The Donovan Law Group

Plaintiffs File Motion to Hold Kenneth R. Feinberg, et al. Accountable for Financially Ruining Them

Plaintiffs File Motion to Hold Kenneth R. Feinberg, et al. Accountable for Financially Ruining Them

Tampa, FL (April 25, 2014) – Plaintiffs Pinellas Marine Salvage, Inc., John Mavrogiannis, Selmer M. Salvesen, and Andrew J. Ditch have filed a Motion to Remand or, in the Alternative, Motion to Commence Formal Discovery in the BP Oil Spill multidistrict litigation (MDL 2179).

On August 23, 2010, Feinberg Rozen, LLP, doing business as GCCF, replaced the claims process which BP had established to fulfill its obligations as a responsible party under OPA 90.

According to the plaintiffs, Feinberg used the fear of costly and protracted litigation to coerce victims of the BP oil spill to accept grossly inadequate settlements from GCCF. During town hall meetings organized to promote GCCF, Feinberg repeatedly told victims of the BP oil spill, “the litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers.” “I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.” “It is not in your interest to tie up you and the courts in years of uncertain protracted litigation when there is an alternative that has been created,” Feinberg said. He added, “I take the position, if I don’t find you eligible, no court will find you eligible.”

To limit BP’s liability, Feinberg, et al. employed two strategies against oil spill victims with legitimate damage claims: (a) an “Expedited Emergency Advance Payment (“EAP”) Denial” strategy, and (b) a “Delay, Deny, Defend” strategy. This resulted in tens of thousands of BP oil spill victims and GCCF victims, including Plaintiffs, being financially ruined by Feinberg, et al.

Plaintiffs filed their actions against Feinberg, et al. in Florida state courts asserting claims for gross negligence, negligence, negligence per se, fraud, fraudulent inducement, promissory estoppel, and unjust enrichment under Florida state law. The cases were subsequently transferred by the United States Judicial Panel on Multidistrict Litigation (JPML) to the MDL 2179 Court.

Because all Motions to Remand are stayed and Plaintiffs are not permitted to propound discovery by the MDL 2179 Court, Plaintiffs essentially have no recourse through the legal process.

Plaintiffs pointed out in their motion that the purpose of the Federal Rules of Civil Procedure is “to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. As of the date of the filing of this motion, approximately 38 months have passed since Plaintiffs filed their complaint against Feinberg, et al.

Plaintiffs also explained that the JPML transferred, albeit inappropriately, their actions to MDL 2179 for coordinated or consolidated pretrial proceedings. These actions were not transferred in order to be indefinitely stayed (in essence, “warehoused”) for the purpose of ensuring that Feinberg, et al. are never held accountable for their tortious acts.

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

CLICK HERE TO READ THE MEMORANDUM OF LAW IN SUPPORT OF THE MOTION.

GM, Like BP, Will Use Multidistrict Litigation and the Fund Approach to Limit Its Liability

GM, Like BP, Will Use Multidistrict Litigation and the Fund Approach to Limit Its Liability

 

April 3, 2014

The Faulty GM Ignition Switch
Since February, 2014, General Motors (“GM”) has recalled 2.6 million cars – mostly Chevrolet Cobalts and Saturn Ions – over a faulty ignition switch, which can cause the engine to cut off in traffic, disabling the power steering, power brakes and air bags and making it difficult to control the vehicle.

Rep. Henry Waxman, D-Calif., said that House Energy and Commerce Committee staff members found 133 warranty claims filed with GM over 10 years detailing customer complaints of sudden engine stalling when they drove over a bump or brushed keys with their knees.

The claims were filed between June 2003 and June 2012. Waxman said that because GM didn’t undertake a simple fix when it learned of the problem, “at least a dozen people have died in defective GM vehicles.”

GM intends to handle its liability for failing to properly address its faulty ignition switch problem in the same manner that BP addressed its liability for the BP oil spill of 2010 in the Gulf of Mexico. It’s basically a simple two-pronged approach:

(a) The United States Judicial Panel on Multidistrict Litigation (“JPML”) will order that centralization of the GM faulty ignition switch cases will “eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel, and the judiciary; and serve the convenience of the parties and witnesses and promote the more just and efficient conduct of the cases.” In sum, all GM cases will be consolidated in one transferee federal court; and (b) GM retains Feinberg Rozen, LLP to manage a fund to allegedly compensate the GM victims for all “legitimate” claims.

