BP Plc (BP/) and lawyers suing the company over the 2010 Gulf of Mexico oil spill submitted their proposed settlement agreement to the judge overseeing the litigation.
Lawyers for both sides filed the accord today with U.S. District Judge Carl Barbier in New Orleans for preliminary approval. They asked Barbier to hold a Nov. 8 fairness hearing before final approval of the accord and to postpone any trial on liability until after the hearing. Barbier today set a hearing April 25 to consider the request for preliminary approval.
“As in any settlement, neither side will receive everything it wants,” the lawyers said in today’s filing. The agreement “represents a resolution that is more than fair, reasonable and adequate.”
BP in March agreed to pay an estimated $7.8 billion to resolve private plaintiffs’ claims for economic loss, property damage and injuries. The settlement, reached March 2, days before a scheduled trial on liability for the 2010 spill, doesn’t cover federal government claims and those of the Gulf Coast states Louisiana and Mississippi.
Also excluded are 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 deepwater drilling prompted by the spill.
11 Workers Killed
“The people and businesses of the Gulf Coast stand to reap great benefits from these settlements,” plaintiffs’ attorneys James P. Roy and Stephen Herman said today in a joint statement. “We have held BP fully accountable for the Deepwater Horizon tragedy less than two years after the spill.”
Attorneys for the plaintiffs will receive as much as $600 million in fees and expenses, according to today’s filing. The money “will be paid separately from any amounts paid to the settlement class, and it does not reduce their payments or benefits” under the agreement.
The plaintiffs’ and government claims against BP’s contractors on the doomed Macondo well also remain, and no new trial date has been set.
A trial would cover not only federal and state government pollution claims, but also cross-claims between BP and its partner companies in the Macondo site and rig. Barbier would decide if those companies pick up some of the estimated $26 billion in costs spawned by the disaster.
Hundreds of Suits
The accident prompted hundreds of lawsuits against London- based BP; Transocean Ltd. (RIG), the Vernier, Switzerland-based owner and operator of the rig; and Houston-based Halliburton Co. (HAL), which provided cementing services.
Beverly Stafford, a Halliburton spokeswoman, said in an e- mail that the company is reviewing the agreement and had no comment at this time. The company has set aside $300 million for “loss contingencies related to Macondo,” Chief Financial Officer Mark McCollum said in a conference call today.
“Although we continue to believe that we have substantial legal arguments and defenses against any liability, and that BP is required to indemnify us for any losses we may ultimately incur, we’ve determined that we can no longer conclude that a probable loss associated with the MDL is $0,” he said, according to a transcript.
Jared Allen, a Transocean spokesman, didn’t immediately return a call and e-mail for comment.
The U.S. government also 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. Louisiana and Alabama sued as well.
Alabama hasn’t decided whether to ask for an earlier trial date than suggested by BP and the lead plaintiffs’ lawyers, said Luther Strange, the state’s attorney general.
“We want a trial date as soon as possible,” Strange said today in an interview. “We don’t think BP will enter into serious settlement negotiations with us until they have a trial date.”
The disaster sent more than 4 million barrels of oil spewing into the Gulf of Mexico, according to the U.S., leaving BP liable for fines as high as $17.6 billion.
The federal Clean Water Act lets the U.S. government seek fines of as much as $1,100 for each barrel of oil spilled as a result of simple negligence, often described as a failure to exercise ordinary care. The maximum increases to $4,300 a barrel for gross negligence, or a conscious act or omission.
BP has settled with MOEX; Anadarko; M-I Swaco, a unit of Houston-based oil services company Schlumberger Ltd. (SLB) that employed two of the 11 workers killed in the explosion; and Cameron International Corp. (CAM), which provided blowout-prevention equipment.
Cameron, based in Houston, said Dec. 16 that it agreed to pay BP $250 million in exchange for the oil company’s indemnifying it from damage claims. The settlement doesn’t cover fines, penalties or punitive damages.
