BP claims process enters new, uncertain phase

NEW YORK Thu Feb 10, 2011 8:20am EST

A boat passes through heavily oiled marsh near Pass a Loutre, Louisiana May 20, 2010. REUTERS/Lee Celano

A boat passes through heavily oiled marsh near Pass a Loutre, Louisiana May 20, 2010.

Credit: Reuters/Lee Celano

NEW YORK Feb 10 (Reuters Legal) - Kenneth Feinberg, the formerly freewheeling administrator of BP Plc's fund to compensate victims of last year's oil spill, could be forced to revamp dramatically how he handles claims now that the fund has come under the jurisdiction of a federal judge in New Orleans.

A ruling last week by U.S. District Judge Carl Barbier that Feinberg stop telling potential claimants that he is "completely independent" of BP brings Feinberg and the fund -- created in the wake of the largest oil spill in U.S. history -- under judicial oversight for the first time.

Beyond the immediate directive about how the fund describes itself, Barbier's decision also opens the door for more changes to how the fund operates, according to experts in mass torts and legal ethics. Specifically, it could lead to the renegotiation or undoing of settled claims, ongoing court intervention in the fund's operations, and more claimants seeking legal representation.

"It's a significant assertion of oversight, if not control, of the claims process by the judge," said David Logan, dean of Roger Williams University School of Law in Bristol, Rhode Island. "There is now a question mark looming over the accuracy of the decisions made up to this point by the (fund) and over how it will work moving forward."

The unprecedented $20 billion Gulf Coast Claims Facility (GCCF) was set up after a meeting between BP and President Barack Obama last June. The White House said at the time that the claims process would be independent and Obama tapped Feinberg, who ran the 9/11 victims' compensation fund, to administer it. BP pays $850,000 a month to Feinberg's Washington, D.C., firm, Feinberg Rozen, for his services.

Feinberg, who has promoted his claims process as faster and less costly than litigation, has paid out more than 250,000 awards to individuals and businesses worth more than $3.36 billion. Of those, more than 86,000 claimants signed releases saying they will not sue BP or its partners. Until last week's ruling by Barbier, who is overseeing hundreds of spill-related lawsuits against BP, Feinberg did not answer to any court or government agency.

To be sure, some scholars and practitioners are downplaying the potential impact of Barbier's order and say the court is unlikely to intervene further in the fund's operations. In his ruling, Barbier called his own order a "narrowly focused remedy" that "will not unduly burden BP's, Mr. Feinberg's and the GCCF's ability to speak on their own behalf."

But several academics and plaintiffs' attorneys said that, based on Barbier's ruling, settlements already made with the fund could be reevaluated. A court could invalidate the agreements or allow them to be renegotiated if claimants can prove there was deception on the part of the fund, said Monroe Freedman, a professor at Hofstra University School of Law and contributor to the Legal Ethics Forum, a popular legal blog.

The court's opinion makes it clear that Feinberg acted "misleadingly, at best," by saying he was independent of BP, Freedman said. "As a result, tens of thousands of claimants who were effectively defrauded will have the opportunity to open the settlements they entered into." In an e-mail, BP said, "We do not believe that there is any basis to undo or challenge the settlements that have been concluded." Feinberg declined to comment.

Kevin Dean, an attorney with the plaintiffs' firm Motley Rice in Mount Pleasant, South Carolina, said he has reached out to clients who had accepted settlements and given up the right to sue to inform them of the judge's ruling. He said his clients were forced to accept these settlements under financial duress and were not informed of their rights before they signed legal releases. If the court takes no further action in the next 30 to 60 days, Dean said he will confer again with his clients to explore their legal options. "My firm believes that clients were forced financially to take an ill-advised settlement, and that that's a violation of the Oil Pollution Act."

The Oil Pollution Act of 1990 requires the responsible party -- in this case, BP -- to set up a claims fund to compensate victims, but does not specify how the fund should resolve claims and makes no mention of claimants signing legal releases giving up the right to sue. Now that Barbier has brought the fund under his jurisdiction in the Eastern District of Louisiana, he could rule on whether the fund can ask claimants to sign away their legal rights. And he could appoint a special master to supervise the fund's oral and written communications, including release forms.

In addition, more claimants or would-be claimants could seek legal representation for their dealings with the fund. As of this week, fewer than 3 percent of those filing claims had their own lawyers. Plaintiffs' attorney Daniel Becnel, who heads a 21-lawyer firm based in Reserve, Louisiana, said his firm has taken on hundreds of new clients in the days following Barbier's ruling -- most of them looking for help bargaining with the claims fund.

Claimants now understand that the process is adversarial, according to Byron Stier, a professor of mass tort litigation at Southwestern Law School in Los Angeles. "It's much more one of haggling and negotiation than of processing paperwork and tendering contracts," Stier said. "It's now clear that claimants need counsel to determine if the fund is the right path for them."

Barbier has asked plaintiffs and defense in the consolidated case against BP to submit briefs by February 11 on the claim fund's compliance with the Oil Pollution Act.