GM ignition switch victims may find the following manner in which BP limited its liability for the BP oil spill of 2010 to be instructive.

Multidistrict Litigation (“MDL”) and the Fund Approach
Judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Regrettably, for victims of the BP oil spill, the BP Oil Spill Multidistrict Litigation (“MDL 2179”) is a “faux” MDL – i.e., an MDL that limits the liability of the defendants, grants excessive compensation to the members of the Plaintiffs’ Steering Committee (“PSC”) and other counsel performing common benefit work, and fails to adequately compensate the plaintiffs.

MDL 2179 is a “faux” MDL primarily because of: (a) the manner in which Kenneth R. Feinberg was permitted by the JPML and the MDL 2179 Court to administer the BP compensation fund; and (b) the terms and conditions of the BP/PSC class settlement agreement.

MDL 2179 officially started on August 10, 2010. The Transfer Order issued on that date by JPML clearly states: “.. Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” The JPML made it clear from the very beginning that the purpose of centralization was not merely to eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel, and the judiciary; and serve the convenience of the parties and witnesses and promote the more just and efficient conduct of the BP oil spill cases. Here, the purpose of centralization was to maximize judicial economy via the creation of a “faux” class settlement wrapped in a “faux” MDL.

From the very beginning, the purpose of MDL 2179 was to replace democratic adversarial litigation with a fund approach to compensating victims of the BP oil spill. The vast majority of BP oil spill victims will never have their day in court. Judicial economy, rather than justice, is the primary objective.

The fund approach to resolving mass claims, i.e., those claims resulting from the BP oil spill incident, ought to be viewed with a significant degree of concern. The precedent established by the JPML and the MDL 2179 Court is clear: A “Responsible Party” under the Oil Pollution Act of 1990 (“OPA 90”) may now enter into a contract with a politically well-connected third party “Claims Administrator,” i.e., Kenneth R. Feinberg and Feinberg Rozen, LLP, d/b/a Gulf Coast Claims Facility (“GCCF”). This third party “Administrator / Straw Person,” directly and excessively compensated by the party responsible for the oil spill incident, may totally disregard OPA 90, operate the claims process of the responsible party as fraudulently and negligently as it desires for the sole purpose of limiting the liability of, and providing closure to, the responsible party, and the third party “Administrator / Straw Person” shall never be held accountable for its tortious acts.

The operation of the GCCF has allowed BP to control, manage, and settle its liabilities on highly preferential terms; has permitted members of the MDL 2179 PSC, who are directly appointed by Judge Barbier, to be excessively compensated for merely negotiating a collusive settlement agreement; and has enabled judges to clear their dockets of large numbers of cases. In sum, fund approaches to resolving massive liabilities shift power over claims resolution entirely into the hands of self-interested parties and largely evade judicial scrutiny and oversight.

As noted above, judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Nevertheless, the excessive delay and marginalization of juror fact finding (i.e., dearth of jury trials) associated with traditional MDL practice are developments that cannot be defended. The appropriate focus for fund resolution of mass claims should be justice for the claimants, not merely judicial economy and closure for the corporate misfeasor.

Kenneth Feinberg’s Administration of the BP Compensation Fund
On August 23, 2010, Feinberg Rozen, LLP, doing business as GCCF, replaced the claims process which BP had established to fulfill its obligations as a responsible party pursuant to OPA 90.

Kenneth Feinberg used the fear of costly and protracted litigation to coerce victims of the BP oil spill to accept grossly inadequate settlements from GCCF. During town hall meetings organized to promote GCCF, Feinberg repeatedly told victims of the BP oil spill, “the litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers.” “I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.” “It is not in your interest to tie up you and the courts in years of uncertain protracted litigation when there is an alternative that has been created,” Feinberg said. He added, “I take the position, if I don’t find you eligible, no court will find you eligible.”

