Oil spill PSC draws fire over six percent holdback proposal

By Steve Korris | Dec 13, 2011

Caldwell NEW ORLEANS – Panic overtakes a plaintiff steering committee whose sudden grab for six percent of Deepwater Horizon settlements drew fire from all directions.


NEW ORLEANS – Panic overtakes a plaintiff steering committee whose sudden grab for six percent of Deepwater Horizon settlements drew fire from all directions.

On Nov. 22, in retreat from defendants who objected to financing their opponents, the committee abandoned a pledge not to impose their surcharge on plaintiffs.

That upset Louisiana attorney general Buddy Caldwell, who urged U.S. District Judge Carl Barbier to reject an order the committee proposed on Nov. 7.

Caldwell wrote on Nov. 23 that "the order, as drafted, did not contemplate a deduction from the recoveries of the state of Louisiana in order to fund the reserve account."

He hadn't opposed the order when the committee proposed it, partly because it trimmed the surcharge to four percent for Louisiana and Alabama.

He wrote that instead of amending the order, the committee filed a brief that "set forth its rather novel interpretation of the submitted order."

"The state should not be required to respond to an interpretation of a submitted order, especially where the interpretation proposes alternative deposits: first by the defendants and, failing that, deposits out of state recoveries," he wrote.

"It is clear that there is current controversy over the scope of the order itself."

A reply the committee filed five days later upset him again, and he moved to strike it as procedurally defective.

"To allow the PSC to simply file an order that is in such contrast to that which accompanied the initial motion deprives the parties in this case of the opportunity to adequately respond to the PSC's request," he wrote on Dec. 1.

The committee finds itself in a unique and unpleasant position.

In normal class actions and mass actions, lawyers on steering committees reap greater rewards than lesser lawyers whose cases they completely control.

The Deepwater Horizon committee lacks complete control because lesser lawyers can resolve claims through BP's $20 billion Gulf Coast Claims Facility.

The facility has paid out more than $5 billion, generating giant fees for lawyers with no connection to the committee.

Those lawyers don't care to share future fees with the committee, especially when a six percent surcharge on the remaining $15 billion would yield about $900 million.

Divisions among plaintiff lawyers mirror those among defendants, who pursue claims against each other more vigorously than they defend against plaintiffs.

Barbier, who presides over Deepwater Horizon cases by appointment of the U.S. Judicial Panel on Multi District Litigation, plans a fault allocation trial starting Feb. 27.

He picked a plaintiff steering committee in October of last year.

More than a year later, committee leaders Stephen Herman and Jim Roy moved to hold back six cents of each settlement dollar in an escrow account.

"Without a hold back order in place, the PSC will have expended many millions of dollars in upfront assessments to fund the necessary work for the common benefit of all plaintiffs which this court has designated and directed them to undertake, without any system for equitable reimbursement," they wrote.

They wrote that they operate a document depository occupying a floor of a building near federal court, with computers for 70 lawyers and researchers.

They wrote that 340 lawyers from 90 firms worked about 230,000 hours.

The hours would equal more than 100 lawyers working 40 hours a week for a year.

They offered millions of their own cash for a first deposit.

They wrote that "while a common benefit award may be owed with respect to settlements or other payments previously made through the GCCF or otherwise, that is an issue left for another day."

They exempted the United States from the surcharge.

Texans led a counter attack on Nov. 21, as plaintiffs who filed personal injury suits in Harris County court challenged the surcharge and Barbier's jurisdiction to impose it.

Lance Lubel of Houston wrote for rig worker Buddy Trahan that the committee didn't quantify the value of its time or estimate the value of time it will incur.

"Thus, the PSC asks the court to establish a six percent holdback on future settlements and payments in an informational vacuum," he wrote.

He wrote that the surcharge assumes that work undertaken by the committee confers a uniform common benefit on all claimants.

"Because that is not so, a uniform holdback unfairly treats those who, like Trahan, are only incrementally benefited by the PSC's common benefit work," he wrote.

He wrote that a surcharge would make settlements more difficult.

He wrote that the committee should explain the four percent holdback for states and no holdback for the United States.

He wrote that the committee directs efforts toward economic and environmental claims rather than personal injuries.

He wrote that a motion to remand the case to Harris County remains pending.

"Trahan is before the court only involuntarily, having been swept into this MDL against his will," he wrote.

