Feinberg, oil spill fund are not neutral, MDL judge says

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February 17, 2011

Feinberg, oil spill fund are not neutral, MDL judge says 

The judge overseeing the multidistrict litigation involving last year’s BP oil spill has ordered Kenneth Feinberg, administrator of the Gulf Coast compensation fund, to disclose that he and the fund are “acting for and on behalf of BP.” Judge Carl Barbier said that “any claim of the [fund’s] neutrality and independence is misleading to putative class members.”

By Allison Torres Burtka

The Gulf Coast oil spill compensation fund and its administrator, Kenneth Feinberg, are not truly independent of BP and must stop referring to themselves as such, a federal judge has said. U.S. District Court Judge Carl Barbier, who is presiding over the multidistrict litigation, issued the order in response to a motion from the plaintiffs’ steering committee (PSC). (In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, MDL No. 2179 (E.D. La. Feb. 2, 2011).)

Plaintiff attorneys and state attorneys general had expressed concern that Feinberg and the Gulf Coast Claims Facility (GCCF) represented themselves as completely independent of BP, told claimants they would fare better with the GCCF than in the courts, and failed to tell claimants what their options were. The claims process has been widely criticized for lacking transparency.

Barbier wrote, “The clear record in this case demonstrates that any claim of the GCCF’s neutrality and independence is misleading to putative class members and is a direct threat to this ongoing litigation, as claimants must sign a full release against all potential defendants before obtaining final payments.”

Barbier ordered BP, Feinberg, Feinberg’s law firm, and the GCCF to clearly disclose that Feinberg and the GCCF are “acting for and on behalf of BP”; tell putative class members that they have a right to consult an attorney before accepting a settlement or signing a release; refrain from giving legal advice to unrepresented claimants, including advice that they should not hire a lawyer; and tell them that they may file a claim in the MDL.

Plaintiff attorneys had also criticized the fund for offering claimants “pro bono” attorneys who were actually being paid by BP. The order requires the GCCF to tell claimants “that the ‘pro bono’ attorneys and ‘community representatives’ retained to assist GCCF claimants are being compensated directly or indirectly by BP.”

“The court made clear that the GCCF is nothing more than a BP agent,” said Ervin Gonzalez, a Coral Gables, Florida, lawyer who is on the PSC.

Barbier ordered the parties to submit briefs on whether and how BP is complying with the Oil Pollution Act’s mandates in processing and evaluating claims and using releases.

“There is a possibility that [Barbier’s order] could affect the enforceability of past releases,” said Brian Barr of Pensacola, another PSC member.

“Going forward, the order is very important,” Gonzalez said, noting that few claimants had yet received final payments.

Barr said claimants without lawyers may not realize the implications of releasing their claims against all defendants in exchange for final payments. But, he added, BP can sue the other defendants.

Two days after Barbier issued the order, U.S. Associate Attorney General Thomas Perrelli sent a letter to Feinberg urging him to make the GCCF more transparent, ensure that the process is efficient, and reconsider whether the emergency advance payment system was fair.

Because of Barbier’s order, “people will understand that when they’re talking with Feinberg, they’re talking with BP,” Barr said. “You’re going in with your eyes open now.”

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