Friday, January 2, 2015




Pelicans gather at the Deepwater Horizon oil spill.
Photo by Petty Officer 3rd Class Cory J. Mendenhall, U.S. Coast Guard

   The U.S. Supreme Court just made it unmistakably clear,  British Petroleum is inescapably in a dangerously vulnerable position in the seemingly never ending Gulf of Mexico spill-liability suits. The Supremes turned down BP’s plea for an intervention in the multibillion-dollar litigation circus stemming from the April 2010 disaster that killed 11 offshore rig workers and spewed millions of gallons of crude Gulf of Mexico off Louisiana. The Supreme Court’s unwillingness to wade into the spill litigation means that the present open-ended settlement of one portion of BP’s liability will now cost billions of dollars more than the original $7.8 billion estimate. The Court's refusal to hear BP's petition came, as is the court's practice, without an explanation. The non decision will have very broad implications. BP's appeal to the Supreme Court appears to be an unusual frontal attack on the federal trial judge hearing other aspects of the complex spill litigation. Now that Justice Carl Barbier of New Orleans, no longer has to worry about the Supreme Court second-guessing his supervision of the BP case, it is more probable than not that  the Brits will pay a penalty for having repeatedly challenged the integrity of the settlement process. 

  Plaintiffs’ attorneys Stephen Herman and James Roy issued a statement  that the high court’s rebuff “should finally put to rest BP’s two-year attack on its own settlement.” Shortly after its well explosion and resulting  offshore oil spill calamity  BP moved to minimize lawsuits and provide funds for cleanup and damage claims. In 2010, the Brits established an initial $20 billion fund for these purposes and began trying to negotiate settlements of various government and private suits. So far, British Petroleum maintains that it has written checks for more than $28 billion. Hoping  to avoid a trial on one category of potentially extensive business and economic claims, BP agreed in 2012 to a settlement whose cost it estimated at $7.8 billion. That agreement with various plaintiffs had no overall cap and relied on a highly flexible formula for determining which claimants qualified for payment. BP unwisely accused both the plaintiffs’ lawyers and the settlement administrator appointed by Justice Barbier of abusing the pact. BP identified what it called exaggerated and some “fictitious” claims totaling hundreds of millions of dollars. Justice Barbier generally rejected BP’s objections and asserted that he took offense at the company’s suggestions that it was being victimized by down home New Orleans justice. This was the allegation that the Supreme Court  declined to review. BP miscalculated that it could draw the Supremes into the case at this stage. As one report indicated; "the interpretation of the business-claims settlement boiled down to a one-time-only contract dispute complicated by highly idiosyncratic facts - not the sort of broad-reaching constitutional or statutory clash the high court normally seeks to resolve." 

 By challenging Justice Barbier’s oversight of the settlement process, the Brits may actually have drawn additional attention to the pact’s extremely loose and ill defined terms. BP now estimates that its liability under the business-claims settlement will exceed $9.7 billion, and plaintiffs’ attorneys encouraged by the Supreme Court's lack of action, are lining up to take a shot and predicting the figure will be much higher. "Bloomberg Intelligence analyst Brandon Barnes agrees. He estimates that the settlement ultimately may cost the company an enormous $20 billion". However, that’s not the final bill.  BP faces a continuing suit filed by the federal government under the Clean Water Act for clean up costs and environmental damages. That separate and distinct  liability could reach $18 billion - and the sole decision maker will be , you guessed it, the long suffering Judge Barbier. In short , the very judge the Brits attempted to take to the Supreme Court wood shed will now have it within his power to sock it to BP. This separate  verdict will turn on highly particular factual determinations unlikely to draw the attention of the Supreme Court. Officially the PR position of BP’s is that they  “remain concerned” that it is being asked to pay claims unrelated to the 2010 spill. The Brits know They have more checks to write. Already the Brits have taken a pretax charge of $43 billion to cover hopefully all of its spill liability. With the recent Supreme Court (non)action,  that amount increasingly looks inadequate. All this because they wanted to save a few hundred thousand on drilling costs. 

                                                                 BP OIL SPILL BOOK SHELF


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