BP spill settlement promises fast payouts
Published: Sunday, March 04, 2012, 3:11 PM Updated: Monday, March 05, 2012, 6:19 AM
By Rebecca Mowbray, The Times-Picayune
After reaching a deal Friday night to settle health and economic damage claims by individuals and businesses who were harmed by the Gulf of Mexico oil spill, BP and plaintiff attorneys leading the litigation say the court-supervised claims process will begin immediately.
Charles Dharapak/The Associated PressGulf Coast Claims Facility Administrator Kenneth Feinberg, shown testifying before a U.S. Senate committee in 2011, will leave his post sometime this week.
Ken Feinberg, the administrator of the Gulf Coast Claims Facility, which has been paying claims on behalf of BP using money from a $20 billion fund, will step aside sometime this week.
Lynn Greer, a principal in the Richmond, Va., firm BrownGreer PLC, which has been assisting Feinberg, will take over as the temporary claims facilitator. Then, in six to eight weeks, assuming U.S. District Judge Carl Barbier gives preliminary approval to the deal, Patrick Juneau, a special master from Lafayette, will begin overseeing the payment of claims under the terms outlined by the settlement.
The plaintiffs describe the settlement as uncapped, meaning there’s no limit on how much money is available to pay damages. BP estimates that the deal will cost about $7.8 billion. The proposed settlement is not an admission of liability by BP.
Juneau has broad experience as a mediator and court-appointed special master in a New Orleans train-car leakage fire case, in product liability cases involving the heartburn drug Propulsid and silicone breast implants, and in a case involving Conoco Phillips Co. He will work under Barbier’s supervision, independently from BP and the plaintiffs committee. Juneau could not be reached for comment Saturday.
The plaintiffs say that the new process will be more transparent than the Gulf Coast Claims Facility. Calculations will be made under formulas approved by the court, so people will be able to see exactly how their award was made and can dispute it if necessary. Few details are available about how the claims will be organized, but they take into account the types of damage and proximity to the coast. Each claim will be multiplied by a “risk transfer premium” that will differ by type of claims since no punitive damages were awarded by a court. The plaintiffs say that the risk transfer premium will ensure that their deal will pay more in compensation than what Feinberg did, but not enough details have been worked out from their agreement in principle to say what the multipliers are and how large the biggest multiplier is.
“Under the new program, eligible claimants will generally be paid greater benefits than under the GCCF,” said Stephen Herman and Jim Roy, liaison counsels for the plaintiffs, in a press release.
Feinberg declined to comment on the deal, but called it “good news” in a statement on the Gulf Coast Claims Facility website, and said “it avoids a lengthy complex trial and uncertain appeals.”
Feinberg also congratulated himself for a job well-done: “I point with significant pride and satisfaction to the achievements of the Gulf Coast Claims Facility: reviewing over 1 million claims submitted by 573,000 claimants and paying some $6.1 billion to approximately 225,000 individuals and businesses in just over 18 months. I believe the GCCF has successfully fulfilled its mandate, and urge an orderly transition to the new proposed claims program.”
People who have made applications to the GCCF will not need to reapply; all data will be transferred to the new administrators. Anyone who has received a final offer from Feinberg will receive 60 percent of their money immediately, and then will be put into the new process, dubbed the “court-supervised oil spill settlement program,” where they will get a new offer. People will have the option of whether to take the new deal, which the plaintiffs believe will be richer, or if they don’t like it, get the remaining 40 percent they were owed by Feinberg.
It’s unclear what will happen to the hundreds of people who had sent in final releases, meaning that they agreed with Feinberg’s determination and released BP from future liability to Feinberg but have not yet gotten their money.
People who have already received full payment from Feinberg and have signed off on that award are not eligible for the settlement.
Feinberg’s process criticized
The plaintiffs steering committee had complained bitterly about Feinberg, calling his process arbitrary and opaque, but attorneys outside the deal observe that it couldn’t have been all that bad if the plaintiffs committee is keeping BrownGreer while the new process ramps up. They also note that Feinberg encountered a steeper learning curve than he expected at handling claims, and if the new claims process experiences the same hiccups, the transition could lead to delays or interruptions in the processing. They also worry that the thousands of people who were poised to get paid immediately by Feinberg will now be held hostage for months while forced to wait for their remaining 40 percent or a new offer from the new court-supervised process.
“A lot of this litigation has just delayed what we were trying to do with Feinberg. This trial had nothing to do with people who were trying to get paid,” said Tony Buzbee, a Houston attorney representing a wide variety of claimants.
Buzbee also questioned how his clients are better off in going from a fund with $14 billion left in it to a settlement that BP values at $7.8 billion. “I don’t see how this has advanced the ball. I’m concerned that it’s going to be more money out of my clients’ pockets, and more delay. They’re going to have to do a really good job of selling it. They could be facing a full-scale revolt.”