Anadarko, which had a 25 percent share in the Macondo well, agreed in October to pay $4 billion to BP to settle oil-spill claims. MOEX, which had a 10 percent share, settled for $1.07 billion in May. The settlements didn’t cover possible fines.
MOEX has also settled with the U.S., agreeing to pay $90 million to resolve Clean Water Act claims.
The proposed settlement between BP and the Plaintiffs Steering Committee, a group of lawyers appointed by Barbier to handle the lawsuits, will be paid out of a $20 billion trust set up to compensate spill victims. The trust fund has about $14 billion remaining. Victims’ lawyers said there isn’t a cap on damages BP must pay.
BP has estimated the cost at $7.8 billion. All sides agree the amount may increase depending on the number of claims paid. The amount also may be lower than the estimate. If the trust is exhausted, the company will pay additional funds directly, lawyers for the plaintiffs said last month.
Under the agreement, BP has assigned to the plaintiffs the company’s right to seek cleanup costs and the value of the lost oil from Transocean and Halliburton, said Joe Rice, an attorney with Motley Rice LLC in Mount Pleasant, South Carolina. Barbier earlier ruled that the drilling contract required BP to indemnify the companies from compensatory damages owed to those alleging economic and pollution-related harm from the spill.
The costs include about $20 billion for cleanup and $5 billion for lost oil, said Rice, a negotiator for the PSC. Participants in the settlement will be able to collect those costs, on top of claims paid by BP, if Barbier determines that Transocean and Halliburton are liable for the spill, he said.
“This settlement demonstrates BP’s continued progress in resolving significant issues related to the Deepwater Horizon incident,” Bob Dudley, BP’s chief executive officer, said in a statement. The agreement offers “those affected full and fair compensation, without waiting for the outcome of a lengthy trial process.”
Under terms of the settlement, two groups of plaintiffs will be eligible to receive payment for their claims. The first will be those whose businesses or properties were damaged by the spill, and the second will include those who suffered injuries from spill exposure.
BP’s Gulf Coast Claims Facility, which was set up to resolve spill claims more quickly than through litigation, was shut down last month and has been administered by a transitional administrator, Louisiana lawyer Patrick A. Juneau. Juneau said last week that the transition process had issued more than 5,000 payments from March 8 through April 6.
The PSC will take over that process and claims will continue to be paid while the parties await the fairness hearing and court approval of the settlement, Rice said.
The deal will allow victims who aren’t satisfied with it to opt out and pursue lawsuits against BP. Plaintiffs not covered in the overall settlement, such as those claiming harm from the drilling moratorium that followed the spill, can continue to pursue their claims, according to today’s filing.
BP will set up a separate process to handle claims for those outside the classes, or groups, that are part of the settlement, Rice said.
“Whole categories of claims aren’t covered by this deal,” said attorney Brent Coon, who represents about 11,000 claimants, including about 1,000 small coastal business owners. Those excluded include businesses located away from the coastline, financial services firms and casinos.
“We’re not going to get approval of this class of claims until the end of the year,” Coon said. “Twenty percent of my business owners have already gone under. Am I going to lose another 20 percent of these business owners if they have to wait another year?”
The proposed settlement also cuts out some Florida residents, Pam Bondi, the state’s attorney general, said in an April 13 filing.
“It appears that the settlement will apply only to claims from Florida businesses and residents located in the Panhandle or along the west coast of Florida,” she said. BP and the Gulf Coast Claims Facility have previously “paid claims from almost every county in Florida.”
Lawyers with large numbers of spill-related clients “will have a hard time recommending against the settlement,” Houston attorney Tony Buzbee, who represents 15,000 claimants, said in a telephone interview. This settlement may be followed by agreements covering other categories of claims, he said.
“This is the first step in what will be multiple settlements,” he said.
BP said last month the proposed settlement won’t increase the $37.2 billion charge it previously recorded in its financial statements for costs associated with the spill. That figure includes $20 billion BP set aside for the claims trust fund, from which the proposed settlement payout will be derived.
The proposed settlement includes $2.3 billion earmarked for economic losses related to the seafood industry in the Gulf of Mexico, the company said.
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).
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