(Source: USA Today) – In 2010, BP claims czar Kenneth Feinberg arrived on the Gulf Coast promising to settle 90 percent of private oil spill claims without need for the courts.
That seemed preposterous after BP and private claimants signed a multi-billion dollar court settlement in 2012 and gave Feinberg the boot. But with BP using appeals to hold up all business loss payments for the last eight months, a WWL-TV analysis finds that Feinberg’s prediction turned out just about right.
After 22 months of Feinberg and 23 months of the court settlement, about 280,000 claimants have received final payments and released BP from liability. Of those, 240,000 were paid under Feinberg’s regime, not the court-supervised settlement process run by Lafayette, La., lawyer Patrick Juneau.
Feinberg was paying claimants only about $26,000 on average, compared to an $87,000 average payment under the settlement. BP had originally estimated the settlement would cost it $7.8 billion, but the deal was uncapped.
After seeing the business claims roll in, with Juneau approving them for an average payment of $245,000 per claim, it appeared that BP could end up shelling out more than $15 billion just to cover business claims.
So now, BP is relentlessly attacking Juneau for paying more than 1,000 claims that the company says suffered losses that had nothing to do with the oil spill.
With BP vowing to take its appeal of Juneau’s eligibility determinations all the way to U.S. Supreme Court, claimants, their lawyers and court observers are wondering why the oil giant ever agreed to ditch Feinberg in the first place.
Loyola Law School Professor Blaine LeCesne says it’s because BP actually got a lot more out of the settlement than it will acknowledge.
“They got to placate their shareholders, who were nervous about how much this was going to cost them through the years going through litigation; they got to settle their criminal and environmental fines on very favorable terms with the federal government; they got to get 100,000 residents along the gulf coast to join the settlement and forever give up their right to sue BP in court,” LeCesne said. “Each of those items is worth billions to BP.”
Steve Herman, the lead plaintiff’s attorney who negotiated the deal with BP, said the company needed and wanted the deal it got because it had huge government liabilities from the spill. BP even cited the deal it struck with Herman and other private plaintiffs as a show of goodwill, to convince a federal judge to accept its $4 billion plea agreement on criminal fines for seamen’s manslaughter in the deaths of 11 rig workers and for polluting the Gulf of Mexico with millions of barrels of oil over 87 days.
But Herman said BP changed its tune about the private settlement when its separate negotiations with the government over massive civil penalties went south.
“It didn’t pan out for them with the government and that’s why — one of the reasons why — I believe they made an about-face on the private settlement,” Herman said.
Also, BP is complaining that anyone who suffered a loss during the post-spill period is being compensated under the settlement. But Juneau and others say the mathematical test that’s used to establish that the spill caused a claimant’s loss, called the “V test,” is actually failed more often than it’s passed.
Juneau said he’s denied 40 percent of claimants for various reasons, thousands of them because of the V-test, which requires claimants, depending on location, to lose a certain amount of revenue after the spill and recover a certain percentage back within the next year.
And that doesn’t even consider Gulf Coast businesses who never even submit claims because they couldn’t prove causation. Plaintiff’s attorney Kevin Schoenberger said he’s had to turn away three-quarters of all businesses who approach him with claims because they do not pass the “V test,” including one prospective client whose losses, Schoenberger said, were absolutely due to the oil spill.
It was a “marine construction business that built housing on barges that worked offshore,” Schoenberger said. “His business dropped right after the spill because these vessels, tugboats, went out to work in cleanup. And his business didn’t quite bounce back enough and he can’t make a claim because he didn’t meet the deep V test.”
BP spokesman Geoff Morrell said the company agreed to the settlement in March 2012 because it thought it would be “a fair and reasonable way to resolve additional legitimate claims and to help those claimants — and the company — move forward. However, BP’s commitment to help the Gulf recover was taken advantage of by plaintiffs’ lawyers trying to exploit the Claims Administrator’s misinterpretation of the agreement.”
LeCesne said BP is being disingenuous in now claiming that it didn’t agree to pay businesses that couldn’t prove their losses were directly caused by the spill. The court record indicates otherwise.
Juneau asked BP in September 2012, two months before it asked a judge to approve the settlement, if he should pay an accounting firm that met the V-test eligibility formula but clearly suffered its losses because of a partner’s illness and not the spill. BP’s lead lawyer, Mark Holstein, said yes, that as long as the test was satisfied, such “false positives” were expected.
When federal appeals Judge Edith Clement asked BP lawyer Ted Olson in July 2013 why BP ever agreed to that, he said, “It was part of a compromise.” But when Olson appeared on CBS’ “60 Minutes” on Sunday, he insisted that claimants “had to have been hurt by the oil spill” to collect.
Morrell, the BP spokesman, also appeared in the “60 Minutes” piece and said “no company would ever agree to a settlement that compensates people that were never harmed by their actions. And we most certainly did not agree to such a settlement.”
“He believes whatever he believes, but the record is clear,” Herman retorted in an interview with WWL-TV on Wednesday. “There are statements made by lawyers, there were statements made by experts. There were statements made in proposed findings. There were statements made in court to Judge Barbier. So they can say, I guess, whatever they want, but the record is pretty clear.”
BP’s appeal on the causation question was denied by a three-judge panel at the 5th Circuit Court of Appeals. But BP has asked for a full hearing before the entire court and the judges have yet to rule on whether they will hear it.
Meanwhile, the appeals and accompanying injunction on paying business claims have slowed down BP’s payments considerably. After paying $24 billion in cleanup, fines and compensation in the first three years after the spill, it’s only paid $3 billion in the last year while fighting terms of the settlement.
BP set aside $42 billion to cover spill-related costs. It appeared the private claims settlement, combined with billions in as-yet undetermined civil fines and natural resources damage claims would blow that number away. But the slowdown has bought the company time, and its stock price has recovered from about $36 a share when it signed the private claims settlement in March 2012 to more than $50 now.
The company also announced a second increase in dividends in the last six months.
One downside of the appellate delays for BP, however, is that the original deadline for submitting a settlement claim was April 22, 2014, but that is now pushed back to six months after whenever the settlement appeals are resolved. And claims center data show that dozens of claimants are taking advantage of the postponed deadline each day.