Judge in BP Spill Case Sends Distress Signal to Supreme Court

Photograph by Chris Ratcliffe/Bloomberg

Judge Edith Brown Clement is waving her arms, jumping up and down—heck, doing everything but setting her office furniture on fire—to draw the attention of the U.S. Supreme Court to the zany goings on in New Orleans concerning BP and its oil spill liability.

Clement, who sits on the federal court of appeals for the Fifth Circuit, wants the justices to intervene in a portion of the never-ending litigation over how much the British-based energy giant has to pay to make amends for the enormous April 2010 offshore well disaster that killed 11 rig workers and sullied the Gulf of Mexico. She probably won’t succeed, but her exertions are both colorful and edifying.

First, the news: BP has failed, again, to persuade Clement’s court to set aside a 2012 settlement in which the oil company agreed to compensate certain classes of business and economic claims based on a phonebook-thick set of formulas arrived at after extended negotiations with New Orleans-area plaintiffs’ attorneys. All along, the settlement had contemplated billions of dollars in payments. Once BP saw that the total would far exceed its initial expectations, however, the company objected that the claims administrator was doling out cash regardless of whether alleged harm had anything to do with the Gulf spill. The administrator and plaintiffs’ lawyers said, in so many words: Too bad, that was the deal BP struck to prevent a trial. The U.S. district judge overseeing the case ruled against BP, as did a three-judge panel of the Fifth Circuit.

On Monday, the full 13-judge appeals court refused to reconsider the panel’s decision. If left undisturbed, that refusal could cost BP billions of additional dollars in claims liability. (The company has already paid out more than $26 billion in cleanup costs and damage claims.) In a dissent from the full appeals court’s rebuff of BP, Clement implicitly—but none too subtly— encouraged the company to ask for Supreme Court review. And she urged the justices to grant that review, which is entirely discretionary.

“The class of people who will recover from this settlement continues to include significant numbers of people whose losses, if any, were not caused by BP,” Clement wrote. “Our courts’ decisions would allow payments to ‘victims’ such as a wireless phone company store that burned down and a RV park owner that was foreclosed on before the spill.” Those are real examples she’s pointing to, not law school exam hypotheticals.

“These are certainly absurd results,” Clement continued. “And despite our colleagues’ continued efforts to shift the blame for these absurdities to BP’s lawyers, it remains the fact that we are party to this fraud.” Clement is willing to acknowledge that in its desperation to avoid a trial, the company’s attorneys agreed to a loosey-goosey, uncapped settlement. Maybe those lawyers deserve to be fired. But having created an opportunity for a plaintiffs’ bar feeding frenzy, BP should not be punished by having its corporate treasury ransacked with the approval of the federal judiciary, she added.

As a technical basis for the Supreme Court to weigh in, Clement pointed to the procedural requirements of “certifying” a class action for settlement. She argued that the class of claimants cannot stand if it includes members who suffered absolutely no harm traceable to BP. She further asserted that federal courts of appeal have declared conflicting methods for sorting out a mess such as this, and therefore the justices should use their discretionary authority to clarify the rules and make sure that RV park owners can’t recover fire damages because they happened to occur roughly around the time of an oil spill.

With this argument, Clement, a savvy and experienced jurist, is playing a chord that’s music to the Supreme Court’s ears. In deciding which civil cases it will accept for review, the high court generally feels obliged to resolve “circuit conflicts”—those situations where the intermediate-level federal courts have issued contradictory rulings.

Will this work? BP would have to file a so-called petition for certiorari. Given the company’s insistence that, having agreed to settle, it was rewarded by being taken to the cleaners, a petition seems certain. Will the Supreme Court take the case? Maybe, but probably not.

The intricate, highly specific nature of what boils down to a contract dispute would ordinarily discourage the justices from using this case as a vehicle for straightening out the standards for a class action settlement. On the other hand, there’s very little about the spill litigation that has been typical. At least some of the justices may look closely at what’s got Judge Clement so upset.

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