BP’s Legal Dance Continues into 2014

courtroom

BP’s (NYSE:B) legal battles march on. A federal appellate court in New Orleans has cleared away a legal hurdle for the thousands of workers and Gulf Coast residents to receive compensation for injuries or illness sustained during the cleanup of the BP’s 2010 oil spill. The 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. Now, not only has BP become embroiled in how the court-appointed administration has conducted the compensation process of those business and individuals that sustained losses related to the spill, but compensation for those workers and coastal residents who said they were injured or sickened during the spill cleanup have also been mired in legal wrangling.

The 5th U.S. Circuit Court of Appeals ruled early this week to allow BP to move forward with awarding the medical benefits portion of its $9.2-billion claims settlement with Gulf Coast residents. In January 2013, a federal judge gave final approval to a settlement between BP and as many as 100,000 plaintiffs, covering the cleanup workers and residents who developed respiratory problems, skin rashes and neurological issues after the exposure to oil. The settlement was then appealed, but objections by some members of the settlement class were withdrawn over the past year, allowing the appeal to be dropped.

Now, the medical settlement program can be implemented; cash payments plus comprehensive medical evaluations once every three years for 21 years will provided to the claimants. In addition, procedures have been established, under which covered workers or residents who develop further spill-related illnesses in the future can file suit for compensatory damages.

Attorneys Stephen Herman and James Roy, who represented the plaintiffs, said in a joint statement to the Associated Press that, “It’s been a long four years, but now hundreds of thousands of people will finally get the medical care and compensation they need.”

For BP, the problem is the potential monetary value of the settlement has yet to be determined as it is unclear how many people could be eligible. According to the Associated Press, the plaintiffs could number as many as 200,000 — a figure greater than earlier estimates.

Meanwhile, BP is concerned that court-appointed administrator Patrick Juneau has compensated “fictitious and inflated losses.” On Friday, a divided panel of the 5th Circuit Court of Appeals upheld certification of the settlement class, meaning that BP’s argument that the class certification must be reversed if the the class includes uninjured claimants was deemed invalid. This argument has been ongoing for months.

At the beginning of October, the 5th U.S. Circuit Court of Appeals in New Orleans directed District Court Judge Carl 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. In particular, Circuit Judge Edith Brown Clement wrote in her opinion that the “district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges.” Furthermore, “if the administrator is interpreting the settlement to include such claimants, the settlement is unlawful,” she added.

However, Barbier issued his December 24 order that ruled businesses in certain geographical regions should not have to prove that those losses were caused by the disaster if their financial records follow a specific pattern, as BP agreed when the settlement was first inked in May 2012. Then BP began to argue that individual fraudulent payments undermined the validity of the overall settlement. But on January 10, two of the three 5th Circuit judges rejected BP’s argument that individual that claim, with Judge W. Eugene Davis writing in his opinion that it was a “nonsensical” argument.

Also on BP’s agenda is a shareholder lawsuit dating back to a 2006 spill in Alaska, in which 200,000 gallons of oil leaked from a BP pipeline onto the Alaskan tundra at Prudhoe Bay. The ruling from the 9th U.S. Circuit Court of Appeals in San Francisco will allow shareholders to bring securities fraud claims against BP after a lower court judge dropped the charges. At issue are explanations made by the company after the disaster. “Despite BP’s public statements suggesting that the spill was an anomaly, a second leak was discovered five months later in a different BP oil transit line in the region,” the court wrote in the opinion obtained by Reuters. “As a result, the company temporarily shut down regional operations.” The appellate court found that the “facts alleged in the complaint support the conclusion that BP had been aware of corrosive conditions for over a decade, and yet chose not to address them.”

BP eventually pleaded guilty to a misdemeanor for negligent discharge of oil, paid a $20 million fine to settle state and federal criminal claims, and in 2008, a group of shareholders filed a proposal against the company, alleging that the company had knowingly made false statements about the events.

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