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Tom Young
Tom Young
Attorney • (813) 251-9706

Dear 5th Circuit, BP has had its day in court

31 comments

It has been over two years since BP “agreed” to a 1,000+ page Settlement Agreement negotiated and drafted by the company’s tony Manhattan attorneys. It’s high time to enforce it.

Delay, Deny, Defend

This Settlement Agreement – a Contract – promised to objectively determine who was harmed by BP’s negligence, putting an end to the disastrously subjective Gulf Coast Claims Facility in favor of a Court Supervised Settlement Program. Instead, through BP’s legal machinations and public relations stunts, the claims administration process has ground to a halt, with no business economic loss claims being paid in over six months and no end to the payment prohibition in sight.

BP has won these delays, despite the fact that until recently the company fully supported the evidentiary requirements as to traceability found in Exhibit 4B of the Settlement Agreement, and had in fact paid hundreds of millions of dollars of claims based on same. Furthermore, a neutral Claims Administrator, a Federal District Court Judge, and two panels of the 5th Circuit Court of Appeals (“BEL” & “Merits“) have ruled that BP’s newfangled position on the subject of causation is nonsensical.

Yet we still wait.

Kumbayah: The Settlement is “fair, just and reasonable”

For nearly one year, BP touted the Settlement Agreement as good for the Gulf and good for British Petroleum. The company seemed eager to put the spill behind and move forward in a fair and positive manner:

“The settlement is placing large sums of money today and tomorrow and next week into the hands and the communities of the Gulf, the victims of this tragic event. We believe that it’s fair, just and reasonable, and that this process should not be interrupted or stopped based upon the objections of the few for the purpose of injuring the many who need to be compensated now.” (emphasis added) – BP Lead Attorney, Richard Godfrey, 2012

The “process should not be stopped based upon the objections of the few for the purpose of injuring the many.” He must have been joking, as two years later that is exactly what BP has done – stopped the process for the benefit of BP and BP only.

“Like any settlement, the settlement that has been reached to resolve this litigation is a compromise, a yielding of the highest hopes in exchange for certainty and resolution. The settlement stands alone, however, in its substantive generosity to the class members and in its procedural fairness.” – BP Lead Attorney, Richard Godfrey, 2012

“Compromise,” “yielding,” “generosity,” “fairness,” these terms describe the antithesis of BP’s behavior with regard to the Settlement. It is an outrage.

“BP made a commitment to help economic and environmental restoration efforts in the Gulf Coast, and this settlement provides the framework for us to continue delivering on that promise, offering those affected full and fair compensation, without waiting for the outcome of a lengthy trial process.” (emphasis added) – BP CEO, Bob Dudley, 2012

Yet Mr. Dudley instructs his reports to file appeal after appeal, forcing those already harmed by the company’s negligence to suffer yet again as they “wait for the outcome of a lengthy trial process.”

Worse, British Petroleum Chairman of the Board, Carl-Henric Svanberg, proclaimed that BP “will fight through the courts … for however long it takes”  in its attempt to renege on the oft-stated “Commitment to the Gulf.”

Nice guys, huh? Perhaps it’s time to expand the reach of the Monroe Doctrine through the application of The BP Corollary?

Traceability: BP negotiated, agreed and stipulated to the evidence required

The exclusive means of qualifying to participate in the Court Supervised Settlement Program is satisfaction of the requirements of Exhibit 4B, titled, tellingly, “Causation Requirements for Business Economic Loss Claims.” Exhibit 4B lays out in painstaking detail how a claimant demonstrates a loss that is fairly traceable to the spill. The evidence required by Exhibit 4B to establish “traceability” was stipulated and admitted by BP as being sufficient to objectively establish that a claimant’s damages were caused by the spill.

For well over a year during the initial implementation of the program and issuance of payments, BP, attorneys for business owners (known as the Plaintiff Steering Committee and its related Co-Class Counsel), and the court appointed Claims Administrator, all agreed that the formulas of Exhibit 4B were controlling on the issue of causation and traceability.

