BP, Plaintiffs Seek Approval of $7.8 Billion Spill Accord

By Margaret Cronin Fisk and Jef Feeley – Nov 8, 2012 12:00 AM ET

BP Plc (BP/) and the lead lawyers representing victims of the 2010 Gulf of Mexico oil spill are set to ask a judge today to approve a proposed $7.8 billion partial settlement of claims, while attorneys for thousands of plaintiffs seek rejection or modification of the agreement.

The BP settlement underpays some claimants and unfairly excludes others, lawyers for the objectors said in court papers before today’s hearing. Lawyers representing more than 13,000 spill victims have attacked the settlement, BP said in a filing last month seeking approval from the judge.

“Tens of thousands of cases may not be resolved by this settlement,” attorneys Stuart Smith and Robert McKee wrote Sept. 9 in objecting to the economic loss portion of the agreement. The settlement should be “rejected in favor of a plan which can encompass and fairly compensate a larger percentage of the victims,” they said.

Both Smith and McKee will be presenting objections before Barbier today, along with five other lawyers who have filed complaints against the settlement. Smith will focus on economic loss and McKee on compensation for physical injury.

Judge’s Familiarity

Given Barbier’s familiarity with the spill settlement and the requirements of U.S. maritime law, he’ll probably approve the accord after giving people a chance to have their say about it, saidCarl Tobias, who teaches complex litigation law at the University of Richmond in Virginia.

“I’d say the chances are pretty good that the settlement will win the judge’s final approval,” Tobias said in a phone interview. “He’s lived with this case for more than two years and he’s familiar with all the intricacies of this deal.”

After Barbier gives the settlement his stamp of approval, spill victims who aren’t included in the settlement probably will appeal, Tobias said. There’s little chance that a federal appeals court in New Orleans will find fault with Barbier’s handling of the spill settlement, he added.

Appellate judges often show great deference to their colleagues assigned to oversee complicated class-action cases spawned by disasters like the Deepwater Horizon spill, he said.

Experience, Expertise

“These judges have been appointed because of their great experience and expertise with the type of case they are handling,” Tobias said. “The appeals courts are generally loathe to overturn the decisions they’ve made.”

The blowout and explosion aboard the Deepwater Horizon drilling rig in April 2010 killed 11 workers and started millions of barrels of crude leaking into the gulf. The accident prompted hundreds of lawsuits against BP; Transocean Ltd. (RIG), the Vernier, Switzerland-based owner and operator of the rig; and Halliburton Co. (HAL), which provided cementing services.

BP’s proposed partial settlement of private claims was reached March 2, days before a trial on liability for the spill. The settlement establishes two separate classes, one for economic loss and the other for physical injuries related to the spill or the cleanup. BP estimates the settlement, which is uncapped, is worth about $7.8 billion.

The settlement excluded claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the Obama administration’s moratorium on deep-water drilling prompted by the spill. It also doesn’t cover federal government claims and those of Gulf Coast states Louisiana and Alabama, or lawsuits against co-defendants.

Transocean, Anadarko

The U.S. sued BP, Transocean and BP’s partners in the well, Mitsui & Co. (8031)’s MOEX Offshore 2007 and The Woodlands, Texas-based Anadarko Petroleum Corp. (APC), alleging violations of federal pollution laws. MOEX has settled the federal claims.

BP has been in negotiations with the U.S. Justice Department to settle the federal claims as well, the company said in an Oct. 30 regulatory filing. BP has provisioned about $38.1 billion for spill costs and has paid more than $8 billion in compensation to individuals, businesses and government entities so far.

Potential Fine

BP faces a potential $17 billion fine by the U.S. under Clean Water Act provisions, should it be found grossly negligent for the spill. The issue of gross negligence will be determined at a nonjury trial over liability for the explosion of the Deepwater Horizon drilling and the subsequentoil spill now set for Feb. 25 before Barbier in New Orleans.

BP has urged Barbier to grant final approval to the settlement, arguing in a court filing last month that the agreement “will bring full compensation to all class members, including those on the Gulf Coast, while resolving a major component of the Deepwater Horizon litigation.”

The objectors represent “only a small fraction of the total class members,” the company said.

Many of the objections to the settlement have been brought by people or businesses that were excluded from the agreement reached in March, Stephen Herman and James Roy, lawyers for the plaintiffs, said in a separate filing last month.

Even if claims were brought to trial and BP was found to be grossly negligent, pursuing individual lawsuits instead of resolving them through a mass settlement would take years, Herman and Roy said.

“No one can deny that these could take decades to resolve conclusively through litigation,” they wrote.

The lawyers protesting the deal want resolution of claims, said Smith, the lawyer for objectors.

‘Economic Loss’

“We are very supportive of a settlement,” he said in an interview. “We think there needs to be an adjustment of the economic loss” offers, he said. “They’re inequitable and unreasonable.”

The partial settlement is “superior to the alternative,” said plaintiffs’ attorney Joe Rice, with Motley Rice LLC in Mount Pleasant, South Carolina, co-lead negotiator for the agreement.

Without the settlement, “tens of thousands of individual cases will have to work their way through the judicial process for a period of years,” he said in an interview.

This would have an adverse impact on oil spill victims, he said. “They need help and relief now.”

The medical benefits portion of the settlement is “unfair, inadequate and unreasonable,” Smith and McKee wrote in a Sept. 9 filing.

Injury, Illness

The settlement lumps claimants who have “substantial proof of significant and impairing injury and illness, with myriad other claimants who do not possess such proofs,” they said.

“The total awardable compensation does not come close to the amount of compensatory damages that each of these claimants can prove for past and long-term future damages and does not appear to actually pay settling claimants for past and future medically necessary treatment,” McKee and Smith said.

The state of Louisiana has also objected to the agreement, contending in a filing in September that the terms “fail to fully compensate victims for the extensive damages already suffered as a result of the spill, and for the damages that are likely to occur in the future.”

Louisiana’s lawyers won’t be speaking at today’s hearing because the state wasn’t part of the settlement.

The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, atmcfisk@bloomberg.net; Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.