GCCF employed two strategies to limit BP’s liability:
(a) an “Expedited Emergency Advance Payment (“EAP”) Denial” strategy. This strategy is as follows: “Fail to verify, investigate, and appraise the amount of loss claimed by the claimant in the EAP claim and deny the EAP claim without ever requesting supporting documentation from the claimant;” and

(b) a “Delay, Deny, Defend” strategy against legitimate oil spill victims. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.”

The ultimate objective of Feinberg’s “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy was to limit BP’s liability by obtaining a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible.

The “Release and Covenant Not to Sue” requirement forces economically and emotionally-stressed victims of the BP oil spill to sign a release and covenant not to sue in order to receive a miniscule payment amount for all damages, including future damages, they incur as a result of the BP oil spill. Feinberg’s “Release and Covenant Not to Sue” requirement violates OPA 90, State contract law, and is contrary to public policy.

The “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy, although unconscionable, have proven to be very effective for Feinberg and BP:

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012. The GCCF paid only 221,358 of these claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims; the average total amount paid per claimant was $27,466.47.

The status report data further indicates that the GCCF paid a total of 230,370 claimants who filed claims with the GCCF during the “Phase II” period. Of these, 195,109 were either Quick Pay or Full Review Final payments; only 35,261 were Interim payments. In sum, the GCCF forced 84.68% of the claimants to sign a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties; only 15.31% of the claimants were not required to sign a release and covenant not to sue in order to be paid. Feinberg’s “Release and Covenant Not to Sue” excluded approximately 200,000 BP oil spill victims from the MDL 2179 Economic and Property Damages Class Settlement Agreement.

The BP/PSC Class Settlement Agreement
BP and the PSC reported settlement negotiations began “in earnest” in February 2011 for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” In sum, the PSC initiated settlement negotiations “in earnest” merely four (4) months after Judge Barbier appointed members to the PSC. Clearly, the MDL 2179 class settlement was not achieved in the full context of adversarial litigation.

There is little doubt that any class settlement agreement which: (a) excludes approximately 200,000 claimants from the settlement benefits because they had been forced to sign an unconscionable “Release and Covenant Not to Sue;” and
(b) excessively compensates members of the PSC and other counsel performing common benefit work is neither “fair, adequate, and reasonable” nor “free from collusion.”

In sum, a faux class settlement wrapped in a faux MDL is not right for America because it:

(a) allows judicial economy to replace justice; and

(b) denies access to the courts by permitting the desires and influence of corporations with deep pockets, and politically well-connected defendants, to trump the legal rights of the individual.

GM victims and BP victims deserve better!

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

UPDATE (April 25, 2014): Plaintiffs File Motion to Hold Kenneth R. Feinberg, et al. Accountable for Financially Ruining Them

CLICK HERE TO SIGN THE PETITION FOR GM VICTIMS

CLICK HERE TO SIGN THE PETITION FOR BP VICTIMS

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Sign the Petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via Subrogation

Sign the Petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via  Subrogation

DATE: March 28, 2014

PURPOSE OF THE PETITION
The purpose of this petition is to demand that Congress requires responsible parties to pay the full costs and damages resulting from an oil spill incident by defining the term “expenditure,” under the Oil Spill Liability Trust Fund (“OSLTF’), as “an expenditure that is not reimbursed by the responsible party.”

PETITION SUMMARY
A primary purpose of the OSLTF is to compensate persons for removal costs and damages resulting from an oil spill incident. In essence, the OSLTF is an insurance policy, or backstop, for victims of an oil spill incident that are not fully compensated by the responsible party.

Any person, including the OSLTF, that pays compensation pursuant to the Oil Pollution Act of 1990 (“OPA”) to any claimant for damages [resulting from an oil spill] shall be subrogated to all rights, claims, and causes of action that the claimant has under any other law. 33 U.S.C. § 2715(a)

Moreover, at the request of the Secretary, the Attorney General shall commence an action on behalf of the OSLTF to recover any compensation paid by the OSLTF to any claimant pursuant to OPA, and all costs incurred by the OSLTF by reason of the claim, including interest (including prejudgment interest), administrative and adjudicative costs, and attorney’s fees. Such an action may be commenced against any responsible party or guarantor, or against any other person who is liable, pursuant to any law, to the compensated claimant or to the OSLTF, for the cost or damages for which the compensation was paid. 33 U.S.C. § 2715(c)

OPA established an expenditure cap of $1 billion per oil spill incident. This $1 billion expenditure limit includes $500 million for natural resource damage assessments and claims.