In fact, in an effort to confirm this “meeting of the minds,” the Claims Administrator posed a hypothetical to BP’s counsel describing a business that experienced a loss that may have resulted from an event unrelated to the Deepwater Horizon spill. Specifically, the Claims Administrator asked BP if such a claimant, assuming the presentation of evidence that satisfied the causation requirements of Exhibit 4B, would still be eligible for payment, regardless of the possibility that the loss may be due to another cause. Put differently, the Claims Administrator asked BP if alternative causes of loss were to be considered, and if so, was there to be an offset if the unrelated loss could be parsed out.

In response, BP said:

“Nothing in the [Settlement Agreement] provides for an offset where the claimant’s revenue decline satisfies the causation test [Exhibit 4B] but extraneous non-financial data indicates 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.” (link added) – Statement by Mark Holstein, managing attorney for BP America Inc., to Court Supervised Claims Administrator, September 2012

That statement from BP attorney Mark Holstein simply confirms what the parties intended from day one of the months long negotiations, that loss resulting from the spill – and thus traceable to it – was to be determined by satisfying the evidentiary requirements of Exhibit 4B and nothing else. In fact, for many months prior to Holstein’s declaration, BP, along with the plaintiffs, submitted numerous court filings supporting that position.

This intent regarding traceability and causation is clear and incontrovertible:

“Indeed, in many ways, the causation principles are remarkably favorable to claimants. Once a business meets the causation requirements [of Exhibit 4B], for purposes of quantifying compensation, all profit declines 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. In contrast, in litigation, a detailed analysis of the reasons for the profit declines is undertaken because it is part of the plaintiff’s burden of proof.” (emphasis added) – BP court filing in support of Settlement Agreement approval, August 2012

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“The causation requirements [in Exhibit 4B] appear more than reasonable. For businesses in certain areas, there is a presumption of causation, which will inevitably include businesses that were not economically or financially affected by the DWH Spill. This alone is an unusually generous feature and atypical, in my experience, in economic loss cases. For those businesses that do not qualify for a presumption of causation, there are multiple tests under which they can qualify and establish causation. This variety of test options gives claimants multiple ways to establish causation, which appears to be more than fair. Moreover, the causation tests reflect reasonable expectations about the economic harm the DWH Spill could have caused to a business, and therefore are appropriate tests for the purpose of establishing causation.” (emphasis added) – Statement of BP financial expert, James Henley, in BP court filing in support of Settlement Agreement approval, August 2012

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“The Settlement Agreement establishes a variety of standardized mechanisms [in Exhibit 4B] that can be used by Claimants that do not receive a presumption to establish that their losses are due to the DWH Spill. These mechanisms are straightforward and transparent, facilitating the review of a claim as well as a Claimant’s decision about whether to participate in the Settlement or to opt out and continue to the claim through litigation.” - Statement of BP financial expert, Henry Fishkind, in BP court filing in support of Settlement Agreement approval, August 2012

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“We have presumed causation in Zone A. We’ve presumed causation. It’s irrebuttable. You know as well as I do, Your Honor, how many people come in and think they have got a claim damage for economic loss; but, when the facts come out, they had a bad year because they lost their key manager, they had a bad year because the street was being repaired in front of them, whatever reason. We’re presuming causation for whole sections of the settlement class depending on where you reside and the nature of your business.” - Statement of BP lead attorney, Richard Godfrey, made during oral presentation to Judge Barbier, November 2012

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“The Settlement reasonably requires that some business claimants demonstrate that their business was affected by the spill. Where class members are required to prove causation, there are multiple reasonable options [in Exhibit 4B] for doing so. The causation tests are reasonable and flexible; they use standardized and transparent approaches. The causation tests reflect rational expectations about the economic harm that the spill could have caused businesses.” (emphasis added) – BP & Class Counsel’s Joint Proposed Findings, filed with the Court in November 2012

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“Once the causation tests [in Exhibit 4B] 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.” (emphasis added) - BP & Class Counsel’s Joint Proposed Findings, filed with the Court in November 2012

