The administrator doling out the $7.8 billion settlement to individuals and businesses harmed by the Deepwater Horizon oil spill has responded sharply to BP PLC’s effort to block him from awarding what the company insists could amount to billions of dollars in "absurd windfalls."
BP Exploration & Production Inc. and BP America Production Co., U.S. subsidiaries of BP PLC, moved on March 15 for a preliminary injunction that would halt payment on some business claims for allegedly "fictitious losses."
In response, Patrick Juneau, the claims administrator for the fund, insisted that he enjoys partial judicial immunity from BP’s allegations and that, even if he didn’t, he has no authority to alter the calculations outlined in the settlement and subject to a March 5 court order, according to documents filed on April 1.
"The Claims Administrator was not the author of the Settlement Agreement, did not devise the criteria to be used in deciding whether a claimant does or does not have losses attributable to the Oil Spill, and did not devise the compensation formula used to determine the award amounts," wrote Juneau’s attorney, Gina Palermo of Stanley, Reuter, Ross, Thornton & Alford in New Orleans. "All of those determinations were negotiated by the Parties and are recorded in the terms of the Settlement Agreement."
Nick Gagliano, a spokesman for the Deepwater Horizon Claims Administration, declined to comment. Juneau previously issued a statement defending the claims process as "consistent and transparent." All claims "have been processed consistent with the federal court order dated March 5, 2013," he added. "We will continue to process all claims until further instructed otherwise by the court."
Lawyers for the plaintiffs have backed Juneau, arguing that BP in effect is asking the claims administrator to violate the terms of the settlement.
"It is extremely disingenuous and misleading for BP to contend that claims for compensation that BP agreed would be due as a result of the Spill are somehow ‘fictitious’ based on nothing more than cold accounting records," Stephen Herman of Herman Herman Katz & Cotlar, and James Roy of Domengeaux, Wright, Roy & Edwards, co-lead counsel on the plaintiffs’ steering committee, wrote in court documents. "The uncapped nature of the potential payments was a seminal feature of the Settlement Agreement. No value was placed on the settlement for good reason, namely, the exceeding difficulty in determining the damage caused by the oil spill on a macro level."
BP spokesman Scott Dean, in an emailed statement to The National Law Journal, wrote: "As noted in our court filings, the Claims Administrator’s misinterpretation of the Settlement Agreement inappropriately and unfairly compensates numerous businesses for wholly non-existent losses. Such a result is completely at odds with the parties’ stated intent in reaching a settlement."
U.S. District Judge Carl Barbier in New Orleans plans to take up the issue during a hearing on April 5.
The dispute centers on BP’s settlement with individuals and businesses claiming economic losses caused by the April 20, 2010, spill. Juneau began distributing money on June 4, according to court documents.
Barbier approved the deal on December 20, but BP already had begun to question how payments to certain businesses were being calculated. BP has asserted that Juneau, with the support of the plaintiffs’ steering committee, has calculated lost profits using a formula that violates the terms of the settlement agreement and approved payments to businesses with "non-existent losses."
On January 15, adopting the interpretation of and responding to a request by the plaintiffs’ steering committee, Juneau issued decisions addressing the calculation of lost business profits. Under the settlement, a business must designate three months in 2010 after the spill occurred and compare those financials to a comparable "benchmark" period.
On March 5, Barbier affirmed the administrator’s decision.
"The Court adopts Class Counsel’s interpretation as it is most in line with the rest of the Settlement Agreement," he wrote. He acknowledged that some of the claims might not equate to actual losses, the consequences of which "BP accepted when it decided to buy peace through a global, class-wide resolution."
Juneau, whom the BP entities personally sued over the same allegations, argued he is entitled to judicial immunity as a claims administrator and settlement trustee. He is, he said, following court orders; to do otherwise would place him in contempt of the March 5 ruling.
Lawyers for the plaintiffs, intervening in the matter, argued that BP’s latest move represents its third attempt to alter the calculation of business claims. Just before the settlement was approved, BP argued for a revised calculation but was rebuffed by Juneau on January 15. BP appealed that decision to Barbier, who on January 30 sided with the claims administrator. BP moved for reconsideration, which Barbier rejected in his March 5 order.
"BP’s Motions are little more than a thinly-veiled challenge to the Court’s March 5th Order," wrote Herman and Roy. "By losing on the merits twice before, BP cannot show that it is likely to succeed on the merits."
BP’s injunction, if approved, would apply only to claims that use the administrator’s decisions in calculating losses, or to those in certain industries, but would not affect the distribution of claims to seafood businesses, individuals with economic or property damages, subsistence farmers, or boat owners who assisted in the cleanup.
Lawyers for businesses potentially affected by BP’s injunction immediately lashed out at the oil giant.
Alabama Attorney General Luther Strange issued a formal statement on March 21: "This challenge is not surprising; it is consistent with BP’s past behavior. At the same time BP lauds its efforts for restoring the Gulf in the media, it blames others in court for its own mistakes to avoid responsibility for its conduct. As usual, BP is wrong. If BP underestimated how much it would owe under the terms of its agreement, that is BP’s problem—not the citizens’. BP cannot undo a settlement it negotiated and signed, just to avoid its consequences. The courts should not allow it."
Michael Ziegler of The Law Office of Michael A. Ziegler in Clearwater, Fla., who represents local businesses with claims against BP, doubted any injunction would be granted. But he acknowledged that the existing method for calculating losses could lead to larger payments for BP, which so far has paid a fraction of the $20 billion it set aside soon after the oil spill.
"Yeah, there probably is a certain degree of over-inclusion, but I feel that at that price BP has gotten the benefit of saving themselves a tremendous amount of litigation costs," Ziegler said. "The system is really intended to be a little bit over-inclusive, and that’s a good thing. It’s better to ensure that everyone that was affected, and maybe a little bit more, are protected or reimbursed through the claims process than to not cover enough claimants."
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