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Wednesday, July 17, 2024 | Back issues
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BP Wins Review of Some Settlement Payments

NEW ORLEANS (CN) - The 5th Circuit reinstated BP's battle over what is says are potentially hundreds of millions of dollars in "fictitious" claims being made by the administrator of a settlement over the 2010 Gulf of Mexico oil spill.

Wednesday's ruling from the divided three-judge panel threw out previous rulings from U.S. District Judge Carl Barbier, who is overseeing the multidistrict oil spill litigation in Federal Court.

The issue Barbier has twice ruled on involves a dispute between BP and the administrator of the multibillion-dollar BP-funded claims process that was designed to handle the claims of businesses and individuals hurt by the oil spill.

The 5th Circuit sent the case back to the district court, instructing 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.

Following the explosion and sinking of the Deepwater Horizon rig 50 miles off the Louisiana coast that killed 11 and set off the worst offshore oil spill in U.S. history, BP established a $20 billion fund to pay businesses and people harmed by the spill.

The fund was initially overseen by Kenneth Feinberg, but after the 2012 settlement jointly crafted by BP and plaintiff attorneys, Patrick Juneau was appointed by the court to oversee it instead.

Last fall BP began to question Juneau's interpretation of how particular claims payments should be made, according to the settlement. BP filed a federal lawsuit last winter to stop claims payments based on its dispute with Juneau's interpretation of the settlement agreement.

Barbier ruled against it, saying Juneau's was "the exact interpretation BP advocated for" while the settlement was in negotiation.

Then in March, BP sued Juneau for allegedly paying claims for "fictitious losses," amounting to hundreds of millions of dollars.

BP originally estimated the total settlement payments would come to roughly $7.8 billion, but the figure is currently expected to clear $9 billion.

Judge Edith Brown Clement, in handing down the 5th Circuit's majority opinion, wrote that the issue at hand "is whether it is permissible to allow the often economically meaningless temporal coinciding of cash received and paid to determine the value of a claim."

"BP never acquiesced to a cash accounting interpretation of 'revenue' and 'expenses' for all claims, i.e., not for accrual-based ones," she wrote. "It has argued consistently that the formula was intended to compensate for real economic losses, not artificial losses that appear only from the timing of cash flows."

She placed the fault of a poorly negotiated settlement agreement with the judge who approved it.

"The district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges," Clement wrote. "If the administrator is interpreting the settlement to include such claimants, the settlement is unlawful."

Judge Leslie Southwick concurred with the majority, while Judge James Dennis largely disagreed.

"The majority misunderstands the record, sails past the only issues on appeal, and unnecessarily and prematurely remands the case to the district court," Dennis wrote in a partial dissent.

"BP agreed to the settlement and actively sought the district court's approval of the eventual consent decree," he wrote. "Accordingly, it is this court's clear duty to affirm the district court's judgment rejecting BP's attempt to force the administrator to modify the consent decree and the parties' settlement simply because it is no longer convenient for BP to live with the terms to which it agreed."

Dennis wrote that BP, in its appeals to the court, "conveniently forgets that it sought to have the administrator modify the settlement agreement's formula for calculating business economic loss."

Clement wrote that BP, in crafting such a broad settlement agreement, had wanted to achieve "global peace."

"Why would BP pay to resolve claims that cannot be plead? The myth of 'global peace' through payment of admittedly non-spill-related claims is a legal nullity that cannot remedy this deficiency," Clement wrote.

"The balance of equities favors a tailored stay," she continued. "The interests of individuals who may be reaping windfall recoveries because of an inappropriate interpretation of the settlement agreement and those who could never have recovered in individual suits for failure to show causation are not outweighed by the potential loss to a company and its public shareholders of hundreds of millions of dollars of unrecoverable awards.

"A stay tailored so that those who experienced actual injury traceable to loss from the Deepwater Horizon accident continue to receive recovery but those who did not do not receive their payments until this case if fully heard and decided through the judicial process weighs in favor of BP."

The majority affirmed Babier's dismissal of the lawsuit BP filed against Juneau and reversed Barbier's denial of BP's preliminary injunction to halt claims payments.

BP spokesman Geoff Morrell said the company "is extremely pleased" with the ruling, which he said "affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses."

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