Oil spill report boosts case against BP, others

Howard Erichson in Reuters, September 16, 2011

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Sept 16 (Reuters) - A U.S. government report largely blaming BP for the Gulf of Mexico oil spill could provide fresh ammunition to plaintiffs in mass litigation against the oil giant and co-defendants Transocean and Halliburton.

If the case proceeds to trial, currently scheduled to start in February before U.S. District Judge Carl Barbier in New Orleans, the report could be ruled admissible in whole or in part, or referred to in examination of witnesses and in closing arguments. The 212-page report, which cites regulatory violations by all three of the companies, could also be used in arguments for punitive damages and as leverage in any settlement talks.

After the report was released, Reuters quoted a source close to BP predicting the company would offer "the mother of all settlements" to end all legal troubles stemming from the 2010 spill. BP is also facing civil charges by the U.S. Department of Justice and by the states of Louisiana and Alabama.

Lawyers for the private litigants declined to offer specifics on how they plan to use the report, which was released on Wednesday by the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). It was even more critical of BP's actions than was a previous U.S. government investigation, conducted by a presidential panel and released early this year.

"By spelling out in detail what went wrong and by listing regulations that were violated, the (new) report practically gives plaintiffs' lawyers a blueprint for trial," said Howard Erichson, a professor specializing in complex litigation at Fordham Law School.

Paul Sterbcow, a lead attorney for the group of plaintiffs and a partner at Lewis, Kullman Sterbcow & Abramson in New Orleans, told Reuters that its findings "bolster what we already know, and strengthen and confirm our position."

BP, Transocean and Halliburton have each praised parts of the report. BP said it agreed "with the report's core conclusion -- consistent with every other official investigation -- that the Deepwater Horizon accident was the result of multiple causes, involving multiple parties, including Transocean and Halliburton."

Transocean said the report "finally puts to rest all previous allegations that improper maintenance of the blowout preventer contributed to the tragedy." Halliburton said the report "accurately places responsibility on BP", which it said was responsible for all the operational decisions in the contributing causes.

The group of private plaintiffs' attorneys is pushing to recover damages in a case that consolidates more than 108,000 claims by fishermen, oystermen, and property and business owners.

The company has encouraged individual claimants to seek compensation outside of court from its victims' compensation fund, the Gulf Coast Claims Facility.

Legal experts said that the report, which found that BP was solely responsible for 21 of 35 contributing causes of the disaster and shared blame with Transocean and Halliburton for eight more, could provide grounds for punitive damages.

"So much went wrong that the question becomes, 'How can you make so many mistakes?'" said Byron Stier, a professor at Southwestern Law School in Los Angeles. "It is hard for me to imagine, that given all the damage to the Gulf, and with the multiple government reports pointing to wrongdoing, that a jury wouldn't award punitive damages."

In order to recover punitive damages, the plaintiffs have to show defendants are guilty of gross negligence or worse, a claim BP and other defendants deny.

David Logan, dean of Roger Williams Law School in Bristol, Rhode Island, said that BP, Transocean and Halliburton could all be hit with punitive damages. "It demonstrates high culpability for all three," he said. "It keeps three deep pockets in play." Transocean owned and operated the sunken rig, while Halliburton was responsible for cement work on the drilling project.

It is not clear how much punitive damages would add to the total sum of any overall recovery, since plaintiffs claiming indirect losses -- such as restaurants and hotels that say they lost revenue as tourism fell -- are not eligible for punitive damages. It is unknown how many of the private claimants allege such indirect losses, compared to those who claim direct losses. Still, any punitive damages award is likely to be huge.

"There could be multibillion dollar punitive damage awards against BP and the other companies involved, but they are unlikely to be in the tens of billions of dollars," said David Uhlmann, a professor of law at the University of Michigan and formerly a top environmental prosecutor for the Department of Justice.

The pending multidistrict litigation is In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

(Reporting by Moira Herbst)