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DEEPWATER HORIZON
BP OIL SPILL UPDATE
Presented By:
Rhon Jones
Beasley Allen, Toxic Torts Section Head
Assisted By: Parker Miller & Leslie Pescia
We Shouldn’t Forget Who BP Is
Deepwater Horizon Oil Spill (2010)
Deepwater Horizon Oil Spill
Pled guilty to 11 felony counts of manslaughter for deaths of workers.
Caused the largest environmental disaster in US history.
Suspended for doing business with the US due to lack of corporate integrity.
Lied to Federal Government about the flow rate of spill
Misled Congress on corporate responsibility.
Former BP Vice President charged with concealing information and obstructing Congress.
Former BP engineer charged with deleting critical information that showed BP knew flow rate was three times worse that represented to Congress.
Convicted felon on probation for three other disasters at the time of the spill.
Pled guilty to a record $4.525 billion criminal settlement.
We Shouldn’t Forget Who BP Is…
Texas City Refinery Explosion (2005)
Texas City Refinery Explosion (2005)
Killed 15 workers, injured 170 more
Cited for hundreds of safety violations, including inoperable alarms and safety devices
OSHA levied even more fines when it learned BP had not implemented procedures it promised after the accident. $21 million fine initially imposed – 2nd largest fine ever imposed by
OSHA on original explosion.
$87.4 million fine imposed – Largest fine ever imposed by OSHA when BP failed to correct hazards after the explosion.
$50 million fine to US Justice Department to settle criminal charges
Telos Group: “We have never seen a site where the notion ‘I could die today’ was so real.”
US Chemical Safety Board: Explosion “caused by organizational and safety deficiencies at all levels of BP”.
We Shouldn’t Forget Who BP Is
Prudhoe Bay Oil Spill (2006)
Worst oil spill ever on the North Slope of Alaska
(267,000 gallons)
Pled guilty to negligent discharge of oil and fined
$20 million as a result
The largest per-barrel penalty ever at the time of
the oil spill ($25 million).
In 2012, the State of Alaska collected $255 million
related to BP, Plc’s pipeline leaks.
Settlement Summary
Last year, the PSC reached two landmark settlements
with BP.
Economic and Property Claims
Medical Claims
The Economic Facility has paid over $3.7 B in claims.
Navigating through the Settlement means
understanding:
How the objector and BEL appeal could affect claims
How to deal with the Facility’s aggressive claim review
How to combat BP’s inevitable appeals
Fifth Circuit Appeal: Class Certification
The appeal challenges Judge Barbier’s order
certifying the Settlement class.
Argued on November 4, 2013, and is currently
under review. There are two possible outcomes.
The class could be decertified, which
could bar any further claim filing.
Class certification could be upheld, which would permit claim filing until
April 2014 at the earliest.
Fifth Circuit Appeal: Class Certification
What to Know
File any legitimate claims as soon as possible.
We believe the Facility must process all
properly filed claims filed before an adverse
class certification ruling.
Claims that are not filed before an adverse
class certification ruling may be forever
barred.
Fifth Circuit Appeals: The BEL Appeal
BP raised, for the first time, a “matching” and “smoothing” appeal after the company realized it had under-valued the settlement.
BP believed that Administrator Juneau was misinterpreting the settlement by not “matching” income earned with expenses incurred. BP also believed that any spikes in revenue should be “smoothed” out.
Nowhere does the settlement reference the “matching” or “smoothing” of revenues or expenses, and BP never brought this issue up during negotiations.
Judge Barbier affirmed the Claims Administrator’s interpretation of the settlement and denied a preliminary injunction.
Fifth Circuit Appeals: The BEL Appeal cont…
On October 2, 2013 a divided Fifth Circuit panel vacated Judge Barbier’s ruling on matching and remanded the issue for further clarification to ensure matching should not occur.
The Fifth Circuit overruled BP’s smoothing argument 3-0.
The Court further ordered the district court to craft a narrowly-tailored preliminary injunction “that allows the time necessary for deliberation reconsideration of these significant issues on remand.”
This preliminary injunction only affects those claims where the matching of revenues and expenses is an issue.