Victims of catastrophic oil spills are at risk as a result of this cap. The cap is for total expenditures. This $1 billion expenditure limit applies even if the OSLTF is fully reimbursed by the responsible party and net expenditures are zero.

PETITION BACKGROUND
I am writing in regard to the need to properly define the term “expenditure” under the Oil Spill Liability Trust Fund (“OSLTF”). Under the OSLTF, expenditure should mean “an expenditure that is not reimbursed by the responsible party.” Defining the term in any other manner ignores the legislative intent of Congress and the Internal Revenue Code.

The BP oil spill of 2010 is instructive.

The question is whether victims of the BP oil spill of April 22, 2010 will have to pay three times: (a) once for the oil spill, the environmental and economic damages of which will devastate their way of life and leave many in financial ruin; (b) again by being misled and undercompensated by GCCF and DHCC; and (c) a third time for daring to demand justice, which will consume their time, energy and hopes for years to come if they are held hostage by protracted individual lawsuits or class action lawsuits.

The damages suffered by victims of the BP oil spill incident of April 22, 2010 will be enormous and on-going. The livelihoods of all persons whose businesses rely on the natural resources of the Gulf Coast are at risk. Commercial fishermen, oyster harvesters, shrimpers, and businesses involved, directly or indirectly, in processing and packaging for the seafood industry will experience the end of a way of life that, in many cases, has been passed down from one generation to the next.

How will victims of this unprecedented oil spill be fully compensated for their losses? Theoretically, there are four potential avenues of compensation for victims of this oil spill: (a) the Gulf Coast Claims Facility (“GCCF”); (b) the Deepwater Horizon Claims Center (“DHCC”); (c) litigation; and (d) the OSLTF.

GCCF
GCCF was meant to replace the inefficient claims process which BP had established to fulfill its obligations as a responsible party pursuant to the Oil Pollution Act of 1990 (“OPA”). It was not the legislative intent of Congress for OPA to limit an oil spill victim’s right to seek full compensation from the responsible party. BP and Kenneth Feinberg, the GCCF claims administrator, allege that GCCF (and the protocols under which it operates) are structured to be compliant with OPA. However, GCCF is in violation of OPA. In lieu of ensuring that oil spill victims are made whole, GCCF’s primary goal appears to be the limitation of BP’s liability via the systematic postponement, reduction or denial of claims against BP.

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012. The GCCF paid only 221,358 of these claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims; the average total amount paid per claimant was $27,466.47.

The status report data further indicates that the GCCF paid a total of 230,370 claimants who filed claims with the GCCF during the “Phase II” period. Of these, 195,109 were either Quick Pay or Full Review Final payments; only 35,261 were Interim payments. In sum, the GCCF forced 84.68% of the claimants to sign a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties; only 15.31% of the claimants were not required to sign a release and covenant not to sue in order to be paid.

DHCC
The DHCC and the GCCF are virtually identical. Under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP (“PwC”). Under the DHCC, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PwC. Accordingly, although Patrick Juneau has replaced Ken Feinberg, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the DHCC.

LITIGATION
BP, the responsible party, is a powerful and well-funded defendant, does not lack imagination or incentive to pose innumerable legal barriers, and will aggressively assert its legal rights and otherwise use the law, the courts and the judicial system to serve its interests. BP can afford to stall, and actually benefits from delay, but its victims cannot afford to wait for years to be fully compensated for their losses.

Kenneth Feinberg uses the fear of costly and protracted litigation to coerce victims of the BP oil spill to accept grossly inadequate settlements from GCCF. During town hall meetings organized to promote GCCF, Feinberg repeatedly tells victims of the BP oil spill, “the litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers.” “I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.” “It is not in your interest to tie up you and the courts in years of uncertain protracted litigation when there is an alternative that has been created,” Feinberg says. He adds, “I take the position, if I don’t find you eligible, no court will find you eligible.” Mr. Feinberg intentionally fails to mention that litigation is not the only alternative to GCCF.

