Tax on Oil Spill Victims Draws Legal Blood

NEW ORLEANS (CN) - A federal judge's order authorizing oil spill plaintiff attorneys to collect a 6 percent fee from payments made through the Gulf Coast Claims Facility has drawn bitter opposition from plaintiff attorneys and attorneys general.

The order was expedited on Dec. 28 by U.S. District Judge Carl Barbier who is overseeing the consolidated oil spill litigation. Barbier's order grants the oil spill plaintiff steering committee (PSC) attorneys' request to take 6 percent of all payments made from the Gulf Coast Claims Facility (GCCF) to victims of the spill. The fee is to be collected into a common fund to pay for litigation expenses incurred by the plaintiff steering committee.

The Gulf Coast Claims Facility was established with $20 billion from BP in June 2010 as a way for BP, as "responsible party," to pay oil spill victims directly and avoid litigation expenses. The idea is that claimants can accept payment through the fund and avoid the legal process altogether.

The fund, overseen by Kenneth Feinberg, has been criticized as slow and ineffective. Still, tens of thousands of claimants have chosen to seek compensation through the fund - often because they are desperate for immediate compensation and because litigation could take decades to resolve.

Barbier's order states: "As requested by the PSC, the defendants who are parties to this multidistrict litigation (MDL) would be required upon settlement of any claimants' case, to hold-back and pay into a special common benefit account within the registry of the court, a sum equivalent to 6 percent of the gross settlement amount in the case of private claimants. ... As explained by the PSC in its motion, such an order by the court would not set the amounts of or award any common benefit fees or expenses, but rather simply establish a fund from which common benefit fees, if any, might later be disbursed." (Parentheses in original.)

Barbier's order says the PSC has been instrumental in helping claimants settle with the GCCF.

"Considering the unique circumstances of this case, it would be unfair to allow parties to benefit from these activities of the PSC, but avoid contributing to the common benefit fund simply because they are able to settle directly with the GCCF and avoid filing a claim in the MDL," Barbier wrote.

Roughly a dozen memoranda have been filed in opposition to Barbier's order, by plaintiff attorneys not affiliated with the PSC, including attorneys general for Louisiana and Florida.

In general, the memoranda make similar arguments: a tax on payments made through the GCCF violates the Oil Pollution Act, which details how BP as "responsible party" for the oil spill must pay victims. The memoranda also state that according to civil procedure Barbier should not have issued an expedited order without first holding a hearing. Finally, attorneys say the PSC is not entitled to money from victims for work it has not performed.

Most of the motions accuse the plaintiff steering committee of wasting resources.

Many of the memoranda correct details from the judge's original order. For instance, motions take issue with credit given to the plaintiff steering committee for bringing in translators to assist fishermen affected by the oil spill.

Plaintiff attorney Daniel Becnel claims there are "material factual inaccuracies" in the judge's order.

"For instance, the order states: 'Early on, the PSC successfully advocated on behalf of Vietnamese and other non-English speaking claimants, and convinced the GCCF to employ translated forms, instructions, etc. The PSC also arranged to make translators available to claimants. ...'

"This is incorrect. BP had been providing both translators and translated forms long before the PSC had even been created and these policies continued under Mr. Feinberg and the GCCF."

Becnel adds in his motion: "In essence, the PSC is attempting to have all claimants pay for things that benefited no one in this matter. ... It is inconceivable that in a case where a party has already been deemed to be at fault and established a $20 billion compensation fund, that a PSC could have already spent (as of over two months ago) almost $12 million in still uncompleted trial preparation alone.

"The Becnel Law Firm always had at least one representative attend each Coast Guard hearing to record and analyze the testimony and evidence. The PSC rarely, if ever, attended any of these hearings. This is just one example of how the PSC has failed to act fiscally responsible for the class. Being named a PSC member does not give a person or firm carte blanche to spend money and incur unneeded costs. The PSC has a fiduciary duty to the rest of the litigants to incur only necessary costs. Most of the discovery in this case has already been done by the United States Coast Guard; the Presidential Commission; Department of the Interior; Mineral Management Service; Bureau of Ocean Energy, Management, Regulation and Enforcement; numerous congressional committees and other federal and state agencies; as well as numerous private scientific foundations." (Parentheses in original.)

According to a memorandum filed by Florida special counsel Russell Kent: "It has been the Gulf Coast State Attorneys General, along with the United States Department of Justice, who are responsible for any meaningful improvements to the GCCF claims process."

Plaintiff attorney Anthony Buzbee, of Texas, wrote: "This is not a situation where the PSC has done all the work, while attorneys and entities outside this litigation have reaped the benefit. This is not a situation where others, who have expended no time or effort, ride the coattails of a PSC that has expended much time, expense, and effort. ... The PSC simply has not helped those who have expended hundreds of thousands of dollars and thousands of hours in an effort to resolve claims through the GCCF. Instead, the PSC has, at times, intentionally or not, worked against the interests of many claimants and their counsel outside this litigation."

Buzbee's motion concludes: "There is no case law that exists that allows the PSC to tax claimants not before this court, and not subject to this court's jurisdiction, who chose to pay a reduced attorney fee, avoid litigation and pursue an OPA [Oil Pollution Act] claim with the GCCF. ... No one is saying the PSC's work is worthless, or that they should not be compensated for their work. But it should not be on the backs of those who have benefited from that work."

In response to the oppositions, the PSC filed a motion: "While a handful of plaintiff attorneys have complained in the press that they should not be required to set aside any of their contingency fees with respect to claims they might henceforth resolve with BP through the GCCF, the PSC would respectfully suggest that: if these plaintiff attorneys and the GCCF have been working as efficiently and effectively as they claim, one would think that most if not all of their cases would have already been resolved in the eighteen months they have had to process claims through the GCCF prior to the effective dates of the reserve, December 30, 2011."

A footnote in the PSC document states: "It could also be noted that several of these same attorneys themselves applied to the court for appointment to the Plaintiffs' Steering Committee, implicitly recognizing the value and necessity of common benefit efforts."

A letter from the GCCF states that it has taken steps to collect the 6 percent fee, but as of Dec. 30 "has temporarily frozen all payments to claimants and the issuance of any payment determination letters. This was necessary both because the GCCF must take various administrative steps to implement the Order's requirements in order to begin withholding amounts from payments and because the GCCF seeks to confirm its interpretation of the Order with the court prior to beginning the process of instituting the hold-back requirements."

The deadline for filing motions in opposition to the judge's order was Jan. 12.

So far, no oral arguments have been scheduled.

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Tax on Oil Spill Victims Draws Legal Blood

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