BP Gulf Spill Victims Challenge Economic-Loss Settlement

BP Plc (BP/)’s $8.2 billion settlement of most private economic-damage claims from the 2010 Gulf of Mexico oil spill is unfair and should be rejected, victims opposed to the deal told a federal appeals court.

The agreement inconsistently compensates victims with the same types of economic injuries, a group of opponents said today in a filing in the U.S. Court of Appeals in New Orleans. Other victims groups have said court deadlines forced them to decide whether to take the deal before they knew what they would get.

“When all class members are similarly situated, they must be treated identically by any proposed settlement,” said John Pentz, an attorney for a group of Texas coastal plaintiffs who said their treatment under the settlement is inferior to that of similar businesses a few hundred yards away in Louisiana.

The agreement as approved by the trial judge “fails to adequately explain the division of the class into zones that can make the difference between recovering some compensation and receiving nothing at all,” Pentz said in the filing.

BP faces thousands of lawsuits over damages caused by the explosion and sinking of the Deepwater Horizon rig in 2010. The blast killed 11 workers and released more than 4 million barrels of crude from BP’s well off the Louisiana coast.

Non-Jury Trial

The company reached a settlement with most private plaintiffs in March 2012, just before a non-jury trial on liability for the incident was to begin. That trial was conducted this year in federal court in New Orleans. No decision has been announced.

Scott Dean, London-based BP’s spokesman, declined in an e-mail to comment on today’s filing. David Falkenstein, a spokesman for the lawyers on the spill-victims’ committee who negotiated the settlement with BP, said in an e-mail that the attorneys declined to comment until they had a chance to review the filing.

Breaking up the class of claimants certified by U.S. District Judge Carl Barbier could endanger the entire deal, said Carl Tobias, a law professor at the University of Richmond in Virginia. Tobias, who specializes in the federal judiciary, said he doesn’t expect that to happen.

“Appeals courts have decertified classes when district judges improperly certified them,” Tobias said in an e-mail. “Barbier properly certified here, so the appeals court is unlikely to decertify.”

‘Honest Opportunity’

Such group lawsuits, known as class actions, are “supposed to provide injured parties with an open, free and honest opportunity to join the class knowing what they’re going to get,” Brent Coon, one of the lead lawyers fighting the settlement, said in an interview before the filing.

“Here, there are too many different issues, too much inconsistency, so it’s not a good class,” he said.

BP’s accord resolved economic-loss claims for classes of businesses and property owners for all of Louisiana, Alabama and Mississippi and parts of Texas and Florida. It 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.

Barbier approved the economic-damages settlement in December, after conducting a fairness hearing on Nov. 8. Victims had until Nov. 1 to decide to take part in the deal and were required to sign opt-out requests personally, rather than through their lawyers, according to court records.

Testing Settlement

Coon said he submitted 1,500 clients’ cases to BP’s claims administrators before the opt-out period ended as a test. He said the clients got compensation offers ranging from “good to mediocre to bad” for the same types of claims. Thousands of his clients opted out.

“We got nothing but a lack of assurance that this will ever work,” he said of the claims-resolution process.

The challenge to the economic-damages settlement follows a similar appeal brought by individuals fighting a medical-benefits agreement that was approved separately. Those objections were filed yesterday in New Orleans.

The appeals court is weighing a third, unrelated appeal in which BP is seeking to force the claims administrator to interpret the economic settlement in a way that could limit payments to some businesses claiming spill damages. A three-judge panel heard arguments in that case on July 8. No decision has been announced.

The case is In Re: Deepwater Horizon-Appeals of the Economic and Property Damage Class Action Settlement, 13-30095, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

The lower court 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).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com

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

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