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Small Businesses Take a Bite Out of Big Oil

Source: U.S. Coastguard; BP PLC's Deepwater Horizon burns on April 21, 2010 

Nearly four years after BP PLC (NYSE: BP  ) spilled four million barrels  of oil  into the Gulf of Mexico, the company is still paying for its crime. A new ruling by the Federal Court puts Big Oil on the line for billions more as small businesses stick it to the man.

Keep on Claiming
BP PLC can't catch a break. A federal appeals court rejected the oil company's request last week to reconsider thousands of claims that BP PLC states have nothing do with spilt oil.

Speaking with The Wall Street Journal, BP Spokesman Geoff Morrell iterated his company's disagreement with the finding that spill settlement claims are being properly administered. Mr. Morrell's words should come as no surprise to those following the saga.

BP PLC is tired of being taken out to dry, and has launched a public campaign questioning the validity of claims against it. The company even took out full page ads in The Wall Street Journal, The New York Times, and the Washington Post , giving real-life examples of small business claims it views as fraudulent:

Source: BP PLC, 

Nightmares such as this claim continue to push costs up for BP. Ironically, its predicted settlement costs have expanded much in the way its own estimates of total barrels spilt continued to grow in the days and weeks following the disaster.

While BP PLC originally put total payments at $7.8 billion, this latest ruling is expected to add on another $1.4 billion to BP's bill .

Don't Cry Over Spilt Oil?
If BP PLC's depiction of the above claim is correct, it may have a reason for wanting to reign in claim settlements. According to its own estimates, the company has already handed out over half a billion dollars to "undeserving claims ."

But if anyone should understand margin of errors, it's BP. Oil rigs carry risk, and so do claims. BP will never recover every drop of oil spilt into the Gulf of Mexico, and it shouldn't expect settlements to always flow smoothly. While the company claims there's half a billion bucks being distributed to the wrong awardees, the current actual tally (from BP's own website) puts fraudulent cases at much lower numbers.

Source: BP PLC, 

That means, according to BP's estimates, the Attorney General and government have only managed to identify 1.9% of all false claims, in terms of dollar tally . The government may not be known for its effectiveness, but failing to identify 98% of all false claims might be a bit of an exaggeration on BP's part.

Where to From Here?
Uncle Sam has shown his support for small businesses. And once again, it's at the expense of Big Oil. Ultimately, no one but the claimants will ever know how many dollars pulled from BP's pockets should've stayed there.

BP PLC has worked hard to diminish the effects of its spill. The company has spent around $26 billion total to pay out claims, clean up oil, and restore affected areas . But while BP PLC notes that "no company has done more to respond to an industrial accident ," it doesn't mention why: its industrial accident also happens to be the worst offshore oil spill ever in the United States .

Looking ahead, these latest cost increases won't bankrupt BP PLC. With $376 billion in sales and $11.8 billion in profit for 2012 , this oil company should keep on expanding.

Rather, this latest court ruling will serve as a continued warning to corporations everywhere: revise your cost-benefit analyses today, or be prepared to be unpleasantly surprised if things ever go sour.

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  • Report this Comment On March 18, 2014, at 11:13 AM, Africaskies wrote:

    BP's assertion that the Settlement Agreement as written requires "proof" to be provided by the plaintiffs/claimants rests on a single sentence in a footnote that is not even directed to the majority of claimants filing for relief under the agreement. That single sentence ambiguously implies that persons or entities who are in that portion of the Class have suffered harm from the oil spill. This single sentence does not reference any other portion of the document or specify any means that such a "direct" or causal "nexus" be established. BP has not stated or produced in any filing before the court means for the court or it's court supervised claims center to make such decisions beyond the objective means tests that are part of the claims analysis required by the settlement. The Settlement Agreement specifies objective means tests that determine if any loss has occurred and then awards specified eligibility for those losses.

    BP now claims that a prior test be applied to all prospective Class members (though BP fails to specify any way to do so) before allowing them to be accepted into the MDL class. Given that there are now over 250,000 filed claims this new demand (not previously specified in the Settlement Agreement) would flood the court system with hundreds of thousands of cases each set to determine if an individual claimant was directly impacted by the oil spill. Avoiding this situation is exactly why Congress passed legislation creating the MDL process. To decide now that such a nebulous prior test for entry into an MDL class be required, would indeed be an obstruction of Congress's intent and their constitutional right to create such legislation to safeguard the operations of the judiciary from such an overwhelming region wide event and subsequent litigation.

