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BP Acted With Gross Negligence in Spill, Plaintiffs Say

June 22 (Bloomberg) -- BP Plc and its contractors should be found grossly negligent for their actions in the April 2010 blowout of the Macondo well and the subsequent Gulf of Mexico oil spill, plaintiffs’ lawyers told a judge.

U.S. District Judge Carl Barbier will determine whether the London-based company or the contractors, Transocean Ltd. and Halliburton Co., acted with willful or wanton misconduct or reckless indifference, the legal requirement for establishing gross negligence. A ruling against BP could subject it to billions of dollars more in damages.

Barbier set a deadline for yesterday for BP and other parties to file proposed findings of fact and conclusions of law, two months after a trial on fault ended in federal court in New Orleans. Lawyers for BP, Houston-based Halliburton and Vernier, Switzerland-based Transocean filed their conclusions, asking Barbier to reject findings of gross negligence against them. The U.S. has filed, seeking a finding of gross negligence against BP.

“BP’s employees engaged in willful and wanton conduct and such willful and wanton conduct was a substantial contributing cause of the blowout, explosion, fire, and initiation of the discharge of oil,” lawyers for the private party plaintiffs and the states of Louisiana and Alabama said in court papers.

Each Defendant

This conduct by BP employees “was the result of corporate policy and/or was otherwise known to, approved by, and/or ratified by corporate officials with policymaking authority,” they said. The plaintiffs lodged identical claims against Transocean and Halliburton.

Each defendant acted with gross negligence, they claimed.

The “case for punitive damages has been established against each of the defendants under the most stringent and exacting standards,” the lawyers said.

U.S. Justice Department lawyers also asked Barbier yesterday to find that BP acted with gross negligence and willful misconduct. BP failed to take any action when pre-blast testing showed a heightened risk of a blowout on the well, the U.S. said.

“The facts related to the negative pressure test demonstrate willful misconduct,” according to the filing. The company also committed gross negligence through other acts and omissions, including “failures in the process safety management system,” the U.S. said.

Maximum Fine

A finding by Barbier that BP acted with gross negligence increases the company’s potential maximum fine for violations of the federal Clean Water Act to $17 billion and leaves it vulnerable to unspecified punitive damages by claimants who weren’t part of the $8.5 billion settlement BP reached with most private-party plaintiffs last year.

Transocean, owner of the Deepwater Horizon drilling rig, and Halliburton, which provided cementing services for the project, could be held liable for punitive damages for all plaintiffs if the companies are found to have handled their duties in a grossly negligent manner.

The contractors aren’t facing compensatory damages, after Barbier ruled last year that the project contract required BP to indemnify them from such costs. Plaintiffs’ lawyers asked Barbier to consider whether this indemnification, if gross negligence or reckless conduct is found, would be rendered invalid “as a matter of public policy.”

Multiple Parties

The Deepwater Horizon “blowout resulted from a series of independent acts and omissions by independent individuals that, when combined, had the effect of overcoming state-of-the-art safety systems,” BP told Barbier in the company’s filing.

Maximum Clean Water Act fines and punitive damages “are available only where a particular defendant, with a culpable mental state, engaged in extreme and egregious misconduct that caused the relevant injury,” lawyers for BP said.

“BP’s conduct does not remotely approach that demanding standard,” they said. “This was a terrible and consequential accident, but it was still an accident.”

The blowout of BP’s deep-water Macondo well off the coast of Louisiana killed 11 people and sent more than 4 million barrels of oil spewing into the Gulf of Mexico. The accident sparked hundreds of lawsuits against BP, Transocean and Halliburton.

Transocean denied that any of its actions met the standard for a finding of gross negligence or willful misconduct.

Behind Schedule

“The evidence cannot support any finding that the crew acted with reckless indifference to danger,” company lawyers said in court papers.

BP was at fault for multiple decisions that led to the blowout, including misinterpretation of the pre-blast negative pressure test, Transocean said. BP also mishandled the cement job aimed at sealing the well to prevent leaks of hydrocarbons, Transocean said.

Halliburton asked Barbier to find as a matter of law that the company owed no damages to any plaintiffs or co-defendants. Conduct by Halliburton’s HESI unit “was not negligent, much less grossly negligent and certainly did not rise to the level of willful misconduct,” company lawyers said in the filings.

“Neither plaintiffs nor BP have provided any evidence that HESI authorized or ratified any alleged malicious actions by its employees in such a manner to render it liable for punitive damages,” they said.

Over Budget

Lawyers for the U.S. and oil-spill victims contended in the nonjury trial that BP was over budget and behind schedule, prompting it to cut corners and ignore safety tests showing the well was unstable. BP was $60 million over budget and 54 days behind schedule on the well by April 9, 2010, 11 days before the blowout, the plaintiffs’ lawyers said in yesterday’s filing.

They also alleged that Halliburton’s cement job was defective and that Transocean employees made a series of missteps on the rig, including disabling safety systems, failing to properly maintain the installation and not providing adequate training for its crew.

BP claimed during the trial that Transocean failed to maintain the drilling rig and Halliburton provided defective cementing services. Transocean and Halliburton pointed fingers back at BP.

The plaintiffs said yesterday that BP’s cost-cutting led to “reckless decisions” that increased risks.

Reckless Decisions

“The ‘Every Dollar Counts’ culture driven from top management directly affected the reckless decisions that were made to disregard known risks in order to save the company time and money,” the lawyers said.

The plaintiffs also focused on the negative pressure test taken before the blast.

“BP engineers had actual knowledge that the negative pressure test was questionable at best, and yet they proceeded with conscious disregard to the significant risk of foreseeable danger,” according to the filing.

The test monitors the well for any increase in pressure or flow of oil or gas up the well. Any pressure increase or fluid flow is an indication that the well isn’t secure and that oil and natural gas could be entering the well.

The U.S. and plaintiffs suing over the incident contend that misinterpretation of this test as successful when it wasn’t was a key cause of the explosion, blaming BP and Transocean for the failure.

Second Phase

Barbier has said he may not issue a judgment on fault and gross negligence before a scheduled second phase of the trial, set for Sept. 16. That phase will concern the size of the spill and the efforts to contain it. Damages trials would follow.

BP’s $8.5 billion settlement last year didn’t cover claims of financial institutions, casinos, private plaintiffs in parts of Florida and Texas, and residents and businesses claiming harm from the deep-water drilling moratorium imposed after the spill.

The settlement also excluded federal government claims and those of Gulf Coast states Louisiana and Alabama, as well as lawsuits against other defendants.

Hundreds of new lawsuits were filed this year by individuals, businesses and governments around the third-year anniversary of the event, including claims by Texas, Florida and Mississippi.

Barbier on April 24 ordered the parties to file post-trial briefs outlining their positions on what conduct would meet the standard of gross negligence.

Address Questions

The judge urged lawyers involved in the litigation to address questions including the standard for such a finding under federal pollution laws and whether gross negligence could be based “one single act or omission” or an accumulation or series of such acts or omissions.

“Is it sufficient if only employees on the rig are guilty of such conduct, or is it necessary to find that this level of conduct was attributable to shore-based or management-level employees?” Barbier asked. He also asked whether a finding of gross negligence was precluded if a party complied with regulations or acted in accord with industry standards.

The 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 reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

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

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