BP in $7.8bn settlement of gulf claims

Πηγή: FT
By Ed Crooks
March 3 2012

BP and the lawyers representing more than 100,000 victims of the 2010 Gulf of Mexico oil spill have reached an estimated $7.8bn out-of-court settlement over damages, delaying the trial that had been due to start on Monday.

The settlement, which BP said was “not an admission of liability”, will be funded out of the $20bn that BP promised as compensation for the damage caused by the spill.

The $7.8bn value of the deal, estimated by BP, includes a dedicated $2.3bn for gulf fishermen and a separate settlement for people who say they have fallen sick as a result of contact with the oil and dispersant chemicals, with $105m to pay for healthcare in the coastal region.

The settlement covers only claims against BP for damages from individuals affected by the spill. Legal action against other companies involved in the disaster, and between those companies, and claims by the US authorities, are still continuing, and will come to trial unless the can also be settled out of court. Lawyers from all sides will meet the judge to set a new trial date.

Bob Dudley, BP’s chief executive, said: “This settlement reflects our commitment not only to the gulf region, but also to the United States as a whole. BP has operated in America for more than 100 years, employs nearly 23,000 people in the US and invests more in the US than in any other country.”

The company said it did not expect the deal to add to the total cost it expects to face as a result of the spill, which it has estimated at $37.2bn.

In a statement, the plaintiffs’ lawyers said the settlement would be fully funded by BP, “with no cap on the amount BP will pay”.

They added: “BP is obligated to fully satisfy all eligible claims under the terms of the Court supervised settlement, irrespective of the funds previously set aside.”

Steve Herman and Jim Roy, the leaders of the plaintiff’ lawyers, said, “This settlement will provide a full measure of compensation to hundreds of thousands in a transparent and expeditious manner under rigorous judicial oversight. It does the greatest amount of good for the greatest number of people.”

BP could still proceed to trial with the US Department of Justice and states from the Gulf of Mexico region, which are seeking civil penalties and damages that could run into the tens of billions of dollars.

The DoJ issued a statement saying it was “open to a fair and just settlement,” but also “fully prepared to try the case.”

It added: “The United States is prepared to hold the responsible parties accountable for the damage suffered in the Gulf region.”

It promised to ensure that any resolution of government claims would be “just, fair and restores the Gulf for the benefit of the people of the Gulf states.”

Garret Graves, the chair of Louisiana’s Coastal Protection and Restoration Authority, described the settlement of the private claims as “a good first step,” but said it was “pretty clear that BP feels that they are above the law.”

He added: “We are looking forward to an expedited trial plan to fast track justice and recovery. We have been preparing for trial for over 18 months and are very anxious to get into court as soon as possible.”

BP and the private plaintiffs have set a deadline of 45 days to reach a final definitive agreement, which also need to be approved by the federal district court in New Orleans where the litigation is being heard.

In a statement, Judge Carl Barbier said that “because such a settlement would likely result in a realignment of the parties in this litigation and require substantial changes to the current phase I trial plan,” he would postpone the trial in the Deepwater Horizon case, which had been due to start on March 5.

The trial, originally planned for February 27, had already been put back once after BP and the plaintiffs’ lawyers said they were nearing a deal.

Lawyers representing an estimated 116,000 plaintiffs, including fisherman, restaurant owners and others hurt by the spill had focused on a plan for a settlement using about $13bn remaining from the $20bn that BP pledged for victims of the spill in June 2010, two months after the accident.

BP resisted committing the full amount, arguing that the $13bn was also needed to pay other costs, including restoring the coastline and meeting claims from state and local governments.

The estimated value of the settlement works out at an average of about $67,000 for each of the plaintiffs. Lawyers’s fees are likely to be 15 per cent or more of the value of any money paid out.

However, the plaintiffs have succeeded in getting access to the fund. Ken Feinberg, the Washington lawyer who had been administering most of the payments from the fund through the Gulf Coast Claims Facility, will lose that role, and the GCCF will be replaced by a new process.

