Coon: Deepwater Horizon settlement troubled after being changed mid-stream
By Brent Coon
The much troubled BP oil spill class settlement has suffered another major blow with a change in how a loss is calculated for paying a claimant. This new revision to the agreement, called Policy 495, once again materially alters a settlement agreement that was already plagued with a myriad of implementation problems, problems so great collectively that it should never have been approved in the first place. While much is now being said about the details of how these new protocols are to be forensically applied, very little has been said about how all of this came to be, and why now, over two years into the program, the rules are still being regularly changed and cases are still being delayed, or worse denied. What happened to the “greatest settlement in history” and why has it imploded? Where did things go wrong? To understand where we are, let’s briefly go back to where we started.
Shortly after the oil spill, BP officials met with the White House, and thereafter announced a $20 billion dollar preliminary settlement program, to be run by a third party administrator, known as the Gulf Coast Claims Facility (GCCF). In the first year of operations, the GCCF funded and resolved tens of thousands of claims, and distributed over $4 billion of much needed assistance. Then, on no prior public notice, the fund was shut down. BP no longer had to honor the agreement, and the remainder of the $20 billion was not required to be funded for losses. To this day, there have been no public statements detailing how this occurred, much less why. What did happen overnight is that the oversight of monies paid out on claims would shift from the GCCF fund to one under the oversight of attorneys involved in the lawsuits in New Orleans (the plaintiff steering committee/PSC). This was in effect the big coup d’ etat in the case, as future payments made would go through a new deal created by BP attorneys and the PSC lawyers in the New Orleans lawsuit. This new deal was a different settlement agreement called the Economic and Property Damage Class Settlement, and was essentially a hodgepodge of language designed to capture most outstanding claims into a process where claimants would go into it with no understanding of how it was applied, no idea of how much they would get..if anything, no date in which they would be paid, no details of what was required to get paid, no details as to how the accounting protocols would be addressed, and no right to decline any offer and reserve their legal rights (the GCCF settlement program advised a claimant as to how much they would get and the claimant could accept or reject, thereby preserving their legal rights). BP did not want any cases escaping this net to pose serious financial risk to them with jury trials and made the terms conditioned on the New Orleans group capturing essentially all potential cases into the deal. However, it was represented by BP counsel, by the PSC, and by the new fund operators that it would be fast, fair, efficient, equitable and claimant friendly. The proposal was then set for approval in November of 2012.
My firm Brent Coon Associates filed objections to the proposed BP Oil Spill Economic and Property Damage Class Settlement in the fall of 2012, preceding the hearings in the MDL on whether the settlement should be approved. BCA was the primary objector, arguing on behalf of 10,000 clients from all walks of life that the settlement was not going to be a fair and efficient mechanism for resolving claims.
BCA had an excellent factual basis for lodging the objections. The most unique aspect of the proposed settlement was that it was preliminarily approved in the late spring of 2012, and up and running on a “test basis” for six months prior to the hearing on final approval. As a consequence, BCA had spent over six months working directly with the class administrator and scores of DHECC personnel analyzing over 1,000 BCA “test cases” in the various categories to see how the settlement program would actually work. It was very clear over that time that the settlement was inconsistent in application, was inconsistent in document requirements and inconsistent in the analysis of the documentation. The DHECC basically was trying to “fill in the gaps” in the various ambiguities in the settlement on the fly, something that was extremely disconcerting to me, and numerous forensic accounting experts from several different firms working in consultation with BCA. The 1,000-plus page settlement document tried to marry too many different situations involving too many different types of claims, geographies, and forensic accounting principles into one single settlement, one that would be binding on every claimant, no matter what the subsequent re-interpretations led to in changes to the outcome of a claim. In short, a single unwieldy document was cobbled together to try and take into account the various contingencies, known and unknown, involving as many as a million different and individual clients, their losses, their supporting documentation, their loss relationships to the spill, and their proof. This included efforts to capture them all in various different categories of eligibility based on business interests, geography and various other subjective and objective criteria, and various “multipliers” applicable to their particular claim.
In the six months prior to the hearing, the DHECC was unable to apply consistent principles to readily calculate losses on any types of claims other that vessels of opportunity and property damage claims. It was very clear that the program suffered far too many deficiencies in operations and that the proposed agreement suffered from far too many ambiguities in interpretation and application. In fact, in the six months prior to the hearing, less than a dozen of the BCA cases under review for any forensic analysis were completed, and even those were rift with inconsistencies.
BCA specifically brought all of these issues to the attention of Pat Juneau, the claims administrator, the MDL Court, the assigned neutrals, the oversight magistrate, and to all members of the Plaintiff Steering Committee, their negotiating team, and adverse counsel for BP. These issues and concerns were all ignored by all parties. In fact, at the subsequent fairness hearing, many of the additional supporting documents in opposition to the hearing were stricken, and there was no request for any representatives of BCA to elaborate on their extensive concerns and experiences in the test runs with BCA cases.
BCA forewarned all of the problems with the settlement, including the fact that the ambiguities in the agreement itself on issues of forensic accounting and many other gaps would create numerous future obstacles to amicable resolution of claims going forward. In spite of these warnings, and in the haste to “get a deal,” the PSC, BP and the claims administrator avidly supported the agreement, advising the court that was already working fabulously (a patently false statement) during the test run, and that it was going to be a fast, fair, equitable program for all claimants and that it would, most importantly, be “claimant friendly.” To add insult to injury, the parties made efforts to get out of the class very difficult for individual claimants. The parties refused requests to provide a standardized opt out form, refused requests to provide for an opportunity for claimants to opt out of the program after the review process was completed on their individual case, and refused acceptance of opt out forms submitted by authorization of their own counsel. This cram down resulted in the ability of the parties to “capture” almost all of the classes eligible for the settlement. Once the fence was up around the cattle, they have all been slowly marched off to the slaughterhouse known as the Deepwater Horizon Claims Center.
