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BP Says Feinberg Fund ‘Exceeds’ Law Requiring Spill Payments

BP Plc’s $20 billion oil-spill damages fund, run by Kenneth Feinberg, “far exceeds” the company’s legal obligations to compensate victims of the worst offshore oil spill in U.S. history, company lawyers said in a court filing.

U.S. District Judge Carl Barbier of New Orleans, who is overseeing more than 350 lawsuits seeking damages for economic and personal injuries from the BP oil spill, asked for opinions on whether the company is doing enough to satisfy a U.S. law requiring a party responsible for an oil spill to compensate victims.

BP is doing everything it’s legally required to do and more, through Feinberg’s Gulf Coast Claims Facility, the company’s lawyers said yesterday in a filing.

“That there may be different ways to run a claims process does not mean that the GCCF’s chosen methods fail to comply” with the law, Don Haycraft, one of BP’s lawyers, said in the filing. The statute “does not give claimants, or the attorneys general, any right to demand judicial involvement in or modification of the claims process.”

The BP claims process isn’t working, public officials from Gulf Coast states and lawyers suing the company said in opposing filings with the court. Mississippi Attorney General Jim Hood asked Barbier in a filing yesterday to appoint the Gulf Coast state attorneys general or other independent watchdogs to monitor Feinberg’s claims-payment facility, which Hood said “is operating without sufficient oversight.”

‘Avoid Court Oversight’

BP has used Feinberg’s claims-payment facility to “avoid court oversight and to evade adherence to the mandates” of the Oil Pollution Act of 1990, which governs payment for offshore spill damages, Hood said in the filing.

“From the outset, Mr. Feinberg has acted as though he was a law unto himself -- free to ignore the requirements of OPA,” Hood said.

Earlier this month, Barbier ruled Feinberg isn’t truly independent, as Feinberg and BP have claimed. The judge ordered Feinberg to tell spill claimants that he’s acting in BP’s interest and they should consult independent lawyers before signing away their rights to sue BP or other companies for spill-related damages.

In January, Feinberg unveiled protocols that would give spill victims immediate cash settlements -- $5,000 for individuals and $25,000 for businesses - if they agreed not to sue over future spill damages. Victims can also apply for immediate final cash settlements, based on their documented past losses and estimated future losses, if they release BP and other companies from future liability.

Dissatisfied Victims

Feinberg said spill victims dissatisfied with the settlements offered by the claims fund can apply every three months to receive interim payments for documented losses from the spill. No interim damage payments have been processed since November, and Feinberg wasn’t clear on when those payments would resume, officials for Louisiana, Florida, Alabama and Mississippi said in court filings.

“Payments have not been prompt, the rules are not uniform and understandable, and the process does not comply with OPA,” Louisiana’s Governor Bobby Jindal and Attorney General Buddy Caldwell said in papers filed Feb. 17.

If Feinberg doesn’t promptly begin paying interim claims, Jindal and Caldwell asked the judge to “order emergency payments be resumed immediately and continued until the court provides the protocols.” They also said the law requires BP to pay interest on damage claims once they are processed, which they said Feinberg hasn’t done.

‘Financially Desperate’

“Financially desperate” fishermen, property owners and small businesses feel pressured to take quick, cheap settlements because they can’t survive on Feinberg’s interim payment plan, Hood said.

Feinberg’s requirements that victims provide documentation of their losses or demonstrate proximity to a contaminated beach to receive payment has “improperly increased the burdens of proof” from what OPA originally established, Hood said. Feinberg has denied or underpaid claims without adequate explanation, he said.

Stephen Herman and James Roy, speaking for lawyers representing victims suing BP, Halliburton Energy Services, Transocean Ltd. and other companies involved in drilling the well that caused the spill, asked Barbier in a separate filing yesterday to void all releases signed by claimants who didn’t have independent attorneys at the time.

Hood said Barbier should prohibit all releases and force Feinberg to stop making final settlements. All claims should be treated as interim claims, as OPA requires, he said.

‘Game of Chance’

“OPA does not envision nor permit its mandated claims process to be converted into a game of chance in which claimants are asked to bet on what the future will bring,” Hood said.

Justice Department lawyers, in papers filed yesterday, didn’t support or oppose BP’s claim that it is satisfying its OPA obligations through Feinberg’s claims-payment process.

“As the United States has said from the outset, the success of the GCCF can only be measured by whether the people of the Gulf feel fairly treated,” government attorneys said in the filing.

BP’s lawyer, Haycraft, said in yesterday’s court filing that placing Feinberg under court supervision would subvert the reason Congress established the OPA claims process.

“While BP has great respect for this court,’’ Haycraft said, placing Feinberg under court supervision would create a process “that provides parties and nonparties alike the opportunity to review and second guess claims decisions and subject every aspect of the process to litigation, delay and disruption -- precisely what Congress sought to avoid under that act.’’

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: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Allen Johnson Jr. in New Orleans at allenmct@gmail.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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