BP Asks Court to Block Payments Not Directly Linked to Spill

Dec 31, 2013 12:01 am ET

Dec. 31 (Bloomberg) -- BP Plc asked a federal appeals court to block economic loss payments in its $9.2 billion settlement of the 2010 Gulf of Mexico oil spill unless they can be directly linked to the disaster.

The London-based company said U.S. District Judge Carl Barbier in New Orleans has ignored the appellate court’s earlier decision requiring him to review causation in determining which claims should be paid. The company asked an appeals panel for an immediate injunction.

“The district court has definitively refused to enforce the settlement’s causal-nexus requirement and has made clear that it will adhere to its erroneous position on causation unless this court directly tells it otherwise,” the company said in yesterday’s filing.

The blowout of BP’s deep-water Macondo well off the Louisiana coast in April 2010 killed 11 people and sent millions of barrels of oil spewing into the Gulf of Mexico. The accident sparked thousands of lawsuits against BP, as well as Transocean Ltd., owner of the rig that burned and sank, and Halliburton Co., which provided cement services for the well.      BP reached a settlement with most private plaintiffs in March 2012, just before a trial on liability for the incident was to begin. BP initially valued the economic-loss settlement at $7.8 billion. It put the cost at $9.2 billion in an Oct. 29 regulatory filing.

Battling Barbier

BP has been battling throughout 2013 with Barbier, lawyers for spill victims and the administrator of the settlement, Patrick Juneau, over an interpretation of the agreement that the company says allows payments to claimants who can’t link losses to the spill.

The company claims Juneau has approved millions of dollars in payments to businesses for “fictitious” economic losses that weren’t related to the worst offshore spill in U.S. history. It appealed Barbier’s decision upholding Juneau’s interpretation and won review by the New Orleans-based appeals court in a divided opinion in October.

Barbier, in a Dec. 24 order, said BP couldn’t tie payments to direct causation under the settlement agreement.

Spill victims’ lawyers have repeatedly said BP is trying to rewrite a deal that is proving more costly than envisioned.

In the settlement, BP agreed businesses in certain geographical regions were presumed to have been harmed by the oil spill if their losses followed a specific pattern, Barbier ruled. As part of the accord, BP agreed these claimants wouldn’t have to prove a link to the spill to recover, the judge said.

‘Clearly Inconsistent’

“BP’s current position is not only clearly inconsistent with its previous position, it directly contradicts what it has told this court regarding causation” of damages, Barbier said in his ruling.

The company contends Barbier has misread the settlement and his decision will “impose further vast and unjustified costs on BP,” according to yesterday’s filing.

“This settlement should have been an historic road map for resolving mass tort claims; instead, it has become a glaring example of a serious miscarriage of justice, where the plain text of the agreement has been subverted, and where persons and businesses with no legitimate claims can nonetheless receive inflated awards,” BP said.

David Falkenstein, a spokesman for lawyers leading the spill litigation, didn’t immediately respond to telephone or e- mail requests for comment on yesterday’s filing.

Appellate Panel

Lawyers for spill victims yesterday urged an appellate panel not to hurry in weighing BP’s request to permanently halt the type of business-loss payments the company finds objectionable.

More than half of the 100,000 business-economic loss claims submitted so far haven’t been processed to the point where claimants have been notified of the offers they’ll receive, “and another 20,000 have received some kind of incompleteness notice” preventing further processing of their claims, Steve Herman and James Roy, lead attorneys for the victims, said in a filing in the New Orleans appeals court. All 70,000 of these claims remain temporarily suspended under a previous lower-court ruling, according to the filing.

The case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 10-md-02179, U.S. District Court, Eastern District of Louisiana (New Orleans).

--Editors: Peter Blumberg, Douglas Wong