Opponents of BP Plc’s $9.2 billion partial settlement of private-party claims from the 2010 Gulf of Mexico oil spill are set to ask a U.S. appeals court to reverse a judge’s approval of the agreement.
The agreement is unfair and can’t be approved because it inconsistently compensates victims with the same types of economic injuries, opponents of the settlement told the U.S. Court of Appeals in New Orleans in court filings. They will be arguing today for a reversal of U.S. District Judge Carl Barbier’s December approval of the accord.
BP, meanwhile, has argued that the settlement can’t be approved yet. The company won review last month of the claims administrator’s interpretation of the settlement, which BP said was causing the approval of millions of dollars in “fictitious” payments to businesses for economic losses. A final ruling on the payments hasn’t been made.
If the earlier interpretation “were to survive in whole or in substantial part, the district court’s order certifying the settlement class and approving the settlement agreement would have to be set aside,” BP said in an Oct. 11 letter to the appeals court.
The April 2010 Macondo well blowout and the explosion that followed killed 11 workers and set off the worst offshore oil spill in U.S. history. The sinking of Transocean Ltd.’s Deepwater Horizon drilling rig and the spill led to hundreds of lawsuits against BP and its partners and contractors.
The company reached a settlement with most private plaintiffs in March 2012, just before a non-jury trial was to begin on liability for the incident and whether BP or its contractors, Halliburton Co. and Transocean, acted with gross negligence.
Barbier conducted that trial this year in federal court in New Orleans. A second phase of the trial, over the size of the spill and the efforts to contain it, finished last month. Barbier hasn’t made decisions on either phase.
The accord resolved economic-loss claims for multiple classes of businesses and property owners in Louisiana, Alabama and Mississippi and in parts of Texas and Florida. It excluded claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill. It also didn’t cover claims by governments.
BP initially valued its economic-loss settlement at $7.8 billion. It now puts the cost at $9.2 billion, according to an Oct. 29 company regulatory filing.
Barbier gave final approval to the settlement in December. Multiple groups of plaintiffs subsequently appealed.
Those covered in the settlement aren’t treated the same, said John Pentz, an attorney for a group of Texas coastal plaintiffs. His clients contend their treatment under the settlement is inferior to that of similar businesses a few hundred yards away in Louisiana.
“When all class members are similarly situated, they must be treated identically by any proposed settlement,” Pentz said in court papers.
The agreement as approved “fails to adequately explain the division of the class into zones that can make the difference between recovering some compensation and receiving nothing at all,” Pentz said.
The standard of commonality required for a class action to be approved isn’t met in the BP settlement, attorney Brent Coon, who represents thousands of victims, said in his appeal of the approval.
“The settlement class is not cohesive, but a large and unwieldy aggregation of several distinct groups of individuals and entities whose situations could possibly be described as similar, but whose only common characteristic, across groups, is that they happened to live or work or own property or operate somewhere in the Gulf region in 2010,” he said in a Sept. 20 filing.
Coon also said victims of the spill weren’t given enough time to determine whether to opt out of the settlement or accept its terms.
Lawyers for the Plaintiffs’ Steering Committee, who negotiated the agreement, said the settlement was fair and complied with legal standards.
“The BP settlement, as a class settlement, achieves the aims of equitable aggregate litigation,” attorneys Steve Herman and Jim Roy said in court papers.
The challenges to the settlement “are remarkably narrow,” they said. “Not one of the appellants states exactly what amount it believed would have been fair, as opposed to what the settlement methodologies dictate.”
They also said spill victims had months before the opt-out deadline to determine whether to pursue claims on their own.
Lawyers for the victims opposing the settlement contend that BP supports their position.
“BP agrees with the appellants that commonality, typicality and predominance are lacking in the settlement agreement and class certified on appeal,” Pentz said in a Sept. 17 filing.
BP doesn’t support the objectors’ claims that a settlement can’t be approved under what the company considered the original terms of the agreement.
As a result of claims administrator Patrick Juneau’s interpretation of what claims can be paid under the settlement, “the landscape has now significantly changed,” BP told the appeals court in August.
“That interpretation creates an irreconcilable conflict among members of the class, which now includes both injured claimants seeking recovery for actual losses and uninjured businesses seeking utterly unjustifiable windfalls,” it said.
BP appealed Barbier’s affirmation of Juneau’s interpretation and a separate panel of the appeals court ordered a review last month. The judges told Barbier to stop some payments under the settlement until he can sort out who has legitimate claims.
“The Fifth Circuit has ordered the district court to correct the problems it identified,” Geoff Morrell, a BP spokesman, said in a statement before today’s hearing, referring to the New Orleans-based appeals court.
“If the claims administrator’s policies with respect to the issues of loss calculation and causation under the business economic loss framework are properly revised as BP is urging in the district court remand proceedings, the settlement agreement could be returned to its original, intended and lawful function: the compensation of claimants who sustained actual losses that are traceable to the Deepwater Horizon accident,” he said.
Barbier has asked both sides to submit filings on their positions on how to comply with the concerns of the appeals court. He has to report back to the appellate panel by Dec. 2.
The case is In Re Deepwater Horizon-Appeals of the Economic and Property Damage Class Action Settlement, 13-30095, U.S. Court of Appeals for the Fifth Circuit (New Orleans).
The lower-court case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10- md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).
–Editors: Andrew Dunn, Stephen Farr