New Deepwater Horizon claims calculation formula could sharply reduce future settlement payments

NEW ORLEANS – An arcane change to the formula that determines awards for settlement of BP oil spill claims may diminish the size of future damage awards, leading some in the trial bar to say that senior plaintiffs’ attorneys who brokered the settlement with BP are more interested in preserving their $660 million payday than in protecting the rights of victims still awaiting payment.

In late May, U.S. District Judge Carl Barbier, who oversees settlement of the massive case that arose from the 2010 oil spill off the coast of Louisiana, implemented Rule 495 on all settlements that have not yet been paid. That rule, developed at the behest of the Fifth Circuit Court of Appeals, forces businesses seeking damages to more closely match post-spill revenue with expenses. The effect, according to many experts, is that future claims in the Deepwater Horizon case will be smaller and many Gulf Coast businesses once deemed eligible for a settlement may no longer collect at all.

The implementation of 495 marks a rare court victory for BP, which has argued since the settlement was implemented that the claims administrator in the case, Patrick Juneau, was improperly matching claimant revenue and income, resulting in oversized awards.

Currently, the rule doesn’t affect claimants who have already been paid, as Barbier did not make the implementation of 495 retroactive. Some legal observers say that if the rule leads to drastically reduced awards, it could create a second pool of class members, possibly leading to further litigation and more delay in settlement payments.

As a general rule in mass-tort cases, all members of a class are supposed to be treated equally.

Last month, BP filed a motion asking that Rule 495 be made retroactive, and that claimants who benefited under the old scheme be forced to pay back excess awards.

“We are seeking restitution for improper payments made under Mr. Juneau’s old policy, and BP continues to litigate over Mr. Juneau’s failure to exercise his basic gatekeeping responsibilities to screen out claims for damages not caused by the spill,” said Geoff Morrell, a spokesman for BP.

The Plaintiff’s Steering Committee (PSC) – a group of 18 plaintiff lawyers who negotiated the settlement with BP and are supposed to represent all claimants equally, opposed the implementation of Rule 495 in court but were overruled. However, some non-PSC lawyers in the case say the PSC attorneys should have done more. These lawyers say the PSC attorneys seem more interested in protecting the settlement than ensuring that oil spill victims are properly compensated.

Under the settlement, the PSC lawyers split $660 million in fees, regardless of what is ultimately paid out to claimants.

“[The PSC] sold a bill of goods to everybody,’’ said non-PSC attorney Daniel Becnel of Reserve, La. Becnel represents dozens of claimants, many of whom have not yet received a settlement.

“They were negotiating for themselves a $660 million fee," he said. "Lawyers ought to not be making that kind of money on a tragedy like this.’’

Becnel said the PSC members have long known that Rule 495 would be foisted on the settlement class eventually. In preparation for this eventuality, he said, PSC members made sure the claims they personally represented were the first to get through the system.

“The people who negotiated the settlement knew who was going to be eligible,’’ Becnel said. “They got these unheard of settlements and they went to the front of the line and all got paid.”

There is some evidence to back Becnel’s assertions. Earlier this year, Jason Berry, who operates the American Zombie website, published a series of documents showing that Juneau’s staff pushed through 409 expedited claims, mostly to PSC attorneys and associated firms, even before the settlement was approved by Barbier in late 2012.

Juneau, in a written statement to Berry, acknowledged he had approved the expediting of cases, as a test to ensure the claims center was working properly.

Becnel blamed Juneau for allowing the PSC attorneys to expedite claims, suggesting the claims administrator may be too friendly with the senior lawyers in the case who approved his appointment.

“I have nothing against Mr. Juneau but he is too close to too many people in Louisiana,’’ Becnel said.

Juneau brushed off the criticism.

“I don’t say who is eligible [for a settlement],’’ he said. “We religiously follow that [settlement] agreement to its ultimate detail to its specific requirement because that is what is what we have to do.’’

Juneau also downplayed the possibility that Rule 495 would substantially change the size of awards or create a second class of claimants.

“It may and it may not change what you would have gotten,’’ he said. “Some will go up and some will go down.’’

Melissa Landry, executive director of the legal watchdog group Louisiana Lawsuit Abuse Watch, questioned the court’s decision to implement such a significant new rule two years into the settlement agreement.

“Basically, the court changed the rules in the middle of the game and decided not to make those changes retroactive,” Landry said. “The question is, how will this change impact claimants moving forward?  Does it undermine the basic principle of fairness that ensures all members of a class are treated equally?”