BP appeals to Supreme Court on spill settlement

HOUSTON – BP is asking the U.S. Supreme Court to intervene in a months-long battle over who can get paid for Gulf oil spill damages. 

The London oil company on Friday filed a petition asking the Supreme Court to enforce requirements for claimants to prove they can join a class-action settlement that has poured billions of dollars into Gulf Coast pockets to fix the economic wreckage left by the spill.

It said the Supreme Court should reverse lower-court decisions that approved a settlement class with “vast numbers” of claimants who weren’t financially harmed by the 2010 Deepwater Horizon disaster, and require that claimants show evidence that the losses were due to the spill. 

Current interpretations of the settlement, BP said, contradicts class-action law and the Supreme Court’s long-held interpretation of a section of the Constitution that requires a plaintiff to trace its injury to a defendant’s actions. Those lower court rulings also depart from similar rulings adopted by several other appeals courts and deepen a circuit-court conflict over how class-action members are defined, the London oil company said. 

It follows other recent moves by BP to play hard ball in the courts on oil spill compensation. In June, BP said it would seek millions of dollars in restitution for erroneous payments to Gulf cash-based businesses under an overturned accounting policy in the settlement.

In 2012, BP had reached one of the largest class-action settlements in U.S. history, agreeing to resolve thousands of claims of economic losses along the Gulf Coast. It had originally estimated it would cost $7.8 billion, though the settlement was uncapped. It later said it could no longer provide a reliable estimate of its oil spill settlement costs. 

In recent months, BP has argued that business claimants were required to show their losses were tied directly to the spill. Lower courts have denied its prior requests to throw out the settlement if the class included claimants who were not directly impacted by the accident.

In its petition to the high court, BP argued that its agreement has allowed Gulf Coast business to gorge themselves on a windfall of unwarranted compensation. That, BP claimed, is largely because of a misinterpretation of the settlement that a claimant doesn’t need to prove its losses were caused by the spill once it meets certain settlement criteria, such as geographic proximity to the spill.

It said more than $600 million in “illegitimate” payments have gone to claimants who reside far from the Gulf or whose losses could not have been linked to the spill.

In May, the 5th U.S. Circuit of Appeals denied BP a full-court rehearing on the matter, after it had upheld a district court’s approval of the settlement despite some claimants that weren’t affected by the spill. The accord had set up certain parameters, including geographic zones, to define some claimants in the settlement class.

The appeals court’s decision “greatly expands the potential for sprawling, disjointed classes, potentially jeopardizing defendants’ willingness to enter into settlement agreements that could be misinterpreted to permit claims by uninjured class members,” BP said. “And it does all this in the context of a dispute that itself implicates hundreds of millions of dollars in payments to claimants with no plausible cause of action against BP.”

BP said the appeals court’s decision also runs afoul of a rule the Supreme Court reaffirmed in a separate case in June, when it emphasized that defendants “must actually prove – not simply plead” that they meet class-action requirements.

In an emailed statement, plaintiffs’ co-lead counsel Steve Herman and Jim Roy said that BP “co-wrote and agreed to every word in the settlement agreement. It is not surprising that the courts have all told BP to honor its word.”

More than $3.96 billion in payments have been made to about 46,000 claimants, according to the claims administrator, Patrick Juneau. BP said there are around 130,000 pending claims, and that the number continues to grow.

It said it has made about $546 million in payments to claimants who “reside far from the Gulf Coast and are engaged in business activities that bear no logical connection to the spill.”

And, the company said, it has also made $76 million in payments to claimants whose losses had nothing to do with the spill, such as businesses with warehouses that had burned down before the spill.

If companies cannot have faith that class-action settlements will be enforced in accordance with these well-established principles of class-action law, then they will be more inclined to litigate than settle, resulting in years of court proceedings and delayed justice for real victims,” BP spokesman Geoff Morrell said in an emailed statement.