A Fifth Circuit Court of Appeals in New Orleans has granted BP plc (NYSE:BP) a temporary stay in paying claims arising from the 2010 Gulf oil spill. BP brought the case to the appeals court because it wanted claims in the $9.2 billion settlement to be reviewed for causation before the payment process took place. The three-judge court ruled 2-1 in favor of BP, and also remanded the case back to the District Court Judge Carl Barbier to review interpretations.
This decision, handed down on Monday, is in stark contrast to the opinion issued on November 15 by Judge Barbier. The issue before Barbier, and what was being appealed to the Fifth Circuit, was that Patrick Juneau, the settlement administrator, did not grant enough scrutiny to claims before awarding payments. BP asked that only claims ”traceable to the oil spill” be paid.
BP alleged that Juneau was ”systematically disregarding” the agreement, and “rewriting” the terms through his actions. Barbier found this a ridiculous notion, writing “if anyone is attempting to rewrite or disregard the unambiguous terms of the Settlement Agreement, it is counsel for BP.”
Barbier described BP’s attempt to amend the payment schedule as “disappointing” and denied the motion. “Frankly, it is surprising that the same counsel who represented BP during the settlement negotiations participated in drafting the final Settlement Agreement, and then strenuously advocated for approval of the settlement before this Court, now come to this Court and the Fifth Circuit and contradict everything they have previously done or said on this issue,” Barbier wrote in his opinion.
BP wants a definitive link between a claimants injuries, and the Deepwater Horizon spill of 2010. The scheme as it currently operates can award false claimants money, according to BP. Bloomberg reports that in the 2-1 decision reached by the appellate court Monday, the court believes that, “The district court erred by not considering the arguments on causation.”
Geoff Morrell, a spokesperson for BP, said in an email that the decision is proof that the settlement had “veered off course.” “If properly implemented by the district court,” Morrell continued, ”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.”
The Independent, a UK-based newspaper, reports that lawyers in the Gulf region advertised “there is no need to provide proof that BP caused your loss” to file a claim against the company. An estimated $500 million has been paid to firms that have no link to the oil spill. In its third-quarter earnings report, BP explained that the trust fund established for the Gulf oil spill contained $20 billion; as of September 30, $19.305 billion worth of charges and reimbursement costs had been recognized. ”
“Thus, a further $695 million could be charged in subsequent periods for items covered by the trust fund with no net impact on the income statement,” the report reads. Beyond that, claims “would be expensed to the income statement.” BP did not publish estimates of these charges, and earlier in the report said the payments were subject to “significant uncertainty,” and ultimately “could have a material impact on our consolidated financial position.” The Deepwater Horizon accident began on April 20, 2010. The fire burned for 36 hours, and eleven people lost their lives.
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