The state of Mississippi is asking that a portion of the proposed $7.8 billion settlement with BP PLC in the Deepwater Horizon litigation be declared null and void, because it excludes more than 200,000 people and businesses that illegally settled claims under an administrative process that forced them to waive all future economic damages.

“No Settlement or Class Definition that incorporates the illegal, illegally-obtained and unconscionable GCCF Releases, to exclude 200,000 claimants from the settlement benefits, can be deemed fair, adequate or reasonable,” Mississippi Attorney General Jim Hood said in a prepared statement on April 26. He referred to the Gulf Coast Claims Facility, the administrative process set up with $40 billion from BP.

U.S. District Judge Carl Barbier heard arguments for and against the settlement at a preliminary approval hearing in New Orleans on April 25, but did not issue a ruling. Mississippi’s concerns followed similar objections by the state of Florida. Halliburton Energy Services Inc., the American Shrimp Processors Association and two Georgia gas stations also have filed objections.

The claims facility, administered by Kenneth Feinberg, managing partner of Washington’s Feinberg Rozen, provided for emergency relief only for damages incurred since the rig explosion on April 20, 2010, and for a final payment of damages. Claimants who took the final payments waived their right to sue BP and, in most cases, got lump sums of $5,000 for individuals and $25,000 for businesses, Hood said in court documents filed on April 25 and April 26.

Many claimants, faced with financial ruin and lacking any other choice, signed releases, Hood wrote.

“This coercion of claimants, already in significant financial distress, provides strong evidence that the GCCF Releases are illegally-obtained, void and unenforceable, because the claimants who executed them, many of whom were of limited means and most of whom were unrepresented by counsel, were subjected to improper economic duress from BP’s agent, Mr. Feinberg,” he wrote.

About 200,000 individuals and entities that waived their right to future damages under the GCCF are being illegally excluded from the BP settlement, Hood wrote. He sought relief for about 2,600 claimants who were identified in an executive summary of a recent audit, conducted by BDO Consulting for the Department of Justice, as having their claims improperly denied under the GCCF, and another 7,300 with significant errors.

Those claimants should be allowed to have their claims reevaluated by Patrick Juneau of Juneau David in Lafayette, La., appointed special master under a new court-supervised claims process in the settlement, he wrote.

“Before the State of Mississippi can accurately assess whether the proposed Settlement is fair, adequate and reasonable, the State respectfully requests that the Court rule on the pending motions and requests that relate to the illegal and illegally-obtained GCCF Releases,” he wrote.

Hood is asking that those portions of the settlement that are illegal be nullified and severed.

Specifically, he wrote, the GCCF releases violate federal law by going against Congress’s intent in passing the Oil Pollution Act of 1990, which provides economic damages of up to $75 million to individuals and businesses harmed by an oil spill. Congress passed amendments in 1996 under which all claim payments under act are considered interim, not final, he wrote.

The releases also allegedly violate state contract law, because they released BP from liability and future and punitive damages and forced claimants to sign releases under coercion.

Unlike Louisiana and Alabama, Mississippi and Florida did not file lawsuits over the Deepwater Horizon oil spill. Instead, they negotiated with Feinberg on processing claims brought by residents in those states.

Amanda Bronstad can be contacted at [email protected].