A federal judge overseeing the $9.6 billion Deepwater Horizon settlement with BP PLC has given the parties until Wednesday to suggest the best way to halt payments on some claims as required by a recent federal appeals decision.
The U.S. Court of Appeals for the Fifth Circuit found on October 2 that problems with the calculation of oil spill claims raised by BP merited a preliminary injunction on those claims. The split ruling reversed two earlier orders by U.S. District Judge Carl Barbier in New Orleans upholding the claims process and refusing BP an injunction.
After the Fifth Circuit decision, Barbier immediately ordered that claims in which “the Claims Administrator determines that the matching of revenues and expenses is an issue” be suspended immediately. He also sought input about how best to interpret the Fifth Circuit’s request for a “narrowly tailored” preliminary injunction; he ordered briefing by Wednesday and scheduled a hearing for Friday.
Barbier added, however, that all other claims should proceed. “Staying the processing or payment of all…claims would be overly broad and unnecessary as applied to those claims for which matching of revenues and expenses is not an issue,” he wrote.
The settlement resolved economic damages claims by individuals and businesses harmed by the 2010 Deepwater Horizon diaster. Soon after its approval, BP began accusing some businesses of making claims for “fictitious losses” to obtain “windfall” payments totaling hundreds of millions of dollars.
BP took aim at the settlement’s profits calculation, under which businesses submitted revenues for a period of three months following the spill and contrasted them to revenues during a comparable period—typically, the same three months of a previous year. BP argued that the claims administrator should have matched anticipated expenses and revenues, rather than compare actual cash received during each period, given that some industries had fluctuating cash flows.
The Fifth Circuit agreed, concluding that the “interpretation urged by the Administrator is completely disconnected from any reasonable understanding of calculation of damages.”
The majority opinion, written by Circuit Judge Edith Brown Clement, called for an injunction “tailored so that those who experienced actual injury traceable to loss from the Deepwater Horizon accident continue to receive recovery but those who did not do not receive their payments until this case is fully heard and decided.”
In a footnote, Clement cited a BP proposal to stop payments to claimants in the agriculture, construction, professional services, real estate, wholesale trade, manufacturing, and retail trade industries.
The decision “affirms what BP has been saying since the beginning: claimants should not be paid for fictitious or wholly non-existent losses,” BP responded in a written statement. “We are gratified that the systematic payment of such claims by the claims administrator must now come to an end.”
Claims Administrator Patrick Juneau said the decision addressed an “important issue,” noting that “it is my job to implement this Settlement Agreement as directed by the Court. This is what we will do.”
In a dissent, Circuit Judge James Dennis, who opposed an injunction, called the majority opinion “erroneous and quite unfortunate for everyone concerned in this case.” He criticized Clement’s conclusions addressing the legal standing of claimants that didn’t suffer economic losses. That, he wrote, was not at issue in this appeal and would be addressed in a separate proceeding scheduled for oral argument on November 4. In that appeal, some objectors have challenged the settlement on standing ground–specifically, that the agreement unfairly compensated some businesses over others, including those with no economic damages from the oil spill.
The Fifth Circuit has asked the objectors and BP in that case to submit briefing by Friday on the implications of its October 2 decision. The plaintiffs’ steering committee, which is defending the settlement, has until October 18 to address that matter.
The Fifth Circuit remanded a separate case in which four oil-spill cleanup workers challenged certification of a class with medical claims resolved through the settlement. In its September 30 order, the panel, without oral argument, remanded the case temporarily to address whether the individuals appealing the settlement had legal standing. U.S. Magistrate Judge Sally Shushan has ordered the plaintiffs’ steering committee to submit a report on that issue by November 1.
Contact Amanda Bronstad at firstname.lastname@example.org.