosions, several of NiSource's gas subsidiaries were cited by regulators in Massachusetts, Ohio, Virginia, West Virginia, and Indiana, for serious pipeline safety violations, all of which involved failures similar to the violations underlying the Greater Lawrence Explosions.

Accordingly, this derivative action seeks to hold the individual defendants responsible for their illegal business decisions, inactions, and failures of oversight, which constitute breaches of their non-exculpable fiduciary duties of loyalty, causing the catastrophic Greater Lawrence Explosions and over $1 billion in damages to NiSource.  

Case name: City of Detroit Police and Fire Retirement System v. Joseph Hamrock, et al., C.A. No. 2021-0370-KSJM