BP settlement talks collapse, sources say (Updated)

(U.S. Coast Guard)

(Updates throughout with comments from attorneys and the Plaintiff Steering Committee.)

Settlement talks have broken down  between BP and lawyers representing business owners and individuals affected by the Deepwater Horizon oil spill in 2010, people familiar with the negotiations said.

Attorneys for both sides had been discussing an agreement that would settle thousands of claims by tapping as much as $14 billion in a claim fund BP set up after the disaster. A federal judge in New Orleans had postponed the trial, originally set to begin this week, in hopes that the talks might produce an agreement.

The trial is scheduled to begin on Monday.

Settlement discussions have run hot and cold in the months leading up to the trial, and could still resume before the proceedings begin. Steve Herman, one of the lead attorneys on the Plaintiffs Steering Committee, insisted the talks were ongoing.

“Talks are continuing,” he said in a statement.

Houston attorney Tony Buzbee, who represents as many as 12,000 spill-related clients, said one of the stumbling blocks has been how to resolve cases that haven’t been filed yet.

“The bulk of the cases are not in the litigation,” he said. “The PSC cannot guarantee BP global peace, so as far as BP’s concerned, it cannot settle.”

The claims fund, set up in the summer of 2010 to pay claims for businesses hurt by the spill, has doled out about $6 billion so far. The government chose attorney Kenneth Feinberg to process the claims. The settlement negotiations stumbled, though, because it wasn’t clear how many claimants would divide the money or what formula would be used, Buzbee and others said.

Attorneys involved in the case claimed to have as many as 116,000 clients, but Feinberg, in a recent filing with the court, called that number into question. Some of those had previously been paid by the fund, others said they had no lawyer representing them in the legal case and still others may not be eligible for claims because they hadn’t filed with Feinberg’s fund first. As a result, the number of actual claims could be less than 10,000.

BP isn’t likely to commit such a large amount of money to settle when the number of potential claims could vary by as much as 100,000.

Preparing cases based on  economic harm to businesses hurt by the spill can take years, Buzbee said. Many of his cases haven’t even submitted their claims to Feinberg’s fund because they’re still completing the necessary documentation.

“It’s going to take a long time to go through all of those,” he said.

Even if BP and others involved in the rig disaster and the 87-day oil spill that followed settled with the business owners and other individual claimants, they still face claims from federal and state governments under anti-pollution laws.