$2.5 million award against BP vacated amid continuing litigation fallout

By Charmaine Little | Jan 2, 2019

Because of a calculation error from a lower court, the U.S. Court of Appeals for the Fifth Circuit vacated and remanded a $2.56 million settlement on Nov. 9 for a company in an ongoing legal battle with BP.

While the Deepwater Horizon oil spill dates to 2010, BP is still dealing with theaftermath, including the E&P Settlement Agreement that it reached with several class-action members. One of those members was Texas Gulf Seafood, a company that is a mediator for Texas gulf shrimpers when it comes to freezing and packing shrimp as it's prepared to be delivered to wholesalers.

The case reached this appeals court after BP challenged an appeal panel’s denial to reconsider increasing Texas Gulf Seafood’s award from $1.34 million to $2.56 million. The appeals court had the duty to decide if the settlement agreement categorizes Texas Gulf Seafood’s expenses as fixed or variable. While Texas Gulf Seafood said they were fixed, the appeals court ruled they were variable and vacated the award and remanded the case, stating the district court abused its discretion.

The appeals court pointed out that Texas Gulf Seafood acknowledged its first classification was incorrect, yet still wants the court to take its word as fact. 

Circuit Judge Don Willett   ICS Media Database

“BP correctly notes that adopting such an approach would lead to ‘absurd results,'” the court said. "In short, Texas Gulf Seafood wants the claims process to resemble a blank check that claimants fill out, panelists rubber stamp, and BP pays.” 

The court added there have been varying cases in which some appeal panels refer to the claimant’s classification while others have ignored it. The notion only presents proof that multiple panels have misapplied the agreement and reinforces the fact that the correct category for claimants needs to be reached before coming to a settlement agreement. Considering this, the court vacated the award and remanded it.

Texas Gulf Seafood first filed the Business Economic Loss with the Court Supervised Settlement Program (CSSP), an entity established to assist with processing claims reached under the settlement agreement, in 2012. The CSSP first gave Texas Gulf Seafood an award of $1.33 million after calculating a base compensation of $322,459.22. Still, before it came to this amount, the CSSP didn’t agree with Texas Gulf Seafood’s way of labeling “fixed” materials, since expenses tend to go up and down. The CSSP determined many of Texas Gulf Seafood’s expenses were “variable” and not “fixed,” as Texas Gulf Seafood claimed.

Texas Gulf Seafood asked for reconsideration, and CSSP then discovered the company’s supplies should actually be categorized as consumable goods and boosted the award to $1.34 million. Texas Gulf Seafood wanted yet another evaluation but was denied. So it ended up taking its matter to an appeal panel, which agreed with Texas Gulf Seafood and increased its awarded amount to $2.56 million. That’s when BP asked for a discretionary review of the appeal panel’s decision. While that was denied, BP appealed that denial, which the appeals court agreed with.

Circuit Judge Edith Jones wrote the opinion and Circuit Judge Don Willett concurred, but Circuit Judge Rhesa Hawkins Barksdale dissented. 

"Contrary to the majority's reviewing on the merits, our court has held a district court should have reviewed a decision by the appeal panel, and remanded to the district court for review of a purely legal issue," Barksdale said.

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