BP wins reprieve over oil spill payouts

Last updated 09:19 04/12/2013

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A United States federal appeals court has handed BP another victory in its bid to block what could be hundreds of millions of dollars in settlement payments to Gulf Coast businesses following the company's 2010 oil spill in the Gulf of Mexico.

A three-judge panel of the 5th US Circuit Court of Appeals ruled on Monday that a judge must reconsider BP's arguments that the settlement shouldn't compensate businesses if their losses can't be directly traced to the nation's worst offshore oil spill.

The panel said US District Judge Carl Barbier erred last month in refusing to consider the company's "causation" arguments.

The spill occurred after BP's Macondo well blew out in April 2010, causing the Deepwater Horizon drilling rig to explode, killing 11 workers.

Millions of gallons of oil spewed into the Gulf, with crude soiling shoreline and beaches from Louisiana to Florida.

So far, the oil giant has paid out billions of dollars to residents and businesses affected by the spill.

For months, and on several different fronts, BP has been attacking Barbier's interpretation of its multibillion-dollar settlement with a team of private plaintiffs' attorneys.

In October, the same 5th Circuit panel overturned Barbier's earlier rulings on the dispute over payouts to businesses.

BP had argued Barbier and court-appointed claims administrator Patrick Juneau misinterpreted the deal's terms in ways that could have forced the company to pay for billions of dollars in bogus or inflated claims by businesses.

Plaintiffs' lawyers countered that BP simply undervalued the settlement and underestimated how many claimants would qualify for payments.

But the panel told Barbier to craft a "narrowly-tailored" order that bars Juneau from paying certain claims.

BP argued Barbier didn't go far enough when he issued an order to comply with the 5th Circuit's directives.

In response to BP's arguments, Barbier said BP and the plaintiffs' lawyers had agreed on an "objective and specific method of proving whether or not a loss was caused by the oil spill."

And losses for businesses located in certain areas were presumed to be caused by the spill under the settlement's terms, the judge added last month.

Barbier wrote that it would not only be unreasonable to expect thousands of claimants to prove losses were directly traced to the spill, but that doing so would defeat the purpose of a class settlement.

In a court filing, plaintiffs' attorneys accused BP of taking settlement terms "out of context and in isolation" in arguing that businesses must meet certain "subjective and as-yet-undefined" requirements to qualify for settlement payments.

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On Monday, the divided 5th Circuit panel directed Barbier to craft an order that will allow businesses who can trace their losses to the spill to continue receiving payments, but that will ensure those who cannot trace their losses to the spill don't receive compensation until the case is resolved.

Fifth Circuit Judge James Dennis, who wrote a dissenting opinion in October, once again disagreed with his two other colleagues on the panel and expressed support for Barbier's reasoning.

Dennis said he believes BP's causation arguments "clearly did not survive the parties' settlement agreement."

In a court filing last month, BP attorneys complained that Juneau has awarded at least US$76 million (NZ$92.9m) to dozens of claimants whose losses were caused by something other than the spill.

They said an Alabama excavation company, for instance, received roughly US$3.5m even though its decrease in revenue resulted from the company's decision to sell most of its assets months before the spill.

"These egregious awards do not represent economic losses caused by the spill, and they contradict the plain terms and purpose of the settlement," BP lawyers wrote.

"Yet (Juneau) nonetheless issued them, and under (Barbier's) rulings is entitled to continue doing so."

Barbier said he found it "deeply disappointing" that BP accused Juneau of rewriting and disregarding the settlement terms.

"To the contrary, when it talks about causation, if anyone is attempting to rewrite or disregard the unambiguous terms of the Settlement Agreement, it is counsel for BP," he wrote in last month's order.

- AP

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