Federal Judge Approves BP's Settlement Of Economic, Property Damage Claims

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By Susanne Pagano  

HOUSTON--A federal judge has given final approval to BP Plc's economic and property damages settlement agreement with individuals and businesses affected by the April 2010 oil spill in the Gulf of Mexico following the Deepwater Horizon accident (In re Oil spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, E.D. La., No. 2:10-md-2179, 12/21/12).

In an order issued Dec. 21, Judge Carl Barbier of the U.S. District Court for the Eastern District of Louisiana called the settlement agreement “fair, reasonable, and adequate” to putative class members.

“There is no evidence whatsoever of any fraud or collusion in the negotiation of the settlement,” Barbier said. “Rather, in light of the considerations discussed above, any suggestion of fraud or collusion is baseless.”

Although Barbier did not specify the amount to be paid to cover economic losses linked to the spill, BP has pegged the amount it will pay to resolve the economic, property loss, and medical claims at $7.8 billion.

Barbier said parties clearly had sufficient information about the strengths and weaknesses of their respective cases to make “reasoned judgment” about the desirability of settling the case on the terms proposed.

“This court allowed settlement discussions to take place, and supervised them as described above, but insisted that discovery and trial preparation continue apace, so that no time would be lost if settlement talks proved fruitless,” Barbier wrote. “This dual track enabled the parties to consider and negotiate a settlement fully informed by unfolding discovery and expert opinions, among other litigation events.”

Without a settlement, cases against BP would continue to be “complex” and “impose significant expenses on all parties,” Barbier said.

Agreement Covers Individuals, Businesses

The agreement covers individuals and businesses in Louisiana, Mississippi, Alabama, and certain coastal counties in eastern Texas and western Florida, as well as specified adjacent Gulf waters and bays, Barbier said.

Barbier has not yet ruled on BP's proposed medical settlement for oil spill workers and others who claim they became ill from exposure to oil and chemical dispersants used to clean up the spill.

BP has estimated it will pay $7.8 billion to resolve the economic, property loss, and medical claims. With the exception of the seafood compensation program that features a guaranteed $2.3 billion fund, there is no cap on the amounts that may be paid under the settlement agreement.

In a Dec. 21 statement, BP said it was pleased that the court approved the plaintiff steering committee's settlement resolving the substantial majority of legitimate economic loss and property damage claims stemming from the Deepwater Horizon accident.

“We believe the settlement, which avoids years of lengthy litigation, is good for the people, businesses, and communities of the Gulf and is in the best interest of BP stakeholders,” BP said.

Barbier's decision is “another important step forward for BP in meeting its commitment to economic and environmental restoration efforts in the Gulf and in eliminating legal risk facing the company,” it said.

Details of Court's Order

In his order, Barbier said the settlement recognizes six categories of damage--specified types of economic loss for businesses and individuals, specified real property damage, vessel of opportunity charter payments, vessel physical damage, subsistence damage, and the seafood compensation program.

“The settlement was structured to assure adequate representation of all interests within the class and to prevent intraclass conflict,” Barbier said. All claims arose from a single event and were presented against the same defendants, and the class settlement is “far easier to manage than the thousands of individual actions could ever be,” he added.

Furthermore, there was no duplication of relief for claimants, common questions of law and fact predominate over individuals issues, and the vessel of opportunity claims are appropriate for class treatment, Barbier said.

Most of the “purported objectors” to the settlement failed to provide written proof of class membership, he added.

The settlement had low objections and opt-out rates, Barbier said.

“None of the objections, whether filed on the objections docket or elsewhere, have shown the settlement to be anything other than fair, reasonable, and adequate,” Barbier said. “All objections to the settlement are hereby overruled on the various grounds specified above.”

Opt-Out Allowed

The central factual basis for all of plaintiffs' claims “is the leak itself--how it occurred and where the oil went,” Barbier said.

“For those few objectors unhappy with the settlement, their remedy is simple: opt out,” Barbier said.

A significant amount of adjudication still must be conducted, Barbier said, noting that the government's multiphase limitation and liability trial has not yet begun to determine the cause of the Macondo well blowout and assign percentages of fault to the companies involved.

That trial is scheduled to begin Feb. 25 in Barbier's court. BP could be subject to a fine of up to $21 billion if the court finds gross negligence under the federal Clean Water Act.

BP Exploration and Production Inc. agreed Nov. 15 to pay $4.5 billion to settle federal charges stemming from the Deepwater Horizon explosion and oil spill in the Gulf of Mexico in what the Justice Department called the largest resolution of a criminal case in U.S. history.

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