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“Qualifying businesses receive compensation for all losses regardless of actual facts and circumstances.” (emphasis in original) – BP PowerPoint training presentation to Court Supervised Claims Administrator, May 2012

Based on the clear language of the Settlement Agreement and BP’s copious statements in support of Exhibit 4B being the exclusive arbiter of traceability and causation, the Claims Administrator issued the following official Policy 308 in October 2012:

“The Settlement Agreement represents the Parties’ negotiated agreement on the criteria to be used in establishing causation. The Settlement Agreement sets out specific criteria that must be satisfied in order for a claimant to establish causation. Once causation is established, the Settlement Agreement further provides specific formulae by which compensation is to be measured. All such matters are negotiated terms that are an integral part of the Settlement Agreement. The Settlement Agreement does not contemplate that the Claims Administrator will undertake additional analysis of causation issues beyond those criteria that are specifically set out in the Settlement Agreement. Both Class Counsel and BP have in response to the Claims Administrator’s inquiry confirmed that this is in fact a correct statement of their intent and of the terms of the Settlement Agreement. The Claims Administrator will thus compensate eligible Business Economic Loss and Individual Economic Loss claimants for all losses payable under the terms of the Economic Loss frameworks in the Settlement Agreement, without regard to whether such losses resulted or may have resulted from a cause other than the Deepwater Horizon oil spill provided such claimants have satisfied the specific causation requirements set out in the Settlement Agreement. Further, the Claims Administrator will not evaluate potential alternative causes of the claimant’s economic injury.”

In an effort to finally and definitively confirm that BP agreed with Policy 308, specifically that no alternative causes of loss will be considered and that the policy adequately addresses traceability of loss to the spill, Judge Barbier put the question to BP lead attorney Richard Godfrey in open court on December 5, 2012. Mr. Godfrey answered in the affirmative and the policy was thus put into effect, with no appeal taken by BP.

A friendly suggestion

BP did however object to, and subsequently appeal, another policy decision of the Claims Administrator that dealt with the calculation of claim value. Specifically, BP complained that claims based on cash basis accounting should be converted to accrual accounting to more accurately reflect any loss. In layman’s terms, BP’s position was that expenses should be “matched” to revenues – something that naturally occurs in accrual accounting but not cash.

Unable to convince either the Claims Administrator or Judge Barbier of its position, BP appealed the “matching” policy to the 5th Circuit Court of Appeals. Oral arguments took place the morning of July 8, 2013 in front of 5th Circuit Judges Clement, Southwick and Dennis. But before BP attorney Ted Olson could make his points regarding the matching dispute, Judge Edith Clement initiated the following dialogue:

Judge Clement: I have a question, sir. In your reply brief, you said the only issue in this appeal is the lost profits calculation and you were talking about how the variable profit is to be calculated . . . . My problem is I think the real issue in the case is causation and consideration. If you look at Exhibit 4B, where is BP’s consideration for agreeing to pay those claims without proving they were caused by the Oil Spill?

BP Counsel Olson: This is a settlement, and with respect to the causation issue, that is not the issue that is before this court . . . [The] settlement agreement with respect to Exhibit 4B as to causation provided a mechanism which allowed someone to come through the door, to be then entitled to prove the amount of actual lost profits. It was a compromise, which every settlement agreement is. With respect to causation issues, some businesses that are very close to the spill, the causation issue is waived entirely. With respect –

Judge Clement: Right. I’m not talking about those. I’m talking about the example that Administrator Juneau sent out for comments, where if there’s an accounting firm of three members, one is hospitalized for several months, of course they lose money.  Where is the legal connexity between a damage or an injury and the ability to make BP pay?

BP Counsel Olson: It was a part of a compromise, which there’s going to be thousands – tens of thousands…

Judge Clement: Where’s the consideration?

BP Counsel Olson: The consideration is the consideration of the settlement class as a whole. But the causation issue is going to be different with respect to each particular claimant. Judgments were made with respect to compromises on a proof of causation.

Judge Dennis: Well, your major consideration is no one can bring suit against you on the oil spill outside of this class action, which you have announced you have settled.

