BP Fights U.S., Spill Victims Over Venue for Lawsuits

BP faces at least 300 suits over the spill
U.S. district judge in Manhattan Shira Scheindlin. Source: U.S. District Court via Bloomberg

BP Plc, the U.S. and plaintiffs who filed hundreds of lawsuits seeking billions of dollars for damages stemming from the largest oil spill in U.S. history are fighting over where the cases should be heard first.

A panel of federal judges in Boise, Idaho, is hearing arguments today on which city or cities will host spill suits, including wrongful-death claims by families of workers killed in the April explosion of the Deepwater Horizon rig. Claims include losses of revenue by Gulf Coast businesses and securities claims by holders of U.S. shares in the London-based energy company.

The government wants the cases consolidated in New Orleans, in the state where many of those damaged by the oil spill live. BP prefers Houston, where BP has its U.S. headquarters.

New Orleans “is the best avenue for justice” for thousands of spill victims thrown out of work, Russ Herman, a lawyer pushing to have the cases consolidated in that city, told the Judicial Panel on Multi-District Litigation. “The place that has suffered the most impact deserves to have the scales balanced.”

The judge tapped to preside over the BP cases will make crucial rulings on what evidence can be used and which laws applied when cases are sent back to their home courts for trials.

Oil analyst Fadel Gheit, at Oppenheimer & Co., estimated today that the damage from the disaster may be as much as $49 billion. BP faces at least 300 suits over the spill as it works to permanently plug the Macondo well 40 miles off the coast. Oil has fouled beaches and marshes in Louisiana, Mississippi, Alabama, Texas and Florida.

Grouping Suits

“If we divide the case up,” how should the panel group the suits, asked U.S. District Judge John G. Heyburn II of Kentucky.

Claims over the deaths and injuries of workers on the Deep Horizon rig should be separated from the other claims, Daniel Becnel, a Louisiana-based lawyer, told Heyburn.

Other suits over loss of business revenue, environmental damage and claims filed by investors could be placed in different groups, Becnel added.

It’s particularly important to set up a separate track for personal-injury claims “ so the widows and orphans” can have their cases addressed first, said Mark Lanier, a Houston-based lawyer who urged the panel to collect the cases in his hometown.

New Orleans Backed

U.S. officials and many plaintiffs’ attorneys contend New Orleans is the best site for consolidation, noting Louisiana is the closest state to the spill site and has suffered the bulk of environmental damage.

The government’s decision to line up behind New Orleans doesn’t carry any more official weight than anybody else’s recommendation, said Adam Steinman, a law professor at Seton Hall University who teaches complex litigation. It’s rare for U.S. officials to express a preference, he said.

Putting the cases in Houston, home to BP’s U.S. headquarters, would be a “cruel irony” for Louisiana victims, Stephen Herman, a lawyer for Louisiana residents suing over the spill’s fallout, said in a May court filing.

Eight federal judges in New Orleans and surrounding courts have recused themselves from spill cases because of potential conflicts of interest, BP noted in court papers.

Company officials want the cases sent to U.S. District Judge Lynn Hughes in Houston, according to court filings.

Disclosure Filings

The judge has lectured for an oilfield industry professional group that pays his travel expenses, according to filings obtained from the Judicial Watch website. The judge declined by e-mail this year to discuss any potential conflicts in the spill cases.

To address the conflict issue, some plaintiffs’ lawyers suggested in court papers that U.S. District Judge Shira Scheindlin in New York, who has a background in environmental litigation, go to New Orleans to oversee the litigation.

Others suggested a retired judge who could focus solely on the spill cases without the burden of a regular caseload.

Perry Weitz, a Manhattan-based lawyer, told the panel today that Scheindlin’s “organizational skills and management skills” sets her apart from other judges.

“Why wouldn’t we find some of the outstanding judges in Louisiana and Alabama instead of importing someone?” Heyburn asked. Weitz argued Scheindlin’s handling of other environmental cases makes her uniquely qualified to oversee spill claims.

Judicial Conflicts

Heyburn asked whether judicial conflicts should compel the panel to bring in a judge from outside the Gulf states.

“The entire country has watched this disaster 24/7,” said Elizabeth Cabraser, a San Francisco-based lawyer pushing for the cases to be centralized in Mississippi. “They’ll be watching the litigation. This case requires a jurist above reproach.”

Lawsuits were filed by commercial fishing interests, beachfront-property owners and environmentalists claiming harm from drifting oil. The parties have suggested courts in all five states as a proper venue for the cases.

Different types of spill-related cases may be consolidated. One group may involve economic loss and environmental damage claims filed in federal courts in a dozen states. Most of those cases also name as defendants Transocean Ltd., Halliburton Energy Services and Cameron International Corp.

The other concentration of cases may include securities lawsuits by BP investors claiming company executives hid the rig’s safety problems and committed missteps that led to the spill.

Impact on Shares

Plaintiffs in those cases allege the failure to disclose problems with the well artificially inflated BP’s stock price. BP’s shares have fallen 36 percent since the rig exploded in April.

The seven-judge panel, created in 1968, meets periodically in locations around the country to decide whether lawsuits in different federal districts have common factual questions that can be decided once and apply to all cases.

The process is designed to streamline the exchange of evidence and avoid duplication. Once pretrial proceedings are completed, the individual cases are sent back for trial in the courts where they were first filed.

The judges on the panel are appointed by the chief justice of the U.S. Supreme Court.

The main MDL case is In Re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, MDL Docket No. 2179.

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