Fifth Circuit Court of Appeals: The BEL Appeal Judge Barbier’s Preliminary Injunction Issued October 18
1. Process all BEL sufficiently-matched accrual-basis records.
2. Temporarily suspended final BEL determinations and payments where matching is an issue.
3. Temporarily suspended final IEL determinations and payments based solely upon employer’s satisfaction when employer’s claim isn’t properly matched.
4. Where matching was an issue in an appeal, those appeals were suspended.
5. Deadlines for Notice of Appeal are not stayed
6. Claims Administrator to provide (within 7 days of Order) declaration outlining what constitutes a matching issue
7. Does not affect: Seafood Program Compensation, IEL other than those stated, Subsistence, VoO Charter Payments, Vessel Physical Damage, Coastal Real Property Damage, Wetlands Real Property Damage, or Real Property Sales Damage.
Fifth Circuit Court of Appeals: The BEL Appeal
Claims Administrator’s Protocol
Any claim that does not fall within one of the following seven criteria
outlined on the next slide, or does not indicate otherwise that the
claimant’s financial records are “sufficiently matched”, will be
presumed “sufficiently matched” and will be processed.
If matching is an issue, the Accounting Vendors will determine whether
that claim is "sufficiently matched" by reviewing the available
information, including the nature and complexity of the business in
question, especially if the claim is based on cash-basis accounting
records. If the claims are determined to be "sufficiently matched,”
they will be submitted to a quality review process, who will confirm
the records are “sufficiently matched”.
Fifth Circuit Court of Appeals: The BEL Appeal
Claims Administrator’s Criteria
negative total revenue is recorded for any month included within the Benchmark Year(s), Compensation Year or 2011;
total revenue recorded in any month included in the Benchmark Year(s), Compensation Year or 2011 exceeds 20% of the claimant's annual revenue for the year which includes that month;
the monthly profit and loss statements or other documentation submitted shows that the claimant's business experienced a period of dormancy during the Benchmark Year(s), Compensation Year or 2011;
total variable expenses when summed up are negative for any month within the Benchmark Year(s) or Compensation Year;
total variable expenses for any month within the Benchmark Year(s) or Compensation Year exceed 25% of the claimant's annual variable expense for the year which includes that month;
variable margin percentages when compared between any two months included within the Benchmark Year(s) and Compensation Year vary by more than 50 percentage points; or,
in any given month within the Benchmark Year(s) or Compensation Year, the variance between that month's percentage of annual revenues as compared to that same month's percentage of annual variable expenses exceeds 8 percentage
points.
Deepwater Horizon Settlement Program
Background
The Claims Administrator, Patrick Juneau, opened the
Settlement Program on June 4, 2012.
Since the program opened, it has received 183,594
Registration Forms and 217,032 Claim Forms as of
October 15, 2013.
The first claims reviews and outcome notices were
completed on July 15, 2012 with payments made on July
31, 2012.
Claims Filed By Type (as of October 30)
24,807
41,291
426
78,021
4,804 3,356
31,447
10,275
1,572
30,897
8,684
1,437 0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Payments
First payments were issued to claimants on July 31, 2012.
As of October 10, 2013, the program has issued 58,725 Eligibility Notices with Payment Offers totaling over $4.9 Billion.
As of October 10, 2013 the program has made over $3.7 Billion in payments on
50,132 claims.
Basic Documents Needed to File A Claim
Business Economic Loss
1. Federal Tax Returns (including all schedules and attachments) for the years 2007-2011
1. Monthly and Annual Profit and Loss statements (or other documents establishing monthly revenue and expenses) for the years 2007-2011
1. A properly completed claim form
For a breakdown of all documents and claims forms required for
each type of claim see the FAQ’s page at:
http://www.deepwaterhorizoneconomicsettlement.com/index.php
Claims Review Process
Identity Verification
Review
Employer Verification
Review
Exclusions Review
Claimant Accounting
Support Review
Quality Assurance
Review
Claims Review Process
Step 1: Identity Verification Review consists of verifying the tax identification numbers.