    BP did not require the 5th District court to hold test cases to determine if such standardized tests were feasible and in fact interrupted proceedings that could have yielded such results with their own Settlement Agreement in March of 2012. The US courts are not expected or required to intervene to defend the interests of a defendant during any settlement process. As such BP's own agreement in the settlement impacts the requirements of claimants to provide "proof" of a "nexus" to the oil spill and BP's conduct or actions. BP made this agreement in the face of the regulations ensconced in the Oil Pollution Act. OPA allows for payments to claimants who were economically impacted by regional or area wide effects of an oil spill. Clearly BP understood this standard to include businesses that might not have actual oil on their property and would include those who would be impacted by the economic losses in a regional or area wide economic chain reaction to the oil spill. Rather than deal with this specific set of regulatory facts that drove BP into this Settlement Agreement, BP instead searches for inflammatory sounding claims to put before the media to stir up emotions of those not directly involved in the region or involved in the claims process, all with the intent of applying political pressure on the judiciary. BP pointedly does not attempt to prove that these "undeserving" claimants had no losses due to the oil spill in their 5th Circuit Court appeals, but instead uses innuendo in full page national media statements. Clearly this media exposure of select information on any claimant's loss is not the acceptable "means test" for such claims to be adjudicated.

    Both 5th Circuit panels thoroughly explore and cite the known precedents to establish standing and class membership and explain how each and every part of those tests are met by the Class of claimants. In particular the Jan. 10th 2014 ruling rests on the the single fact that each claimant is required to assert that BP was in fact responsible for their economic losses in their registration form under threat of perjury. BP has claimed that many claimants do not have a "colorable" claim for losses due to the oil spill and BP's conduct. BP's argument for this was offered or suggested by Judge Clement in her Oct. 2nd, 2013 majority opinion on a different appeal on the matching of revenues to expenses. Judge Clement suggested that if some claimants "admit" that they had loses not caused by the oil spill, then inclusion of these claimants in the MDL class could cause the Settlement Agreement to face Article III or Rule 23 scrutiny. Such an idea is rebutted in the Jan. 10th, 2014 majority decision by Judge Davis when he points out that each claimant must sign and agree to a statement, under threat of perjury, that BP's actions and the oil spill were the cause of their losses. As such no claimant "admits" or states that the conduct of BP and the effects of the oil spill were not the cause of the claimed losses.

    To be able to assert a "colorable" claim does not mean that the plaintiff or claimant would necessarily prevail in court and BP knowing this standard made this settlement agreement in the face of OPA to avoid many years of litigation and the likely addition of punitive damages that could have very seriously raised the level of their liabilities far more than the current settlement processes does.

    BP's attempt to join other objectors in the Nov. 3rd 2013 hearing (now referenced as the Jan. 10th, 2014 decision) came as an amicus brief and their standing to join and request an En Banc review of that Jan. 10th hearing is not accepted by the court at this time. Further BP had not (unless such a request was included in this Monday's filing) appealed to the 5th Circuit Court of Appeals for an En Banc of the Jan. 10th, 2014 decision. The class of objectors who appealed originally has made such a request for En Banc, but after two months there is no sign of the 5th Circuit moving to grant such a request.

    Mr. Olsen's comments on the possible expansion of rights to join future class actions predicated on this settlement agreement is not factual as OPA and other MDL related precedent suggest that regional or area wide MDL classes are indeed possible and likely. Mr. Olsen's language is itself meant to inflame not inform. The intent of Congress when it created the MDL process was to allow a structured and manageable litigation process that would sort plaintiffs into class members and non-class members and provide a means for MDL class members to be correctly evaluated based on previous precedent for class actions. No previous class action has required the level of proof that BP now asserts must be demonstrated to join a class (see definitions and precedent of colorable).

    The intent of Mr. Olsen and BP is to cloud the issue and threaten to clog the US court system with endless trials and challenges for entrance into the MDL. Clearly this was not the intent of Congress when it created the MDL process. BP's single opportunity to advance a theory as to "causal nexus" requirements and demands for proofs of this was during the negotiation of the Settlement Agreement in 2012.

    When BP argued for the adoption of the Settlement Agreement before the 5th District Court in Nov. or 2013 they raised no issues with the class or entrance into the class and lauded the payment to thousands of claimants as proof of the correctness of the agreement itself. Surely Mr. Olsen and BP cannot now claim to believe that a never before described or practiced standard should have been applied to to the very claims that they lauded before the court in Nov. 2012? BP was fully involved and apprised of the entirety of the claims evaluation process and nowhere in the Court Supervised Settlement Program and it's published handbook of procedures is any such "causal nexus" test described or suggested. Mr. Olsen and BP have abused the interests of the US legal system and the people of the region for far too long.

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