BP Ordered by Appeals Court to Abide by Oil-Spill Settlement

BP Plc (BP/) was told by a federal appeals court to abide by terms of a $9.2 billion settlement with victims of the Gulf of Mexico oil spill after failing to satisfy judges that a claims administrator is misinterpreting the deal.

BP, Europe’s second-largest oil company, must resume paying millions of dollars in business-loss claims that were temporarily halted in December while the company fought to block payments over losses not directly linked to the worst offshore spill in U.S. history, the U.S. Court of Appeals in New Orleans said in yesterday’s ruling.

“In light of our reading of the settlement agreement,” U.S. Circuit Judge Leslie Southwick wrote in the panel’s 2-1 ruling, “we conclude the settlement agreement does not require a claimant to submit evidence that the claim arose as a result of the oil spill.”

BP traded at 495 pence in London at 12:43 p.m. local time, up 0.4 percent, having earlier slumped as much as 2.4 percent.

The April 2010 blowout of BP’s deep-water Macondo well off the coast of Louisiana killed 11 people and sent millions of barrels of oil into the Gulf of Mexico. BP settled with most private plaintiffs in March 2012, just before a trial on liability for the disaster. BP initially valued the economic-loss accord at $7.8 billion. In a regulatory filing last year, it increased that amount to $9.2 billion.

Appellate Options

BP disagrees with the decision, Geoff Morrell, a spokesman for the London-based company, said yesterday in an e-mailed statement.

“BP had asked the court to prevent payments to business economic-loss claimants whose alleged injuries are not traceable to the Deepwater Horizon accident and oil spill,” Morrell said. “BP believes that such claimants are not proper class members under the terms of the settlement and is considering its appellate options.”

The oil producer has struggled to convince two three-judge appeals panels that its settlement was invalid unless the company’s interpretation was enforced by the courts.

A separate three-judge appeals court upheld the approval of the settlement on Jan. 10, ruling the accord satisfied all legal requirements for resolving a class action, or group lawsuit.

BP failed to convince both appellate panels its settlement wasn’t legally valid unless victims were required to provide evidence their losses were caused by the Gulf of Mexico spill.

Anyone submitting a claim must attest that the spill caused the damages, which are required to match certain agreed-upon loss patterns defined in the accord, Southwick said in yesterday’s decision. The deal allowed for “suspicious forms” to be investigated for potential fraud, he said.

Nothing ‘Unreasonable’

“These requirements are not as protective of BP’s present concerns as might have been achievable, but they are the protections that were accepted by the parties and approved by the district court,” Southwick wrote. “There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not.”

Steve Herman and Jim Roy, co-lead attorneys for spill victims in the litigation, said in an e-mailed statement that the “ruling makes clear that BP can’t rewrite the deal it agreed to.”

In a dissenting opinion, Judge Edith Brown Clement said the majority’s conclusion that the settlement didn’t require claimants to prove losses were caused by BP’s actions tied to the spill raised constitutional issues about who has standing to receive benefits from the fund.

Dissenting Judge

Clement said “causation was a critical part of the” accord and by expanding the eligible class of claimants “to those who cannot trace their injuries to BP’s conduct,” the majority is improperly “using the powers of the federal courts to enforce obligations unrelated to actual cases or controversies.”

In court filings, the victims’ lawyers accused BP of “buyer’s remorse” and of attempting to undermine an accord intended to resolve most private spill-damage claims without litigation.

In a split decision last year, the three-judge panel that ruled yesterday kicked BP’s appeal back to the lower-court judge in charge of administering the settlement. The panel instructed U.S. District Judge Carl Barbier to investigate whether BP intended to include only victims with direct ties to the disaster in its accord.

Barbier re-examined the agreement and issued two rulings in December. In one ruling, he agreed with BP that claimants must more closely match revenue and related expenses when submitting claims to prevent distortion of losses.

Victim Payments

In the second, Barbier ordered the company to pay victims whose losses fit the numerical formulas spelled out in the accord, regardless of whether they could prove direct links to the spill.

“No case cited by BP or the objectors suggests that a district court must also safeguard the interests of the defendant, which in most settlements can protect its own interests at the negotiating table,” Barbier said.

The case is In Re. Deepwater Horizon, 13-30315, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The lower-court case is In Re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

Sourced from Businessweek


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