NEW ORLEANS (CN) - BP sued the court-appointed oil spill claims administrator, claiming he's paid "hundreds of millions of dollars" of false business claims that bear no "rational connection to the oil spill," and that could cost it "billions of dollars" for "fictitious losses."
BP sued Patrick A. Juneau, court-appointed claims administrator and trustee of the Deepwater Horizon Economic and Property Damages Settlement Trust, in Federal Court.
It claims that "many business claimants are receiving substantial awards for fictitious losses not contemplated by the agreement" reached between BP and claimants' attorneys after the Deepwater Horizon oil spill.
"To date, and based on expert analysis, it appears that the Claims Administrator's failure to comply with the settlement agreement has resulted in improper offers to BEL [Business Economic Loss] claimants of hundreds of millions of dollars, and growing. Many such businesses have been awarded compensation for fictitious 'losses' that do not exist at all, let alone claimed losses that bear any rational connection to the oil spill," the complaint states.
It continues: "Contrary to the settlement agreement, a number of these awards went to businesses earning demonstrable profits in the May-December 2010 post-spill period that were greater than their pre-spill profits (i.e. they did not experience spill-related losses)." (Parentheses in complaint.)
In April 2012 BP and plaintiff attorneys reached a settlement agreement to resolve most of the economic and property damage claims from the April 20, 2010 Deepwater Horizon explosion that killed 11 people and dumped nearly 5 million barrels of into the Gulf of Mexico.
The settlement was given final approval on Dec. 21, 2012.
BP says in its 32-page complaint: "The settlement agreement established the settlement program and provided for a court-appointed claims administrator to (a) 'faithfully implement and administer the settlement, according to its terms and procedures, for the benefit of the economic class, consistent with this agreement,' (b) 'head the settlement program, oversee and supervise the claims administration vendors (including any subcontractors) and staff in the processing and payment of claims,' and (c) 'engage in supervision and oversight activities designed to ensure the implementation and integrity of the overall settlement program." (Citations omitted.)
BP says Exhibit 4 of the settlement agreement specifies what business claimants must demonstrate to obtain compensation for oil-related losses.
"That exhibit requires the claims administrator and settlement program to (1) calculate a claimant's monthly 'variable profit' by subtracting from the claimant's monthly revenue the 'corresponding variable expenses' incurred to earn that revenue; and (2) compare the claimant's variable profit in certain months of the post-spill 2010 compensation period to the 'comparable' months of the pre-spill benchmark period.
"The correct application of these contractual provisions is critical both to achieving the parties' purpose of compensating class members for 'loss of income, earnings or profits suffered by ... [business] entities as a result of the Deepwater Horizon incident' and to avoiding windfall awards to claimants for nonexistent 'losses.' Despite this, the claims administrator has implemented the provisions of the BEL framework in a manner that is contrary to the plain language of that agreement as well as to fundamental principals of economics, accounting, and common sense. Specifically, in a policy determination issued on January 15, 2013 (the 'BEL Policy Decisions'), the claims administrator announced that the settlement program would calculate 'variable profit' by simply comparing cash received in a given month with cash paid out for expenses in the same month, without regard to (a) when the 'revenue' was earned, or (b) whether the cash paid out in the month represented expenses 'corresponding' to those revenues. The settlement program has also mechanically compared the selected months of the compensation period to the identical months of the benchmark period, instead of using 'comparable' months as required by the agreement." (Ellipses and brackets in original; citations to attachments and exhibits omitted.)
The complaint includes 29 pages of attachments, much of it detailing alleged "misapplication of business economic loss" claims from 200 businesses, whose names and, apparently, addresses, are blacked out.
The complaint adds: "Given the pendency of additional unwarranted and unlawful awards, which will cause irreparable harm to BP when paid (and compound the irreparable harm BP has already experienced), and the interests of all parties in the timely settlement of claims arising out of the Deepwater Horizon incident, BP requires urgent relief."
The complaint states that "BP is entitled to a remedy for breach of contract to prevent the payment of monies to claimants with fictitious or inflated losses, in violation of the settlement agreement's terms."
It claims that "many of the largest awards made by the claims administrator and the settlement program have been for fictitious losses."
In the body of the complaint, BP cites four unnamed businesses, claiming they represent "four of the hundreds of examples of unjustified awards that have already been made because of the administrator's erroneous BEL policy decisions that fail to interpret the settlement agreement to avoid absurd results."
According to the complaint, the "absurd results" involving these four businesses included:
a $21 million payout to a rice mill, "even though its 2010 spill year revenue exceeded its revenue in each of the years 2007-2009;"
$9.7 million to a construction company in Northern Alabama "almost 200 miles from the Gulf," even though its 2010 variable profit exceeded its May-December 2010 variable profit exceeded the years before by 21 percent;
$3.7 million to an Alabama printing business, even though its May-December 2010 profits were 14 percent higher than May-December 2009;
and $3.3 million to a central Louisiana law firm, "even though its profit in the year of the spill exceeded its benchmark period profits by 10 percent," according to the complaint.
The complaint then cites Appendix B: the 200 businesses with names and addresses redacted.
"While the claims administrator's errors have impacted claimants in virtually every industry, the errors are particularly pronounced in the farming, construction, and professional services industries," the complaint states.
In a March 5 order , U.S. District Judge Carl Barbier, who is overseeing the oil spill litigation, ruled that the claims administrator's interpretation of the settlement agreement is correct.
"Notably," this is "the exact interpretation BP advocated while the parties negotiated the settlement agreement," Barbier wrote.
The third week of the first trial begins today (Monday). This trial, expected to last three months, seeks to find the causes and apportion the blame for the spill.
A second trial, set for September, will try to determine how much oil spilled. If BP is found grossly negligent, its damages for Clean Water Act violations alone could nearly quadruple, from the $4 billion to $17 billion range.
In its new complaint, filed Friday, BP seeks damages for breach of contract and wants Barbier to put an immediate hold on some business loss claims.
BP is represented by R. Keith Jarrett with Liskow & Lewis of New Orleans. Sabrina Canfield can be reached at email@example.comFollow @https://twitter.com/sabrinacanfiel2
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