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Tom Young
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BP Should Set Record Straight on Settlement Interpretation

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“This is not ordinary litigation, but rather a negotiated resolution of a broad program of social remediation and rehabilitation. The object is not simply the compensation of plaintiffs, but the economic and social rehabilitation of the Gulf Coast areas affected by the Deepwater Horizon disaster.” – John C. Coffee, Jr., Professor of Law, Columbia Law School, Consultant to BP and Class Counsel when asked to analyze the settlement on behalf of both BP and the class in 2012.

BP Misstates the Facts & Record

On behalf of the businesses and families of the Gulf Coast, we would like to correct some of the misinformation surrounding BP’s current court challenge and media campaign. The following is part of the undisputed factual record.

Judge Barbier was Selected by a Panel of Respected Judges

Judge Carl Barbier, who oversees the Court-Supervised Settlement Program, was selected by a panel of respected trial and appellate court judges from across the country to preside over the BP Oil Spill Litigation, one of the largest, if not the largest, consolidated cases in history. He has been universally praised by BP and others for his ingenuity, commitment and dedication to the efficient and effective management of this vast and complex litigation.

Judge Barbier has served on the Federal Bench for well over a decade, and his integrity and judicial excellence have never been called into question.

BP Selected the Claims Administrator

BP selected and proposed Patrick Juneau to be appointed by the Court as Claims Administrator for the Court-Supervised Settlement Program.

Mr. Juneau is a long-time corporate defense attorney who is a member of the Federation of Defense and Corporate Counsel as well as the Louisiana Association of Defense Counsel. Mr. Juneau is universally respected by both sides of the Bar, and has been appointed by courts all across the country to serve as special master or mediator in high stakes litigation.

Mr. Juneau was BP’s selection. Now BP is suing him.

BP Selected the Accounting Firms

BP selected and proposed PriceWaterhouse (PwC) as a Program Vendor for the Court-Supervised Settlement Program. PwC, one of the largest accounting firms in the world, had been previously hired by BP to assist the company in analyzing claims immediately following the spill. PwC was therefore not only trusted by BP but also familiar with oil spill related claims.

BP selected and proposed Postlewaite & Netterville (P&N) as a Program Vendor. This independent accounting firm had not done any previous work for either plaintiffs or BP.

P&N and PwC, the accounting firms that BP selected, have always implemented the Settlement Agreement exactly the same way that Mr. Juneau, supervising Federal Judge Carl Barbier, and plaintiff counsel has. In fact, until recently, BP interpreted the agreement in an identical manner.

Now the company says we are all wrong.

BP’s Own Experts Disagree with the Company

BP’s expert, Holly Sharp, studied the Settlement Agreement and submitted a sworn declaration to the Court in August 2012 confirming that:

“Once a business meets the causation requirements, for purposes of quantifying compensation, all revenue and variable profit declines during the claimant-selected compensation period are presumed to be caused by the spill, with no analysis required to determine whether the declines might have been due, at least in part, to other causes.”

Now BP calls these “fictitious” claims, even though its own expert declared, under oath, that this is exactly how one qualifies under the company’s program.

BP’s Own Lawyers Disagree with the Company

BP’s counsel, in a letter to the Claims Administrator in September 2012, reiterated that:

“One of the cornerstones of the Settlement Agreement is the use of transparent, objective, data-driven methodologies designed to apply clearly-defined standards to a claimant’s contemporaneously-maintained financial data submitted in compliance with documentation requirements.  These methodologies and requirements were carefully negotiated by the parties and are set forth in the Settlement Agreement as mandatory requirements.  Among other reasons, these methodologies and requirements were negotiated in response to concerns voiced by some that the prior GCCF process was too dependent on accounting judgments that were not transparent….  The Settlement Agreement does not allow for the use of professional judgment or discretion as a substitute for expressly articulated standards or requirements….”

Now BP wants to substitute its judgment for the Court’s.

