Fifth Circuit Sides With BP on 'Windfall' Oil Spill Claims
This story originally appeared in The National Law Journal, an American Lawyer affiliate.
A divided federal appeals court panel has ruled that BP PLC should have been allowed to temporarily block payment of claims from the $9.6 billion Deepwater Horizon settlement while challenging the methods by which those payments were being calculated.
The U.S. Court of Appeals for the Fifth Circuit on Wednesday reversed two significant orders granted earlier this year by U.S. District Judge Carl Barbier in New Orleans against BP involving the settlement, which resolved claims by individuals and business asserting economic damages caused by the 2010 oil spill. The ruling marks a significant victory for the oil company and for Theodore Olson of Gibson, Dunn & Crutcher, who argued the appeal in July.
One order affirmed the methods used by claims administrator Patrick Juneau in calculating the amounts of the settlement payments. BP had maintained that the process allowed businesses with no oil spill damages to file claims for "fictitious losses" and receive "windfall" payments. Another order denied BP’s request for an emergency preliminary injunction halting some payments given its concerns over those calculations.
The majority opinion, written by Judge Edith Brown Clement, said that "the district court had no authority to approve the settlement of a class that included members that had not sustained losses at all, or had sustained losses unrelated to the oil spill, as BP alleges. If the Administrator is interpreting the Settlement to include such claimants, the Settlement is unlawful."
As for the injunction, Clement, a George H.W. Bush appointee, wrote that the case involved "significant legal questions" that necessitated a stay.
"This case is one of the largest and most novel class actions in American history," she wrote. "The interests of individuals who may be reaping windfall recoveries because of an inappropriate interpretation of the Settlement Agreement and those who could never have recovered in individual suits for failure to show causation are not outweighed by the potential loss to a company and its public shareholders of hundreds of millions of dollars of unrecoverable awards."
The panel upheld a third order, however, in which Barbier dismissed a breach of contract lawsuit that BP filed against Juneau.
In a dissent, Judge James Dennis, a Clinton appointee, said he would uphold all of Barbier’s orders.
"BP has failed to demonstrate that there has been a significant change either in circumstances or in the law since it entered into—and, in fact, affirmatively sought adoption of—the consent decree approving and incorporating the settlement agreement," he wrote.
And Judge Leslie Southwick, appointed by George W. Bush, while concurring in the reversal and remand of Barbier’s orders, disagreed that some class members could lack standing because they were unable to prove the spill caused their damages.
Meanwhile, Barbier’s rulings have not stopped BP from continuing to press for an injunction halting the claims process.
In its most recent request, BP cited a recent investigative report Barbier authorized that referred four lawyers – two with oil spill claims and two who previously worked for Juneau in approving claims – to federal authorities for potential criminal activity associated with kickbacks.