On Wednesday, a split 2-1 jury of the 5th US Circuit Court of
Appeals in New Orleans said the administrator of the payoff
program was approving millions of dollars of payment based on
what BP called a flawed interpretation of the settlement deal
reached last year.
It ordered US District Judge Carl Barbier, who in March had
approved administrator Patrick Juneau’s damage evaluation
methods, to reconsider his decision and make sure that the claims
covered are legitimate. The judge was also told to bar payment of
certain claims until the review is over.
The appeals judges however upheld another Barvier ruling, which
in April dismissed BP’s lawsuit against Juneau.
“This decision throws a huge monkey wrench into the settlement
and it could well save BP hundreds of millions in settlement
payments,” Carl Tobias, a law professor at the University of
Richmond specializing in the federal judiciary, told Bloomberg.
“It’s going to create a real mess.”
The 2012 settlement, which BP reached with most private
plaintiffs, resolved economic-loss claims from many businesses
and property owners affected by the spill. Under the accord
claims payments are primarily based on plaintiffs’ own accounting
during the periods before and after the disaster. Businesses
didn’t have to prove direct impact or a link to it, with the
assumption being that they suffered because the spill affected
entire region’s economy.
BP said Juneau’s interpretation of the terms led to his paying
“baseless awards” that weren’t contemplated in the agreement. The
appeals court agreed with the arguments.
“There is no need to secure peace with those with whom one is
not at war,” Judge Edith Clement wrote in the decision.
“The district court had no authority to approve the settlement
of a class that included members that had not sustained losses at
all, or had sustained losses unrelated to the oil spill, as BP
alleges,” she added. “If the administrator is interpreting
the settlement to include such claimants, the settlement is
Judge James Dennis wrote a partial dissent, largely disagreeing
with Clement and Judge Leslie Southwick, the second jury member
siding with BP.
“Because BP has not satisfied its heavy burden of showing that
a change in circumstances or law warranted the modifications it
sought, the district court correctly affirmed the administrator’s
decision rejecting BP’s argument and actions to modify the
agreement,” Dennis wrote.
The settlement does not have a cap, but BP initially valued its
cost at $7.8 billion. The company later increased its estimate to
$9.6 billion, citing the interpretation by the claims
administrator. As of Wednesday, about $3.69 billion has been paid
out, according to Juneau’s claims website.
Meanwhile, a second phase of a trial before Barbier began on
Monday to determine the size of the spill and BP’s efforts to
The explosion at the Deepwater Horizon drilling rig in April 2010
and rupture of BP’s Macondo oil well killed 11 people and caused
the worst-ever US offshore oil spill. BP has already spent more
than $42 billion to cover clean-up costs, fines and compensations
related to the spill.