Lawyers in Gulf Oil Spill Settlement Prepare for Fight Over Fees

By | March 8, 2012

The estimated $7.8 billion settlement reached last week between BP Plc and attorneys for victims of the Gulf of Mexico oil spill left many details unresolved, but at least one thing looks like a sure bet.

The lawyers are gearing up for a fee fight.

At the moment, there is nothing yet to battle over. It is unknown how many plaintiffs will participate in the deal and what their claims are worth.

But with the pot for lawyers likely to reach into the hundreds of millions of dollars, two distinct groups of attorneys are positioned to lock horns.

One set is the lawyers that negotiated the deal with BP. These attorneys are seeking to allay fears that the fees will come out of the pocket of claimants. Meanwhile, the other faction – which did not take part in the settlement talks and which has been pursuing claims for clients outside of court – is concerned the money will go to lawyers who do not deserve it. The lawyers in the second faction have been pursuing claims through the Gulf Coast Claims Facility which is backed by a $20 billion trust.

“That antagonism seems to be very strong and will probably continue,” said Edward Sherman, a professor at Tulane University Law School in New Orleans.

The feud actually dates to 2010, when BP set up the $20 billion trust, administered by mediator Kenneth Feinberg, to compensate victims from the spill. The point was to allow victims to settle claims quickly without the costs and risk associated with litigation. To date, the Gulf Coast Claims Facility has paid out about $6.1 billion, and resolved more than 220,000 claims.

But many victims did not want just a quick payout. They wanted their day in court and chose to join a massive lawsuit against BP and its drilling partners.

As is typical in such cases, the presiding judge appointed a Plaintiffs’ Steering Committee of about two dozen lawyers to gather evidence and prepare witnesses on behalf of the plaintiffs. Given the lucrative nature of leading massive litigation – attorneys in leadership positions can collect between about 5 percent and 30 percent of a settlement’s value – there was fierce jockeying for the seats.

Some lawyers who were not picked grumbled that the process was unfair, but eventually began recruiting clients to appear before the Feinberg facility.


The two factions – the Steering Committee lawyers versus the Gulf Coast Claims Facility lawyers – proceeded on parallel tracks until last Friday when BP announced a settlement in principle with the Steering Committee – just days before the case was set to go to trial on March 5.

As part of the deal, BP announced plans to transition the Feinberg facility to a new structure and to use the $13.9 billion remaining in the fund to pay the estimated $7.8 billion cost of the settlement. Under the deal, victims who had not yet had their claims heard by Feinberg would be able to either appear before the new administrators, or opt out of the settlement and pursue claims against BP independently.

The settlement announcement, which needs to be finalized by April 16, immediately exacerbated a rift between the two plaintiffs’ camps. Steering Committee lawyers sought to position the development as a positive one for victims who were planning to file claims with Feinberg.

Claimants “will generally be paid greater benefits” than they received from Feinberg, lawyers Stephen Herman and James Roy of the Steering Committee said in a statement. Herman also sought to position the committee as not taking fees “out of the claimant’s pocket” and stated that BP has agreed to pay their legal fees on top of what is paid to victims.

But lawyers who had been pursuing their clients’ claims with Feinberg, and who were not part of the settlement discussions with BP, worry that Steering Committee attorneys will receive fees that do not belong to them.

“We have clients who have offers on the table that have either been accepted or are probably going to accept,” said attorney Tony Buzbee, who said he has settled about $150 million worth of claims. “If we accept these offers, lawyers who had nothing to do with it will claim they’re entitled to some of the money.”

Daniel Becnel Jr., another attorney with clients who have not received payments from the Feinberg-administered fund, also criticized the settlement as a money grab.

“This is all about fees,” said Becnel, who has become an outspoken critic of the Steering Committee after he was not named to the body.

The proposed settlement returns the locus of power to the Steering Committee. Over the last several months, as lawyers who appeared before Feinberg collected hefty fees, lawyers on the court cases sat largely empty-handed. Finally last year, the court case lawyers asked presiding judge Carl Barbier to hold back 6 percent of Feinberg’s settlements for “common benefit fees” to be paid to the Steering Committee. The Committee argued it deserved the fees because its work had benefited fund claimants.

Barbier initially granted the Steering Committee request, but amended his order in January to exempt settlements to fund claimants who never had or did not currently have claims pending in the multi-district litigation.

Now, power is back in the hands of the Steering Committee, which has left attorneys who had been pursuing claims with Feinberg feeling like the rug has been pulled out beneath them.

“I just feel like the interests of a lot of people are being shut out,” said Buzbee.

(Reporting by Andrew Longstreth; editing by Matthew Lewis)

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