OSLTF
As Representative Lent explained in urging passage of OPA, “The thrust of this legislation is to eliminate, to the extent possible, the need for an injured person to seek recourse through the litigation process.” See 135 Cong. Rec. H7962 (daily ed. Nov. 2, 1989) Prior to OPA, federal funding for oil spill damage recovery was difficult for private parties. To address this issue, Congress established the OSLTF under section 9509 of the Internal Revenue Code of 1986 (26 U.S.C. 9509).

The OSLTF is currently funded by: a per barrel tax of 8 cents on petroleum products either produced in the United States or imported from other countries, reimbursements from responsible parties for costs of removal and damages, fines and penalties paid pursuant to various statutes, and interest earned on U.S. Treasury investments.

Under OPA, claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a) In the event that a claim for damages is either denied or not paid by the responsible party within 90 days, the claimant may elect to commence an action in court against the responsible party or to present the claim to the OSLTF. 33 U.S.C. § 2713(c)

Expenditure
The maximum amount which may be paid from the OSLTF with respect to any single incident shall not exceed $1 billion. 26 U.S.C. § 9509(c)(2)(A) Furthermore, except in the case of payments of removal costs, a payment may be made from the OSLTF only if the amount in the OSLTF after such payment will not be less than $30,000,000. 26 U.S.C. § 9509(c)(2)(B)

This is an incident of first impression for the OSLTF. The BP oil spill of April 22, 2010, a catastrophic oil spill incident, represents the first time that the viability of the OSLTF has been threatened. Federal statutes and relevant regulations neither specifically address such a scenario nor provide authority for further compensation. However, OPA legislative history and statements from OPA drafters indicate that drafters intended the OSLTF to cover “catastrophic spills.” See U.S. Congress, House Committee on Merchant Marine and Fisheries, Report accompanying H.R. 1465, Oil Pollution Prevention, Removal, Liability, and Compensation Act of 1989, 1989, H.Rept. 101-242, Part 2, 101st Cong., 1st sess., p. 36

If an expenditure is reimbursed, is it still an expenditure? The OSLTF is established under Internal Revenue Code. 26 U.S.C § 9509 Under the Internal Revenue Code, a reimbursed expenditure is not deductible. It is not considered to be an expenditure. Therefore, under the OSLTF, why should an expenditure, reimbursed by the responsible party, be defined as an expenditure?

Legislative history and the Internal Revenue Code strongly support the conclusion that, in the case of a catastrophic oil spill, the proper definition of the term “expenditure,” under the OSLTF, means “an expenditure that is not reimbursed by the responsible party.”

Subrogation
Any person, including the OSLTF, who pays compensation pursuant to OPA to any claimant for damages shall be subrogated to all rights, claims, and causes of action that the claimant has under any other law. 33 U.S.C. § 2715(a)

Moreover, at the request of the Secretary, the Attorney General shall commence an action on behalf of the OSLTF to recover any compensation paid by the OSLTF to any claimant pursuant to OPA, and all costs incurred by the OSLTF by reason of the claim, including interest (including prejudgment interest), administrative and adjudicative costs, and attorney’s fees. Such an action may be commenced against any responsible party or guarantor, or against any other person who is liable, pursuant to any law, to the compensated claimant or to the OSLTF, for the cost or damages for which the compensation was paid. 33 U.S.C. § 2715(c) Thus, a responsible party may ultimately pay a claim that was initially denied, or not addressed for more than 90 days, by the responsible party.

CONCLUSION
The advantage of defining an expenditure, under the OSLTF, as “an expenditure that is not reimbursed by the responsible party,” is threefold:

(a) It eliminates the $1 billion cap which may be paid from the OSLTF with respect to any single incident;

(b) It allows the OSLTF to maintain a balance of at least $1 billion for the purpose of paying claims for damages resulting from other oil spill incidents. As the OSLTF pool of $1 billion is depleted by payments made to catastrophic oil spill claimants, it is replenished, by virtue of subrogation, by reimbursements made to the OSLTF by the responsible party; and

(c) It ensures that the costs and damages resulting from a catastrophic oil spill incident shall be borne by the responsible party, not the federal taxpayer.

Thank you for your prompt attention to this issue.

