On Monday the 5th U.S. Circuit Court of Appeals heard oral arguments regarding whether a judge should have approved BP’s multibillion-dollar settlement for compensating victims of the 2010 oil spill in the Gulf of Mexico. According to BP attorney Theodore Olson, the 5th Circuit Court of Appeals should throw out the settlement because it doesn’t require all businesses to prove their losses were caused by the accident and spill. During arguments before a three-judge 5th Circuit panel, he maintained that the company believed the settlement it signed was in compliance with Rule 23, a federal court rule governing class action lawsuit settlements. But Olson further argued that the implementation of the settlement under rules approved by U.S. District Court Judge Carl Barbier resulted in a violation of that rule because businesses didn’t have to prove their losses were directly caused by the spill. “BP supports the settlement as properly construed and implemented to compensate claims for actual losses caused by the Deepwater Horizon oil spill,” said Olson. The company further asserts that Barbier and court-appointed claims administrator Patrick Juneau interpreted the settlement in a way that would force it to pay for billions of dollars in inflated or bogus claims by businesses.
The plaintiffs’ lawyers who helped negotiate the settlement agreement on behalf of thousands of Gulf Coast businesses urged the three-judge panel to uphold Barbier’s approval of the settlement. “They’ve all lost their livelihood or their business revenue as a result of the economic calamity” caused by the spill, said Samuel Issacharoff, who argued the case for the plaintiffs’ attorneys. In response to the contention that BP has paid billions for inflated or bogus claims, plaintiffs’ lawyers argue that BP simply undervalued the settlement and underestimated how many claimants would be eligible for payments. BP had originally estimated the settlement would cost $7.8 billion, but recently the company readjusted its claims cost estimate to $9.2 billion.
Awards under the settlement are based on a comparison of revenues and expenses before and after the spill. BP argues that a “policy decision” that Juneau announced in January has allowed businesses to manipulate those figures in a way that leads to errors in calculating their actual lost profits. Barbier ruled that the settlement agreement recognized that in some cases, it made sense to assume that the losses were caused by the spill, such as with businesses directly on the coast in areas known to be affected by the oil spillage. Plaintiffs’ attorneys argue that the complicated accounting processes that BP prefers would be more expensive and time consuming and would result in little overall difference in the amount of claim payments.
BP previously appealed Barbier’s ruling on the business class losses directly to the 5th Circuit, and on Oct. 2, a different three-judge panel ordered Barbier to reconsider the rules. Barbier is currently doing just that and last week new interim rules were proposed. Permanent rules are expected to be submitted by December 2. Olson urged the current 5th Circuit panel to hold off on its own ruling until it’s clear that Barbier approves rules that comply with the ruling of the previous panel. The appeals court gave no indication on when it will issue a ruling.
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