BP ordered to resume oil spill payments as Court reviews settlement

Gulf Oil Spill - SettlementNEW ORLEANS — BP PLC must resume paying claims while it asks the U.S. Supreme Court to review its settlement with businesses over the 2010 Gulf of Mexico oil spill, a federal appeals court panel said yesterday.

The 2-1 judgment said the 5th U.S. Circuit Court of Appeals will not put a stop to payments while BP appeals the court’s earlier ruling that businesses, under the settlement, don’t have to prove they were directly harmed by the spill to collect money.

BP asked the Supreme Court to review yesterday’s ruling, saying that otherwise “countless awards totaling potentially hundreds of millions of dollars will be irretrievably scattered to claimants that suffered no injury traceable to BP’s conduct.”

The high court is likely to hear the case because it deepens a split among federal appeals courts about whether courts can approve of a group of people who say it was wronged by the same action, which is called a class, “even when it includes vast numbers of members who were not injured by the defendant’s conduct.” Six appellate courts have said no; the 5th Circuit is one of two that have upheld certification of such classes, the attorneys wrote.

It said the claims administrator has approved “$76 million to entities whose entire losses clearly had nothing to do with the spill, such as lawyers who lost their law licenses and warehouses that burned down before the spill occurred.” He has approved another $546 million to people and companies far from the coast whose businesses have no logical connection to the spill, according to the appeal.

The 5th Circuit’s four-sentence judgment does not include detailed reasons for an order handed down a day earlier or for the dissent by Judge Edith Brown Clement, who also disagreed in the court’s March 3 ruling. In March, she wrote that whatever BP agreed to in its settlement, courts should make sure that payments go only to people who can prove the spill caused their losses.

The claims fund was set up after a BP well off the Louisiana coast blew out in April 2010 and spewed oil into the Gulf for nearly three months.

BP initially estimated that about $7.8 billion would cover all claims. It later said the administrator was misinterpreting the settlement in ways that could add billions of dollars in bogus or inflated claims.

There has been no dispute that some Gulf Coast businesses, including tourism and fisheries-related interests, lost money because of oil on beaches or the closure of fishing waters after the spill.

However, BP argues that the claims administrator wrongly interpreted the settlement to mean that businesses must only show losses during and after the spill without proving a direct link. Examples cited by the oil giant and in Clement’s strongly worded dissent include a wireless telephone company that burned to the ground and an RV park that closed before the spill.

BP says it has paid out more than $12 billion in claims to people, businesses and government entities. A trial scheduled for January in New Orleans is part of the litigation that will determine how much the oil giant owes in federal Clean Water Act penalties.

 

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