Sincerely,
[Your name]

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

CLICK HERE TO SIGN THE PETITION

 

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BP Oil Spill: Macondo Well Could Have Been Shut in Within 24 Days!

BP Oil Spill: Plaintiffs’ Phase Two Post-Trial Brief

_________________________

Had BP Prepared for a Deepwater Blowout, With a Capping Stack Available on April 20, 2010,

the Well Could Have Likely Been Shut in Within 24 Days or Less

Tampa, FL (December 22, 2013) – Phase Two was divided into two segments: the Source Control segment and the Quantification segment. The Source Control segment was tried as a bench trial before the MDL 2179 Court beginning on September 30, 2013, and concluding on October 3, 2013. The Quantification segment was tried as a bench trial before the MDL 2179 Court beginning on October 7, 2013, and concluding on October 17, 2013.

On December 20, 2013, Plaintiffs submitted their Post-Trial Brief to address specific legal and factual issues raised by the Court and by the Parties based on the evidence admitted during the Phase One and Phase Two Limitation and Liability Trial. The following are excerpts from this brief.

Plaintiffs contend, “It was established at trial that BP consciously disregarded the need to prepare for an uncontrolled deepwater blowout and willfully extended the capping of the Macondo Well by intentionally concealing material information and affirmatively misleading the U.S. Government and others regarding the volume of hydrocarbons escaping from the well after the blowout.”

The question is whether BP’s overall conduct – as evidenced by not only the Phase Two issues of post-spill lying to the Government and pre-spill lack of preparedness, but also the Phase One issues of fast and reckless drilling, establishing and maintaining a dysfunctional leadership team, proceeding with the cement job without reliable test results, proceeding with the displacement despite a failed negative pressure test, refusing to correct known and persistent maintenance failures, and recklessly selecting, configuring, and refusing to upgrade the BOP – demonstrates a willful, wanton and reckless disregard for the environment, the property rights of others, and/or public health and safety.

With respect to the Phase Two evidence in particular, BP did not dispute the fact that BP did absolutely nothing in advance of the Macondo incident on April 20, 2010 to develop source control plans and equipment in preparation for a possible deepwater blowout. BP simply attempts to muster, in its defense, an argument that the Government allegedly “approved” of its lack of preparation and that others in the industry allegedly failed to do the same.

Based on the law and on the evidence submitted in the Phase One and Phase Two Trial, BP’s corporate conduct associated with the Macondo Well explosion, fire, blowout and resulting spill was willful, wanton and reckless, and was a direct result of BP corporate policies and/or with the knowledge, approval and/or ratification of BP officers with policymaking authority.

A Finding of Willful, Wanton or Reckless Conduct Should Be Made on the Series and Accumulation of Acts and Omissions Established by the Evidence Admitted in the Phase One and Phase Two Trial

As set forth in Plaintiffs’ Phase One Post-Trial submissions, an accumulation or series of negligent acts or omissions are properly viewed together in order to determine whether the defendant has acted out of gross negligence, willful misconduct, or a wanton or reckless disregard.

Hence, the burden is not on Plaintiffs to show that BP’s pre-spill planning, in and of itself, rises to the level of wanton, willful or reckless conduct. Nor are the plaintiffs required to show that BP’s post-spill intentional misconduct, in and of itself, caused or contributed to the uncontrolled flowing of the well for 87 days.

Rather, it is only Plaintiffs’ burden to show that BP’s (i) pre-spill failure to plan, combined with BP’s (ii) post-spill intentional misrepresentations and concealment – combined with BP’s (iii) fast and reckless drilling, with little or no regard for the safe kick margin, despite multiple kicks, and in violation of the MMS Regulations requiring a safe drilling margin; (iv) creating, maintaining and largely ignoring a dangerously dysfunctional leadership team, which embraced the corporate culture of cutting costs and maximizing profits; (v) proceeding with the cement job without a set of reliable test results confirming the slurry’s stability; (vi) proceeding with the displacement despite a failed negative pressure test; (vii) selecting, configuring, sequencing, modifying, and refusing to upgrade the safety critical BOP, which was not sufficient or appropriate for the Macondo well; and (viii) knowingly refusing to correct the persistent maintenance failures of safety critical equipment on the Deepwater Horizon – evidences a willful and reckless disregard for the environment, the property rights of others, and/or public health and safety.

