Trials & Litigation

BP cries foul, says crafty lawyers and claimants collected $500M in comp unrelated to oil spill


In a written settlement agreement concerning the massive Gulf of Mexico oil spill that began with a 2010 explosion on the Deepwater Horizon drilling rig, BP agreed to a compensation formula to reimburse businesses.

But now BP is unhappy about language that is being interpreted not only by plaintiffs lawyers but a court-appointed claims administrator and even a federal appeals court in a manner that those in charge of the giant petroleum company say was never intended: They are requiring some $500 million payments to be made by BP to companies that suffered losses of business during the relevant time period, even if those losses weren’t caused by the oil spill, 60 Minutes reports.

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Workers try to collect oil-covered sand in Pensacola Beach, Fla. Cheryl Casey / Shutterstock.com

Pat Juneau, the claims administrator, says he initially questioned this, too, but a BP accounting expert testified in court in court that he was to apply the formula as stated in the written settlement agreement. So Juneau has done so. “I have an obligation as a court-appointed official by the federal court to implement what these two parties wrote,” he told the CBS News program.

Specifically, expert Holly Sharp said in court in 2012 that once the settlement formula is satisfied, losses are “presumed to be caused by the spill with no analysis required to determine whether the declines might have been due at least in part, to other causes,” the CBS news program reports.

Responding to arguments by BP lawyers that the formula presupposes an oil spill-related loss, plaintiffs attorney Jim Roy says he was in the room when the settlement was discussed and BP’s counsel understood that the formula would be interpreted just as it has been. Now, he contends, the company is suffering from “buyer’s remorse.”

However, Kenneth Feinberg, a former court-appointed administrator responsible for administering claims against BP, told 60 Minutes he found during his time in the job that only about one-third of the claims he received were justified. (He was replaced, with BP’s agreement, after complaints that he was too strict in applying compensation standards.)

Separate 60 MInutes segments include one discussing plaintiff attorney advertising that openly says claims don’t have to be related to the spill and an interview with a survivor, the Deepwater Horizon’s chief technology officer, Mike Williams, who escaped by leaping approximately 10 stories off the side of the rig after the last lifeboat had already been launched.

Williams said a combination of factors caused the explosion, including a push by BP to skip an important step in sealing the underwater well (it would be pumped out later by another crew) and failure by those in charge of the oil rig to fully investigate an apparent problem with rig equipment used to test an underwater blowout preventer. The rig equipment, which had been unintentionally damaged by a crew member, apparently failed to detect problems with the blowout preventer.

When the blowout preventer failed, a gush of highly pressurized oil from under the Gulf caused an explosion, a fire and a massive oil spill. Nearly a dozen people were killed and many more were injured in the April 2010 accident.

Additional and related coverage:

ABAJournal.com: “BP oil-spill settlement is upheld by 5th Circuit”

Financial Times (reg. req.): “Row between lawyers hits BP’s Gulf of Mexico oil spill deal”

Louisiana Record (sub. req.): “BP claimant ordered by court to return $357K in fraudulent claims”

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