BP has stepped up its campaign for a revision of the way compensation for its 2010 Gulf of Mexico oil spill is calculated by placing advertisements in leading newspapers ahead of a July 8 appellate court hearing in the United States.
The British oil company’s advertisements in the Wall Street Journal, New York Times and Washington Post are part of its attempt to put a lid on payments. The company has said that without relief it could be “irreparably harmed” by payouts.
BP has no control over its payments to claimants, having agreed a compensation formula and framework in a legal settlement covering certain personal and business liabilities.
While the company insists the formula is being misinterpreted, the court-appointed claims administrator disagrees and its process was upheld by the New Orleans federal court that is dealing with a host of legal issues surrounding the 2010 disaster.
BP hopes to have that decision overturned at a July 8 hearing at the United States Court of Appeals for the Fifth Circuit, which is also in New Orleans.
“Trial lawyers and some politicians are attempting to capitalize on this misinterpretation by encouraging the submission of thousands of claims for inflated losses, or losses that do not even exist,” BP said in its advertisement.
“Whatever you think about BP, we can all agree that it’s wrong for anyone to take money they don’t deserve. And it’s unfair to everyone in the Gulf—commercial fishermen, restaurant and hotel owners, and all the other hard-working people who’ve filed legitimate claims for real losses.”
But Mary Alice McLarty, president of the American Association for Justice, which represents plaintiffs’ lawyers, criticized BP for its “campaign to evade accountability” despite its guilty plea in a criminal case last year.
“BP is not a victim of small businesses, judges or even trial lawyers; they are still just a corporate felon who pled guilty to killing 11 rig workers, polluted the Gulf and ruined the livelihoods of thousands of Americans,” McLarty said in a statement.
In a separate development last week, BP sought to use allegations against a member of claims administrator Patrick Juneau’s team to back its case for a full review of the claims process.
Juneau placed team member Lionel Sutton on administrative leave and filed a report to the New Orleans federal court judge, Carl Barbier, about allegations that Sutton referred claimants to other lawyers in exchange for a cut of subsequent compensation.
Juneau later issued a statement anouncing that Sutton had resigned and that the allegations would be investigated internally.
BP described the affair as “troubling” and repeated its request for “a comprehensive and public audit of the settlement programme by a reputable national accounting firm”.
Sutton did not respond to phone calls and emails requesting comment, but the Associated Press last week quoted him confirming that he had been suspended.
Much of BP’s argument hinges on an interpretation of accountancy terms that the company says is too loose. One of the key triggers for a so-called business economic loss claim is the ability to show a lower revenue, higher expense, or both, during and/or after the oil spill, compared with other periods.
Proof of a connection with the spill itself is not necessary in most cases.
BP argues that a loose definition of what constitutes revenue and expenses produces more volatile figures and is allowing businesses to be classed as eligible claimants even though there is no real longer-term impact on profit.
The company’s case against the compensation payouts was backed by a group of accountancy professors last month.
But BP says the nature of the disputed compensation payments – many small, individual payouts—means that recovering them through further litigation would be next to impossible.
“Simply put, BP has buyers’ remorse because it guessed wrong on the cost of a deal, which it—for nearly two years – negotiated, co-authored, agreed to and sought court approval of,” said Jim Roy, one of the lawyers for the individuals and businesses who sought compensation. “The notion that BP is somehow trying to portray itself as a victim is preposterous.”
In April, BP added $500 million to its estimated compensation payouts under the settlement. Its best guess was for a total of $8.2 billion of business economic losses and other compensation claims, with only $1.7 billion left of the $20 billion it set aside for paying these and other costs.
BP has a total of $42.2 billion set aside in its accounts for clean-up costs, fines and compensation for the oil spill, which killed 11 men and devastated the Gulf of Mexico coastline.
According to Deepwater Horizon Economic Settlement website, 46,460 claims—out of nearly 193,000 in the works—have been identified as eligible, for a payout of $3.8 billion so far. About 60 percent of that is for business economic losses, and the facility will remain open until next April.
So the compensation payouts contested by BP may end up as a relatively small part of the final bill. Other developments, such as being found grossly negligent rather than negligent, could increase its liability by much more.