Judge Must Decide if State Law Applies|to Punitive Damages in BP Oil Spill

     NEW ORLEANS (CN) – A federal judge must decide whether Alabama and Louisiana can recover punitive damages for the Deepwater Horizon oil spill under state law. The decision could have lasting consequences on the states’ oil spill recovery.
     In a hearing after the monthly status conference on Friday, U.S. District Judge Carl Barbier, who is overseeing the consolidated oil spill litigation, compared the oil spill with a deadly rocket launch.
     “We’re talking about state sovereignty,” Barbier said, addressing BP attorney Andrew Langan. “You can imagine scenarios … where someone launches a rocket from federal waters and it lands on someone’s property in Louisiana or Alabama and lands on someone’s roof and causes death. … You don’t think someone in Alabama or Louisiana could file a claim?”
     Barbier was not referring to the hypothetical rocket launch aspect of the scenario; the broken wellhead that spewed the oil was in federal waters, so federal law applies. And the Oil Pollution Act (OPA), which governs oil spills, is a federal law.
     Barbier issued an order on Aug. 26, that OPA and federal maritime law, not state laws, govern oil spill claims.
     But the question remains whether states can seek punitive damages under state law in instances where there is no corresponding federal law to “fill in the gap.”
     The way legislation is written, all federal fines recovered from the oil spill, including fines for Clean Water Act violations, will go into the federally overseen oil spill trust fund. The trust fund is used for oil spill-related damages, but it is not certain whether it is to be applied to oil spill damages in states that border the federal waters from which the fines were recovered.
     The only way states can be certain to recover oil spill fines is if they file for damages under state law.
     Langan told Judge Barbier: “You expressly stated all state law penalty claims were preempted notwithstanding OPA penalty claims. … The reasoning you reached in the Aug. 26 order is, state law is ineligible in this case; there is no gap to fill. The Clean Water Act and other laws fill in the blank.”
     Barbier then theorized about a rocket launch from federal waters that lands on a roof in Alabama or Louisiana and causes a death. “Don’t you think someone in Alabama or Louisiana could file a claim?” he asked.
     “That’s a criminal act,” Langan replied. “Here there is no source state. If you go that route, you will be allowing numerous penalty laws.”
     Langan said that allowing states to seek damages under state law would be contrary to Barbier’s Aug. 26 order, because the United States already is a plaintiff and is seeking penalties.
     Corey Maze, deputy attorney general of Alabama, said that if a rocket launched in federal waters killed someone in Alabama or Louisiana, it would be both a civil and criminal act.
     Maze said that not allowing states to recover damages under state law strips states of the power to protect themselves; he indicated that criminal charges in this case might have little lasting consequence.
     “I don’t think anyone disputes that you can prosecute this criminally. But what BP does is every time something like this happens, the CEO resigns,” Maze said.
     “And the Clean Water Act money – the federal government doesn’t have to give us a dime of that.
     “Had the water never crossed our 3-mile borders, we wouldn’t be seeking a civil penalty. I am not going to argue whether state law should apply on top of federal law; what I am going to do is show how the laws should apply,” Maze said.
     Although Barbier’s Aug. 26 ruling does state that OPA and federal maritime law replace state law, Maze said state law is not replaced by federal law with regard to punitive damages sought for economic, nonphysical injury losses.
     Maze said states should be eligible to seek penalty fines and punitive damages for nonphysical injury because there is no federal law that applies in such cases.
     Maze said that state law here would be limited to penalty claims – state penalties and punitive damages for nonphysical injuries – “because it is only for those instances where federal law doesn’t apply and there is a gap to be filled.”
     Barbier gave the parties a week to submit up to 10 pages of briefings on the topic of whether Alabama and Louisiana can seek state penalties before he decides on the matter.
     The hearing followed the monthly oil spill status conference.
     The hearing focused on two issues: whether damages can be brought under state law, which is wrapped up in the defendants’ multiple motions to dismiss the first amended complaints from Alabama and Louisiana; and whether Transocean’s liability insurance carrier recognized BP as an additional insured.
     Related to the first topic and also discussed at the hearing were issues of presentment to the Gulf Coast Claims Facility: when a party should present and how often.
     During the status hearing, Barbier ruled that any limitation of liability claims filed after Friday, Sept. 16, will be considered to be in default. The original deadline expired on the 1-year anniversary of the April 20, 2010 explosion of the Deepwater Horizon.
     The limitation of liability trial is scheduled to begin Feb. 27, 2012.
     The next status conference is scheduled for Oct. 21.

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