NEW ORLEANS – In a major decision that could get oil spill claims payments going again for the first time in eight months, federal appeals judges declined to sit as a full court to hear two BP appeals.
The U.S. 5th Circuit Court voted 8-5 to not hear two BP appeals that were previously denied by 2-1 margins by smaller three-judge panels. In one appeal, BP argued that its massive settlement with private plaintiffs had been misinterpreted so that hundreds of businesses were getting paid for losses that had nothing to do with the oil gusher BP caused off the Louisiana coast in April 2010.
In the other appeal, BP essentially argued that by misinterpreting the settlement, court-appointed claims administrator Patrick Juneau had improperly expanded the class of claimants covered by the settlement.
BP has been fighting these issues since last summer after realizing that the settlement, as it was being implemented, would likely cost it billions of dollars more than it originally estimated. It got the claims payments stayed last fall, but lost before the three-judge panels in March. Since then, everyone has waited for the re-hearing decisions. Meanwhile, thousands of legitimate, approved claims sit unpaid.
The appeals court stood by both of the smaller panel decisions Monday, essentially holding that BP agreed to terms that clearly set up a formula to establish whether a business claimant suffered from the oil spill – a formula that would avoid having to check if each individual business’ losses were really due to the spill or not.
The majority of the 5th Circuit said the formula “was the compromise reached by the parties on how an extremely difficult part of the claims process was to be handled.” The majority ruling went on to say that Juneau’s interpretation “simply states that the compromise still controls even when its accuracy as a substitute for direct evidence of causation as to a particular claim is questionable.”
Juneau raised questions early on about how to handle claims when a business’ losses met the causation test but seemed to be caused by other factors, such as a partner in an accounting firm who fell ill right after the oil spill.
BP’s lawyers initially said such “false positives” were inevitable and should be paid as if their losses were caused by the spill. But later, at the urging of 5th Circuit Judge Edith Clement, BP changed its position and filed an appeal that said more had to be done to prove “causation,” or that the spill – and not some other factor – caused a claimant’s losses.
Clement remained defiant and dissented strongly to her colleague’s decision not to hear the case, contending at one point that the appeals court was a "party to this fraud."
“Today the court approves a class action settlement agreement that permits payment for economic losses ‘without regard to whether such losses resulted or may have resulted from a cause other than the Deepwater Horizon oil spill,’" Clement wrote. "Left intact, our holdings funnel BP’s cash into the pockets of undeserving non-victims. These are certainly absurd results. And despite our colleagues’ continued efforts to shift the blame for these absurdities to BP’s lawyers, it remains the fact that we are party to this fraud...."
Once again, BP echoed Clement.
“BP is disappointed that the full Fifth Circuit will not be considering the divided panel decisions relating to the compensation of claims for losses that have no apparent connection to the spill,” said BP Vice President Geoff Morrell in a statement. “The company is considering its legal options.”
By contrast, plaintiffs' lawyers were relieved.
"We are pleased that the Court of Appeals agreed that BP must honor its contract," said the lead class attorneys, Jim Roy and Steve Herman, in a statement.
BP’s appellate lawyer, former U.S. Solicitor General Ted Olson, has already said BP will take the case to the U.S. Supreme Court. But while it considers its options, it’s unclear how long the district court’s injunction against paying business claims will stay in effect. The stay could be lifted in seven days, when something called the "mandate" related to the denial of rehearing is issued. But BP could also go to the Supreme Court and prevent the mandate from being issued, which would keep the stay in place.
The Supreme Court justice for each circuit has the power to keep an injunction in place while an appellant seeks to be heard by the High Court. The justice for the 5th Circuit is Antonin Scalia, who imposed a stay in 2010 on a settlement between states and Big Tobacco so the tobacco companies could take their losing case the final step without having to pay for several more months.