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BP Accused of 'Gross Misconduct' in Macondo Blowout

The Department of Justice (DOJ) has filed an objection to BP plc's $7.8 billion preliminary settlement to resolve court claims following the blowout of the Macondo well in April 2010, saying that it plans to prove "gross negligence or willful misconduct" on the company's part.

BP clinched a hard-fought settlement in March with the Plaintiff's Steering Committee (PSC) to resolve a "substantial majority of legitimate economic loss and medical claims" from the Macondo well blowout in the deepwater Gulf of Mexico (see NGI, March 12). The PSC acts on behalf of thousands of individuals and businesses in the multi-district litigation (MDL) proceedings pending in New Orleans (MDL 2179). The agreement effectively halted the nonjury trial that was scheduled to begin before Judge Carl Barbier, who had delayed the proceedings to allow the parties to continue to negotiate. Barbier said the settlement "would likely result in a realignment of the parties in this litigation and require substantial changes" to the phased MDL plan.

The $7.8 billion settlement was to be paid from BP's $20 billion trust to help resolve economic loss claims related to the Gulf Coast seafood industry. After DOJ filed an objection to the preliminary settlement, BP countered last week that it "was not grossly negligent and looks forward to presenting evidence on this issue at trial in January" over civil penalties. The London-based producer further contended that the damages from the well blowout, which killed 11 men and led to the worst oil spill in the Gulf of Mexico, should be "divisible" with other BP co-defendants, such as Transocean Ltd. Transocean owned the Deepwater Horizon drilling rig.

If gross negligence is proved, this could raise BP penalties under the 1972 Clean Water Act to close to $20 billion (see NGI, Feb. 27). Compensatory and punitive damages could be added to that amount.

"Until receiving BP's motion [for final approval of the settlement], it is unlikely that the United States would have felt compelled to file any type of response related to the proposed settlement. That changed, however, as a result [of] plainly misleading representations in BP's papers concerning liability and natural resource damage issues," the DOJ said in a briefing filed in the U.S. District Court in New Orleans [2:10-md-02179].

The court approved the landmark $7.8 billion BP preliminary settlement in May, which resolved more than 100,000 court claims stemming from the blowout. A fairness hearing is scheduled for Nov. 8 to consider a final settlement. "The court can and should make findings as to the fairness of the proposed settlement, without making findings on the merits of the claims of the United States, the states or other plaintiffs. Instead, the court should make only those findings sufficient to assure itself that the settlement meets the legal test for approval, " the DOJ said.

The preliminary settlement is "fair, reasonable and adequate and meets all the legal requirements for final approval by the court," a BP spokesman said.

"BP's support for the class settlement it sponsors is understandable and predictable, but BP overreaches in seeking to establish either that it acted without gross negligence and willful misconduct or that the environment has recovered without harm from the discharge of millions of barrels of oil," the federal government said.

Moreover, "BP did not act alone, by any means, and its gross negligence and willful misconduct are inextricably joined with the acts and omissions of Transocean. Nowhere is this more evidence [than] BP's and co-joined conduct of the negative pressure test, well monitoring, and well control in the final hours before the first explosion aboard the rig," the court brief noted.

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