Questions of ethics arise as BP class action claims process gets second look

By Holland Phillips | Nov 7, 2013

NEW ORLEANS – As the legal process for determining BP’s depth of liability for the 2010 Deepwater Horizon Gulf oil spill continues, claims against the company are racking up for personal injury, environmental injury, and economic injury.

Lawyers for BP argue that the 2012 class settlement applicable to hundreds of thousands of claimants is not being administrated properly and should be thrown out. They claim that the process, overseen by an appointed administrator, Patrick Juneau, has compensated claimants too widely and has failed to require claimants to show causation for their economic losses. BP argues that the current process violates settlement terms and class action rules because it allows those not directly affected by the oil spill to collect damages.

Settlement costs have surpassed BP’s original estimate of $7 billion, putting current figures closer to $9 billion.

Some say BP agreed to the initial settlement terms in order to avoid the risk and uncertainty of litigation, and because the company did not expect so many claimants to emerge.

Perspectives from local law professors certainly trend toward this analysis, but there are some, such as Tulane Law Professor Vernon Palmer, who have ethical questions about the claims process itself.

“If someone can be absolutely certain that his business was not affected in any way, then it would be an ethical question whether he should file or accept a payment,” Palmer said.  “Most of the time, however, no one can ever be that certain, and that is the point of establishing the objective formulas for reimbursement.”

The settlement requires two parameters for businesses to file a claim: location within a specific geographic region and evidence of economic loss based on expected versus actual profit over a period of three or more consecutive months between May and December 2010. It does not necessarily state that causation for that economic loss must be proven.

In an Oct. 2 U.S. Court of Appeals for the Fifth Circuit ruling presented by Circuit Judge Edith Brown Clement, the court ordered District Judge Carl Barbierto draft a preliminary injunction on the claims process so that settlement terms could be reconsidered.

The appeals court especially took issue with the method of payouts for claimants using cash-basis accounting versus those using accrual-basis accounting. The court notes that the method of determining actual economic loss during the claims period is inconsistent.

The Oct. 2 ruling acknowledged arguments presented by “Class Counsel and the Administrator [maintaining] that BP fully agreed during negotiations in 2012 to the district court’s March 2013 interpretation in order to achieve ‘global peace,’ and that it should not now be permitted to extract itself from its bargain.”

However, the ruling states that settlement interpretations that allow businesses to recoup losses unrelated to the spill are “counterintuitive and contradictory to […] common sense” as there is “no need to secure peace with those with whom one is not at war.”

Professor Blaine Lecesne of Loyola University–New Orleans College of Law, argues that Judge Clement misses “the fundamental point of a settlement” by allowing the terms to be revisited.

“[There is] absolutely no ethical issue surrounding the [claims] process” because under the agreement, every business and individual potentially has a claim if they can show decline in revenue following the oil spill,” he said.

Lecesne asserts that the only requirement is that claimants are “presumed to have suffered a loss.”

In agreement with Lecesne, Professor Dane Ciolino of Loyola University–New Orleans College of Law, argues that the parties made the law between themselves, so that as long as the parties are living by that law, there are “no ethical concerns” as to who can make a claim.

Ciolino characterizes BP as “relentless in their public relations campaign” in their attempts to “disparage those who sought to recover damages.”

Settlement modifications will be presented by district court Judge Barbier on Dec. 2.

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