BP Wants Settlement Thrown Out Over Class Action Rules

By Brett Snider, Esq. on November 05, 2013 | Last updated on March 21, 2019

BP argued before the Fifth Circuit on Monday that the settlement of its private claims related to the Deepwater Horizon spill should be thrown out for allowing claims that are too attenuated.

According to The Times-Picayune, British Petroleum's (BP's) attorneys argued before a three-judge panel that the settlement rules approved by the district court violated Federal Rule 23 by allowing businesses to recover without proving losses were directly caused by the spill.

This isn't the first time that BP has come crying to the Fifth Circuit about the huge settlement amounts they will owe to Gulf-area businesses, but do they have a point this time?

BP Still Hurting Over Settlement Rules

Although BP won its battle against its insurance companies in covering the damage related to the Deepwater Horizon spill, paying out to private businesses as part of BP's civil settlement has been a different story.

The oil giant was in front of the Fifth Circuit in September complaining that the billions it would be estimated to pay to private businesses along the Gulf may be too much if the rules on "Business Economic Losses" remained so speculative.

Much of the issue was with the rules promulgated by the court-appointed settlement claims administrator Patrick Juneau, which purportedly allowed businesses to collect without proving losses were directly caused by the spill.

When these rules were appealed to the Fifth Circuit in October, the Court sided with BP stating that the district court could not approve a settlement of a class that included parties not actually damaged by the spill. And any interpretation by Juneau to the contrary is unlawful.

Rule 23 to the Rescue

The difference between this case and a normal private settlement is that class action settlements are governed by the confines of FRCP 23 ("Rule 23"), and courts can block class settlements which contain "overbroad class definitions."

The Fifth Circuit gave BP a nice preview of the Rule 23 argument against the settlement they would like to hear in its October ruling, and lo and behold, BP filed another appeal claiming Rule 23 violations.

This second appeal might be overkill, or even moot, considering that Juneau proposed new interim rules to the court in late October which he believed were compliant with the Fifth Circuit's ruling, reports the Times-Picayune.

Bottom Line

It still takes a great deal of faith to believe that BP was largely in the dark about the consequences of a settlement agreement they signed, but possible abuse of an otherwise legitimate settlement is good cause for the Fifth Circuit to look closer.

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