Battles over BP settlement could be nearing an end

Legal wrangling over BP’s multibillion-dollar settlement to resolve hundreds of thousands of claims for damages tied to the 2010 Deepwater Horizon disaster could be nearing the end of the line, some experts believe, after a federal appellate panel ruled last week that businesses did not have to prove the Gulf of Mexico oil spill directly caused their losses.

At the moment, though, payment of such business claims is still on hold while two separate legal challenges by BP work their way through the courts.

The 2012 settlement called for treating all claimants who live in a certain area along the Gulf Coast the same way if they could show a loss of income after the disaster, regardless of the reason for that loss. However, BP over the past year has vigorously contested this interpretation of the settlement, arguing in court filings and full-page ads in national newspapers that businesses should not be paid unless they can show the oil spill caused their losses.

By a 2-1 vote, the 5th U.S. Circuit Court of Appeals in New Orleans on March 3 upheld an earlier ruling by U.S. District Court Judge Carl Barbier, who is overseeing the Gulf oil-spill litigation. Barbier had ruled Dec. 24 that the settlement’s terms meant even unharmed plaintiffs could receive money. He said BP knew that when it agreed to the deal, the purpose of which was to avoid having to litigate each case individually.

“We conclude the settlement agreement does not require a claimant to submit evidence that the claim arose as a result of the oil spill,” Appeals Court Judge Leslie Southwick, who was appointed to the court by former President George W. Bush, wrote in the appellate panel’s March 3 ruling.

BP spokesman Geoff Morrell said the company believes the ruling “will improperly allow for the payment of losses with no connection to the spill. BP further believes that unless this problem is fully corrected, this settlement cannot be upheld under the law.”

The appeals court’s 10-page ruling faintly echoed a critique made by others: that the British oil giant has developed “buyer’s remorse” over the landmark settlement its attorneys once praised. “There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not,” Southwick wrote.

Judge James Dennis, who was nominated by former President Bill Clinton, concurred separately.

Judge Edith Brown Clement, who was also appointed by Bush, dissented, saying the settlement shouldn’t pay money to people who can’t prove their losses were caused by the spill.

The unfavorable ruling for BP has led some legal experts who have followed the oil-spill litigation to conclude the back-and-forth between the district and appellate courts may be winding down.

“I think they’re running out of options,” Edward Sherman, a law professor at Tulane University who studies complex litigation, said about the 5th Circuit ruling. “They’ll go ahead and certainly play out whatever option they have within the 5th Circuit and probably seek (a review by) the Supreme Court, but it becomes less and less likely that they’re going to be able to overturn it.”

In March 2013, a year after agreeing to the settlement, BP asked Barbier to issue an injunction blocking further payments on the grounds that claims administrators were misinterpreting the terms of the deal — specifically, the formula used for claimants to match revenue with expenses in showing post-spill losses. Barbier denied that request, ruling in April that BP had acknowledged that “class settlement payments do not always perfectly match economic losses in every instance.”

BP’s lawyers then went to the 5th Circuit, complaining to a three-judge panel in July that the settlement program was paying out “fictitious, exaggerated and excessive awards.”

This is not the only time BP has challenged the settlement program. The company last year asked the 5th Circuit to throw out the entire settlement it once had lauded, arguing at that point that the “agreement can be salvaged if ‘properly construed and implemented.’ ” In January, a separate three-judge appellate panel upheld Barbier’s approval of the settlement. BP has since requested a rehearing on that issue before all the judges of the appeals court.

Though it hadn’t done so by Friday, BP is widely expected to request a rehearing by the full court on last week’s ruling as well.

The two issues — the validity of the entire settlement and whether businesses must show the spill caused their losses — could potentially be consolidated into a single hearing if the 5th Circuit decides to grant BP’s request, legal experts said.

Sherman, who has followed the fallout from the April 2010 oil spill, believes a rehearing before the full 5th Circuit may be in BP’s best interest, as the 5th Circuit is widely considered to be one of the nation’s most conservative circuits, tending to favor business interests.

Regardless of how things are finally decided by the 5th Circuit, the losing side will undoubtedly try to take its cause to the U.S. Supreme Court. “These are serious questions that involve a major catastrophe, and an enormously important corporation,” LSU law professor Paul Baier said, adding that at present the nation’s highest court is “very receptive to the claims of big business.”

Still, the odds of the Supreme Court agreeing to hear the case are long: The court receives about 10,000 petitions for a writ of certiorari each year, granting and hearing oral argument in only about 80 cases.

Baier acknowledged that BP’s appeal “does not fit the mold of the usual considerations” that the Supreme Court looks for in deciding whether to hear a case, such as conflicting decisions by various circuit courts. “On the surface of it, there isn’t any real reason for the Supreme Court to get involved in this kind of case, because there’s no new law,” he said. “But an enormous settlement on a national scale that is involved here, a catastrophe the likes of which we haven’t seen in many years, may be enough for the court to say, ‘We have to get involved, because the trial lawyers are making too much headway and we’d like to trim their sails.’ ”

BP has until March 24 to request a rehearing on last week’s ruling before the entire 5th Circuit, which could potentially be scheduled the next month.

Although Barbier last year refused to issue an injunction against further payments, in December — at the direction of the 5th Circuit — he issued a temporary injunction against payment of certain business claims.

The March 3 ruling said that injunction should be dissolved, but it left the order in place until both issues before the court are completely resolved. The ruling noted the pending request for a rehearing on the separate panel’s decision approving the entire settlement, and the anticipation “that our decision might not persuade all parties either.”

Since it opened in June 2012, the settlement program’s claims facility has processed more than 268,700 claim forms, federal court documents show. As of Feb. 28, the program — run by Lafayette lawyer Patrick Juneau — had issued eligibility notices affirming the validity of more than 63,000 claims, with payment offers totaling almost $5 billion. More than 55,800 claims had been paid, adding up to more than $3.8 billion.

Louisiana residents accounted for 26 percent of the overall damage claims, second to Florida.

That $3.8 billion is in addition to $400 million that was in the pipeline when Juneau took over from Kenneth Feinberg, whose earlier claims facility paid out $6.1 billion to more than 221,000 claimants.

BP initially estimated that the settlement would cost it about $7.8 billion. The company has since adjusted that figure, saying in regulatory filings that it is expected to hit $9.2 billion.