BP Suffers Loss in Gulf Settlement Appeal: Time to Pay Up?

By Brett Snider, Esq. on March 06, 2014 | Last updated on March 21, 2019

BP received some bad news this week from the Fifth Circuit: It has to pay up according to the settlement agreement it signed to compensate the victims of the Deepwater Horizon Gulf oil spill.

We wouldn't hold our breath that this is BP's last word on the case, but for now it appears that the oil giant will have to shell out billions to affected and possibly affected Gulf-area businesses, Reuters reports.

What did the court say to finally shut the door on this epic BP case?

There and Back Again

This BP case did at times seem a bit like J.R.R. Tolkien's "The Hobbit," beginning with a hastily signed agreement and continuing with battle after battle with "fictional," numerous forces which threaten to doom the plaintiff/protagonist.

But the Fifth Circuit didn't quite see it that way. In their version of the tale (entitled In re: Deepwater Horizon) the court determined that this was simply a case of too bad v. so sad. In more legal terms, the Court affirmed that claimant businesses under the Deepwater Horizon settlement agreement didn't need to provide evidence linking damages to BP -- just to attest under penalty of perjury that the damage was caused by the Deepwater Horizon disaster.

BP had attempted to show that adopting such an interpretation would effectively undo the class certification under Federal Rule 23, but the court disagreed. The claims are still "traceable" under Rule 23 even if no evidence is required -- the attestations of the claimants are enough.

Yes, this is a raw deal for BP in terms of weeding out spurious claims, but the Court had zero sympathy for BP's claims that it had made a huge mistake in accepting this settlement deal.

Oil Wells That End Well

That doesn't mean that the Fifth Circuit wants just anyone to makes claims under this deal. Patrick Juneau, the claims administrator who BP had taken to the mat (unsuccessfully) in this fight, will still be responsible for investigating and rooting out fraudulent claims. However, BP can't require that Juneau make each claimant offer up any quanta of evidence other than the attestation as proof of their eligibility under the settlement.

This was a 2-1 decision in the panel, and BP currently has an appeal pending en banc on many of the same issues. It is uncertain after this decision that the whole of the Fifth Circuit will hear BP's epic tale, or if they'll finally start paying the piper.

Bottom Line

Caveat emptor seems like an understatement in a case with a giant oil company like BP. Despite the fact that they voluntarily entered into the settlement in 2012, they continue to try to wriggle out of paying. The Fifth Circuit hasn't had much sympathy for this position in the past, and the future isn't looking too bright either.

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