BP Says Loss on Spill Claims Appeals Could Scuttle Settlement

The settlement BP Plc (BP/) reached last year with most private parties over the 2010 Gulf of Mexico oil spill could be scuttled if a U.S. appeals court doesn’t throw out the interpretation of payments being used by the claims administrator, the company said.

BP is fighting to avoid potentially billions of dollars in business economic-loss payments that are being made under what the company claims is a misinterpretation of settlement terms by Patrick Juneau, its oil-spill claims administrator.

The oil company is appealing a ruling by U.S. District Judge Carl Barbier, who has three times refused to order Juneau to adopt an interpretation of deal terms that BP prefers. London-based BP claims Juneau’s decision results in different levels of compensation for victims with similar injuries, which it contends violates the legal requirements of a class, or group, settlement.

“If the district court’s decision in the variable-profit appeal were to be affirmed, the class certification and class settlement at issue in this case would be rendered invalid, which is one of the reasons why reversal is required in that appeal,” Ted Olson, BP’s lawyer, said in a filing yesterday in the U.S. Court of Appeals in New Orleans.

Olson’s statement was made in a request for expedited handling of a separate appeal by victims challenging the economic settlement as unfair.

‘Best Interest’

“We took this action because we believe it is in the best interest of all parties for these issues to be resolved as quickly as possible,” Geoff Morrell, a BP spokesman, said in an e-mail.

Businesses in five southern states have received hundreds of millions of dollars in payments for “fictitious” losses BP claims are unrelated to the worst offshore oil spill in U.S. history, according to court filings.

As of July 28, BP has paid $4.2 billion in total compensation under the economic settlement, according to yesterday’s filing. Since July 8, the Deepwater Horizon Claims Center has paid an average of $119 million a week for all kinds of claims, including the disputed business-loss claims.

In a separate court filing yesterday, BP said it will appeal Barbier’s order limiting the company’s right to challenge specific economic-damages awards. Barbier, who oversees consolidated spill-related litigation in New Orleans, ruled in May that BP can’t appeal any damage awards by claims administrators that were made in accordance with his prior rulings.

Settlement Rights

BP has said the settlement gives it the right to challenge individual damages awards, first to a claims appeals board and ultimately to Barbier. Barbier and the appeals court both refused to halt spill-compensation payments while the company appeals the Juneau interpretation.

BP initially valued its economic-loss settlement at $7.8 billion. The company increased its settlement estimate to $9.6 billion in regulatory filings last month.

The accord doesn’t cover loss claims by state and local governments, financial institutions, casinos or companies harmed by the deep-water drilling moratorium imposed by the Obama administration after the April 2010 spill.

Lawyers for spill victims are opposing BP’s attempt to reinterpret its deal.

David Falkenstein, a spokesman for the committee of lawyers representing spill victims, declined to immediately comment yesterday on BP’s filing.

The appellate case is In Re: Deepwater Horizon-Appeals of the Economic and Property Damage Class Action Settlement, 13-30315, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The main 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 Detroit at mcfisk@bloomberg.net; Laurel Calkins in Houston at lcalkins@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.