Step 2: Employer Verification Review ensures that all employees of the same business are treated uniformly. It also ensures that all businesses are placed in the correct Zone and walks through the intricate analysis necessary to assign correct NAICS codes to businesses.
Claims Review Process
Step 3: Exclusions Review ensures that claims and claimants excluded under the approved Settlement Agreement are appropriately denied.
Step 4: Claimant Accounting Support (“CAS”) Reviews involves CAS reimbursement that is available under the Settlement Agreement for IEL, BEL, and Seafood Claims. After a claim is returned as payable, the CAS team reviews the accounting invoices and sworn statements.
Claims Review Process
• To ensure that all claims are reviewed in accordance with the policies of the settlement agreement by targeting anomalous claims results through data metrics analysis
• To provide a mechanism to monitor review performance and the necessary tools to efficiently and effectively provide feedback to reviewers
• To identify areas of review resulting in high error rates
Step 5: Quality
Assurance Review
addresses three
fundamental needs of the Settlement Program
Review & Appeals
BP has the right to appeal certain claims within 14
days while claimants have the option to seek a Re-
Review and Reconsideration of their claims after a
notice has been issued.
Review & Appeals
Must be aggressive at every stage of the review
and appeals process
Our experience in the appeals process shows:
BP is appealing almost every BEL claim
Many BP appeals are not supported, but you must
respond anyway
BP appeals oftentimes hit on a number of complicated
accounting and legal issues
Phase 1
The First Phase, or “Blowout Liability” part of the trial,
lasted nearly eight weeks and concluded on April 17,
2013.
Goal: Identify causes of the blowout and apportion
blame between BP and its contractors -Transocean Ltd.
(owner of the oil rig) and Halliburton Co. (cement
provider), including whether they were grossly
negligent.
Phase 1
At the conclusion of Phase 1 Judge Barbier posed the following
questions for post-trial briefing: What is the standard for finding gross negligence or willful misconduct under the Clean Water Act (“CWA”), 33 U.S.C. § 1321(b)(7)(D), and the Oil Pollution Act of 1990 (“OPA”), 33 U.S.C. § 2704(c)(A)?
What is the standard for a finding of punitive damages under general maritime law? Is this a different standard than under the CWA or OPA, and if so how?
In order to find that a party acted with gross negligence, is it necessary to find that there be at least one single act or omission that equates to gross negligence, or can such a finding be based upon an accumulation or a series of negligence acts or omissions?
Can an act or omission that is not itself causal of the accident nevertheless be considered in determining whether a party engaged in conduct constituting gross negligence?
In order to find gross negligence, is it sufficient if only employees on the rig are guilty of such conduct, or is it necessary to find that this level of conduct was attributable to shore-based or management-level employees?
Does compliance with MMS (or other applicable) regulations preclude a finding of gross negligence regardless of whether a defendant knew or should have known that its conduct or equipment was unsafe, or violated accepted engineering standards?
Does the fact that a party acted in accordance with industry standards preclude a finding of gross negligence?
Phase 2
Began on October 4, 2013 in New Orleans and just recently concluded.
Goal 1: Determine volume of oil spilled into the Gulf of Mexico.
The government argued that 4.2 million barrels (176 million gallons) of oil were released into the Gulf while BP alleged only 2.45 million barrels (103 million gallons) were actually leaked.
Phase 2
Goal 2: Determine if BP adequately prepared the disaster and if their measures to cap the well were appropriate once the oil began flowing into the Gulf.
If BP and its contractors are found to be negligent in Phase 2, Clean Water Act fines could be $1,100 for each barrel of oil leaked into the ocean. A gross negligence or willful misconduct finding could raise the maximum fine limit to $4,300 per barrel of oil spilled.
At stake during this phase are penalties and fines
reaching up to $18 billion.
Phase 2
Phase 2 ended on October 18 after nearly two
weeks of courtroom debate.
Summaries and proposed findings of fact and
conclusions of law are due by December 20
with post-trial briefs due January 24, 2014.
Hypocrisy At Its Best
BP just recently threatened the Indian Government that
if the oil minister did not honor its contract with BP, BP
would stop investing in oil production in that country.