Other attorneys outside the plaintiffs steering committee were eager to learn more details about the deal and new process.
“I don’t think I can comment until we see the term sheet,” said Stuart Smith, a New Orleans attorney with a large number of claims.
But Joel Waltzer, a New Orleans attorney representing the Wisner Trust and two Indian tribes as well as about 1,000 fishers and deckhands, was optimistic about the $2.3 billion set aside for commercial fishermen.
“If it’s distributed correctly, it’s going to be a deal that people are going to be able to believe in,” he said. “It’s six times the value of the entire catch for the entire seafood industry in Alabama, Mississippi, Louisiana and west Florida.”
Attorneys for BP and the plaintiffs are basically working from an agreement in principle, and need to fill in the details and file a proposed settlement agreement with the court within 45 days. Although the court still needs to review the settlement and ask for comments before considering whether it is fair, probably in late summer or early autumn, BP and the plaintiffs decided not to wait for official court approval.
The deal is divided into two class actions, one covering economic loss claims and the other covering medical claims.
Anyone who fits the descriptions in the class actions — even those who had never filed with Feinberg or filed in court — will automatically be included. If they don’t want to participate, they will need to opt out. That process will occur quickly, giving people probably 60 days to opt out.
Structuring the settlement as class actions gives BP greater certainty that the deal will resolve its problems. For the plaintiffs, it adds another year to the clock, moving the ultimate deadline for making claims from April 2013 to April 2014. It also enables the settlements to handle not only individual losses but create things for collective interests, such as the $105 million set aside for improving the capacity for health care delivery on the Gulf Coast and other money reserved for tourism and seafood marketing.
Attorneys’ fees will be determined by the judge at a later date.
The economic agreement will compensate businesses and individuals for lost profits; damage to coastal property, wetlands and real property; loss of enjoyment and use of property; loss of subsistence use; and claims by boat owners who participated in the Vessels of Opportunity cleanup program who say they were improperly compensated.
The medical agreement will compensate cleanup workers and coastal residents who believe they were harmed by exposure to oil and dispersants. People who develop future illnesses linked to the spill will retain their right to sue BP. The deal also sets up a “medical consultation” program for 21 years — the amount of time between the Exxon-Valdez disaster in 1989 and the BP oil spill.
While the settlement assigns priority to medical claims, which had largely been left out of discussion so far, it ignores two key groups of people.
People who suffered economic harm from the deepwater drilling moratorium put in place after the disaster are not covered by the settlement. This group, estimated at about 6,000 people or businesses, had also been ineligible for compensation under the Feinberg process. They will probably need to file a separate class action.
People who were injured in the explosion of the Deepwater Horizon rig also are not covered by the settlement.
One area of concern is that the medical provision greatly widens the number of people eligible, yet BP has estimated the settlement at $7.8 billion, meaning that individual compensation may not be as rich as the plaintiffs committee promises.
Other claims linger
The settlement does not include federal, state and local governments. With the private party settlement out of the way, it could make it easier for BP to focus on working with public bodies, but comments on Friday night by the Justice Department and Louisiana’s head of coastal restoration indicate that they’re eager to go to trial.
Walter Leger — who represents Orleans, St. Bernard, St. Tammany, Lafourche and Terrebonne parishes, plus a host of water districts and school boards — said that his clients are similarly ready and eager for a trial over things such as loss of tax revenue, local response costs and damage to parish land.
The agreement between BP and the plaintiffs committee changes the structure of the litigation; BP has assigned the rights to its suits against rig owner Transocean and cement contractor Halliburton to the plaintiffs committee. That gets BP out of all parts of the litigation except the governmental bodies, and makes Transocean and Halliburton bigger targets for the plaintiffs. Those disputes could be subject to a new trial, or new settlement talks.
It is unclear whether subsequent phases of the trial — on how much oil was spilled, where it went and the cleanup effort — will go forward, although the government could litigate over the issues. It is also unclear what will happen to the 72 million pages of evidence and more than 300 depositions that were taken in advance of the trial.
Blaine LeCesne, a tort law professor at Loyola who has followed the oil spill litigation closely, said that the settlement seems to be a bigger help to BP’s litigation strategy than it was to the plaintiffs. BP’s estimate of $7.8 billion strikes LeCesne as low, perhaps because the parties knew that plaintiffs represented by attorneys that were not directly involved in striking the settlement may opt out of the deal. Meanwhile, the plaintiffs agreeing to take on Transocean and Halliburton on BP’s behalf means they’re helping to defend BP and pursue the company’s strategy of placing blame as widely as possible. “I think this case is as poised for trial as it ever was,” he said.
Mark Schleifstein and David Hammer contributed to this report.