BP Counsel Olson: Exactly, your honor.

Judge Clement: They couldn’t bring suit against you anyway if it wasn’t caused by –

BP Counsel Olson: They could bring suit. They’d have to prove causation. They could bring [suit] – they could. And this is a compromise of tens of thousands of claims. But the important thing, and the issue that were’ talking about here, is, assuming causation, assuming that a claimant gets through the door and is now entitled to prove lost profits; we then come to what everyone agrees in this case. This appeal presents a straight forward question of contract interpretation. (emphasis added)

On goes the light bulb

From all appearances, prior to Judge Clement’s questioning on the causation issue, BP had no qualms with the evidentiary requirements of Exhibit 4B as they related to supporting a loss traceable to the spill. From the clear language of the Settlement Agreement itself, to the company’s enthusiastic and seemingly infinite praise of 4B, from its acquiescence in the approval of Policy 308 to its failure to timely appeal same, to attorney Olson’s sparring match with Judge Clement above, BP was a firm believer in the accuracy and adequacy of Exhibit 4B.

A few days later, no so much.

Almost immediately after being handed a free get out of jail card involving an argument not even BP was bold enough to cook up on its own, the company began complaining about the Settlement Agreement’s causation requirements and attacking individual claimants as frauds. No longer was Exhibit 4B ‘more than reasonable,’ ‘more than fair,’ ‘objective,’ ‘transparent,’ ‘standardized,’ ‘economically appropriate,’ ‘consistent with . . . economic reality,’ and an ‘efficient method of establishing causation’ – words BP had used to describe Exhibit 4B prior to Judge Clement’s questioning. Now BP demanded more “proof” – above and beyond what was required by 4B – in order to substantiate a claim in the company’s eyes.

Of course, a plaintiff does not settle a dispute only to be forced to prove his allegations later. While no one is suggesting that those unaffected by the spill should receive windfall payments, the question is how does one demonstrate he was affected if not through the application of the ‘more than reasonable,’ ‘more than fair,’ ‘objective,’ ‘transparent,’ ‘standardized,’ and ‘economically appropriate,’ tests set forth in Exhibit 4B?

The bottom line is that the claims identified as undeserving by BP are in fact “fairly traceable to” the spill, in that they are supported by evidence that BP stipulated and admitted would be sufficient to objectively establish that damages were “caused by” the spill.

BP has had its day, err… months in court

In 2012, shortly after announcing the Settlement, BP CEO Bob Dudley said the people and businesses of the Gulf should receive “full and fair compensation, without waiting for the outcome of a lengthy trial process.” While lead BP attorney Richard Godfrey remarked that the Settlement will put in place a “process that should not be interrupted or stopped based upon the objections of the few for the purpose of injuring the many who need to be compensated now.”

As we sit today, the process has indeed been stopped for the benefit not of a few, but of one, British Petroleum. This payment stoppage is in fact grievously injuring the many who need to be compensated now. BP’s frivolous causation position has been soundly rejected by a neutral Claims Administrator, Judge Barbier, and two separate panels of the 5th Circuit.

It has been six months since BP paid a dime to any business economic loss claimant. Both the Merits and BEL panels have denied the company’s requested relief, the most recent opinion issued over four weeks ago. Yet an injunction remains in effect. It should be lifted and the mandate issued.

BP’s petitions for en banc rehearings should be immediately rejected as these appeals involve neither a circuit conflict nor a matter of great legal importance. Instead, as Mr. Ted Olson so eloquently put it, all we have here is a “straight forward question of contract interpretation.” Not exactly the stuff of law school hypotheticals.

31 Comments

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  1. Tortlawguy says:
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    Some of the 5th Circuit’s reticence can be explained by looking at the background of Judge Edith Clement. Judge Clement is a board member of a big-oil think-tank called the Foundation for Research into Economics and the Environment (FREE). It is unsurprising the Judge Clement has been BP’s lone champion on the 5th Circuit. For more info see James Gill’s excellent article here:

    http://theadvocate.com/news/opinion/8108074-123/james-gill-clements-makes-friends

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    As a CPA, I can tell you that there will be no significant difference in the cash method of accounting versus the accrual method in most small businesses. If I have $ 5,000 in payroll due but unpaid, I must accrue that as an expense but I must also reduce the expense by the $ 5,000 that was paid this month for last’s month’s earned and unpaid payroll. Zero effect.

