Court Rejects BP’s ‘Efforts to Rewrite’ Oil Spill History

U.S. District Judge Carl Barbier in New Orleans ruled Monday that businesses harmed by the 2012 Deepwater Horizon oil spill in the Gulf of Mexico should not be required to prove their economic losses were caused by the disaster, as BP (NYSE:BP) had requested. Steve Herman and Jim Roy, leaders of a group of plaintiffs’ lawyers overseeing the court-determined settlement fund, wrote in an email to Bloomberg that, “Business owners across the Gulf should be pleased that Judge Barbier once again rejected BP’s efforts to rewrite history and the settlement.”

The history of the settlement is a complex one. In May 2012, BP and the lawyers for the individuals and businesses harmed by the Deepwater Horizon oil spill reached an accord to settled the class action lawsuit. Instead of the $20-billion fund created by BP, the agreement called for the court to administer the compensation payments to those Gulf Coast residents or businesses who endured the months-long oil leak that befouled beaches, killed wildlife, and disrupted the economies of their states.

At that time, the company — which had already paid more than $6 billion from the original fund to about 200,000 individuals and businesses — estimated that payouts related to plaintiffs’ claims would cost just $7.8 billion. But, by late October, that estimate had been increased to $9.2 billion, and by the calculations of court-appointed administrator Patrick Juneau, approximately $3.81 billion has been paid out to 40,371 spill claimants.

BP’s Gulf of Mexico disaster was the worst offshore spill in U.S. history. It began on April 20, 2010, when an undersea well exploded 50 miles off the Louisiana coast, killing 11 workers and spewing millions of barrels of crude oil into the ocean. Marshes, fisheries, and beaches stretching from Louisiana to Florida were polluted, harming local tourism and fishing. The oil producer has acknowledge responsibility for the oil spill, spending more than $25 billion on cleaning up the marshes, fisheries, and beaches along the coast and compensating victims. Furthermore, that spending is just the tip of the company’s spill-bill iceberg; $42.4 billion has been spent or earmarked for spending on clean-up, compensation, fines, and other costs. BP even sold assets that generated $5 billion of cash flow a year to pay those expenses.

However, the biggest driver of skyrocketing spill bill costs is victim compensation. When the restitution payments started to overshoot its original estimate, BP began to contest the manner in which restitution payments were awarded, arguing that court-appointed fund administrator Patrick Juneau has compensated “fictitious and inflated losses.”

As a result, the sideshow of BP’s civil trial in the district court in New Orleans has been the company’s efforts to convince Judge Barbier to tighten the standards by which the court-appointed administrator Patrick Juneau evaluated compensation claims made by the individuals and business harmed by the 2010 Gulf of Mexico oil spill. For months the company petitioned the court to freeze payouts while the administrator’s payout formula was reexamined, but for months, Barbier denied that request. However, at the beginning of October, the Fifth U.S. Circuit Court of Appeals in New Orleans directed Barbier, who had approved of Juneau’s evaluation methods back in March, to halt payments on claims that do not meet stricter standards, and issued an injunction, preventing further compensation from being paid until the terms of the settlement were tightened.

According to Geoff Morrell, BP’s spokesperson, that decision underscored that that the implementation of the settlement had “veered off course” again. “If properly implemented by the district court, the Fifth Circuit’s order will help return the settlement to its original, intended and lawful function — the compensation of claimants who sustained actual losses that are traceable to the Deepwater Horizon accident,” he wrote in an email to Bloomberg.

Barbier reexamined Juneau’s methodology, and authored a 38-page decision on his findings, the text of which was acquired by Reuters. He concluded that changes were needed, directing the court administrator to “implement an appropriate protocol or policy for handling business economic loss claims in which the claimant’s financial records do not match revenue with corresponding variable expenses.” Yet, the judge decided that businesses in certain geographical regions should not have to prove that those losses were caused by the disaster if their losses follow a specific pattern, as BP agreed when the settlement was inked. “BP’s current position is not only clearly inconsistent with its previous position, it directly contradicts what it has told this court regarding causation” of damages, Barbier wrote in the ruling.

In response, Morrell wrote in an email to Reuters that, “Awarding money to claimants with losses that were not caused by the spill is contrary to the language of the settlement and violates established principles of class action law. BP intends to seek appropriate appellate remedies to correct this error.”

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