BP Oil Spill Update

On April 18, 2012, BP Exploration and Production Inc. and BP America Production Company (collectively “BP”) entered into an economic and property damages class action settlement with the Plaintiffs’ Steering Committee in the multidistrict litigation pending in New Orleans. This settlement was guaranteed by both BP Corporation North America Inc. and BP p.l.c.

The class was composed of individuals and certain businesses that suffered economic losses in designated areas of the affected states. The areas varied by state with the entirety of Alabama, Mississippi, and Louisiana included but only Gulf coastal counties in Florida and Texas.

Excluded from the class were financial institutions and funds, gaming entities, casinos, insurance entities, oil and gas industry entities, Department of Defense contractors, real estate developers, and BP jobbers and dealers.

District Judge Carl Barbier appointed Patrick Juneau to administer the claims process established by the settlement documents. For many months, Mr. Juneau and his team received, analyzed, processed, and paid out more than $4.7 billion to claimants he determined were eligible under the formulae set out in the settlement agreement. A substantial amount of the payments were to clients of this firm for which our team prepared and submitted claims.

Beginning in January, 2013, BP started challenging the settlement and the manner in which Mr. Juneau interpreted the formulae in the settlement agreement. Since this time, BP has engaged in a public relations campaign in the press largely stating their opinion on these issues.

The challenges are based primarily on arguments that: (1) Mr. Juneau was improperly paying claims that were not supported by a matching of revenues and expenses (a purely cash accounting method avoided by accrual accounting), (2) implicit in the settlement agreement is a requirement to demonstrate a causal connection between losses and the spill, and (3) the settlement was unconstitutional because payments were being made to claimants that had not suffered actual losses caused by the spill. These three arguments are largely different ways of saying the same thing but resulted in separate orders that were appealed to two separate panels of the Fifth Circuit Court of Appeals.

The payment of claims was enjoined on October 3, 2013, and will remain enjoined until resolution of the appeals.

The first panel considered the matching issue and sent the matter back to Judge Barbier to build a more complete record and address certain issues in the first instance, which he did and found no “matching” problem that could not be resolved by Mr. Juneau. The matter returned to the first panel, and a final ruling has not issued.

In the second appeal, directed to BP’s assertion that the class should be decertified because of the causal connection issue, the panel rejected BP’s arguments and affirmed certification. BP has sought en banc review, and the parties are to submit on February 6, 2014, briefs on their respective positions regarding whether en banc review should or should not be allowed.

It is anticipated that payments will remain enjoined until the appellate process is exhausted, which might include an effort by one side or the other to seek review by the U.S. Supreme Court.

However, pending claims are continuing to be analyzed by Mr. Juneau’s claims process—it is just final determinations and payments that are enjoined—and new claims are being accepted with a deadline of April 22, 2014, for members of the class to submit their claims. For further information, contact Carl Nelson.