BP Wins Appeals Court Order Stopping Some Spill Payments

BP Plc (BP/) won an appeals court order stopping some payments under a $9.2 billion settlement tied to the 2010 Gulf of Mexico oil spill.

BP last month asked for an injunction halting payments to claimants whose injuries weren’t traceable to the spill, contending the New Orleans federal judge overseeing the case ignored the appellate court’s Oct. 2 mandate to review claims. The settlement agreement provided a formula for calculating payments to businesses without requiring proof that losses were caused by the spill.

“The district court erred by not considering the arguments on causation,” the appellate panel said yesterday in a 2-1 decision, agreeing to the halt. “The issue of causation is again remanded for expeditious consideration.”

BP is challenging U.S. District Judge Carl Barbier’s decision upholding the interpretation of the agreement by the settlement’s claims administrator. BP claimed the administrator, Patrick Juneau, 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.

The appeals court in New Orleans in October sent the dispute back to Barbier to review his interpretation of some of the accord’s terms. The panel also ordered Barbier to stop some payments under the settlement until he can sort out who has legitimate claims.

‘Interpretive Difficulties’

The appeals panel repeated those orders yesterday, acknowledging that it may have confused matters by issuing a divided opinion in October.

“This court’s expressing its views through two different opinions may have created interpretive difficulties on the remand,” the court said.

David Falkenstein, a spokesman for lawyers leading the spill-claims litigation, declined to immediately comment on yesterday’s ruling.

The blowout of BP’s deep-water Macondo well off the coast of Louisiana 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. (RIG), owner of the Deepwater Horizon drilling rig that burned and sank, and Halliburton Co. (HAL), 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 now puts the cost at $9.2 billion, according to an Oct. 29 company regulatory filing.

Property Owners

The accord resolved economic-loss claims for multiple classes of businesses and property owners in 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 gave final approval to the settlement in December 2012.

Under the settlement, the payments for claims are based on a numerical formula, primarily depending on distance from the spill, using sample periods before and after the event. Businesses that claim losses don’t have to prove direct impact or a link to it, according to the claims administrator’s interpretation of the settlement. They are assumed to have suffered because of the spill’s general economic impact across the region, according to court filings.

The plaintiffs contend that BP agreed to this provision in its settlement negotiations, while the company says that it shouldn’t pay for those not harmed.

‘Off Course’

The appeals court’s order yesterday “again underscores that the implementation” of the settlement “has veered off course,” Geoff Morrell, BP’s spokesman, said in an e-mail. “If properly implemented by the district court, the Fifth Circuit’s order will help return the settlement to its original, intended and lawful function –- the compensation of claimants who sustained actual losses that are traceable to the Deepwater Horizon accident.”

Morrell said the appellate order further supports BP’s contention that “continued violation of the settlement agreement’s clear terms” creates legal problems that “threaten to invalidate the entire settlement unless corrected.”

Lawyers for spill victims have claimed in court filings that BP is trying to renegotiate a deal that is proving more costly than it intended. They contend BP is suffering from “buyer’s remorse.”

The appeal is BP Exploration & Production Inc. v. Deepwater Horizon Court-Supervised Settlement Program and Patrick Juneau in his official capacity, 13-30315, 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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