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BP gets slick in trying to undermine gulf oil spill settlement

In full-page ads, BP ridicules payouts it believes are undeserved, including $8 million to famed chef Emeril Lagasse and $173,000 to an escort service.

February 23, 2014|Michael Hiltzik
  • The 2010 Gulf of Mexico oil spill caused “immense environmental damage” along the Gulf Coast, including harm to this oil-drenched pelican.
The 2010 Gulf of Mexico oil spill caused “immense environmental… (Carolyn Cole, Los Angeles…)

It would be perfectly proper for BP, the giant British oil company, to feel a sense of corporate remorse.

After all, the firm was responsible for the 2010 Gulf of Mexico oil spill disaster, the Deepwater Horizon oil rig explosion and well blowout that took 11 lives and created "immense environmental damage" in and around the gulf. (Those words were uttered by a Department of Justice official just over a year ago, when BP pleaded guilty to a dozen felony charges and agreed to pay $4 billion in penalties and fines.)

"Buyer's remorse," however? That's a different story.

But it's what BP is displaying these days toward a class-action settlement it reached in 2012, covering individuals and businesses that claimed economic losses from the oil spill — hotels and restaurants, seafood businesses, property owners and many others. The settlement aimed to streamline the claims process, so these victims wouldn't each have to bring their cases before a judge and jury. The company "wanted to do the right thing," it says.

But in recent months BP has mounted a frontal assault on the settlement. The firm has placed full page ads in major newspapers, ridiculing supposedly fraudulent claims blithely paid by the settlement administrator, Louisiana lawyer Patrick Juneau — including $8 million to "celebrity chef" Emeril Lagasse.

Last week BP turned up the heat by sponsoring the daily Playbook web page and email blast aimed at Washington opinion makers, among many other people, by the Politico news website. Each day's Playbook message from BP pinpoints a different, ostensibly absurd case with the tag line, "Would you pay these claims?" Sample: a $173,000 award to an "adult escort service." (What, an escort service can't be harmed by a fall-off in tourism?)

But that's just the PR side of things. The company also has mounted an intensive legal attack on Juneau in federal court in Louisiana. It has obtained a restraining order preventing further payments for the moment and is seeking a permanent injunction so that the policies governing the settlement awards can be recrafted.

BP is going down this path at a time when one would expect it to display maximum agreeability and contrition. The company is negotiating with federal agencies to end its more than year-old exclusion from new government contracts, dating back to its guilty plea. A lawsuit by the federal government and several states, seeking billions of dollars in damages, is before the same federal judge overseeing the class-action settlement. Reports are still emerging of the toxic effects of the spilled oil on the ecosystem; the latest being a just-released finding by Stanford researchers that the crude is bad for the cardiac health of tuna. (BP asserts that the lab study bears no relation to the "real-world conditions" experienced by fish in the gulf.)

Plaintiffs' attorneys say that what's happened is that BP has belatedly awakened to the fact that its obligations to businesses and individuals may come to billions of dollars more than it anticipated. The settlement, indeed, is uncapped — the money keeps getting paid out as long as claims roll in and BP has the cash.

"They figured out that they underestimated what the settlement is going to cost," speculates Stephen J. Herman, a lead plaintiffs' attorney. "Now it's costing them too much money, and they're trying to find ways to not pay it."

BP says it's just trying to keep the payouts fair. A company spokesman, Geoff Morrell, said in an emailed statement that "the company's commitment to the Gulf is being twisted and exploited" by awards that violate "the intent of the parties, and the law."

Does BP have a point? Let's take a look.

The settlement agreement says that most claimants have to show that their economic losses were caused by the oil spill, which began April 20, 2010, with a series of explosions at the Deepwater Horizon rig. The well wasn't permanently capped until mid-September. By then millions of gallons of oil had spilled into the gulf.

The agreement also says that for many of those claimants, all they need to do to prove that their economic losses were caused by the spill is to show that they operated a business within the geographic zone of the gulf and experienced a certain pattern of income — chiefly a "V-shaped" pattern reflecting a sharp reduction after the blowout, followed by a recovery in income after the incident. (Other patterns can be used, but that's the main one.)

That's the interpretation of the settlement rules favored by the plaintiffs. BP, however, maintains that claimants first have to prove they had spill-related losses, and only then can they apply the V-shaped test. The problem with BP's position is that it seems to have changed — for months after the settlement was reached the company seemed to agree that passing the V-test was tantamount to proof of "causation." But late last year it changed its tune.

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