    What will the courts let BP question next, perhaps the inventory method of the flower shop that went belly up?

  3. John Resch says:
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    I get a nagging feeling that the reason this appeal is taking so long is that it takes BP agents quite a bit of time to navigate the bribing and blackmailing of sitting Federal judges without getting caught. I hardly believe that Circuit Court Judges regularly “suggest” new avenues of appeal to plaintiffs. She must have been directed to do so by somebody.

    How can we let any company walk all over Americans like this? The fix is in.

  4. Jim Vaughn says:
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    Very informative. I filed a business claim that met the criteria to a ‘T’ over two years ago, clearly documenting a 7 figure loss…and I haven’t even been made an offer. It has cost me dearly just to document the loss…and still I wait…

  5. Tom says:
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    How does Bob Dudley sleep at night? Ambien?

  6. Brandy Gonzales Scurria says:
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    Very good piece, Tom. As an attorney representing claimants devastated by this spill, from corporations to fisherman, it has been particularly difficult providing an explanation for the hold up every step of the way – even more so now than ever. It’s hard to explain the unexplainable at this point. “What’s the hold up now, Brandy?” is the most popular question these days with a response not nearly as popular.

  7. Les Smith says:
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    Will they bankrupt their US subsidiary over BEL claims and federal fines?

    • Tom Young says:
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      The Settlement Agreement requires the other BP entities to back up all of the claims. So presumably the whole shooting match would have to file in order to go that route.

  8. Ashley says:
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    As long as the people who ran this company and made these decisions are allowed to go free, justice is not being served. These people deserve a very long prison sentence.

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    Agree with all the comments, but suggest you add the Lexmark decision filed by the PSC to your analysis since it helps to put to rest the only issue raised by the dissenting justice on the Article III question. There are many cases farther back than the cases in the settlement, and attention needs to be directed to the needs of the claims of the excluded classes. The only way to do this, ultimately, is to start setting more test cases for trial. Something, 4 years after the spill, that is happening too slowly.

    • Tom Young says:
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      Good points Greg.

      Writing for a unanimous Court in Lexmark v. Static Control Components, Justice Scalia confirmed, as the Merits Panel in BP opinion held, and consistent with the BEL Panel, that Article III standing is a matter of pleading, not of proof, and that “proximate causation is not a requirement of Article III standing, which requires only that the plaintiff’s injury be fairly traceable to the defendant’s conduct.” While causation must be adequately pleaded (such as here where the class’ allegations survived motions to dismiss), if the plaintiff’s allegations, taken as true, are sufficient, “then the plaintiff is entitled to an opportunity to prove them,” or, as here, to settle them.

      Regarding the slow pace of non-settled cases, opt-outs, moratoria, etc. I agree. But I suspect that BP is laughing all the way to the bank b/c they are keeping the court so busy with these CSSP BEL issues that those trials have ended up on the back burner.

  10. DAVID K says:
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    Tom, How can the settlement be changed to pay the claimants a fair rate of interest while BP slows down the process with their appeals.

  11. Rick Lacey says:
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    Tom, It’s been 4 years! I’m so increasingly ashamed of us as a nation for letting them get away with it. As a former BP insider, every move the company makes is blatantly obvious and predictable to me. BP understands that we as a nation are controlled by a mass media it has effectively bought in regards to the spill. If we were to get a movement started around The BP Corollary to the Monroe Doctrine, BP would fold and pay all claims. If we were to get one mention of the corollary on prime time national news, BP would pay all claims and start a new round of ads bragging about having done it. The ONLY thing BP fears is The BP Corollary!

  12. Tom Young says:
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    Thanks Gary. Let’s hope it doesn’t take that long. In order to maintain the injunction, BP has to convince SCOTUS that it has a “substantial likelihood of success on the merits of the case.”

