Just 10 days after a federal judge in New Orleans lambasted BP for demanding that businesses must prove their losses were caused by the Deepwater Horizon oil spill before being paid under the terms of a private settlement, an appeals court ordered the judge not to allow such payments without proof that losses resulted from the spill.
But the ruling by a three-judge panel only applies during a temporary stay in the claims payment process that is in effect until U.S. District Judge Carl Barbier, who is overseeing the class action settlement, approves rule changes in the claims program, or until a separate three-judge panel of the 5th Circuit rules on whether the claims should be paid without such proof as part of a larger appeal over whether the settlement agreement is fair.
In that appeal, which BP joined after it became clear that settlement payments were going to total well beyond the company’s initial $7.8 billion estimate, BP attorneys argued that if Barbier didn’t rewrite the business economic loss rules to require proof of “causation,” that losses were directly caused by the accident, the entire settlement should be thrown out.
It’s yet another complicated ruling involving the equally complicated private settlement aimed at paying businesses and individuals for damages resulting from BP’s April 2010 Macondo well blowout, the sinking of the Deepwater Horizon drilling rig and ensuing oil spill.
As with the first ruling, which Barbier interpreted as ordering him to assure that business losses were properly matched with business revenues, the newest appeals court opinion carries the views of Judges Edith Clement and Leslie Southwick. A third judge wrote in dissent.
The judges acknowledged that the multiple rulings made the issues difficult for even a federal judge to follow.
“This court’s expressing its views through two different opinions may have created interpretive difficulties on the remand, but the district court erred by not considering the arguments on causation,” the new order reads.
In remonstrating BP in his Nov. 22 ruling, Barbier wrote that “if anyone is attempting to rewrite or disregard the unambiguous terms of the settlement agreement, it is counsel for BP.”
What’s at issue is a part of the agreement that allowed Court-Appointed Claims Administrator Patrick Juneau to assume that the BP accident caused business losses in certain circumstances, including in areas closest to the coast that were directly affected by the oil spill, without each business having to prove the losses were directly related to the spill.
“In the context of a class-wide settlement program, involving claims by tens of thousands of claimants, it would be infeasible to expect or require every claimant to prove actual, or factual, causation,” Barbier wrote. “Doing so would require thousands of individual trials of causation, defeating the whole purpose and intent of a class settlement.”
But at least temporarily, the new 5th Circuit ruling requires Barbier to halt payments where causation isn’t proved until he completes the rule changes under a stay. That stay, the judges noted, should be “tailored so that those who experienced actual injury traceable to loss from the Deepwater Horizon accident continue to receive recovery, but those who did not do not receive their payments until this case is fully heard and decided through the judicial process, including by any other panel of this court that resolves these issues.”
Circuit Judge James Dennis, who disagreed with the other two judges in the first ruling, again disagreed on key provisions of the order. Dennis also sits on the second three-judge panel that is considering the causation issue.
“In my view, the issue of causation in fact of economic damages ‘resulting from’ or ‘due to’ the oil spill under the Oil Pollution Act of 1991 … that BP belatedly seeks to raise in this court, clearly did not survive the parties’ settlement agreement, the district court’s consent decree, or BP’s failure to properly raise the issue in its initial proceeding before the district court,” Dennis wrote in his dissent.
He raised similar points during oral arguments held by the second three-judge panel on Nov. 4, pointing out that BP agreed to the written formula in the settlement on which the business loss rules were written.
“I don’t understand the turnaround,” Dennis told BP attorney Ted Olson, a lawyer in private practice that represents the company in the appeal.
In a statement Monday, a senior BP official praised the new ruling, saying it “again underscores that the implementation of BP’s settlement agreement with the Plaintiffs’ Steering Committee has veered off course.”
“If properly implemented by the district court, the Fifth Circuit’s order will help return the settlement to its original, intended and lawful function — the compensation of claimants who sustained actual losses that are traceable to the Deepwater Horizon accident,” said Geoff Morrell, BP’s senior vice president of U.S. communications and external affairs.
The new ruling, he added, confirms that “continued violation of the settlement agreement’s clear terms creates serious constitutional and other legal problems that threaten to invalidate the entire settlement unless corrected.”