Judge rejects BP request to block payment on some Gulf spill claims

NEW ORLEANS — A federal judge Friday threw out BP’s request for an injunction to block payment of what BP alleges are fictitious business economic loss claims by plaintiffs who weren’t harmed by the Gulf of Mexico oil spill.

The company alleges the claims administrator has improperly rewritten some wording of the class-action settlement reached last year, and it believes the result could cost BP billions of dollars if an injunction isn’t granted.

BP faced an uphill battle in its effort to convince U.S. District Judge Carl Barbier to issue the injunction because the settlement administrator, Patrick Juneau, has been operating under Barbier’s supervision, and the judge previously upheld Juneau’s interpretation of the agreement for processing compensation claims.

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Barbier said nothing he heard at a hearing in federal court in New Orleans changes his mind. The issue now is likely to end up before a federal appeals court, where BP has already filed papers.

“Despite the fact the record has continued to grow, I don’t think it changes the fundamental issue before the court,” Barbier told a packed courtroom.

He added, “I find BP’s motion for a preliminary injunction should be denied.”

Barbier also threw out a breach of contract complaint BP filed against Juneau.

In a statement after the hearing, BP said it “continues to believe that the claims administrator’s interpretation of the settlement agreement as to business economic loss claims is contrary to the agreement and has produced unjustified windfall payments to numerous business claimants for non-existent, artificially calculated losses.”

The company added, “BP believes that such a result is completely at odds with the parties’ stated intent in reaching a settlement.”

BP said it will now continue working on its appeal.

BP initially estimated it would pay out $7.8 billion under the settlement, though the settlement has no cap. It has since stopped estimating its expected total liability because of the uncertainty over the business economic loss claims it is disputing.

BP owned the undersea well that blew out 50 miles off the Louisiana coast on April 20, 2010, causing an explosion on the Transocean-owned Deepwater Horizon rig that killed 11 men. It took nearly three months to cap the runaway well that spilled millions of gallons of oil into the sea.

BP was trying to secure as much certainty as it could buy when it agreed to a landmark settlement last year with individuals and businesses suffering economic and health damages from the worst offshore oil spill in U.S. history.

But it argued at the hearing that a January decision by Juneau on his interpretation of the settlement changed everything.

“We’ve laid out the irreparable harm,” BP lawyer Richard Godfrey told Barbier. “These are not losses.”

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BP sought to block Juneau from making business economic loss payments to claimants in the agriculture, construction, professional services, real estate, manufacturing, wholesale trade and retail trade industries. The company alleges that claims for nonexistent losses are most prevalent among those industries.

But lawyers for the steering committee that represents plaintiffs in the settlement say BP agreed to the rules for how injuries would be determined and compensation would be calculated. They cited documents submitted by BP attorneys that they believe show the company fully understood the terms of the deal.

If BP underestimated its liability under the settlement, that’s the company’s problem and it shouldn’t be allowed to push the rewind button now, the attorneys said in a letter to Barbier, previously filed under seal but released recently.

Provisions in the settlement calculate business economic losses partly by comparing a business’s revenue and variable costs during a certain period in 2010 with those numbers in previous years and in the year after the spill.

All economic losses during the period by businesses near the coast are presumed spill-related for purposes of the settlement, plaintiffs’ lawyers say.

They say that for claimants farther from the coast but whose businesses operated anywhere in Louisiana, Mississippi or Alabama or in designated regions of Texas and Florida, economic damage is presumed spill-related when it reaches specified percentages relative to other years.

BP contends, however, that the administrator has interpreted the meaning of certain key terms in the agreement to the benefit of people who could not have been harmed by the spill because of the business they were in or their distance from the coast.

In their letter, however, the plaintiffs’ lawyers say the possibility that factors other than the spill may have contributed to a claimed loss “is a risk that BP accepted in negotiating and agreeing to the terms of the settlement.”

And in court, plaintiffs’ attorney Steve Herman said BP never suggested that claimants in the industries the company is now challenging be excluded from the settlement or operate under a different framework.

“These are the same claims they agreed would be compensated under an objective formula,” Herman told Barbier.

Herman also said it was “very offensive” that in some of BP’s filings it has seemed to threaten claimants with perjury who file claims the company doesn’t agree with.

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