Legal experts: Ruling a limited BP triumph

Howard Erichson in My San Antonio (from Houston Chronicle), October 03, 2013

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A federal judge on Thursday suspended BP's settlement payments to a slice of businesses that claim losses tied to the economic slowdown that followed the disastrous 2010 Gulf oil spill.

Because those small businesses use a cash-based accounting methodology, it's difficult to find a connection between revenue declines and the spill. The London-based oil giant has argued that a faulty interpretation of last year's settlement with spill victims caused some claimants to be paid for “fictitious or wholly nonexistent losses.”

After rejecting several requests by BP to halt those payments, U.S. District Judge Carl Barbier said he plans to develop a “narrowly tailored” preliminary injunction for business economic loss claims in which revenue and expense matching “is an issue.”

Barbier wrote that suspending all business-economic loss payments “would be overly broad and unnecessary.”

The order follows a Wednesday ruling by a federal appeals court that reversed Barbier's denial of BP's motion for a preliminary injunction to stop settlement payments organized by claims administrator Patrick Juneau. The appeals court also reversed Barbier's order that supported Juneau's interpretation of BP's settlement.

Two members of the three-judge panel agreed that BP could be paying inflated claims.

“BP is extremely pleased with today's ruling by the U.S. Court of Appeals for the Fifth Circuit setting aside the claims administrator's interpretation of the business economic loss framework in the settlement,” BP spokesman Geoff Morrell said in a written statement.

But legal experts say the BP triumph was limited.

“They didn't get the broad relief that they were seeking,” said Blaine LeCesne, a Loyola University law professor who has followed the case.

The appeals court noted that BP proposed an injunction that would include construction, professional services and other large-business industries that would not use cash-based accounting.

Such an injunction could have saved BP “hundreds of millions,” said Carl Tobias, a law professor at the University of Richmond, who studies federal courts and has followed the legal fallout from the nation's worst oil spill.

He also said the appeals court seemed to say Barbier should reconsider his conclusions and left the final decisions up to him, making it “really unclear” what happens next.

Howard Erichson, a law professor at Fordham University, called the appeals court ruling “strange,” as it's “not common for parties to start litigating on issues about how a class-action settlement is being administered.”

“The fact that the 5th Circuit is giving some credence to BP's position might make it easier for parties in other cases to go to court if they're unsatisfied with the way settlements are being administered,” he said.

Houston lawyer David Berg said he thought the appellate court would lean BP's way eventually because it is generally “anti-plaintiff, pro-business and very conservative.”

“I thought the 5th Circuit would find a way to help BP out of a jam they created, and they've done it,” he said.

Samuel Issacharoff, an attorney for plaintiffs in the case, noted the ruling allows most of claims to move forward unchallenged.

“I think it's a mixed ruling,” he said. “BP got something it wanted, and we got a lot of what we wanted.”

The company has said it set aside $42 billion for costs related to the Gulf spill. Juneau says BP has already paid claimants $3.7 billion.

Barbier scheduled a status conference with BP, class counsel and the claims administrator for Oct. 11.