BP gets slick in trying to undermine gulf oil spill settlement

In full-page ads, BP ridicules payouts it believes are undeserved,
including $8 million to famed chef Emeril Lagasse and $173,000 to an
escort service.

It would be perfectly proper for BP , the giant British oil company, to feel a sense of corporate remorse.

After all, the firm was responsible for the 2010 Gulf of
Mexico oil spill disaster, the Deepwater Horizon oil rig explosion and
well blowout that took 11 lives and created "immense environmental
damage" in and around the gulf. (Those words were uttered by a Department of Justice official just over a year ago, when BP pleaded guilty to a dozen felony charges and agreed to pay $4 billion in penalties and fines.)

"Buyer's remorse," however? That's a different story.

But it's what BP is displaying these days toward a
class-action settlement it reached in 2012, covering individuals and
businesses that claimed economic losses from the oil spill — hotels and
restaurants, seafood businesses, property owners and many others.
The settlement aimed to streamline the claims process, so these victims
wouldn't each have to bring their cases before a judge and jury. The company "wanted to do the right thing," it says.

But in recent months BP has mounted a frontal assault on the settlement. The firm has placed full page ads
in major newspapers, ridiculing supposedly fraudulent claims blithely
paid by the settlement administrator, Louisiana lawyer Patrick Juneau —
including $8 million to "celebrity chef" Emeril Lagasse.

Last week BP turned up the heat by sponsoring the daily Playbook web
page and email blast aimed at Washington opinion makers, among many
other people, by the Politico news website.
Each day's Playbook message from BP pinpoints a different, ostensibly
absurd case with the tag line, "Would you pay these claims?" Sample: a $173,000 award to an "adult escort service." (What, an escort service can't be harmed by a fall-off in tourism?)

But that's just the PR side of things. The company also has mounted an intensive legal attack on Juneau in federal court in Louisiana.
It has obtained a restraining order preventing further payments for the
moment and is seeking a permanent injunction so that the policies
governing the settlement awards can be recrafted.

BP is going down this path at a time when one would expect it to display maximum agreeability and contrition.
The company is negotiating with federal agencies to end its more than
year-old exclusion from new government contracts, dating back to its
guilty plea.
A lawsuit by the federal government and several states, seeking
billions of dollars in damages, is before the same federal judge
overseeing the class-action settlement. Reports are still emerging of the toxic effects of the spilled oil on the ecosystem; the latest being a just-released finding by Stanford researchers that the crude is bad for the cardiac health of tuna. (BP asserts that the lab study bears no relation to the "real-world conditions" experienced by fish in the gulf.)

Plaintiffs' attorneys say that what's happened is that BP has
belatedly awakened to the fact that its obligations to businesses and
individuals may come to billions of dollars more than it anticipated. The settlement, indeed, is uncapped — the money keeps getting paid out as long as claims roll in and BP has the cash.

"They figured out that they underestimated what the settlement is
going to cost," speculates Stephen J. Herman, a lead plaintiffs'
attorney. "Now it's costing them too much money, and they're trying to find ways to not pay it."

BP says it's just trying to keep the payouts fair. A company spokesman, Geoff Morrell, said in an emailed statement that "the company's commitment to the Gulf is being twisted and exploited" by awards that violate "the intent of the parties, and the law."

Does BP have a point? Let's take a look.

The settlement agreement says that most claimants have to show that
their economic losses were caused by the oil spill, which began April
20, 2010, with a series of explosions at the Deepwater Horizon rig. The well wasn't permanently capped until mid-September. By then millions of gallons of oil had spilled into the gulf.

The agreement also says that for many of those claimants, all they
need to do to prove that their economic losses were caused by the spill
is to show that they operated a business within the geographic zone of
the gulf and experienced a certain pattern of income — chiefly a
"V-shaped" pattern reflecting a sharp reduction after the blowout,
followed by a recovery in income after the incident. (Other patterns can be used, but that's the main one.)

That's the interpretation of the settlement rules favored by the plaintiffs. BP, however, maintains that claimants first have to prove they had spill-related losses, and only then can they apply the V-shaped test.
The problem with BP's position is that it seems to have changed — for
months after the settlement was reached the company seemed to agree that
passing the V-test was tantamount to proof of "causation." But late last year it changed its tune.

At least that's how U.S. District Judge Carl Barbier of New Orleans,
who is supervising the case, sees it; he tossed out BP's challenge to
the settlement in December, ruling in effect that it's too late for BP
to reinterpret the deal terms now. A three-judge panel of the U.S. 5th Circuit Court of Appeals backed up Barbier last month.

Barbier observed that BP had acknowledged — repeatedly — that the
streamlined approach meant that some undeserving businesses would cash
in. He quoted a BP lawyer as stating, in writing, that "such 'false positives' are ... inevitable" when an objective test is applied rather than examining every case individually. But that was the price, BP acknowledged, of compromise.

BP says its position hasn't changed but has been misread — it always
expected claimants to first show they were damaged by the spill and only
then to pass the revenue test.
But the problem there is that it has never said how thousands of
businesses are supposed to prove that their losses were the result of
the spill, if not through the revenue tests.
That's especially true given that the economy of the region is so
heavily influenced by the health of the Gulf of Mexico that it's hard to
think of a manifestation of the oil spill that can't best be expressed
in dollars and cents.
Should a hotel submit affidavits from customers attesting that they
canceled their reservations because the thought of oil-slicked beaches
made them nauseous? Or charter boat owners photos of the oily sheen on their hulls?

If all would-be claimants must show some subjective proof that the
Deepwater Horizon lurked behind their loss, says Elizabeth Cabraser,
another member of the plaintiffs' legal team, these cases will "run to
the end of time."

In any event, if BP really thinks that money is being handed out to
undeserving recipients, it doesn't need to upend the entire claims
process.
A court-supervised appeals system exists for claims, and BP has taken
advantage of it vigorously, appealing more than 3,900 awards.

Nor is the settlement a slam-dunk path to wealth for business owners in the gulf region. As of last week, more than 270,000 claims had been filed with Juneau, but only 63,436 have been approved so far, for a total of almost $5 billion. Juneau so far has denied 52,683. Tens of thousands more have been closed, withdrawn or remain incomplete.

That's one reason that BP's attack on the settlement process, especially its advertising campaign, is perplexing. It's unclear who the audience for the ad campaign is intended to be.
The only people who can rewrite or reinterpret the settlement agreement
are judges, and they're not likely to be swayed by the vague ridicule
of individual claims. (At least, one hopes not.) If BP is aiming to gin up sympathy among residents or politicians in the gulf states, it's probably wasting its money.
And it's hard to imagine that anyone in Congress, which is a big
audience for the Politico Playbook, would consider stepping into this
mess.

BP's claim is that "over half a billion dollars" has already been
paid to "undeserving" claimants like Lagasse, but that figure looks
squishy. The figure appears to be based on a sample of supposedly improper claims it filed in federal court in November. But plaintiffs' lawyers have already challenged the company's description of many of those cases as incomplete or misleading.

The oil company denies that it's trying to back out of the
class-action settlement because of its cost, and maintains that it has
"honored its commitment" to the Gulf Coast's recovery. But its publicity and legal campaign ultimately raises the question of how much of a commitment is enough.

The Deepwater Horizon spill is one of the worst environmental disasters in U.S. history, if not the very worst. Any way you cut it, the event will rewrite standards of corporate responsibility.
The more BP splits hairs about how residents and businesses around the
gulf can prove their losses, the more it might find itself in deeper
water than it expected.