  13. Gary Wittock CPA says:
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    Keep up the good work Tom. Unfortunately, even with the en banc denials, bp will still get a mandate stay while they appeal to the ussprmct because of “irreparable harm” even tho they do not have chance at getting a cert. It is going to be early November before we finally get our mandate and finally get the bel’s released. There is no doubt in my mind that bp had any real hopes of appeal success, but they sure have had success in further injuring our businesses. Thanks again for all of your hard work Tom

  14. JonM says:
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    Tom: As an individual claimant my claim has been placed in the exact same category and held hostage for over 6 months now. After receiving an offer which was off by half due to a single “missing” paystub I resubmitted all info according to procedure and ensured they had 100% of the records. A few short weeks later my claim status changed to “awaiting policy decision”. I have never been given an opportunity to challenge the aspects of the settlement I disagree with, but I knew that going in and BP should be forced to do the same. Now 4 years after the spill I’m still out my earnings, while BP is trying to re-write the rules to the settlement they made. The settlement was not very generous either, after paying for attorneys, claimants like myself will get less than 100% of their provable losses and no interest or compensation for 4 years waiting. The S&P has returned nearly 50% since Dec 2010, I’d say its been a costly 3+ years waiting for my cash.

  15. Tom Young says:
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    Lee – It is certainly perplexing that we are over a month from the BEL panel’s opinion affirming Judge Barbier re causation and we still have an injunction in place with no word re en banc.

  16. Lee says:
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    Thanks – Tom for a great article! The 5th Circuit appears to have fallen right into the hands of BP. There is absolutely no reason to continue to delay payments to claimants that valid claims.

  17. Tom Young says:
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    John – The longer the current management team can fool the equity markets the better for the company.

  18. John says:
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    Tom-Don’t you think that the reason that BP is delaying payments of claims is because it costs them nothing to drag their feet ? They’re earning money on the cash they’ll eventually have to pay,

  19. Tom Young says:
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    All – Thanks for reading and commenting. BP’s conduct is unconscionable and it is time the courts show the company the door.

  20. Kent says:
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    I have been in business for 27 years. The BP oil spill damaged my business to the tune of 100K+. I had to borrow 100K to stay in business during the spill, yet to date, BP has paid me nothing. My claim has just sat there. The interest expense on the 100K is killing me now. Yet nothing.

  21. joe simon says:
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    i dont see it how a contract can be voided especially by the one that drafted it

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    I have worked on BP claims since May 2010, and have gone through BP, GCCF and now the current DWHC adjusters and PwC accountants. The changes in methodology and supporting documentation “necessary” to calculate BEL claims has been mindboggling. I “look forward” to the next set of requirements. P.S. I’ve enjoyed reading your well written articles..very informative.

  23. Amanda says:
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    I agree with the prior 2 comments completely.
    I also commend and thank you again, Tom Young, for providing the facts straightforward and often, and also for printing the facts that myself and many others have been seeing for months now.
    We can only hope that your articles are read by “the right people.”

    “It has been six months since BP paid a dime to any business economic loss claimant. Both the Merits and BEL panels have denied the company’s requested relief, the most recent opinion issued over four weeks ago. Yet an injunction remains in effect. It should be lifted and the mandate issued.”

    “BP’s petitions for en banc rehearings should be immediately rejected as these appeals involve neither a circuit conflict nor a matter of great legal importance.”

  24. Jerry elrod says:
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    Great article Enjoy your comments
    No doubt they have more money than the people they owe.

  25. Dave Arnsby says:
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    This is the most accurate, definitive, indisputable timeline article I have read in three years. Why on earth is the 5th circuit waiting to rule on it ?. I am sure I speak on behalf of all victims still waiting for just compensation, by saying ” Thank you Tom Young “. Many of us, like me are represented by excellent Law Firms, and I am sure they also welcome and appreciate your continued efforts to help all of us collectively.

  26. Rich Lacour says:
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    Great article and causation synopsis