BP Has Been 'Inaccurate and Misleading' About Oil Spill Fund, Law Professor Says
NEW ORLEANS (CN) - A legal expert says BP made "inaccurate and misleading" statements about its oil spill compensation fund, the Gulf Coast Claims Facility. Public statements about the fund portray it as neutral though it is operated through BP; "portray GCCF procedure as more just and fair than" the law demands; and claimants are told they will have to pay substantial attorneys' fees if they do not accept offers from the GCCF rather than sue BP, according to Geoffrey Hazard Jr., a professor at the University of California's Hastings College of Law who was hired by plaintiff counsel to determine whether Kenneth Feinberg's BP oil spill claims facility is releasing inaccurate information.
Hazard makes the claims in a 10-page statement, with 47 pages of appendices, submitted to U.S. District Judge Carl Barbier, who is hearing the massive oil-spill cases. Hazard claims that in addition to the inaccurate statements above, claimants are forced to sign away their rights if they take money from the claims center.
Hazard has practiced and taught law, specializing in civil procedure and professional ethics, for more than 45 years. He has coauthored law school casebooks in both fields and is a consultant to the Standing Committee on Practice and Procedure of the Judicial Conference of the United States.
"A recognized standard of accuracy is whether the statements are materially misleading considered as a whole, which is the modern definition of fraud," Hazard wrote in his declaration.
"Another standard is that of the Federal Judicial Center's Plain Language Guide for Notice in federal class actions. This guide advises that communications to class members should give 'sufficient information for a class member to make an informed decision,' and avoid omitting 'information that the lawyers may wish to obscure.'"
The Gulf Coast Claims Facility was set up by BP's agent Kenneth Feinberg after the Deepwater Horizon catastrophe, ostensibly to get more money faster to desperate victims of the oil spill.
Critics of the fund have said BP had a second motive: to skew public perception of the disaster as it affects fishermen, seafood proprietors and tourism industry workers, and to reduce the litigation resulting from the spill.
Hazard said the claims center's public statements have been "inaccurate and misleading."
He added that "statements at issue are being disseminated in public media for the purpose of encouraging oil spill claimants (who are also putative class members in the [oil spill litigation]) to enter contract relationships through the GCCF," but that information in the statements is false. (Parentheses in original.)
He said the Gulf Coast Claims Facility has issued a variety of inaccurate and misleading information.
For instance, public statements about the claims facility "contrast the GCCF procedure with 'the tort system.' This is misleading because the Oil Pollution Act ('OPA') imposes duties on BP that are more exacting and beneficial to claimants than in the ordinary tort system," according to Hazard's statement.
"The statements portray GCCF procedure as more just and fair than that in the ordinary tort system. The accurate contrast is with OPA. The OPA requires a responsible party, such as BP, directly to receive claims, to make interim payments, and to fully compensate a claimant for loss caused," Hazard wrote.
The Oil Pollution Act of 1990 was set up after the Exxon Valdez oil spill. Until the Deepwater Horizon disaster, the Exxon Valdez spill was regarded as the worst in U.S. history, and much of the legal process relating to oil-spill claims was amended after that disaster.
Instead of portraying the GCCF as doing what it is expected to do according to federal law, the statements made publicly by agents of the GCCF "portray GCCF as an independent mediator. GCCF is not entirely independent because its operating expenses, which are substantial, come from BP. The GCCF is not a mediator, according to ordinary understanding of that term, because it was established unilaterally by BP and not with agreement of opposing claimants," Hazard wrote.
Also, "the statements say or suggest that claimants who proceed outside the GCCF will have to pay a large percentage of their recovery to legal counsel (40% being specifically mentioned). This is misleading because the claims prosecuted outside GCCF will or can be within the present class proceedings, in which the court has authority to limit the fees accruing to claimants' counsel," (g 7 d) according to Hazard's statement. (Parentheses in original.)
"The GCCF procedure requires claimants, in order to receive final payment, to release BP from types of damages (such as punitive damages and claims preparation expenses) that are not being considered by the GCCF. The release also covers other possibly liable parties. If the release covered only BP, claimants could assert claims against these other parties, to recover amounts not obtained from BP," Hazard wrote. (Parentheses in original.)
"As I understand, the attorneys being hired by the GCCF to assist claimants are not working pro bono but are being paid by BP. If that is so, those attorneys have a professional duty to inform any claimant they may assist of that compensation arrangement," Hazard added.
Hazard cites legal procedure laid out in the Manual for Complex Litigation: "'Rule 23 (d) authorizes the court to regulate communications with potential class members, even before certification.'" The rule also states that "'Misleading communications to class members concerning the litigation pose a serious threat to the fairness of the litigation process, the adequacy of representation and the administration of justice generally,'" Hazard wrote.
"If the statements are attributed to Mr. Feinberg as a lawyer representing a different entity (the GCCF itself), they may also properly be evaluated under the Louisiana Rules of Professional Conduct and the counterpart professional rules of other jurisdictions," according to Hazard.
But "consideration of the grievances about the public statements has been short-circuited by questions concerning the role of the Feinberg law firm and GCCF and the relationship to BP. On one hand it is argued that the law firm and GCCF are independent. On the other hand it is implicitly affirmed that GCCF is an agent for BP, because otherwise there is no one fulfilling BP's responsibilities under OPA. It cannot be both ways," Hazard wrote.
"The Feinberg firm and GCCF can properly be considered agents for BP, even though they seek to be 'fair and independent,'" Hazard wrote. "It is a reasonable interpretation of OPA that a responsible party, such as BP, is required to be fair and to act in good faith in fulfilling its responsibilities, directly or through an agent, much as an insurer is required to do with respect to its insureds."