Over the last two years, most claims are still unresolved. More claims have been denied than paid, and to add insult to injury, BP won a major victory in their own appeal of their own settlement and have now forced an even more onerous requirement in calculating losses. This will result in thousands more unsuspecting claimants to lose all the legal rights they had under the Oil Pollution Act, and even worse, may result in the minority of claims that actually have been paid to be forced to give some or all of their recoveries back.
BCA accurately predicted all of these problems over two years ago, and documented the concerns in a formal filing with the MDL court. BCA did all it could to object and raise our concerns to all stakeholders before this agreement was inked. Unfortunately, our concerns were shouted down, disregarded, ignored and even suppressed. BCA accurately predicted that once BP gained control over the caseload, and created a legal process denying every client the right to retain their legal rights to a trial by jury, that they would go on the offensive, deny claims, castigate the efforts of claimants to finally get paid something for their tragic losses, and stubbornly refuse to reasonably settle disputes. Even now, this month, BP sent out a press release advising the media that their own internal settlement program for those not captured in the class had resolved 99% of all the claims, and was therefore closing down. This again was a bold faced lie.
In fact, BP didn’t settle 1% of the claims, much less 99%. They have refused to provide any data on the number of claims they actually paid, the number of claims filed, or the total amounts paid out. Regardless, BCA alone submitted over 5,000 cases to this program in 2012-2013 and received offers on only 2. These are the only two that our firm has been able to identify.
So who wins with the latest recreated interpretation of the class settlement agreement as a result of Policy 495?
Biggest Winners:
1. BP. First, they win an uncontested PR battle, argued mostly in locales like New York and Washington, instead of where they had done their damage along the Gulf Coast. They even sucked in normally objective media like 60 Minutes to promote their spin. Now BP will get the benefit of a new set of accounting protocols that will reduce damage awards or in many cases completely deny them. Claimants relying on the original methodologies used by the DHECC have lost their right to object or opt out and preserve their legal rights. In addition, BP has filed motions with the MDL Court and may pursue efforts to get money back from everyone paid under the “old methodology.”
In addition, BP has avoided paying claims for the last year while all of these issues have been argued and debated, and may continue to keep remaining claims tied up in red tape for an extended additional period of time. Likewise, the $20 billion that would have already been doled out by the GCCF in the prior agreement has not been paid, and as a consequence BP has kept over $10 billion in their pocket for all this additional time…and maybe forever.
Last and not least, BP is now claiming they are owed money back from past claims paid, along with interest and attorney fees!!
2. The Plaintiff Steering Committee (also known as the Class Counsel…depends on which hat they are wearing at the time):
They cut the deal with BP to approve this settlement and BP would pay them up to a whopping $600,000,000.00 in separate “class counsel fees,” in addition to whatever any of them get from individual clients they represent for putting this deal together with them. The changes with Policy 495 address some of the other legal arguments BP had on other appeals and may result in the appeals ending with the class ultimately approved, which then triggers potential payment to the PSC. Not a bad payday for a bad settlement.
3. The claims administrator, the DHECC team, Price Waterhouse accounting, Brown & Greer law firm, and all the other members of the class settlement entourage who analyze each document 10 times, lose half of them so they request them of the client again, change all the rules so they can start it all over, all the while ginning up hundreds of millions of dollars of billable hours annually, all timely paid by BP. Guess BP figures that is still cheaper than paying claims.
Biggest Losers:
1. The claimants. Now wading into their fifth year since the spill, most of them will never see any payment. In addition to the fact that BP only paid a couple of the tens of thousands of claims outside this deal, they are only paying a small fraction of the claims of those hardest hit. For instance, less than 5 percent of the companies who were driven out of business from the spill will collect a dime from the settlement.
2. Claimant representatives. Several thousand small law firms and claims firms helped hundreds of thousands of clients round up their required documents, analyze them, prepare supporting accounting information, and investment of a great deal of personal time and resources, usually in an agreement with the distraught client to get paid out of the recovery, rather than up front. Now that most of the claims haven’t been paid, and won’t be paid, they are SOL as well.
3. Justice: Any deal between lawyers that pays all the lawyers, analysts, overseers, auditors and administrators but doesn’t pay most of victims is deplorable.
More light is being shed on these issues as time goes by, and hopefully we will all know a great deal more of what has happened behind the magic curtains before this is all said and done. One interesting source these days is www.theamericanzombie.com, a blog site that has been releasing insider documents and videotape witness testimony of people close to the process.
BP has a long and checkered history of killing workers, killing contractors, deliberately violating U.S. law, deliberately violating our state laws, and spending much more money on politicians, lobbyists and false media than they pay to settle claims for the damages they cause. They were on probation for pleading guilty to felony manslaughter of 15 workers at their refinery in Texas City when they blew up the Deepwater Horizon rig, again in a bloodthirsty zeal to start producing more money on a project and get it up and running before it was ready. They had the highest fatality rate in a high fatality rate industry even before this tragedy, and they collected over 90 percent of the knowing violations of OSHA laws in the entire industry in the years preceding this incident.
For more information on what BP is really about, and what is going on, feel free to go to one of several websites our firm has created which document all of these issues and many others in great detail.
This would include the following sites:
We are very disappointed in the most recent events associated with the class settlement, just unfortunately not at all surprised. As a public policy law firm, BCA we will remain committed to the pursuit of transparency and justice for the travesty that has occurred to our entire southern coast. Likewise, as an eighth generation Texan, as an avid fisherman and outdoorsman, and as a friend to the working man and small business owner, we will continue to work around the clock to hold BP accountable for the harm they have done.