The proposed settlement of health and economic damage claims arising from the 2010 Gulf of Mexico oil spill breaks new legal ground and raises questions about whether its class- action structure is too rigid for the wide range of circumstances it covers.
“There is a tension between the seeming inflexibility of these class action settlement rules and the need for them to be applied to individual businesses on a case-by-case basis within industries,” said Chris Dean, a Houston-based lawyer with several spill clients.
BP and a steering committee representing plaintiffs negotiated the proposed settlement to resolve economic and medical claims for Gulf Coast residents and businesses affected by the massive oil spill after the deadly blowout of BP’s Macondo well in April 2010.
The British oil company estimates it will pay out $7.8 billion in the settlement, although the agreement doesn’t set a cap for damages.
The proposal does not cover wrongful death or injury claims directly tied to the blowout-related explosion of the Deepwater Horizon drilling rig, which killed 11 workers. It also wouldn’t settle civil or potential criminal claims by federal or state governments.
Seven months after the parties announced the proposed deal, its blueprint has evolved into a 1,200-page document establishing various categories of injured parties – cleanup workers, seafood industry businesses and tourism interests, for example – and setting formulas for awarding damages.
Plaintiffs who wish to opt out and pursue individual lawsuits must do so by Nov. 1 or they automatically will be included in the settlement.
Some plaintiff attorneys have argued that the formulaic approach makes it inherently unequal for some plaintiffs, such as applying the same risk multiplier in a given geographic area to compensate for future losses.
“You can’t put everyone in the same pot and treat them the same,” said Brent Coon, a Houston-based attorney for several thousand spill clients.
“They all lost different amounts of money,” he said. “You can’t create an arbitrary system and just lump them together. Some of these guys may never go back to work.”
Fairer for all?
Other legal experts, however, say that the formulas ultimately will make the settlement fairer for all plaintiffs.
“It would defeat the purpose of a class action to have plaintiffs be able to negotiate their settlement,” said Blaine LeCesne, a torts law professor at Loyola University. “You need some kind of structure and to apply the same formula to each category of claims. If it is structured in such a way to give every benefit of the doubt to the claimants and then some, I don’t see how you can do any better.”
Still, it appears the settlement will stretch the boundaries of the class-action structure if it wins approval from U.S. District Judge Carl Barbier of New Orleans, who is overseeing spill-related litigation. He’ll consider the deal’s fairness at a hearing to begin Nov. 8
“The classic class action is one where the main plaintiffs are virtually identical with all the people in the class, because they have all been hurt in the same way,” said George Strickler, a law professor at Tulane University specializing in civil procedure. “Normally the class will be divided up into various categories, and they will calculate how much they are entitled to, but the class device is not really designed for hugely different kinds of claims.”
Creating a class
Indeed, last year the Supreme Court rejected a sex discrimination lawsuit against Wal-Mart Stores, saying that the proposed class of 1.5 million women across the country did not share enough common circumstances to create “questions of law or fact common to the class.”
Similarly, the diverse and entrepreneurial Gulf Coast economy makes it difficult to apply class-action rules. For example, a worker’s claim for lost wages is based on an employer’s tax identification number, which may cover multiple types of businesses.
“How about a truck stop with a casino, which are common in gambling states along the coast?” Coon asked. “Casinos have been excluded from this settlement. If your employer is listed as a truck stop, you are eligible. If it is listed as a casino, you don’t get paid.”
Coon believes Barbier’s court should establish facts and apportion liability for the accident, with some individual cases then pursued through individual jury trials at different courts.
Individuals who opt out of the settlement still have a right to a trial, but because the multi-district litigation is being kept in one court, they could wait years for a court date.
Eliminating the wait
Advocates of class-action settlements say that one of their big benefits is that they remove this wait.
“A lot of times, mass torts are settled on a class-action basis, and the reason for that is because it is efficient,” said Dean Gresham, a Dallas-based attorney with Payne Mitchell Law who specializes in class-action litigation. “I think the lawyers did a remarkable job of coming up with an omnibus vehicle to address a lot of different claimants – different types of claims and damages – in a very efficient way.”
The settlement is designed to meet requirements of the Oil Pollution Act of 1990, which requires responsible parties to cover economic damages relating to oil spills.
Congress passed that law after the oil tanker Exxon Valdez ran aground and spilled crude into Alaska’s Prince William Sound in 1989.
But some who followed the years of litigation after that disaster say efficiency should trump almost any other consideration in resolving claims from the 2010 spill.
“Alaska plaintiffs would have been better off going to Judge Judy in 1990 and getting an arbitrated settlement, rather than wading through the messy federal court system for 20 years, which ultimately gave them a very poor settlement,” said Rick Steiner, a former University of Alaska professor.
“While the settlement may not be perfect, if it resolves this and people can get on with their lives, that is a good thing. If it draws out for 20 years, the only one who will win will be BP.”