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Another Fifth Circuit Panel Rejects BP Arguments, Sides with Macondo Plaintiffs

Over BP plc's objections, a federal appeals court on Friday upheld the multibillion-dollar settlement with Macondo spill-impacted plaintiffs, which could force the oil major to pay billions more in claims.

BP's lawyers have been arguing for months that a settlement crafted in December 2012 with the Plaintiffs' Steering Committee over the April 2010 well blowout and oil spill should be restructured to prevent bogus claims from being paid (see Daily GPI, Dec. 28, 2012; March 6, 2012). The original agreement did not have a cap, but BP estimated at the time it would pay around $7.8 billion to resolve most of the claims; that figure in October was revised to $9.2 billion (In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, U.S. District Court for the Eastern District of Louisiana, No. 10-2179).

Following internal investigations by BP that have determined some of the claims to be illegitimate, BP has asked the court to halt payments until those issues are resolved. BP has argued that U.S. District Judge Carl Barbier, who is overseeing the multi-district litigation in New Orleans, and court appointed claims administrator Patrick Juneau misinterpreted the settlement terms.

At each legal juncture, Barbier mostly has sided with plaintiffs. And BP has appealed at every step. Separately, BP also faces mountains of litigation still to come dealing with U.S. Clean Water Act violations and allegedly criminal conduct.

Last October the US. Court of Appeals for the Fifth Circuit tossed Barbier's various rulings concerning how business payments were being made, and it ordered him to change the calculation of some damage awards (see Daily GPI, Oct. 4, 2013). Barbier in December ruled that calculations would be revised, but he also ruled that proof of economic losses did not have to be detailed (see Daily GPI, Dec. 26, 2013).

BP turned to the Fifth Circuit once again, this time composed of different judges. The court currently has 14 judges with three vacancies.

In the latest, 48-page opinion, two of the three judges affirmed Barbier's original settlement and ruled that they could not agree with arguments presented by BP and others.

"No case cited by BP or the objectors suggests that a district court must also safeguard the interests of the defendant, which in most settlements can protect its own interests at the negotiating table," the panel concluded. A request by BP was rejected to "find an intraclass conflict of interest because the claimants allegedly include persons and entities that have suffered no injury."

BP, said the two judges, "presents us with a series of economists' declarations that had not been provided to the district court when the class was certified."

Appellate Judge Emilio M. Garza, in a 14-page dissent, said the "attempted global settlement fails in a narrow, but significant, regard" and should be vacated and restructured.

Plaintiffs' lawyers Steve Herman and Jim Roy, who helped craft the original settlement, called the latest ruling "an enormous victory for the Gulf, and an important step forward in ensuring that every eligible claimant is fully compensated according to the objective, transparent formulas spelled out in the settlement agreement that BP co-authored and agreed to."

BP is expected to appeal. A spokesman said BP "is assessing its...options and the further implications" of the court's decision. "BP will continue to press its position on the proper interpretation of the settlement agreement’s provisions requiring a causal nexus between a claimant's injury and the spill."

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