The oil rig fire and the nearly unstoppable fountain of oil that followed at the Macondo Prospect on April 20, 2010, was the largest marine oil spill in the nation’s history. The oil poured into the gulf for 87 days, fouling an estimated 68,000 square miles of waters and almost 500 miles of coastline from Louisiana to Florida.
With complex ripple effects and lingering uncertainty about the health of the gulf, the economic impact remains nearly impossible to quantify. But BP, exceeding its obligations under the federal Oil Pollution Act to compensate victims, set up a multibillion-dollar program and turned to Kenneth R. Feinberg, an expert in administering complicated programs like the Sept. 11 victims compensation fund, to run it. (...)
But in meeting halls and boardrooms along the gulf, Mr. Feinberg’s compensation program was criticized as being confusing and unpredictable.
“I can’t tell you how many times we did our financials,” said Michael Hinojosa, the owner of Midship Marine, a boat building company in Harvey. “They always asked for more documentation. They kept asking for more and more, and we kept giving it to them.”
With anger and criticism mounting, BP and a committee of plaintiffs’ lawyers began to work out, over nearly 150 negotiating sessions, a broad settlement that could help the company limit the scope of any coming litigation. Negotiators envisioned a program very different from Mr. Feinberg’s. The new claims process was intended to be accessible, and the explicitly stated goal was to help claimants get the largest amount for which they qualified.
Both sides agreed on a claims administrator: Patrick Juneau, a laid-back Louisiana lawyer and a veteran administrator of major settlement funds, including the one resulting from lawsuits over the painkilling drug Vioxx.
A central element of the agreement, however, would prove to be a time bomb. Instead of having claims calculators contend with different kinds of arguable evidence to prove that damage was linked to the spill, the negotiators came up with a formula that relied solely on financial data for proof of harm. If a business was in a certain region and could prove that its income dropped and rose again in a specific pattern during 2010, that would be enough to establish a claim.
To David A. Logan, the dean of the law school at Roger Williams University in Rhode Island, this was a creative way to avoid endless minitrials. “The whole idea is to make this proceed without laborious technical findings on causation,” he said.
The deal covered a broad array of businesses in the gulf states, stretching all the way to the Tennessee state line. It offered those claiming damages the potential of maximizing compensation. For BP, it promised to sharply reduce the number of litigants it would face.
The agreement was unusual in another critical way: There was no limit on the overall payout. Aside from a fund for the seafood industry capped at $2.3 billion, BP had agreed not to turn off the spigot as long as there were legitimate claims to pay.
Elizabeth Cabraser, a member of the group of lawyers representing damage claimants, described the deal, which runs to more than a thousand pages including exhibits, as “the most detailed, highly defined settlement agreement that I’ve ever seen.”
“It was a model,” she said. “Up until the day it wasn’t.” (...)
Lawyers all along the Gulf Coast tell the same story: of taking a casual look at the agreement, reading it with increasing disbelief and then immediately encouraging their partners to read it, too. Accountants were hired, chambers of commerce were contacted, and clients — doctors, nonprofit organizations, just about any type of enterprise — were urged to gather financial documents. Law firms, also eligible for claims under the deal, began to look at their own account books.
One lawyer in Tampa, Fla., sent out a mass mailing, later highlighted in court filings by BP, saying that “the craziest thing about the settlement is that you can be compensated for losses that are UNRELATED to the spill.”
With complex ripple effects and lingering uncertainty about the health of the gulf, the economic impact remains nearly impossible to quantify. But BP, exceeding its obligations under the federal Oil Pollution Act to compensate victims, set up a multibillion-dollar program and turned to Kenneth R. Feinberg, an expert in administering complicated programs like the Sept. 11 victims compensation fund, to run it. (...)But in meeting halls and boardrooms along the gulf, Mr. Feinberg’s compensation program was criticized as being confusing and unpredictable.
“I can’t tell you how many times we did our financials,” said Michael Hinojosa, the owner of Midship Marine, a boat building company in Harvey. “They always asked for more documentation. They kept asking for more and more, and we kept giving it to them.”
With anger and criticism mounting, BP and a committee of plaintiffs’ lawyers began to work out, over nearly 150 negotiating sessions, a broad settlement that could help the company limit the scope of any coming litigation. Negotiators envisioned a program very different from Mr. Feinberg’s. The new claims process was intended to be accessible, and the explicitly stated goal was to help claimants get the largest amount for which they qualified.
Both sides agreed on a claims administrator: Patrick Juneau, a laid-back Louisiana lawyer and a veteran administrator of major settlement funds, including the one resulting from lawsuits over the painkilling drug Vioxx.
A central element of the agreement, however, would prove to be a time bomb. Instead of having claims calculators contend with different kinds of arguable evidence to prove that damage was linked to the spill, the negotiators came up with a formula that relied solely on financial data for proof of harm. If a business was in a certain region and could prove that its income dropped and rose again in a specific pattern during 2010, that would be enough to establish a claim.
To David A. Logan, the dean of the law school at Roger Williams University in Rhode Island, this was a creative way to avoid endless minitrials. “The whole idea is to make this proceed without laborious technical findings on causation,” he said.
The deal covered a broad array of businesses in the gulf states, stretching all the way to the Tennessee state line. It offered those claiming damages the potential of maximizing compensation. For BP, it promised to sharply reduce the number of litigants it would face.
The agreement was unusual in another critical way: There was no limit on the overall payout. Aside from a fund for the seafood industry capped at $2.3 billion, BP had agreed not to turn off the spigot as long as there were legitimate claims to pay.
Elizabeth Cabraser, a member of the group of lawyers representing damage claimants, described the deal, which runs to more than a thousand pages including exhibits, as “the most detailed, highly defined settlement agreement that I’ve ever seen.”
“It was a model,” she said. “Up until the day it wasn’t.” (...)
Lawyers all along the Gulf Coast tell the same story: of taking a casual look at the agreement, reading it with increasing disbelief and then immediately encouraging their partners to read it, too. Accountants were hired, chambers of commerce were contacted, and clients — doctors, nonprofit organizations, just about any type of enterprise — were urged to gather financial documents. Law firms, also eligible for claims under the deal, began to look at their own account books.
One lawyer in Tampa, Fla., sent out a mass mailing, later highlighted in court filings by BP, saying that “the craziest thing about the settlement is that you can be compensated for losses that are UNRELATED to the spill.”
by Campbell Robertson and John Schwarz, NY Times | Read more:
Image: U.S. Coast Guard, via Reuters
