By John Kemp
LONDON, Aug 20 (Reuters) - BP’s increasingly bad-tempered spat with the U.S. federal court, claims administrators and legal community in New Orleans over oil-spill compensation payments suggests the company has given up trying to win the case locally.
Instead, BP seems to be focused on getting it before a regional or national tribunal as quickly as possible in the hope of a more sympathetic hearing.
Opinion is divided on whether the original settlement was poorly drafted by BP’s lawyers, or whether local lawyers are pushing an expansive interpretation of the deal which was never intended.
My colleague Alison Frankel has described it as a bad case of “buyer’s remorse.” [ID: nL1N0FH2DX]
But whatever the legal merits of the dispute, the verbal brawl has spilled beyond the court room.
“We are going back to the 1814 attack on New Orleans by the British,” complained Joe Rice, one of the lawyers who negotiated the settlement on behalf of the victims, in an interview with Reuters.
“They are attacking our entire judicial system. They’re attacking the judge. They’re attacking the claims administrator they helped appoint. They’re attacking the lawyers for representing people.”
“In our view, BP views us as a colony that they own and can exploit. It’s outrageous,” Rice said. “I think they’ve made a vast strategic error by fighting and shifting this whole battle to an attack on the people of the Gulf ... Any goodwill they built on trying to the right thing, they have destroyed.”
In response, BP insisted it was defending its rights. “To hear Mr Rice’s xenophobic name-calling and hyperbolic characterisations, you’d think the War of 1812 was still raging,” a spokesman for the company told Reuters.
“While we are willing to pay legitimate claims, we did not agree to pay for fictitious losses, or for claims that are based on fraud or tainted by corruption,” BP said.
Normally the lawyers in a case are careful to treat the court process with utmost respect and deference, even when they are losing, in the hope of preserving at least some influence over the outcome.
In this case, however, BP appears to have given up on trying to win in the local court system and is preparing to push the case up the appellate ladder, even to the U.S. Supreme Court, in the hope a different court sitting in a different location will look on its arguments with more sympathy.
Venue matters, which is why prosecutors as well as plaintiffs’ and defendants’ lawyers spend so much time trying to influence the location where cases are heard in the hope of finding the most favourable court, judges and juries.
The quality of law practised in state courts is variable. State courts and juries are notorious for favouring local plaintiffs, especially against out of state defendants.
In this case, however, the compensation claims are being dealt with the U.S. District Court for the Eastern District of Louisiana. Federal courts have a much better reputation for quality and even-handedness.
Still, the District Court sits in New Orleans, near the centre of the area most affected by the oil spill, where passions about the disaster run high.
BP clearly hopes it might get a different and perhaps more sympathetic hearing once the case moves up the hierarchy away from the affected region. Past experience suggests it may be right.
In March 1989, the tanker “Exxon Valdez” ran aground in Alaska, spilling an estimated 37,000 tonnes of oil. Compensation claims were heard by a judge and jury in the U.S. District Court for the District of Alaska. In 1995, the jury awarded $287 million in compensatory damages and a record $5 billion in punitive damages against Exxon.
Exxon lodged multiple appeals with the U.S. Court of Appeals for the Ninth Circuit, sitting outside Alaska, which ultimately reduced the punitive damages to $2.5 billion.
In 2007/08, Exxon appealed again to the U.S. Supreme Court, sitting in Washington DC, which in a landmark ruling, held the punitive damages award against Exxon was excessive as a matter of common law. It stipulated punitive damages against Exxon should be limited to no more than $507 million (“Exxon Shipping Co versus Baker” No 07-219).
No one will ever know whether the original $5 billion punitive award was influenced by the fact the court was sitting in Alaska, the state most affected by the spill, and composed of Alaskans. But it is certainly true the further away from Alaska the case moved, and the more time elapsed between the spill and legal decisions, the more favourable the outcome became to Exxon.
BP must hope appealing and shifting the venue away from New Orleans and the Gulf will produce a similar improvement in its fortunes.
Unfortunately for BP, the U.S. Court of Appeals for the Fifth Circuit, to which its first appeal lies, also sits in New Orleans. But the Fifth Circuit draws judges from across a much wider region. BP’s appeal in June was heard before judges from Mississippi, Louisiana and Texas.
Judges matter too.
In 2005, U.S. Chief Justice John Roberts told his Senate confirmation hearing: “Judges are like umpires. Umpires don’t make the rules; they apply them. The role of an umpire and a judge is critical. They make sure everybody plays by the rules. But it is a limited role. Nobody ever went to a ball game to see the umpire... I will remember that it’s my job to call balls and strikes and not to pitch or bat.”
It’s a nice fiction, but far from the truth. “Judicial mentality would be of little interest if judges did nothing more than apply clear rules of law ... to the facts that judges and juries determined without bias or preconceptions,” Richard Posner wrote in a famous 2008 book on “How Judges Think”.
Posner is a judge on the U.S. Court of Appeals for the Seventh Circuit, the most cited jurist of the 20th century, and a formidable legal scholar.
If this was really all judges did “judges would be well on the road to being superseded by digitised artificial intelligence programs,” he wrote.
“But even legal thinkers who believe passionately that judges should be rule appliers and unbiased fact finders and nothing more do not believe that’s how all or even most American judges behave all the time. Our judges have and exercise discretion.”
In many areas, the law is simply not clear. “Legal uncertainty ... creates the ‘open area’ in which the orthodox (the legalist) methods of analysis yield unsatisfactory and sometimes no conclusions, thereby allowing or even dictating that emotion, personality, policy intuitions, ideology, politics, background, and experience will determine a judge’s decision,” Posner concluded.
BP seems to have decided it has already lost any influence with the U.S. judge in New Orleans hearing its case at trial. The company has little to gain by playing nice and little to lose from a more critical and confrontational approach.
BP may want to get the case as quickly as possible into the Fifth Circuit Court of Appeals and from there possibly to the U.S. Supreme Court in the hope of finding judges with different ideas and a different approach.
Alienating the trial judge and pinning hopes on the appeals process is a risky strategy. The Fifth Circuit’s attitude remains uncertain; the Supreme Court takes fewer than 100 appeals each year.
Nonetheless, the Supreme Court has shown scepticism about large damages awards in the past decade, and has moved in an even more pro-business direction since Exxon was decided.
BP seems to be gambling the Fifth Circuit cannot be any more hostile than the U.S. District Court in New Orleans, and even after that it has a good shot at persuading at least four of the nine justices at the Supreme Court to take the case eventually.