BP settlement flawed, law professor and judicial activist say: 'No way for defendant to take responsibility without being extorted'

By Kyle Barnett | Oct 2, 2013

Deepwater Horizon oil rig

NEW ORLEANS – A little over two years following the 2010 BP oil spill, BP came to a class action settlement that would provide relief to many Gulf South businesses and individuals who claim to have experienced negative economic impacts.

Before the settlement was reached BP had already set up and operated the Gulf Coast Claims Facility (GCCF) that processed over one million claims and paid out over $6 billion in damages. In March 2012, the Court Supervised Settlement Program (CSSP) was enacted as part of the settlement action and independent Claims Administrator Patrick Juneau was put at the helm by court order and by agreement of BP and the plaintiffs’ steering committee.

BP initially estimated it would pay $7.8 billion under the CSSP, a number it is now saying could be much higher due to Juneau’s interpretation - or misinterpretation - of the settlement agreement.

In fact, BP has been so adamant that the CSSP procedures are flawed that it has asked the court to revisit the settlement on more than one occasion. The company's requests were denied by U.S. District Judge Carl Barbier, who is overseeing the case at the Eastern District of Louisiana, because both parties, the plaintiffs’ steering committee and BP, agreed to the language contained in the settlement.

Loyola University-New Orleans law professor Blaine LeCesne, who has written extensively on the matter, said it was obvious to him that the CSSP would cost more than BP’s initial estimate.

“I thought it was an extremely generous settlement," he said. "One that I can’t say I would have agreed to if I were on that side of the negotiating aisle because I thought they undervalued it from its inception."

LeCesne said he feels the settlement definitely favors the plaintiffs.

“I just think it was a horribly bad deal for BP and plaintiffs’ attorneys were dancing in the streets when it first came down because it was such an, I think, overly generous deal,” he said.

One of the main concerns BP has with Juneau’s operation of the CSSP is that businesses were being awarded damages when they could show little to no damage directly related to the oil spill.

This July, BP went before the U.S. Court of Appeals for the Fifth District in an attempt to have the settlement overturned. A ruling has not yet been issued, but LeCesne said it is unlikely that BP will prevail.

"The Fifth Circuit would have to disregard the undisputed facts and bedrock principles of contract interpretation to either change or throw out the settlement and that simply isn’t going to happen," LeCesne said.

At that hearing New York University Law Professor Samuel Issacharoff represented the plaintiffs’ steering committee and said areas that have no known tourism or industry that would see noticeable effects from the oil spill could still rightfully receive awards because they meet the parameters set forth in the settlement agreement.

“I can’t say if I was representing the defendants I would agree to an open-ended settlement where every conceivable individual and business could pursue a claim without having to show a causal connection between the claim and the oil spill,” LeCesne said.

But LeCense said that is just what BP did by agreeing to the settlement program, which he suggests lowered the burden of proof on claimants.

“It would have been very, very difficult as a matter of proof to show a causal connection on losses due to the spill, especially when there are other factors, such as an overall downturn in the economy,” he said.

Melissa Landry, executive director of Louisiana Lawsuit Abuse Watch group, said the fact a claimant could receive a damage claim without have to show proof of actual loss is just wrong.

“It is reflective of a larger problem that we have,” she said. “People view the legal system as rather than being a place that you go to be made whole when you’ve been wronged... using it over and over again as a lottery instead of an instrument of justice and that is a problem.”

Landry said even worse is that plaintiffs’ attorneys embolden more claimants to come forward who meet the settlement agreement parameters, but cannot show any damages.

“Lawyers encourage citizens to engage in this kind of behavior and they do it, not because it is the right thing to do but because the higher they drive up the claims the more they make off of it,” she said.

However, LeCesne said the settlement also left out other claimants who would have been eligible for damages.

“There are some companies that suffered losses, but because of their bank deposits were not made in the right month they didn’t meet the metric. They suffered losses, but they are just out of luck. But you don’t hear about that," he said.

Still, LeCesne still said he was surprised when BP’s legal team accepted the settlement agreement.

“I don’t want to cast any aspersions necessarily on their attorneys. I just find it mystifying how they could agree to such a generous settlement and with all of the time they had to think about it and negotiate it,” he said.

LeCesne said he could see a scenario in which BP’s attorneys face a legal malpractice lawsuit over their handling of the settlement agreement.

“Whether that’s a lack of reasonable care on their part that is for a court to determine in the event that a malpractice lawsuit is filed,” he said.

While the appeals court ruling is being awaited, BP has continued to challenge the CSSP by contesting claims, trying to deny an operating budget for Juneau’s office and rooting out corruption within the CSSP, of which evidence has been found.

Landry said the issue BP is facing now in fighting against making damage payments to those who cannot show actual damages will have a deterrent effect on future defendants facing similar cases.

“No company is ever going to set up a process like this ever again," Landry said. "They are going to look at what BP did and instead of coming to the conclusion that this is the right thing to do - put up a large sum of money so claimants can get paid as quickly as possible - if something ever happens like this again they are never going to do that, they are going to stick their feet in and drag this thing out for 20 years because you can’t win. It suggests that there is no way for a defendant to come forward and take responsibility for what they’ve done without being extorted by lawyers."

Meanwhile, the second phase of the BP trial, which will determine punitive damages under the Clean Water Act, began on Sept. 30 and will be ongoing over the next month.

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