As it prepares to go to court over the Deepwater Horizon accident, BP finds itself on the edge of a legal landscape into which few other companies have strayed.
In the past, the oil company has been quick to write big checks to solve its legal problems, but this time it finds itself ensnared in a complex web of legal issues that may be impossible to untangle without going before a judge.
BP and lawyers representing Gulf Coast business owners and individuals were discussing a $14 billion settlement. The talks, which appeared promising enough for the judge on Sunday to delay the trial a week, had stalled as of Wednesday.
It’s a reminder that the complex court proceeding BP faces as early as Monday is unlike anything it – or most other companies – has faced before.
The case is bigger than the litigation that followed the Exxon Valdez spill, and it’s more unwieldy in many ways than even the multistate litigation with tobacco companies more than a decade ago.
BP, of course, is no stranger to massive legal cases, as we are painfully aware in the Houston area. It paid billions to settle lawsuits related to its Texas City refinery explosion in 2005. Most of those claims came from the families of the 15 people who died and workers who were injured.
BP’s tactic in that case was to offer big settlements early, and while some lawsuits lingered, none went so far as to be decided by a judge or jury. It wound up settling about 4,000 claims, of which only a few even made it to trial.
No businesses claimed economic damage from the blast. In the Gulf oil spill case, thousands, perhaps tens of thousands, do. The full number may not be known for months because some attorneys are still filing them.
Houston lawyer Tony Buzbee, for example, says he has 12,000 spill-related clients, many of whom haven’t even presented claims to the $20 billion fund that BP set up to streamline the legal process after the spill. That is the first step required before the cases can go to court, and that fund isn’t required to have all claims paid until August 2013.
That makes it difficult for lawyers on the steering committee of plaintiffs in the court case to cut a deal that would include lawyers like Buzbee with clients who aren’t in the case yet.
“Other people will have to be folded into the process,” Buzbee told me earlier this week. “The bulk of the cases are not in the litigation.”
Even the Exxon Valdez disaster didn’t have the sort of open-ended business claims that BP and its co-defendants now face. That spill, in Alaska’s Prince William Sound, occurred in a more remote area. Both disasters hurt local fishermen, but the Valdez accident didn’t affect hotels and other beach-front businesses.
The BP case has been compared with the settlement between the states and Big Tobacco in 1998. The dollar amounts were larger in that case – the companies wound up settling for $206 billion – but the claims didn’t have to be reviewed individually. Each state entered into its own settlement with the tobacco companies.
In BP’s case, its spill fund has cleared off many of the smaller, more straightforward claims. What’s left are mostly business owners trying to prove how much commerce they lost.
Determining which businesses were affected and to what extent is the legal equivalent of nailing Jell-O to the wall – messy and ineffective.
In other words, it’s unlikely a settlement would encompass all the potential claims against BP and its co-defendants and would do little to relieve the financial uncertainty that continues to hang over the oil giant.
It’s not going to write a check for $14 billion without any idea of what it gets in return.
Even if it did, that wouldn’t resolve other facets of the case, such as settling government claims of violating pollution laws, which could result in fines of more than $17 billion.
BP would undoubtedly prefer to settle rather than allow a judge to decide its fate. While there’s still a chance for an 11th-hour settlement, the sheer complexity of the case appears to be pushing BP and its co-defendants close to uncharted legal territory.
Loren Steffy, firstname.lastname@example.org, is the Chronicle’s business columnist. Follow him online at blog.chron.com/lorensteffy, www.facebook.com/LorenSteffypage and twitter.com/lsteffy.