BP loses ruling on spill claims
NEW ORLEANS - BP may have to pay billions of dollars it didn't expect to under last year's settlement with victims of the 2010 Gulf of Mexico oil spill after a federal judge Friday rejected the company's request that the court block payment of some of the claims.
U.S. District Judge Carl Barbier told BP lawyer Richard Godfrey during a hearing in New Orleans that he was concerned that if he found in the company's favor, he would effectively be faulting claims administrator Patrick Juneau for following Barbier's own instructions.
"If I enjoin Mr. Juneau, he is in contempt of my court order," Barbier said, drawing laughter from the packed courtroom. "And then I have to cite him for contempt. BP would have to pay, would have to indemnify him for that."
The company alleged Juneau improperly rewrote some wording of the class-action settlement to the benefit of claimants who were not harmed by the spill, and that absent an injunction, BP could pay billions of dollars extra.
The company faced an uphill battle to convince Barbier because Juneau has been operating under his supervision, and the judge previously upheld Juneau's interpretation of the agreement for processing compensation claims.
Barbier said nothing he heard at Friday's hearing changed his mind. The issue now is likely to end up before the 5th U.S. Circuit Court of Appeals, where BP already has filed papers.
Barbier also threw out a breach of contract complaint BP filed against Juneau.
Friday's hearing was distinct from an ongoing civil trial over the spill, also before Barbier, which resumes Monday.
In a statement after the hearing, BP said it "continues to believe that the claims administrator's interpretation of the settlement agreement as to business economic loss claims is contrary to the agreement and has produced unjustified windfall payments to numerous business claimants for nonexistent, artificially calculated losses."
When the parties announced the settlement last year, BP estimated it would pay out $7.8 billion in claims, though the settlement has no cap. It since has stopped estimating its expected liability under the settlement because of uncertainty over the business economic loss claims it is disputing.
BP owned the undersea well that blew out 50 miles off Louisiana on April 20, 2010, causing an explosion on the Transocean-owned Deepwater Horizon rig that killed 11 workers. The runaway well spilled millions of gallons of crude into the Gulf before it was capped nearly three months later.
BP was trying to secure as much certainty as it could when it agreed to a landmark settlement with individuals and businesses suffering economic and health damages from the spill. But it argued at the hearing that a January decision by Juneau on his interpretation of the settlement changed everything.
'These are not losses'
BP sought to block Juneau from making business economic loss payments to claimants in the agriculture, construction, professional services, real estate, manufacturing, wholesale trade and retail trade industries. The company alleges that claims for nonexistent losses are most prevalent among those industries.
"These are not losses," Godfrey said of the disputed claims.
But lawyers for the steering committee that represents plaintiffs in the settlement say BP agreed to the rules for how injuries would be determined and compensation would be calculated. They cited documents submitted by BP attorneys that they believe show the company fully understood the terms of the deal.
If BP underestimated its liability under the settlement, that's the company's problem, the attorneys said in a letter to Barbier.
Provisions in the settlement calculate business economic losses partly by comparing a business's revenue and variable costs during a certain period in 2010 with those numbers in previous years and in the year after the spill.
All economic losses during the period by businesses near the coast are presumed spill-related for purposes of the settlement, plaintiffs' lawyers say.
They say that for claimants farther from the coast but whose businesses operated anywhere in Louisiana, Mississippi or Alabama or in designated regions of Texas and Florida, economic damage is presumed spill-related when it reaches specified percentages relative to other years.
BP contends, however, that the administrator has interpreted the meaning of certain key terms in the agreement to the benefit of people who could not have been harmed by the spill because of the business they were in or their distance from the coast.
An accepted risk?
In their letter, however, the plaintiffs' lawyers say the possibility that factors other than the spill may have contributed to a claimed loss "is a risk that BP accepted in negotiating and agreeing to the terms of the settlement."
Plaintiffs' attorney Steve Herman said in court Friday that BP never suggested that claimants in the industries the company is now challenging be excluded from the settlement or operate under a different framework.
"These are the same claims they agreed would be compensated under an objective formula," Herman said.
Herman also said some of BP's filings seemed to threaten perjury allegations against parties who file claims with which the company disagrees, which Herman called "very offensive."
In a terse statement after Barbier's decision, Herman said, "The court ruling speaks for itself."