(Reporting by Moira Herbst of Reuters Legal; Editing by Eddie Evans and Eric Effron)

(This article first appeared on Westlaw News & Insight, www.westlawnews.com)

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Comments (5)
Alexander_Sr wrote:
As in anything in the US of A lawyers are going to be the net beneficiary of all the BP settlements not the claimants which should be outlawed, but won’t since it’s lawyers that write the laws for their own personal gain which should be against the law but won’t since again it’s lawyers that write the laws.

Feb 10, 2011 8:45am EST  --  Report as abuse
The Gulf of Mexico, Deep Water Horizon Spill, impact study conducted by Dr. Wes Tunnell at the Harte Research Institute (HRI) is inherently and desperately flawed. First off, this HRI Study is not a scientific study at all. In fact there was no peer review of his findings and no protocol as required in a general environmental research study. In short, this 2 or 3 year recovery guesstimate is simply one person’s guess based on looking at marine life statistics for two weeks. Dr. Tunnell spent two weeks doing a marine life count and suggested that the marine life, with the exception of a few species would recover in two to three years. In 1989, surrounding the Valdez Spill, Exxon attempted to do the same thing that BP paid Dr. Tunnell to do. In 1989, Exxon tried a similar ploy and argued that the salmon population was soaring near Prince William Sound, Alaska. Exxon argued, based on the salmon population, that the impact to the environment only suffered minimally over the Valdez Spill. Of course, that argument fell apart when it was discovered that the salmon population was soaring because of the salmon’s predators, namely birds, had been killed by the spill. There was nothing left alive to eat the salmon so, no surprise, the salmon population flourished. Today, twenty two years after the Valdez Spill, a spill less than 4% the size of the BP Deep Water Horizon Spill, the cleanup still continues in Prince William Sound. The EPA Estimate is that the Valdez Spill at Prince William Sound, Alaska is dissipating at a rate of just above 4% per year. Dr. Tunnell’s guesstimate that sea life could recover in 2 or 3 years is only one of many factors which has to be considered in any recovery of the Gulf Coast, including things as obscure as public perception of conditions. On Feb. 06, 2011 University of New Hampshire Professor, Larry Mayer, director of UNH’s Center for Coastal and Ocean Mapping was commisioned by the National Research Council to conduct an actual scientific study of the Deep Water Horizon’s impact on the Gulf of Mexico. The study will last 30 months (that’s right 30 months..not 2 weeks like BP’s Dr. Tunnell evaluation). Dr. Wes Tunnell should know better than to spend his credibilty like this. Millions of people along the Gulf Coast deserve a full, unbiased evalution of the damage inflicted by the Deep Water Horizon Spill. This two week guesstimation by Dr. Tunnell is not such an evalution.
Another major problem, insofar as the integrity and credibility of this GCCF program, is the Federal Court ruling against Kenneth R. Feinberg and the Gulf Coast Claims Facility. Unless all 486,335 claims, including the 168,573 Emergency Advanced Payment Claims paid and the 88.757 Final Quick Claims paid are reopened and reevaluted, there will be a flood of lawsuits filed. Those Quick Final Pay releases will be determined as worthless in accordance with the decision rendered against Mr. Kenneth R. Feinberg and the Gulf Coast Claims Facility (GCCF) by Judge Carl Barbier (Case: 2:10-md-02179-CJB-SS). All claimants entering into those Quick Payment Releases relied on Mr. Feinberg’s statements that he and the GCCF were independent from BP and therefore Mr. Feinberg issued his opinion that he would pay them more than claimants could get in a court of law. Mr. Feinberg publicly and repeatedly advised claimants, under, what now has been ruled, a false and self proclaimed independent status, not to retain an attorney. This was an egregious mistake on the part of Mr. Feinberg, providing what is tantamount to legal advice and opinions to the complaintants/claimants while at the same time representing the defendant BP, PLC as outlined in Judge Barbier’s ruling. Federal Judge Barbier’s ruling against Mr. Feinberg and the GCCF states that Mr. Feinberg and the GCCF are, and have always been, acting on behalf of BP.PLC and are representing BP.PLC’s interests in the negotiation process, not the claimant as Mr. Feinberg insisted. This entire process was based on Mr. Feinberg’s repeated assertion that he and the GCCF were independent of BP. We now understand, as outlined in the ruling by Federal Judge Carl Barbier, that is not the case. I’m not sure if under this current arrangement, in light of this ruling which runs contrary to everything we have been told by Mr. Feinberg for months, Mr. Feinberg or the GCCF can ever recover any credibility in the Gulf Coast States.

Feb 10, 2011 9:25am EST  --  Report as abuse
Soothsayer wrote:
To clarify, the fund was announced immediately after Barack Hussein Obama returned to Washington DC following a Gulf Coast trip to consult with BP AND Gov. Jindal of Louisiana, Gov. Barbour of MS, Gov. Riley of AL, and Gov. Crist of FL. In other words, the gulf coast governors blessed the $20B deal (one year’s profit) before BO announced it.

Relatedly, perhaps a federal judge can get Ben Bernanke to stop representing inflation as being at the lowest historical level?

Feb 10, 2011 2:01pm EST  --  Report as abuse
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