(The opinions expressed here are those of Alison Frankel, a
columnist for Reuters.)
By Alison Frankel
NEW YORK May 29 Poor besieged BP.
As you know if you've seen the full-page newspaper ads
BP has been running for the last year, or watched a 60
Minutes report earlier this month, BP -- the company whose well
spewed millions of gallons of oil into the Gulf of Mexico in the
2010 disaster that killed 11 workers on the Deepwater Horizon
rig -- considers itself a victim, too.
As BP tells it, the company has been martyred over and over
again: by trickster trial lawyers who forced it into an
open-ended class action settlement; by the administrator of the
settlement, Patrick Juneau, who misinterpreted the terms of the
deal in a way that permitted claims by people who weren't even
harmed by the oil spill; by U.S. District Judge Carl Barbier of
New Orleans, who threw in with the plaintiffs lawyers and
approved Juneau's interpretation; and, most recently, by the 5th
U.S. Circuit Court of Appeals, which just refused BP's last plea
Now the company's only hope for salvation from billions of
dollars in supposedly unwarranted claims lies with the U.S.
Supreme Court, which BP petitioned on Wednesday to halt all
payments to businesses harmed in the spill while it pursues its
final appeals. BP wants all of us to know, however, that "this
legal fight has not in any way changed our commitment to the
Gulf," as it said in its latest ad in The New York Times, which
Here is what BP isn't so eager to publicize: New rules
promulgated by settlement administrator Juneau and approved by
Judge Barbier will effectively block the very claims BP was so
worried about when it launched its campaign against its own
settlement a year ago.
According to Joseph Rice of Motley Rice, a member of the
plaintiffs steering committee in the BP class action and one of
the lead negotiators of the original deal, the new policies will
decimate payouts to construction, education, professional
services and agriculture businesses -- four industries BP
initially targeted for filing unwarranted claims. In addition,
Rice said, the new rules -- which Barbier on Wednesday ordered
the claims administrator to apply retroactively to all claims
that haven't yet been paid -- will drastically reduce BP's
"If the policy is implemented as it is written, BP will have
successfully rewritten the settlement agreement to save itself
several billion dollars," Rice told me. "With this policy, they
got everything they were asking for in the beginning."
Rice and his colleagues are trying to overturn the new
claims administration policy, even though Judge Barbier has
already approved it. This week they filed a motion to amend it,
arguing that the new rules are inconsistent with the 5th
Circuit's approval of the original settlement. According to the
plaintiffs' brief, the new policy impermissibly changes the
framework of the deal, and that's not what the appeals court
told Barbier and Juneau to do when it directed them to
reconsider certain terms of the settlement last October.
'MISINTERPRETATION OF ACCOUNTING RULES'
I should say here that a BP representative declined to
comment in response to my email detailing Rice's assertions
about the impact of the new claims policies. In its New York
Times ad on Thursday, the company said that it had succeeded in
fixing "a misinterpretation of accounting rules that allowed for
the payment of fictitious or artificially inflated losses" -- an
acknowledgment of the new policy. But BP continues to insist in
the ad that it "cannot sit idly by" and permit payments to
uninjured claimants. "It's not what we agreed to do when we
signed the settlement agreement," BP said.
That is at best a debatable point, considering evidence in
the 5th Circuit record that BP understood and accepted the risk
that the settlement's low bar for causation would permit claims
by uninjured plaintiffs. As the 5th Circuit said in its final
rejection of BP's appeal, the company was willing to compromise
to buy peace.
What's amazing about its continued campaign against the
settlement is that BP has already managed to get Juneau and
Barbier to reinterpret the settlement to give BP a much better
deal than the one it originally agreed to -- and that's still
not good enough for the oil company!
You're probably wondering exactly how the new policy affects
claims. I'm only going to offer a broad-strokes explanation; if
you want more, read Juneau's 88 pages of accounting jargon. The
policy attempts to smooth out the impact of variable and
occasional expenses, such as insurance payments, that can skew
In the original settlement, alleged victims could base
claims on any three-month post-spill time frame they chose --
including a stretch that included once-a-year expenses that
could inflate loss claims. The new policy allocates those
occasional expenses across the year, weighting the allocation to
reflect monthly variation in the business's revenue.
It also establishes additional hurdles for farms, law firms,
construction outfits and other businesses that use cash-based
accounting. The new regulations require these businesses to
rejigger their accounting so that their revenues are balanced
against the expenses they incurred to generate the receipts. A
contingency-fee law firm, for instance, would have to submit a
claim that allocated the fee it received proportionally across
the years it litigated the case. Farmers would have to submit
claims based on expenses and revenues for particular plantings
and harvests, not based on year-by-year accounting.
Plaintiffs lawyer Rice said that hundreds of claimants
simply won't be able to revise their accounting to satisfy the
new rules or else don't have the documentation to meet the new
standard for businesses that use a cash in/cash out accounting
model. And the new policy on allocating one-time expenses will
cost claimants at least a billion dollars, according to Rice.
Both policies, he said, rewrite the terms of the original deal.
"Juneau has eliminated the right of a significant number of
businesses to participate in the settlement," he told me.
It's possible that the next wrinkle in this litigation will
be a plaintiffs' appeal to the 5th Circuit on the new policy
(assuming that Judge Barbier declines to amend it) even as BP
argues that the Supreme Court should chuck the settlement
What a mess for the real victims of the Deepwater Horizon
spill. And I think you can deduce that I don't include BP in
(Reporting by Alison Frankel; Editing by Andrea Evans)