BP Updates for 2014: Second Oil Spill in Lake Michigan and DWH Settlement Recap

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The claimant eligibility for the DWH settlement agreement reaches just under the $5 billion mark this month, meanwhile BP’s Indiana based Whiting Refinery leaks an estimated 1600 gallons of crude oil into Lake Michigan.

BP said a malfunction in a new distillation unit forced up to 39 barrels or 1,638 gallons of oil into the lake just across the Illinois border. While the US Coast Guard reports that the spill has been contained and has not contaminated local drinking water nor wildlife, Illinois Senators Mark Kirk (R) and Dick Durbin (D) as well as Chicago’s mayor, Rahm Emmanual are demanding answers from BP on the stability of its expansion project and the safety of local residents . BP has only commented that they are having their engineering team review the scope of the spill.

BP’s Fight to Stall Payments and De-Certify Class in the Deepwater Horizon Settlement Continues

BP has been vehemently fighting certain aspects of the Deep Water Horizon settlement which was agreed upon in 2012. When it became apparent that settlement payouts would far exceed its $7.8 Billion reserve for claimants, BP officially challenged the interpretations of the claims administrator Patrick Juneau and Judge Barbier. The oil giant in fact succeeded in stalling payouts on individual and economic loss claims in October of 2013 until March 2014.

March 13th – WIN for BP: P&L Matching and Policy 495

BP has been engaged in a bitter battle with claims administrator Patrick Juneau and district judge Barbier both in the media and in the courtroom, the later through the issue of ‘matching’. In essence, BP sought to prove that BEL claimants who were not impacted by the spill were being approved for payouts  and shouldn’t have. Their method of proof would be to convert the financial documents of businesses using the cash based accounting method (expenses are reflected in the month incurred and revenues in the month entitled to receive) to the accrual method (in which expenses are matched and reported in the same month as revenues). The accrual method is only required to be used by public companies and the majority of small businesses use the cash based method. In March of 2013, Judge Barbier rejected the company’s request, noting that the accrual method was not required in the language of the settlement agreement. BP in turn filed suit against claims administrator Juneau and filed an emergency motion to the 5th Circuit Court of Appeals. The Fifth circuit overturned Barbier’s decision and claims administrator Patrick Juneau was tasked with adopting a method for implementation. On March 13th, claims administrator Juneau submitted his proposal as policy 495, meeting the approval of BP, but currently being appealed by class counsel.

March 3rd – WIN for Claimants: Causation

Within months of the signed off Deepwater Horizon settlement agreement, BP’s estimates of settlement payouts to DWH claimants skyrocketed to about $9.5 billion, and questions were raised as to the causation presumptions agreed upon in the uncapped settlement. The company claimed that settlement agreement they had agreed to allowed for claimants who had not been harmed by the spill to collect payments, citing a $21 million payout to a rice mill located 40 mi from the spill zone and which turned a record profit in 2010. BP appealed the original settlement agreement and requested decertification of the class, noting that the settlement was unconstitutional. The Fifth Circuit Court granted a temporary injunction on payments in December of 2013. In March of 2014, the three judge panel upheld the original settlement agreement and vacated the injunction pending the result of BP’s current en banc review of the opinion.

Topics:  Discharge of Pollutants, Environmental Liability, Oil & Gas

Published In: Civil Remedies Updates, Toxic Torts Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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