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BP Justice Scalia Supreme Court
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.

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, two panels of the 5th Circuit Court of Appeals (“BEL” & “Merits“) as well as the entire 5th Circuit, 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


“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


“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


“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


“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


“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


“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, two separate panels of the 5th Circuit Court of Appeals, as well as the entire 5th Circuit by poll.

It has been eight months since BP paid a dime to any business economic loss claimant. Yet an injunction remains in effect. It should be lifted and the mandate issued.

BP’s petitions and complaints 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.


  1. Gravatar for Eyeswideopen

    Has anyone asked BP what they want as proof the losses were linked to the spill? Rule 23 was satisfied by the causation test and geographical zones agreed upon with acceptance of causation in Zone A.

    If they want changes are they willing to drop the math test in exchange for it? I don’t think so they just want more requirements that end up with more delays and denials. BOTTOM LINE

  2. Gravatar for Jean M. Champagne
    Jean M. Champagne

    This is an extremely well written and concise summary of the truth, versus BP's spin. With respect to Scalia, he authored the Supreme Court's March 25, 2014 unanimous opinion in Lexmark, which ruled against requiring "actual" vs. "alleged" causation for purposes of satisfying Rule 23, which is the exact issue that BP proposes to bring before the SC. Given this fact, and the fact that there are no differences among the Circuits, there would be absolutely no justification for Scalia to issue a stay. The time has come for BP to respect the Court and honor its agreement, rather than continue to spend hundreds of millions of dollars on disingenuous commercials about its commitment to the Gulf. If they're unhappy with the agreement that they signed, let them sue their attorneys that wrote it.

  3. Gravatar for James Bankes, CPA/PFS
    James Bankes, CPA/PFS

    Oslon never did categorically answer Judge Clement's direct question, but in case he reads this, here are least two items of consideration BP received in full accord and satisfaction of the Stipulation Agreement, in no particular order of value: 1) end of potential costly and lengthy class action litigation; 2) Plaintiff's waiving forever the right to come back and sue BP if future economic damages recur for unknown or unquantified sources.

  4. Gravatar for James Gray

    Tom; It sounds crazy to say all losses are due to BP, yet that is what they asked for and got.Now they say if you had losses and send in the proper paperwork and documentation that you are a fraud. Great job and thanks for watching out for the small guy!

  5. Gravatar for Mining Consultant
    Mining Consultant

    The US media has not properly covered this subject matter and frankly the stories from BP are false, misleading or far worse. The examples BP and Judge Clement have used in their arguments to show claimants who were "falsely" or improperly paid (approx. 10 of 15 publicly released examples) are most often companies or persons paid NOT by the court approved Settlement, but claimants who were instead paid by the GCCF under Feinberg, who was I must remind, a direct BP employee.

    3 other cases where the media distorts are as follows:

    A car dealer who lost his franchise for a car line (Pontiac) - This dealer tried unsuccessfully for the entire summer and fall of 2010 to get a new franchise to sell new vehicles. Prior to the spill they had 3 other auto makers bidding to give them their franchises to sell their new vehicles. The spill ended those talks and the business shut for the year. That is a real loss as opposed to the BP half truth.

    An RV park that had a foreclosure filed against it prior to the spill - This is a not an RV park that had closed it's business. It simply had a filing against it. Their business remained open at that location through 2010. A foreclosure does NOT mean a closure of business in the current FL real estate market for businesses. Most negotiate for a rental contract with the bank who forecloses as the banks prefer a property to be occupied and thus keeping the property from becoming abandoned. Many home owners are keeping residence in their homes in FL now under the same management agreements with banks (though ownership of the property is lost their business income was not.) The RV park in question WAS profitable in 2009, but they had fallen behind on their payments due to the economic crisis in 2007-09.This property would have been able to utilize the Federal Foreclosure Relief Act to refinance had they not faced the effects of the tourist exodus from the region in 2010 caused by the oil spill.

    The business that burned down prior to the spill - This company was ready with contractors to use their insurance money to move to a different adjacent location and restart their business, but failed to be able to do so as there was simply no customer base to move forward. Further banking loans that were extended prior to the spill we pulled back by two local banks. Hard to make money or reopen a business after a fire when the oil spill changed the economy around them.

    The Oil Pollution Act, made law by Congress specifies that "regions" affected by an oil spill are "affected economies" and as such no direct contact with oil is required to show losses that are then liable to the offending party (BP, Transocean et al). OPA rules give all regional business a chance to ask for compensation regardless of their business type and also apply punitive damages if the court rules that negligence was involved in creating the spill. In this case the court was to rule in Feb of 2012 but BP rather than allow that case to be heard (and a possible 3x multiplier added to losses) BP offered this settlement with these specific rules of filing based on OPA law out of the fear that litigation costs would be higher than this settlement.

    Remember that to make a settlement, one just needs to count the dollars it would cost to defend yourself from any and all law suits. BP is ignoring their own math calculations that said this settlement (even with the new cost estimates) would be a cheaper outcome. Yes some people have less deserving losses and are getting paid, and others who had truly huge losses are getting very little. Many businesses (around 100,000) that had real losses were convinced to settle for just $25k when their losses were twice to many times that number. The idea of a class action is to keep courts from being shutdown by the overburden of the law suits and finding a solution that is "good enough". BP said this one was better than good enough and said that after they compared their likely losses in open court due to the volume of cases that would have numbered into the 100,000's.

    One last note...the oft quoted "4 partner accounting firm" where one partner takes a medical leave during the oil spill...this was a hypothetical case not a real one. If it was real then there would be other factors that would have allowed the case to proceed against BP in a normal court of law. As it is hypothetical then one might ask first - Did this 4th partner decide to take his medical leave at this time because there simply wasn't enough business for him to be needed in the office? Or did his absence from the office result in any turning away of clients? Really...would a business of that type actually lose business because one partner had a forced medical leave? Of course not! They would hire a temporary staff accountant. There were many unemployed accountants due to the prior economic crisis available to hire to take up his work load IF and only if such a work load existed. Truly these cases put forward by BP are red herrings meant to deceive the public and at least one Judge by the name of Clements.

    FYI I was an expert for BBC World service for many years and saw first hand the way we were instructed to use "notes" pre-prepared by corporations and other groups who were on a single side of an issue when appearing on air. If we failed to use these "notes" we were eliminated from the tapings and not asked to return. The news you hear is edited before it even reaches the writers or broadcasters these days. It was not so even as recently as though...hard to find any proper analysis or truth left.

  6. Gravatar for Eyeswideopen

    Hopefully Justice Scalia will look into the facts and reasons why BP agreed to the settlement, the benefits they received from this deal are never mentioned. The class members are being victimized twice by BP as they continue to delay these payments. Don’t stop the mandate!!!

    Second his son Eugene is an attorney with the Gibson Dunn that represents BP. The perception of the conflict should not be overlooked by a letter to the court. There are many ways a firm can benefit just by stalling these payments.

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