By Anthony J. Garcia
In early March, the United States Court of Appeals for the Fifth Circuit issued a strong-handed, 2-1 opinion rejecting British Petroleum’s (BP) cries of foul play and mandated that the claims administrator, Patrick Juneau, resume payment of proper business economic loss claims.
The back-story: Eleven lives were lost and many were negatively affected by what some are calling the greatest unnatural disaster of our time, BP’s Deepwater Horizon oil spill of April 2010. Awareness of the spill deterred those planning to visit our Gulf Coast states. When tourism dwindled, the Gulf Coast’s economy suffered greatly while creating a ripple effect that spread well beyond the beaches. Over the course of two years, BP and the plaintiff’s steering committee negotiated a class settlement that would recognize losses based on proximity to the Gulf as well as detailed financial analysis. Shortly after the agreement was ratified by the Eastern District of Louisiana, claims were processed and paid accordingly. BP then began the onslaught of objections, claiming unfairness, unconstitutionality, and fraud, to name a few.
The Fifth Circuit entertained BP’s arguments that the oil giant was being treated unfairly, the causation-related settlement terms were not properly followed, and claimant’s questionable accounting techniques were distorting actual business losses. In re: Deepwater Horizon, Nos. 13-30315 and 13-30329, (5th Cir. 2014).
The heavy-handed, wit-filled opinion in March 2014 affirmed the lower court’s ruling of December 2013 and vacated the injunction that prevented thousands of worthy claimants from being processed and compensated. Id. BP relied heavily on a footnote buried in the causation section of the 1,033-page agreement. “Wielding this footnote, BP seeks to dismantle the complex framework of exemptions, presumptions and formulas that allow business claimants to submit evidence of their income and expenses before and after the BP-caused disaster,” Judge Leslie H. Southwick wrote. Id. at 9. There likely is a more nuanced manner in which BP would characterize its argument, but this fairly captures its essence. Id.
Despite negative ad campaigns in major newspapers, atomic briefings at every trench, and a viciously accusatory tone, BP is bound to the agreement it negotiated and signed. “There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not,” Southwick wrote. Id. at 11.
At the time of this publication, there are doubts that BP will accept this ruling. It has, however, achieved success in shaming many for filing and deterred those who have not. It has also persuaded the court to revise accounting procedures to require a matching of revenues to expenses. This may prevent the occasional fraudulent or undeserving claim from payment but will undoubtedly call for more detailed analysis, less favorable compensation for select industries, and increased accountant involvement. Although the filing deadline at publication time was April 2014, expect an extension into mid- to late 2014.
Bottom line: Oil claims can be a bit messy, but there is no better time for a Gulf Coast business to be evaluated.
