BP wins appeal over Gulf of Mexico disaster claims
Court orders re-examination of key terms in 2010 oil spill settlement
An April 21st, 2010, file photograph of BP’s Deepwater Horizon oil rig burning afer an explosion in the Gulf of Mexico that claimed nine lives and resulted in a massive offshore oil spill. Photograph: Gerald Herbert/AP
BP persuaded an appeals court to order a re-examination of key terms of the 2010 Gulf of Mexico oil spill settlement that the company said could have cost it billions of dollars in improper payouts.
BP said the programme’s administrator, Patrick Juneau, was approving millions of dollars in “fictitious” payments to businesses for economic losses based on what BP called a flawed interpretation of the agreement reached with spill victims’ lawyers in 2012.
The US Court of Appeals in New Orleans sent the dispute back to the trial judge for further consideration. The appellate panel also ordered US District Judge Carl Barbier to review his interpretation of some of the accord’s terms. The appellate panel ordered Judge Barbier to stop some payments under the settlement until he can sort out who has legitimate claims.
“This decision throws a huge monkey wrench into the settlement and it could well save BP hundreds of millions in settlement payments,” said Carl Tobias, a law professor at the University of Richmond who studies and teaches about the federal judiciary. “It’s going to create a real mess.”
BP shares rose in London on receipt of the news. “This is the best news BP has had out of the US legal system in a while,” said Jason Gammel, an analyst at Macquarie Capital Europe in London. “If payments can be stopped to those who didn’t suffer direct losses from the spill, it has to be seen as a positive for the company.”
Judge Barbier ruled in March that Mr Juneau was interpreting the contract properly. In April, he dismissed BP’s lawsuit against the administrator and rejected a request to bar certain payments while the company appealed his ruling. The appeals court upheld Judge Barbier’s dismissal of BP’s suit against Mr Juneau, while sending back his other rulings.
“Today’s ruling affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses,” Geoff Morrell, a company spokesman, said.
The divided appeal court panel ordered Judge Barbier to re-evaluate complex accounting issues underlying some settlement claims and to halt some payments until that review is complete, according to the 67-page ruling. Judges Edith Clement and Leslie Southwick concluded the settlement should be sent back to Judge Barbier for further review.
Judge James Dennis dissented, saying the trial judge’s interpretation of the disputed terms should be upheld.
Settlement administrator Mr Juneau’s interpretation of the accounting terms targeted by BP were “completely disconnected from any reasonable understanding of calculation of damages”, Judge Clement and Judge Southwick said in the majority decision.
“The Fifth Circuit just gave BP a get-out-of-jail-free card, and a ruling that says you don’t have to live by the settlement you negotiated,” said David Berg, a lawyer in Houston who has litigated environmental claims. He isn’t representing clients in the BP settlement.
BP initially valued its economic-loss settlement at $7.8 billion. The company increased its estimate to $9.6 billion in regulatory filings, citing the interpretation by the claims administrator. “We’re pleased the vast majority of class members will continue to be paid in a timely and expeditious manner,” Steve Herman and Jim Roy, the lead lawyers for the plaintiffs’ steering committee, said in a statement. “We look forward to working with the claims administrator and the court to determine the best way to get the affected claims processed and paid as soon as possible.”
Mr Juneau said he’ll await the outcome of the judge’s re-evaluation of the settlement terms before pushing ahead with payments. “As the court-appointed claims administrator, it’s my job to implement this settlement agreement as directed by the court. This is what we will do.” – (Bloomberg)