He wrote that the committee's proposed order included parties it shouldn't and failed to include parties it should.

John Stevens of Houston filed a similar brief for rig worker Kevin Senegal, writing that his client settled on Nov. 7.

Todd Elias of Houston wrote for eight explosion survivors that the committee did nothing in the claims facility but encourage the court to oversee its speech.

"Those lawyers have not evaluated claims for the GCCF or assisted claimants, except those they represent, through the GCCF process," he wrote.

"Many, many injury victims have already settled with the GCCF," he wrote.

"These cases are unlike the typical mass or class action case," he wrote.

"In pharmaceutical cases, or indeed, fishermen cases, the lawyer has little skin in the game, invests very little time and money in the case, and instead, stockpiles cases hoping to take advantage of a future settlement," he wrote.

He wrote that "oil spill victims who chose not to seek recovery through the GCCF should have to pay a reasonable amount of fees."

He wrote that "recovery in this case will be enormous and a small amount of fees will fully compensate the PSC for their risks and efforts."

Lawyers at Arnold and Itkin of Houston wrote that a six percent assessment across the board failed to take into account the different benefits each class of plaintiffs derived.

"AI has litigated and settled its cases without the assistance of any other parties," they wrote.

"AI has not relied on any of the PSC's work product," they wrote.

"Liability has never been a question, or even disputed, in settlement negotiations," they wrote.

"Instead, all negotiations have dealt with questions of inherently individualized damages which the PSC has not been in a position to perform work on," they wrote.

Michael Stag of New Orleans stood with the Texans, writing for economic loss clients that the committee provides no benefit to those who resolve claims through GCCF.

He wrote that GCCF's creation led to resolution of many claims and will lead to more.

"The PSC cannot legitimately claim any responsibility for either," he wrote.

He wrote that the committee won't disclose the names of its experts but seeks payment for their work from claimants who have never seen it.

"Businesses and individuals injured by this oil spill have waited long enough for compensation due them," he wrote.

"They should not have to forfeit one penny of those funds to pay for work they did not need and did not use," he wrote.

"Service on a plaintiff steering committee is a risky business," he wrote.

Next, defendants took their shots.

Float collar manufacturer Weatherford U.S. and cement contractor Halliburton Energy Services argued that the committee cited no case law for its blanket statement that courts have authorized holdback funds to be paid by defendants.

"It is illogical to propose, as the PSC does here, that the defendants contribute a reserve to the common benefit fund when the defendants receive absolutely no benefit from the PSC," Glenn Goodier of New Orleans wrote for Weatherford.

Phillip Wittmann of New Orleans wrote for blowout prevention contractor Cameron International that a common benefit fund applies only when litigation produces a fund under the court's jurisdiction.

"The doctrine cannot be used to impose additional liability on the defendants or the fund beneficiaries," he wrote.

"The PSC has not demonstrated that it has successfully conferred any benefit yet on the plaintiffs, much less a substantial one," he wrote.

"Effort and costs do not in and of themselves establish that a benefit has been or will be obtained," he wrote.

He wrote that nearly 400,000 claimants elected not to participate in the litigation and instead presented claims to GCCF.

Don Haycraft of New Orleans objected to the surcharge for BP on Nov. 22, writing that Barbier has no jurisdiction over GCCF claimants.

"At bottom, the PSC's holdback motion is about nothing more than a dispute between competing plaintiffs' lawyers for control over fees," he wrote.

The committee retreated on Nov. 23, writing that they wouldn't compel defendants to hold back a reserve fund over and above a plaintiff's recovery.

They wrote that their order "affords the parties the flexibility to negotiate a resolution."

They wrote that a defendant funds the reserve over and above the settlement amount or the entire reserve is held back out of the settlement amount.

"Nothing in the order, as proposed, would require a defendant to pay attorneys' fees," they wrote.

After Caldwell protested, Herman and Roy replied that they didn't ask for a fee.

"The funds will be held in trust, subject to the direction of the court, including the potential refund of such plaintiffs and claimants, and no party or attorney will have any individual right to any of the funds except to the extent funds are directed to be disbursed by the court," they wrote.

Caldwell moved to strike the reply, writing that the committee sought to bypass the steps associated with submitting a motion and proposing an order.

As of Dec. 9, Barbier had not set a hearing on the surcharge.

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