Houston Chronicle September 16, 2013

Is this fair to BP?

By Carol Sims | September 16, 2013 | Updated: September 16, 2013 6:28pm

BP’s decision to settle thousands of lawsuits arising from the terrible Gulf of Mexico oil spill in 2010 must have seemed like a good idea at the time. After all, settlements of complex litigation are supposed to provide full compensation to injured parties, while quantifying a defendant’s liability. Settlements also conserve scarce judicial resources and promote the efficient resolution of disputes.

But in this case, BP’s good faith effort to make whole the individuals and businesses harmed by the spill has morphed into a travesty of justice that threatens not only the financial future of a major U.S. employer and energy producer, but the integrity of the judicial process itself.

The story goes like this. Unhappy with the initial voluntary compensation fund established by BP and administered by Kenneth Feinberg, the same trustee who handled the 9/11 claims, a group of Louisiana plaintiffs’ attorneys found clients willing to bypass the claims process (which required that claimants prove damages actually caused by the spill) and sue BP in court – despite the fact that the fund had already paid more than $6 billion to more than 200,000 Gulf Coast individuals and businesses.

Consequently, facing the uncertainty of defending thousands of legal claims, BP agreed in early 2012 to settle pending and future lawsuits by replacing Feinberg with a Louisiana plaintiff’s attorney to pay the rest of the legitimate claims, estimated by BP to be $7.8 billion. Since that time, however, BP has paid almost $5 billion in new claims, with no end in sight.

How could BP be so disastrously wrong about the amount of compensation claims it might have to pay? Apparently, the company didn’t reckon on an avalanche of claims that have nothing to do with the oil spill itself. In one reported story, a lawyer, who represents 260 claimants in all, solicits new claimants by telling them that the “craziest thing about the settlement is that you can be compensated for losses that are UNRELATED to the spill.”

In the words of another Louisiana plaintiff’s attorney in a recent interview with Bloomberg BusinessWeek. “This is Louisiana, after all,” he said. “A big foreign company with deep pockets, and you’re surprised there’s a feeding frenzy? Come on, man.”

Make no mistake: BP should pay for the damage it has caused and any damage that may occur in the future. But the idea that BP should have to pay for more – and maybe a lot more – than the damages it caused just because the “big foreign company” has “deep pockets” should set off alarm bells in this country. We might expect other places with corrupt governments to disregard the rule of law, but to see it happening right in our backyard is simply appalling and besmirches the entire judicial system, not just Louisiana’s.

Plaintiff’s attorneys understandably defend the settlement on the basis that “a deal’s a deal” and BP will have to live with the agreement it made. Ordinarily, we would agree. But when a good faith settlement becomes a vehicle for bankrupting a public company that supports more than a quarter million jobs in the U.S., we might reasonably ask why any business would commit substantial investment dollars to the United States and subject itself to American-style justice of this ilk.

Gulf Coast residents and businesses have every right to be angry and frustrated with BP.

But cooler heads should stop and think about the future consequences of allowing the unrestrained plunder of a huge U.S. job provider and major economic asset. We hope that the federal appeals court currently reviewing the propriety of the settlement agreement and its administration will put a stop to this chicanery.

Carol Sims is executive director of Texas Civil Justice League.

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