BP Oil Spill Judge Tentatively Approves $7.8 Billion Pact

Gulf Oil Spill
Greenpeace worker Lindsey Allen collects samples of oil that washed up along the mouth of the Mississippi River near Venice, La., May 19, 2010. Oil from April 2010's Deepwater Horizon oil rig explosion in the Gulf of Mexico has started drifted ashore along the Louisiana coast. Photographer: Charlie Riedel/AP Photo

BP Plc and lawyers suing the company won preliminary approval of their proposed settlement of claims over the 2010 Gulf of Mexico oil spill.

BP in March agreed to pay an estimated $7.8 billion to resolve most private plaintiffs’ claims for economic loss, property damage and spill and cleanup-related injuries. The settlement establishes two separate classes, one for economic loss and the other for physical injuries related to the spill or the cleanup.

The proposed settlement is “fair, reasonable, adequate, entered in good faith, free of collusion, and within the range of possible judicial approval,” U.S. District Judge Carl Barbier, who has been overseeing the litigation, said in granting preliminary approval of the agreement yesterday.

Barbier set a fairness hearing where he will consider final settlement approval for Nov. 8. A trial on liability for the incident will be scheduled for Jan. 14, Louisiana Attorney General Buddy Caldwell said in an interview today after a closed-door hearing before Barbier.

Separately, U.S. Attorney General Eric Holder said yesterday that the blowout at the Macondo well that caused the worst U.S. offshore oil spill may lead to additional criminal charges. A former BP Plc engineer, Kurt Mix, was arrested on April 24 on charges of intentionally destroying evidence requested by the U.S. about the size of the spill.

Settlement Scope

The proposed settlement, reached March 2, days before a scheduled trial on liability for the 2010 spill, doesn’t cover federal government claims and those of Gulf Coast states Louisiana and Alabama. It also excludes 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.

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 moratorium, can continue to pursue their claims.

Plaintiffs “who opt out or who possess reserved claims will be able to pursue those claims effectively outside” the settlement under the terms of the agreement, Barbier said in yesterday’s order.

‘Starting Point’

Barbier said yesterday he considered objections to his initial approval of the accord and found they weren’t persuasive at this stage of his review of the settlement. “The court finds these objections do not warrant denial of preliminary approval,” the judge said.

Preliminary approval “is just a starting point, not an ending point,” Barbier said at an April 25 hearing on the agreement. Prospective claimants will receive notices of the settlement terms following his order.

BP and the Plaintiffs Steering Committee, a group of lawyers appointed by Barbier to handle the lawsuits, asked the judge to hold a Nov. 8 fairness hearing before granting final approval of the accord and to postpone any trial on liability until after the hearing.

BP has agreed to pay claimants before final approval of the settlement, Steve Herman, co-lead counsel in the PSC, said at the April 25 hearing.

Hundreds of Lawsuits

The blowout and explosion on the Deepwater Horizon drilling rig killed 11 workers and started millions of barrels of crude leaking into the Gulf. The accident prompted hundreds of lawsuits against London-based BP; Transocean Ltd., the Vernier, Switzerland-based owner and operator of the rig; and Halliburton Co., which provided cementing services.

The plaintiffs’ and government claims against BP’s contractors on the doomed Macondo well remain, and no new trial date has been set. A trial would cover federal and state government pollution claims, as well as cross-claims between BP and its partner companies in the Macondo site and rig.

Under the settlement, 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.

“We continue to believe that we have substantial legal arguments and defenses against any liability and that BP’s indemnity obligation protects us,” Halliburton spokeswoman Beverly Stafford said in an e-mail today. “Halliburton will strenuously object as appropriate at the trial and appellate levels to provisions and terms that adversely impact our position.”

Scott Dean, BP spokesman, declined to comment.

“We are pleased with the court’s decisions to date and continue to have the utmost confidence in the strength of our case,” Lou Colasuonno, a Transocean spokesman, said in an e-mail.

Wyn Hornbuckle, a Justice Department spokesman, said the government had no comment on the judge’s ruling.

Trust Fund

The proposed settlement between BP and the Plaintiffs Steering Committee will be paid out of a $20 billion trust set up to compensate spill victims. The trust has about $14 billion remaining.

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.

“There is no cap on the settlement,” plaintiffs’ attorney Joe Rice told Barbier at the April 25 hearing.

Multiple parties filed objections to the settlement or requests that Barbier delay preliminary approval.

Halliburton Objects

Halliburton objected “to the limited amount of time available to analyze the settlement agreements and files these preliminary objections,” Donald E. Godwin, a lawyer for the Houston-based company, said in court papers filed April 24. The proposed settlement was filed with the court April 18.

Halliburton also objected to the agreement because it assigns BP’s claims against the company to the plaintiffs lawyers and attempts to make Halliburton “liable in part for settlement payments,” Godwin said. The settlement also restricts Halliburton’s ability to settle claims, he said.

The American Shrimp Processors Association asked Barbier April 23 to delay preliminary approval of the settlement, calling it biased against some members of the shrimp industry. The accord treats shrimp harvesters and boat captains better than owners of docks and plants that receive the catch and prepare it for market, the organization said in court papers.

‘No Obvious Deficiencies’

“At this stage, the Settlement Agreement appears fair, has no obvious deficiencies, does not improperly grant preferential treatment to the Class Representatives or to segments of the Class, and does not grant excessive compensation to attorneys,” Barbier said in yesterday’s order.

“The comprehensive system of claims frameworks featured in the Settlement Agreement is the product of many months of intensive negotiation, provides for class recovery unlimited by any aggregate cap, does not constitute a limited fund to be divided among competing claimants (with the sole exception of the $2.3 billion Seafood Compensation Program, whose allocation was placed with a court-appointed neutral), and does not place class members in conflict or competition with each other,” he 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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