A Hypothetical Confirms the Correct View

Around the same time, attorney Michael Juneau, on behalf of the Claims Administrator, posed the following inquiry to BP in an attempt to understand the intent of the settling parties:

“As to BEL claims [Business Economic Loss], once a claimant’s financial records satisfy the causation standards set out in Exhibit 4B, does the Settlement Agreement mandate and/or allow the Claims Administrator to separate out losses attributable to the oil spill vs. those that are not? Stated another way, once a claimant passes the causation threshold, is the claimant entitled to recovery of all losses as per the formula set out in Exhibit 4C, or is some consideration to be given so as to exclude those losses clearly unrelated to the spill? I will give a hypothetical situation to try to illustrate the question we are asking:

Hypo: A small accounting corporation / firm is located in Zone B.  They meet the ‘V-shaped curve’ causation test. The explanation for the drop in revenue is that one of the three partners went out on  medical leave right around the time of the spill. Their work output, and corresponding income, thus went down by about a third. The income went back up 6 months later when the missing partner returned from medical leave. Applying the compensation formula under Exhibit 4C of the Settlement Agreement, the accounting firm can calculate a fairly substantial loss. Is that full loss recoverable?”

In response to the question and hypothetical, BP confirmed that:

“If proper application of the methodology with accurate financial data yields a determination that causation is satisfied, BP agrees with Class Counsel that all losses calculated in accordance with … Exhibits 4C … of the Settlement Agreement are presumed to be attributable to the Oil Spill….   If the accurate financial data establish that the claimant satisfies the BEL causation requirement, then all losses calculated in accord with Exhibit 4C are presumed to be attributable to the Oil Spill.  Nothing in the BEL Causation Framework (Ex. 4B) or Compensation Framework (Ex. 4C) provides for an offset where the claimant firm’s revenue decline (and recovery, if applicable) satisfies the causation test but extraneous non-fictional data indicate that the decline was attributable to a factor wholly unrelated to the Oil Spill. Such “false positives” are an inevitable concomitant of an objective quantitative, data-based test.”

In the Joint Proposed Findings submitted to the Court by BP in support of approval of the Settlement in November 2012, BP again confirmed that:

“Once the causation tests are satisfied, all revenue and variable profit declines during the Compensation Period are presumed to be caused entirely by the spill, with no analysis of whether such declines were also traceable to other factors unrelated to the spill.”

Finally, on December 12, 2012, the Parties appeared before the Court, and BP’s Counsel, Richard Godfrey, again confirmed, to the Claims Administrator, to the PwC and P&N accountants who were present, to Class Counsel, and to the Court, that BP:

“agreed with the Claims Administrator’s objective analysis of causation with respect to his evaluation of economic damage claims, as previously set forth by Mr. Juneau.”

This is the factual record. It is clear. It is documented. And it cannot be disputed.

Such are the rules that the parties negotiated and claimants are required to abide by. For well over one year, our clients have relied on BP’s representations as stated above.

It is preposterous for BP to now attempt to change those rules well into the game, and it is shameful for the company to vilify those who played by the rules as they were originally written, interpreted and implemented.

Why did BP Change its Tune?

The company grossly underestimated the financial damage its spill inflicted on the entire Gulf Region. With an annual tourism economy that exceeds $19 billion, BP’s estimate of a $7.8 billion settlement bill was based in fantasy, not reality. With the projections of that bill coming due in excess of what BP erroneously predicted, the company needed an out. It needed a scapegoat.

So BP blamed the Judge. BP blamed the Claims Administrator. BP blamed the accountants. BP blamed the lawyers. The only party BP did not blame was itself.

Worse, it blamed the people and businesses of the Gulf who did nothing but play by BP’s rules.

We cover the uncapped nature of the settlement agreement here, explaining why BP was negligent in assigning a $7.8 billion figure to its settlement liability.

4 Comments

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  1. Tom Young says:
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    Boycott is a great idea. At a minimum, please consider signing our petition:

    http://www.change.org/brokenpromise

    Pass it on.

  2. Chris Wrenn says:
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    Maybe everyone in this country should boycott BP until they follow through with their promises.

  3. Richard Voivedich says:
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    The Feds came down with Fidel Holder and did their money grab like they were at a drive-thru atm . Meanwhile my dusty folder sits on someone’s desk “In review” for a year and every once in a while they ask another stupid question of my accountant. “We need your sales tax records again..Opps sorry we lost them 2 times”.. .I started this trek 3 years ago…Judge Juneau should find BP in contempt as well as the representing attourneys. BP has nothing to loose in the stall process but time.The plaintiffs should receive additional compensation for every day BP has stalled this agreement since they signed off on it.

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