Mr Feinberg had been criticised for imposing excessive burdens of proof on claimants seeking redress for losses resulting from the spill, and many of the claimants in the legal action were people who felt they had not been offered adequate compensation.

Although claimants will still have to show proof of losses, there will be new rules governing pay-outs, based on factors such proximity to the coast and type of business.

Many fishermen had been particularly unhappy with the GCCF because they work in cash and had been unable to show tax returns to prove loss of income, and they are being specifically looked after with their guaranteed $2.3bn.

The terms of the new settlement seem certain to be more generous than those set by Mr Feinberg. For example, losses suffered by businesses and individuals in close proximity to the Gulf Coast, or in the seafood industry, will be presumed to have been caused by the oil spill “without further proof”, the plaintiffs’ lawyers said.

Businesses will also be able to choose the months used to measure their lost income or profits, and also make claims for lost growth potential that could have materialised had the spill not intervened.

BP remains in dispute over responsibility for the disaster with other companies working on the Deepwater Horizon drilling rig, including Transocean, which owned and operated the rig, and Halliburton, which provided cement to seal the well.

As part of its settlement, BP has agreed to cede to the private plaintiffs some of its legal claims against Transocean and Halliburton, putting those companies directly in the line of fire.

Transocean said in a statement it was still ready to go to trial. “Delays or deals made by other players do not change the facts of this case and we are fully prepared to argue the merits of our case based on those facts,” it said.

Separately, the DoJ is investigating BP and other companies for possible criminal charges.

David Uhlmann, a former head of the environmental crimes section at the DoJ, said: “Tonight’s settlement announcement is good news for the victims of the Gulf oil spill who will see their losses compensated much more quickly than the victims of the Exxon Valdez oil spill. It also paves the way for BP to negotiate agreements with the federal and state governments.”

Talks have been held over a possible resolution of those actions. BP has said it is willing to do a deal, providing it believes the price is fair.

Given the importance of the US to BP, as highlighted in Mr Dudley’s statement, it has seemed to many legal experts to be implausible that the company would want a prolonged court battle with the authorities.

One issue of concern about a settlement with the private sector plaintiffs has been uncertainty about the number of eligible claimants, as claimants have three years from the accident in April 2010 to come forward, or more than a year remaining to come forward.

Speaking before the settlement was announced, Brent Coon, a Texas-based lawyer with clients in the case said: “We won’t know until April 2013 how many claimants there are.”

However, another lawyer involved in the case, also speaking before the deal announcement, said it should be possible to come to an estimate of the number of potential claimants and the value of their claims.

“It’s not really that hard’” said Gerry Nolting, who was one of the attorneys who led the fight against Exxon for damages from the 1989 Exxon Valdez spill.

“In the state of Louisiana, people get certified to catch shrimp. You can count the number of shrimpers, oyster-fishers, crabbers, restaurant owners, and so on. We’ve made estimates based on looking at the data. It’s not this great mystery.”

BP is offering to start paying claims under its system immediately and to take over claims not being considered by the GCCF; a move that will help reduce uncertainty by encouraging people to agree a deal, get a cheque and sign a piece of paper saying their action at BP is now at an end.

The issue now will be how many of the plaintiffs choose to sign up in that way.

If any plaintiffs do not like the look of the overall settlement, they have the option of opting out of the process and refusing to be part of the settlement. There could be a succession of mini-trials across the southern states.

“There may be multiple trials, as there have been over asbestos,” said Mr Coon. “Putting it all together with a bow on top may be a convenient resolution, but it may not be an appropriate resolution.”

However, the legal hurdles facing such plaintiffs would be higher than they were for the original plaintiffs in the litigation.

If BP can now agree a deal with the US authorities, it may stand a chance of not coming to trail at all over the spill, thus avoiding hearings that could do damage to the company’s image and reputation.