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Gulf Coast oil spill litigation moves into discovery phase

Depositions begin as plaintiff attorneys, AGs caution claimants about compensation fund

Allison Torres Burtka

While some people and businesses harmed by the Gulf oil spill have begun to receive compensation through the $20 billion fund set up to pay claims, plaintiff lawyers and several state attorneys general are warning claimants that they may be giving up too much by waiving their right to sue. Meanwhile, those who have opted to seek relief in the courts are seeing movement in their claims. In the multidistrict litigation that was consolidated in New Orleans last year, depositions began in January, and trial of the first test case is planned for June.

The compensation fund—known as the Gulf Coast Claims Facility (GCCF)—had paid more than $3.3 billion to nearly 170,000 individuals and businesses by late January. Its emergency payment process ended in November.

In December, fund administrator Kenneth Feinberg offered claimants three options: a lump-sum, final payment in exchange for agreeing not to sue BP or the other companies involved; quarterly interim payments that do not require a release; and a “quick-pay” option. Claimants who had already received emergency payments and did not plan to ask for further compensation were offered quick payments of $5,000 per person or $25,000 per business—without having to submit any more documentation—if they agreed to sign a full release.

Plaintiff lawyers have complained that these offers take advantage of claimants by convincing them to settle and relinquish their right to pursue their claims in court before they know the full extent of their damages.

“I’m fearful of Mr. Feinberg’s methods,” said Rhon Jones, an MDL plaintiffs’ steering committee member from Montgomery, Alabama. “He’s adjusting and settling claims on behalf of BP and obtaining releases, yet he tells the world he’s independent.”

Critics have called into question Feinberg’s own impartiality as well as that of the law firms he has appointed to advise claimants pro bono. One of those firms has been working for BP since June, the Mobile, Alabama, Press-Register reported in January. (Ben Raines, Ken Feinberg Appoints Law Firm Working with BP to Advise Oil Spill Claimants, Press-Register (Jan. 3, 2011).)

On February 2, U.S. District Court Judge Carl Barbier, who is presiding over the MDL, ordered Feinberg and the GCCF to stop referring to themselves as neutral or completely independent of BP. He also required them to make other disclosures to claimants, including that the pro bono attorneys are being compensated by BP.

“I’m concerned about a process that undercuts the civil justice system, where the person making the decisions as to claims payments is not independent, the claims process is not transparent, and, at best, the signals coming from the person paying the claims are wildly inconsistent,” Jones said.

Alabama Attorney General Troy King wrote in a December 28 USA Today op-ed, “Feinberg has exploited the hopelessness and despair that many Gulf Coast residents feel . . . by telling them that they will receive a better deal through the claims process than if they go to court—a statement he cannot substantiate.”

King and the Florida, Louisiana, and Mississippi attorneys general issued a notice cautioning claimants to consult lawyers before signing releases. “Due to the speculative nature of estimating a final claim value and the breadth of the GCCF release, the attorneys general advise claimants against accepting any form of final payment or signing any release without first thoroughly reviewing and understanding the GCCF’s terms,” the notice said.

Richard Arsenault, an Alexandria, Louisiana, lawyer, acknowledged the “risk that unrepresented people tend to be taken advantage of,” but he said his experience with the fund has been positive and his clients have been treated fairly.

Meanwhile, litigation is moving forward. Joining the more than 300 cases in the MDL is one filed by the U.S. Department of Justice (DOJ) on December 15. The lawsuit names nine defendants, alleging that their violations of safety and operating regulations caused or contributed to the oil spill. The lawsuit seeks to hold the companies responsible for government removal costs, economic losses, and environmental damage. The agency is investigating both criminal and civil allegations, and it will coordinate discovery with other MDL plaintiffs.

Jones said he thinks the DOJ’s involvement will promote efficiency in discovery. “To have the major stakeholders at the table is a good thing,” he said. His firm represents more than 1,000 clients in the litigation.

Arsenault isn’t so sure. He noted that the addition of the DOJ suit may further complicate an “already extraordinary case” with many moving parts. “We’re in uncharted territory with a case of this magnitude and a fund put up in the embryonic stages of litigation,” he said.

In early January, Barbier settled a dispute about where the first round of depositions of 18 BP employees would be held, ordering the parties to conduct them in New Orleans. (In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, No. 2:10-02179-CJB-SS (E.D. La. Jan. 3, 2011).)

Trial in the first test case, involving liability and damages issues under the Oil Pollution Act, is planned for June. Trials in the next test cases are expected in February 2012.

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, established by President Obama, released its final report on January 11, detailing what went wrong and recommending actions to prevent future disasters. It found that “the immediate causes of the Macondo well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry.”

Jones said the report is likely to be helpful, but the “nuts and bolts” of the litigation will come through discovery.

Arsenault agreed. “The documents and depositions will be where the rubber meets the road,” he said.

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