BP seeks approval of oil spill class action settlement

Posted on: May 10th, 2012 by Steve Larson
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BP and attorneys for more than 100,000 people and businesses presented a federal judge on April 18 with a class action settlement designed to resolve billions of dollars in claims spawned by the 2010 oil spill in the Gulf of Mexico.  The London-based oil giant and the lawyers are asking U.S. District Judge Carl Barbier in New Orleans to give preliminary approval to the settlement agreement.  The judge hasn’t indicated when he will rule.

BP PLC estimates it will pay about $7.8 billion to resolve these claims, but the settlement doesn’t have a cap.  It will likely be one of the largest class action settlements ever.

“As in any settlement, neither side will receive everything it wants — not BP, which believes that plaintiffs’ claims are subject to considerable litigation risk, and not the (Plaintiffs’ Steering Committee), who maintain that they would one day obtain larger awards if their claims were to proceed to trial,” the filing said.

The details of the agreement, spelled out in hundreds of pages of documents, are consistent with the deal announced last month, but the reaction was mixed, leaving open the possibility that many businesses and individuals might decide not to take part.

The agreement announced March 2nd doesn’t resolve separate claims brought by the federal government and Gulf states against BP and its partners on the Deepwater Horizon drilling rig over environmental damage from the nation’s worst offshore oil spill.

The settlement also doesn’t resolve claims against Switzerland-based rig owner Transocean Ltd. and Houston-based cement contractor Halliburton.  Judge Barbier has scheduled a May 3 hearing to discuss plans for a possible trial on the other claims.

Judge Barbier also is expected to hold a “fairness hearing” on the settlement before deciding whether to approve it.

The agreement calls for paying medical claims from cleanup workers and others who say they suffered illnesses from exposure to the oil or chemicals used to disperse it.  None of those claims were paid through a BP-created $20 billion compensation fund.

The agreement spells out several compensation levels, with cleanup workers eligible for the most: up to $60,700 plus money to cover hospital and medical bills they might have racked up.

There’s money for workers and residents who can prove they suffered more mild symptoms from breathing in oil fumes or dispersants.  Many people have complained of ear, nose, throat, skin and neurological problems.  Under the agreement, residents in this category can get between $900 and $5,450 with some eligible for medical bills they have paid.  Workers can get between $1,300 and $7,750 plus medical expenses.

In addition, BP has agreed to spend $105 million over five years to set up a Gulf Coast health outreach program and pay for medical examinations for 21 years.

The oil company also agreed to pay $2.3 billion for seafood-related claims by commercial fishing vessel owners, captains and deckhands.

“Notably, the amount that BP has agreed to pay to fund the Seafood Compensation Program exceeds the annual revenue of these industries many times over,” a court filing said.

The settlement also would compensate lost wages, loss of business and damage to vessels that worked on the clean up.  Plaintiffs’ lawyers are seeking fees, costs and expenses capped at $600 million.  They’re asking for an interim award of $75 million plus additional quarterly payments equivalent to 6% of class claims.  Lawyers’ awards won’t come out of plaintiffs’ payments.

Judge Barbier would set the award for the attorneys.  BP isn’t contesting the request.

BP also has agreed to pay an additional $57 million to promote the Gulf Coast tourism and seafood industries and spend up to $5 million on a publicity campaign to inform Gulf Coast residents how to participate in the settlement.

The April 20, 2010, blowout of BP’s Macondo well triggered an explosion that killed 11 rig workers and unleashed a gusher that spewed more than 200 million gallons of oil into the Gulf.

In the aftermath, BP created a $20 billion fund to compensate commercial fishermen, property owners, hotels and other tourism-driven businesses that claimed they suffered economic damages.

The Gulf Coast Claims Facility processed more than 221,000 claims and paid outmore than $6 billion from the fund before a court-supervised administrator took over on March 8, 2012.  The administrator, Patrick Juneau, announced that 5,238 claimants have been paid more than $134 million during the transition period as of April 6th.

The settlement excludes certain types of businesses, including financial institutions, casinos and racetracks, as well as losses allegedly caused by the federal government’s temporary moratorium on deepwater drilling.