Swamp Stomp
Volume 14, Issue 50
On Monday December 8th 2014, BP saw their plea for government intervention in the multibillion-dollar litigation they face for the April 2010 debacle turned down. They were responsible for the millions of gallons of crude that were spilled into waters off of Louisiana, and the 11 offshore rig workers who were killed during the event. An open ended portion of BP’s liability will now cost billions of dollars more than the original $7.8 billion estimate thanks to the Supreme Court’s snub.
However, the Supreme Court’s refusal to act may have larger implications than simply raising BP’s liability fees. The oil and gas company’s appeal remarkably turned into a direct attack on Carl Barbier, the federal trial judge who oversees several aspects of the multifaceted spill litigation. Without the cloud of the Supreme Court looming over Barbier’s head, BP is expected to have to pay a heavy penalty for repeatedly challenging the integrity of the settlement process.
Stephen Herman and James Roy, the plaintiff’s attorneys, claim that the high court’s shun “should finally put to rest BP’s two-year attack on its own settlement.”
After the explosion that led to the worst offshore oil disaster in U.S. history, BP established an initial $20 billion fund to provide revenue for cleanup and damage claims, as well as attempting to negotiate settlements of various government and private suits. Since then the company has written checks in excess of $28 billion.
In order to avoid a trial on one category of potentially vast business and economic claims, BP agreed a settlement in 2012 estimated at $7.8 billion. The agreement, however, had no ceiling and the overall value was to be established by a highly flexible formula used to determine which of the alleged victims qualified for payment. This resulted in chaos as hundreds of large-dollar claims that appeared to have no apparent connection to the spill were made. Subsequently, BP accused the plaintiff’s solicitors and the settlement administrator—appointed by Barbier—of violating the agreement. Barbier, however, rejected the accusations of excessive and in some cases “fictitious” claims, and felt persecuted by the unfounded allegations that he was victimizing the oil and gas company.
It was this section of the claim that the Supreme Court refused to review. Constitutional or statutory clashes are not in question, but rather a one-time-only contract dispute that was complicated by peculiar facts. Therefore, it is not the kind of dispute the Supreme Court normally sets out to resolve.
BP’s attack on Barbier may prove to backfire in a substantial way. Having questioned Barbier’s settlement process, additional attention has been given to the loose terms of the settlement agreement. BP now estimates that the settlement will exceed $9.7 billion, however, the plaintiff’s attorneys expect a much larger number, estimating figures closer to $20 billion.
Keep in mind as well that this is only one portion of the claim against BP. The company also faces federal charges filed under the Clean Water Act. Barbier will also preside over that trial, whose the separate liability may itself reach $18 billion. The man who BP tried to railroad, then, will have it in his power to penalize the company in many facets of the suit without drawing the attention of the Supreme Court.
It is looking increasingly likely that the $43 billon pretax charge BP took to cover all of its spill liability will not sufficiently cover all of their expenses.