Judge Rejects BP Complaint Over Proof of Economic Losses from Gulf Oil Spill

BP Plc lost a bid to require businesses to provide proof their economic losses were caused by the 2010 Gulf of Mexico oil spill under a $9.2 billion settlement over the disaster.

U.S. District Judge Carl Barbier in New Orleans, overseeing the settlement of lawsuits spawned by the blowout of BP’s Macondo well, found the London-based oil company would have to live with its agreement to pay billions of dollars in business losses tied to the disaster. An appeals court ordered Barbier in October to reexamine the accord’s terms to ensure claimants weren’t receiving improper payouts.

In the settlement, BP agreed businesses in certain geographical regions were presumed to have been harmed by the oil spill if their losses followed a specific pattern, Barbier concluded in yesterday’s ruling. As part of the accord, BP agreed these claimants wouldn’t have to prove a link to the spill to recover, the judge said. The company now contends claimants can only recover if they have damages directly linked to the spill.

“BP’s current position is not only clearly inconsistent with its previous position, it directly contradicts what it has told this court regarding causation” of damages, Barbier said in his ruling.

BP officials said they plan to appeal Barbier’s ruling that claimants don’t have to show their damages were directly tied to the spill.

“Awarding money to claimants with losses that were not caused by the spill is contrary to the language of the settlement and violates established” legal principles, Geoff Morrell, a BP spokesman, said in an e-mailed statement.

‘Rewrite History’

“Business owners across the Gulf should be pleased that Judge Barbier once again rejected BP’s efforts to rewrite history and the settlement,” Steve Herman and Jim Roy, leaders of a group of plaintiffs’ lawyers overseeing the BP settlement, said in an e-mailed statement. They said Barbier found the accord’s “objective formulas” were the proper way to determine whether a claim qualified.

Barbier said because he had “accepted BP’s previous position” on the damages issue, he barred the company from making future arguments that losses must be linked to the spill to qualify for compensation. BP this month won an appeals-court order stopping some payments under the settlement until Barbier could sort out which claims should be paid. The company has complained that its spill payments were being wrongly inflated by hundreds of millions of dollars in “fictitious” claims and improperly calculated spill-related losses. In two separate appeals before the U.S. Court of Appeals in New Orleans, BP argued that its settlement will be legally unsupportable unless the company’s interpretation prevails.

Final Resolution

Imposing additional causation requirements as BP suggests “frustrates the parties’ attempt” to reach a final resolution of thousands of spill claims, Barbier concluded. “The delays that would result from having to engage in a claim-by-claim analysis” of whether damages were directly caused by the spill would be unduly burdensome, he added.

In another part of the decision, Barbier sided with BP’s arguments that spill-related business losses should be calculated with properly matched revenue and expenses. He reversed his previous ruling which supported an interpretation by Claims Administrator Patrick Juneau that some expenses and revenue needn’t be matched. Juneau is responsible for overseeing settlement payments. Barbier instructed Juneau to “adopt and implement an appropriate protocol or policy for handling business economic- loss claims in which the claimant’s financial records do not match revenue with corresponding variable expenses.”

April 2010

The blowout of BP’s deep-water Macondo well off the Louisiana coast in April 2010 killed 11 people and sent millions of barrels of oil spewing into the Gulf of Mexico. The accident sparked thousands of lawsuits against BP, as well as Transocean Ltd., owner of the Deepwater Horizon drilling rig that burned and sank, and Halliburton Co., which provided cement services for the well. BP reached a settlement with most private plaintiffs in March 2012, just before a trial on liability for the incident was to begin. BP initially valued the economic-loss settlement at $7.8 billion. It put the cost at $9.2 billion in an Oct. 29 regulatory filing. BP’s settlement doesn’t cover claims by financial services institutions, casinos, businesses in certain parts of Texas and Florida or companies claiming losses from the deep-water drilling moratorium imposed by the Obama administration following the spill.

The 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).

–With assistance from Margaret Cronin Fisk in Detroit and Harry R. Weber in Houston. Editors: Peter Blumberg, Andrew Dunn