Punitive Damages Ruling May Be Pivotal in BP Case

By | September 19, 2011

A key court ruling in the Gulf of Mexico oil spill litigation could change the landscape in the massive case — encouraging more plaintiffs to sue, or spurring the parties to make a deal to resolve what could be a long string of trials over damages.

The judge overseeing a group of spill-related lawsuits against BP Plc and its business partners ruled that claims for punitive damages — not just compensatory damages — could be brought by fishermen and other plaintiffs alleging harm to physical property.

The ruling gives some potential plaintiffs an incentive to sue because of the possibility of higher damage awards, experts say. Some people have been on the fence about suing or seeking payouts from BP’s $20 billion victims’ compensation fund, which offers settlements as an alternative to litigation.

The ruling also could lead to massive settlements. The prospect of punitive damages of any size is a “potent inducement to settle,” said David Logan, dean of Roger Williams University School of Law in Bristol, R.I.

Neither BP nor the plaintiffs’ attorneys would comment on the possibility of a settlement before a liability trial is scheduled to begin in February 2012. The trial will decide who is to blame for the largest-ever U.S. offshore oil spill. If there are claims outstanding by the time that proceeding is done, multiple smaller trials will be scheduled to determine specific dollar amounts for damages.

The ruling on punitive damages was handed down by Judge Carl Barbier of U.S. District Court in New Orleans, who will preside over the February trial.

In an emailed statement, BP representative Daren Beaudo said: “The court’s decision builds on the earlier dismissal of several other types of plaintiffs’ claims. The court agreed with BP on several key issues, including dismissing plaintiffs’ state law claims, limiting availability of attorneys’ fees, and significantly narrowing the group of plaintiffs who are eligible to try to prove punitive damages.”

Co-defendants Transocean, Cameron, Anadarko and Halliburton declined to comment.

The punitive damages ruling had been one of the major issues pending before Judge Barbier. While the decision largely benefits plaintiffs, it is not a straightforward victory for them, legal experts said. Barbier dismissed all claims brought under state law in the ruling, as well as general maritime negligence claims against Anadarko and MOEX, a unit of Japan’s Mitsui & Co Ltd.

U.S. Supreme Court decisions in the last decade could serve to limit the size of punitive damages juries can award, said David Uhlmann, a professor of law at the University of Michigan. In the long-running Exxon Valdez case, the high court in 2008 ruled that punitive damages could not exceed the amount of compensatory damages awarded.

Plaintiffs who say they suffered indirect losses — as opposed to fishermen and those with property damage — are not eligible for punitive damages. It is unknown how many of the 108,000 private claims before Barbier alleged such indirect losses, including restaurants and hotels claiming lost revenue as tourism fell.

The case is In re: Oil Spill, U.S. District Court, Eastern District of Louisiana, 2:10-md-02179.

Reporting by Moira Herbst; editing by Martha Graybow and Matthew Lewis.

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