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BP Must Cover Business Losses Without Evidence

(CN) - Business-loss claims under a civil settlement related to the Deepwater Horizon disaster do not require evidence of causation, the 5th Circuit ruled Monday.

This marks the second time that BP failed to sway the court with its concern that it may have to pay hundreds of millions of dollars in "fictitious" claims filed over the 2010 Gulf of Mexico oil spill.

BP had established a $20 billion fund to pay businesses and people after the Deepwater Horizon rig exploded and sank 50 miles off the Louisiana coast, killing 11 and setting off the worst offshore oil spill in U.S. history.

Kenneth Feinberg initially oversaw the fund, but the court appointed Patrick Juneau to take over BP and attorneys for the plaintiffs crafted a settlement in 2012.

His interpretation of how particular claims payments should be made under the settlement raised questions from BP, however, which then filed a federal lawsuit to stop claims payments.

In ruling against BP last year, U.S. District Judge Carl Barbier, who is overseeing the multidistrict civil litigation related to the spill, said Juneau's was "the exact interpretation BP advocated for" while the settlement was in negotiation.

BP then sued Juneau himself for allegedly paying claims for "fictitious losses," amounting to hundreds of millions of dollars. It estimated the total settlement payments would come to roughly $7.8 billion, but the figure was expected then to clear $9 billion.

About five months ago, a split three-judge panel instructed Barbier to design a "narrowly tailored injunction that allows the time necessary for deliberate reconsideration of these significant issues" arising from BP's claim that the administrator is paying claims that aren't related to the April 20, 2010 spill.

Barbier made two rulings in light of that remand. Neither party challenged the resolution of an accounting question, but BP balked when Barbier said the settlement did not require those submitting claims for certain business losses to provide evidence of causation.

The New Orleans-based federal appeals court affirmed Monday, 2-1, and vacated an injunction that prohibited payment of the relevant claims.

Though the settlement does not require a claimant to submit evidence that the claim arose as a result of the oil spill, each claimant does attest, "under penalty of perjury, that the claim in fact was due to the Deepwater Horizon disaster," Judge Leslie Southwick wrote for the majority.

"Suspicious forms would be subject to investigation," Southwick added. "These requirements are not as protective of BP's present concerns as might have been achievable, but they are the protections that were accepted by the parties and approved by the district court. It was a contractual concession by BP to limit the issue of factual causation in the processing of claims. Causation, or in Rule 23 terms, traceability, was not abandoned but it was certainly subordinated.

"There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not."

The ruling notes that there are sometimes multiple causes for a business loss.

"Why businesses fail or, why one year is less or more profitable than another, are questions often rigorously analyzed by highly paid consultants, who may still reach mistaken conclusions," Southwick wrote.

It "could be overwhelming" for claimants to provide evidentiary support and for Juneau to investigate the existence and degree of nexus between the loss and the disaster in the Gulf, according to the ruling.

Southwick also emphasized how BP did not object in this appeal to an October 2012 decision that barred the claims administrator from having to look at potential alternative causes for claimants' losses.

"Though we are reluctant to say that all claims must be accepted no matter how clear the absence of the required nexus may be, no one has concerned itself in this appeal with the when, by whom, and how of analyzing such suspicious claims after they are submitted," Southwick wrote. "It seems to us that absent any specific provision in the settlement agreement, and no one suggests there is one, such concerns are to be addressed in the usual course of processing individual claims. The settlement agreement contained many compromises. One of them was to provide in only a limited way for connecting the claim to the cause. The claims administrator, parties, and district court can resolve real examples of implausible claims as they resolve other questions that arise in the handling of specific claims."

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