BP seeks injunction over Gulf oil spill settlement dispute

BP wants an injunction to prevent the administrator handling claims under a class-action settlement reached with victims of the 2010 Gulf of Mexico oil spill from paying inflated or fictitious claims that could cost the British oil giant billions of dollars.

In an emergency filing in federal court in New Orleans on Friday, BP said that if the injunction is not granted related to business economic loss claims, it will suffer irreparable harm.

“While the ultimate amount at stake is at present inestimable, awards for fictitious losses already are hundreds of millions of dollars and could reach billions,” BP lawyers said in the filing.

There was no immediate ruling by U.S. District Judge Carl Barbier. BP urged Barbier to schedule an expedited hearing on its motion, perhaps as early as March 22.

Separately, BP filed a complaint against the settlement program and its administrator, Patrick Juneau, alleging breach of contract. The complaint doesn’t seek monetary damages, but it does ask that Juneau be ordered to change how he  interprets the agreement so that he complies with what BP believes the agreement says.

Juneau, a lawyer in Lafayette, La., did not immediately respond to a request for comment left at his office.

In a statement, the Plaintiffs Steering Committee, the lead attorneys for the thousands of individuals and business affected by the spill that reached the settlement with BP, defended the claims administrator’s decision, noting that the court has already affirmed his interpretation.

“Claims are to be paid under the terms spelled out in the agreement – terms which were negotiated, co-authored and expressly agreed to by BP,”  lead counsel Steve Herman and Jim Roy said.  “Simply put, BP undervalued the settlement and underestimated the number of people and businesses that qualify under the objective formulas that BP agreed to.”

Because of a January decision by the claims administrator about how to handle the disputed business economic loss claims, BP has stopped estimating the total amount under last year’s landmark settlement that it expects to pay out.

Initially, BP had estimated it would pay out $7.8 billion under the uncapped settlement for economic and health damages arising from the disaster off Louisiana. Later, it raised that estimate to $8.5 billion. But in a recent regulatory filing, the company said it would only now project the amount it can reliably estimate, which is $7.7 billion. That figure excludes  disputed claims that are the subject of Friday’s filing.

Financial troubles: BP warns investor it’s paying more than expected for spill

BP’s request for an injunction, if granted, would not appear to impact the overall claims process. But, it would prevent the paying of business economic loss claims that were subject to the administrator’s policy decision in January that BP is challenging.

BP said the policy decision is tantamount to a fundamental rewriting of the framework that it agreed to when it reached the settlement with the steering committee of lawyers that represent thousands of plaintiffs that sued the company over the the disaster. BP alleges in its filing that the PSC urged the administrator to make the policy decision.

Specifically, BP wants to block the claims administrator from issuing or paying to claimants in the agriculture, construction, professional services, real estate, manufacturing, wholesale trade, and retail trade industries any determinations for business economic loss claims. The company alleges that non-existent losses are most prevalent among these industries.

“Thus, to the extent that all determinations on claims affected by the business economic loss policy decisions cannot be enjoined, all determinations for claims in these specified industries should be enjoined instead,” the filing says. “BP requests that the preliminary injunction remain in effect pending conclusion of the claims administration process.”

BP said that to date over 1,200 awards have been made to claimants in these industries with a total value of over $400 million. But it said many of the awards were for damages that never occurred.

It cited four examples that it described as “absurd,” including $21 million to a rice mill in Louisiana that was located 40 miles from the coast. BP says the rice mill was granted the award even though in 2010,  the year of the spill, it earned more revenue than in the previous three years.

BP also cited a $9.7 million award to a highway, street and bridge construction company in northern
Alabama, almost 200 miles from the Gulf,  that does no business in the Gulf region even though 2010 was its best year on record.

BP owned the undersea well that blew out in the Gulf, leading to the worst offshore oil spill in U.S. history. An explosion on the Deepwater Horizon drilling rig, which BP was leasing from Swiss drilling contractor Transocean, killed 11 workers.

To date, BP has paid out more than $24 billion in damages and clean-up costs related to the disaster. It also has been socked with $4 billion in criminal fines and faces potentially billions of dollars more in fines and damages at a civil trial that is currently ongoing before Barbier in New Orleans.

The third week of the trial concluded on Thursday. Next week, Transocean’s chief executive officer, Steve Newman, is expected to testify.

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Read ongoing FuelFix coverage of the legal fallout from the Gulf of Mexico oil spill:

BP Motion for Injunction