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BP Loses Round in Court over Spill Claims

The New Orleans federal judge overseeing the BP plc multi-district litigation concerning the Macondo well blowout ordered the producer on Wednesday to ante up more than $130 million in fees to continue funding the court-supervised claims administrator.

U.S. District Judge Carl Barbier affirmed a lower court's decision, despite protests by BP lawyers that the claims administrator has mismanaged the fund. BP Group CEO Bob Dudley said last month the $20 billion fund soon will run out as compensation claims, many of which management believes are fraudulent, continue to accelerate (see Daily GPIJuly 31).

Former FBI Director Louis Freeh is investigating, with Barbier's approval, allegations of misconduct by an attorney who worked on the settlement program. Freeh, now a private consultant, is investigating, among other things, Lionel H. Sutton III, who resigned from the claims settlement office in June after being accused of receiving a portion of the settlement proceeds for claims that he referred to a law firm before he began working on the settlement team.

In his ruling on Wednesday, Barbier said Patrick Juneau, the claims administrator, needs to submit budget proposals earlier than he has been. However, Barbier concluded that BP's refusal to pay for the program's third quarter budget is not unreasonable.

"My primary concern is that we don't allow these issues to cause a shutdown of the claims facility," said Barbier. His ruling upheld one by U.S. Magistrate Sally Shushan, who earlier on Wednesday had ordered BP to pay the fees after hearing arguments from both sides.

BP's Maria Travis said in a letter on Monday that Juneau's office hasn't provided adequate documentation for the budget request. She also claimed that the program was overrun with poor productivity and excess costs.

Shushan said the dispute over documentation was regrettable, but she said there was no way she could cut off funding immediately, as BP had requested.

Barbier backed up Shushan's ruling that Juneau has to begin submitting budget proposals 60 days before the start of a new quarter, beginning with the first quarter of 2014. Barbier also approved Shushan's outline of a process through which BP would be able to review and respond to the budget proposal.

BP attorney Keith Moskowitz called it "patently unreasonable" for BP to pay more than $130 million in claims without a detailed budget proposal from Juneau. The budget submitted by Juneau in June was "in summary form without any backup...That's simply not how budgets are created. That's not how businesses are operated."

 Separately, BP has requested that settlement payments be suspended until Freeh's investigation is completed. Barbier has not ruled on the request nor indicated when he would.

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