Over the course of the last six weeks, there have been a number of news articles discussing BP’s ongoing dispute with Judge Carl Barbier over the interpretation of the Business Economic Loss (BEL) calculation procedures referred to as “the settlement.” Having failed to convince the judge of its new proposal for “matching” and “smoothing” revenues and expenses, and having failed to convince the Appellate Court to enjoin payments, BP has now gone completely over the top and has definitely crossed the line. BP has been carrying on a direct advertising “Publicity Campaign” and direct letter campaign threatening claimants and their lawyers and indirectly the courts.
All of these actions are a thinly veiled attempt to intimidate businesses and their lawyers who have properly filed and been paid according to the terms that BP agreed to under the Settlement Agreement last year. BP has even set up a fraud and “corruption” hotline – even though one already exists and is overseen by a Federal Judge – to further try to intimidate businesses along the coast from filing legitimate claims.
It’s time for everyone to understand the facts. There are facts that BP wants the American people to forget. BP wants folks to forget where the oil giant and its lawyers were in 2010 and 2011 when the Settlement was being negotiated. At the time, BP was very concerned, over its conduct and the potential for claims. It was facing governmental, legal, and public attack for the total absence of corporate integrity that led to the worst oil spill that the world has ever seen. The death of 11 men, still unknown environmental damage, and destruction of the Gulf Coast economy can’t be ignored. BP was guilty of at least gross negligence and had to determine how best to reduce its very large exposure.
Facing potential failure under the weight of the private claims and other potential economic impacts of the spill, BP worked hard to negotiate a satisfactory resolution and one was reached. It was a resolution that BP’s Board was told would cost billions of dollars, but secure the financial survival of the company. As Rick Godfrey, the lead counsel for BP, told Judge Barbier when he was seeking approval of the Economic Settlement:
Like any settlement, the settlement that has been reached to resolve this litigation is a compromise, a yielding of the highest hopes in exchange for certainty and resolution. The Settlement stands alone, however, in its substantive generosity to the Class Members and in its procedural fairness
The formulas were negotiated at length by the Parties’ counsel, assisted and informed by experts and colleagues with specialized knowledge of various aspects of the litigation and the array of claims categories. These experts, who included economists, accountants, and real estate experts, among others, analyzed and responded to questions posed by both BP and the PSC throughout the negotiation process.
BP got predictability, eliminated uncertainty and gave the people of the Gulf economic aid when they needed it the most, not 10 years from now. This was a negotiated settlement. Prior to the settlement, claimants had the right to seek damages extending beyond 2010, and punitive damages. They gave up that right and agreed to the settlement.
The Settlement was intended to be applied exactly as it was written, which is exactly what Pat Juneau has done and what Judge Barbier confirmed on three separate occasions. The fact that a Business Economic Loss is based on a pure revenue analysis, subject to the timing of the receipt of the revenue, is exactly what the document says. This is what was intended, expressly negotiated for and agreed to by BP when it was seeking financial protection. Under the settlement, the Class Geography extends to virtually all businesses throughout the entire states of Louisiana, Alabama and Mississippi – all the way to the Arkansas and Tennessee lines. Mr. Godfrey, BP’s chief lawyer, made it very clear in his letter to the lead negotiators for the class, when he said:
The compensation framework is not the “causation test,” which determines eligibility to claim that there was a loss caused by the oil spill. Rather, once the causation test has been satisfied (or presumed, as in Zone A for example), the Compensation Framework is designed to determine the compensation amount for the post-spill loss.
The economics or accounting for determining a compensation amount for a post-Spill loss is, in simple terms, to compare the actual financial results during the defined loss period measured against the profit that the claimant might or should have been expected to earn in the comparable post-spill period of 2010…. Put simply: The claimant has the right to select three or more consecutive months from the period May to December 2010 as the Compensation Period. Thus, if the claimant selects the months of June, July, and August 2010 as the Compensation Period, for example, then that 3-month selected period is measured against the “comparable months of the Benchmark Period” i.e., June, July and August of the pre-spill Benchmark Period.
This is exactly what the Agreement says, how it was interpreted by the professional accounting firms that were hired by the Program, and how it was interpreted by Pat Juneau. Incidentally, BP nominated Juneau for the position of Claims Administrator. It was correctly interpreted by the Court in the same manner. For BP to now seek to take the benefit of the bargain away from the people of the Gulf, and yet keep the economic comfort they received from the Settlement, is incredible and very wrong.
Indeed, Mark Holstein, BP’s Counsel, wrote two letters to Mr. Juneau, in his capacity as Claims Administrator, in September of 2012. In those letters, BP agreed that:
One of the cornerstones of the Settlement Agreement is the use of transparent, objective, data-driven methodologies designed to apply clearly defined standards to a claimant’s contemporaneously maintained financial data submitted in compliance with documentation requirements. These methodologies and requirements were carefully negotiated by the parties and are set forth in the Settlement Agreement as mandatory requirements. Among other reasons, these methodologies and requirements were negotiated in response to concerns voiced by some that the prior GCCF (Gulf Coast Claims Facility) process was too dependent on accounting judgments that were not transparent.
…. Because the claimant’s actual monthly results are the foundation for the causation and compensation evaluations under the BEL framework, use of allocated proxy rather than actual data could severely distort the resulting outcomes.
….If the accurate financial data establish that the claimant satisfies the BEL causation requirement, then all losses calculated in accord with Exhibit 4C are presumed to be attributable to the Oil Spill.
Nothing in the BEL Causation Framework or Compensation Framework provides for an offset where the claimant firm’s revenue decline (and recovery, if applicable) satisfies the causation test, but extraneous non-fictional data indicate that the decline was attributable to a factor wholly unrelated to the Oil Spill. Such “false positives” are an inevitable concomitant of an objective quantitative, data-based test.
How can BP now complain about Pat Juneau and Judge Barbier agreeing with BP’s own description of how the Settlement was supposed to be applied to business claims? BP generates almost $400 billion a year. The oil giant is crying “foul” when BP is projected to pay a very small fraction of its earnings to compensate the families and businesses for the Deepwater Horizon disaster. It’s ironic that BP talks about people “getting something for nothing” when that’s exactly what BP is trying to do.
While BP was facing a trial on the merits and felony charges, it agreed to the Economic Class Settlement and, initially, promoted the Settlement Program, encouraging many claimants to file. Now that the felony charges have been resolved, (BP using the settlement as a basis for reduced criminal fines and penalties), and now that the Phase One Liability Trial has concluded, laying bare BP’s gross negligence, and exposing the company to billions more in additional civil fines and damages, BP is looking for a way to save some money.
BP waited until after the three-year anniversary of the Spill, after the class was locked in, and after the criminal charges were resolved before setting off on this anti-Settlement (and anti-Class Member, anti-Claims Administrator, anti-Small Business, anti-Lawyer and anti-Gulf Coast) campaign. It’s the old “bait and switch” game carried to the extreme.
Every claimant who receives an Eligibility Determination must sign an individual release that BP co-drafted and insisted upon for its benefit. This release says that (with some express reservations), the claimant forgoes all other rights, claims or benefits under any other laws and agrees to be bound by the Claims Administrator’s determination. Shouldn’t BP be bound by that same determination since it agreed to it? Judge Barbier believes that it should and I believe the 5th Circuit will agree.
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