The Phase Two evidence, in this respect, cannot be untethered from the Phase One evidence, in making the overall determination of BP’s state of mind with respect to the damages and effects of the Macondo disaster.

Nevertheless, the Phase Two evidence, standing alone, establishes that BP was wanton and reckless in both its pre-spill lack of planning and in its post-spill lying to the Government and others regarding the flow rate and source control.

It is Undisputed that BP Willfully and Recklessly Refused to Prepare for an Uncontrolled Deepwater Blowout, the Largest Known Risk in the Gulf

There is no question that it was foreseeable to BP that a deepwater well in the Gulf of Mexico could experience a blowout. Indeed, BP Management had identified the risk of a deepwater blowout as one of the highest risks worldwide, and the number one risk in the Gulf of Mexico. And both BP and the industry generally knew, beginning in 1991, that it was necessary to engage in deepwater source control planning and to develop deepwater source control capping equipment and techniques. Yet, BP Management admittedly spent no time or money preparing for a deepwater source control effort.  BP Management did not direct or provide for any training in deepwater source control. Nor did BP Management develop or acquire any capping equipment. It is clear, in sum, that BP’s pre-spill preparation was nothing more than a plan to make a plan.

Both Legally and Factually, BP Has Failed to Establish a Defense Predicated on an Alleged “Industry Standard”

Mere compliance with industry standards does not preclude a finding of gross or egregious conduct.   In this particular case, the entire industry recognized the need to develop capping stack equipment as far back as 1991. Indeed, an industry study predicted and diagramed at that time an uncontrolled blowout strikingly similar to what would occur at Macondo almost twenty years later. To the extent that companies other than BP may have also failed to adequately prepare for a deepwater blowout, this reveals nothing more than laxness, inefficiency, and inattention to innovation by other companies. Yet BP, a self-proclaimed “leader” in the industry, refused to invest a single penny into developing or acquiring the necessary equipment for post-spill source control.

As a factual matter, BP came far from proving that there was an “industry standard” to develop no pre-spill capping stack or other source control plans, equipment or technology. See, e.g., Maxey v. Freightliner Corp., 665 F.2d 1367, 1376 (5th Cir. 1982) (when considering whether a defendant has complied with an industry standard, “a district court must limit its consideration to evidence actually presented at trial”). Indeed, as noted, the industry was recognizing the need for such devices since 1991.

BP Knew For More Than Two Decades That Capping Devices Are The Best Available Technology For Controlling Deepwater Blowouts

Well capping techniques have been applied both on land and offshore locations and have historically proven successful in regaining well control in shorter durations and are preferred over the more time-consuming alternative of drilling a relief well. Capping devices have existed and been used in the industry for decades. Capping device technology is feasible, well proven and not novel. Indeed, the Macondo Capping Stack was assembled using current technology and “off-the-shelf” equipment.

Within a few days of April 20, 2010, representatives from BP, Transocean, Cameron and Wild Well Control, met at BP’s offices to discuss capping solutions. On April 27, 2010, Wild Well Control provided BP with a project memo that raised “Well Capping” and “Installation of Capping Stack on existing BOP” as options that should be considered. The memo also included a summary of procedures for installation of a capping stack onto the existing BOP.

Moreover, in response to U.S. Secretary of the Interior Ken Salazar’s request for ideas from the industry after the Macondo event, Apache Corporation responded on April 30, 2010, “[i]f the LMRP can be removed from the BOP, conventional wisdom would suggest that another subsea BOP could be placed on top of the Horizon’s BOP in order to close the well in.”

There was evidence presented at trial that capping stack devices had, in fact, been developed, deployed and utilized by others in the industry, using existing technology. The evidence showed that Cameron’s own BOPs had been used as capping stack solutions as early as the 1980s, and were actually used to kill wells in Kuwait. BP itself, in 2001, adopted well capping devices in Alaska as the best available technology. Indeed, BP concluded and certified that a well capping solution could mitigate the overall duration and extent of an uncontrolled blowout by 50%.

With respect to deepwater operations, the evidence established that at least two capping-type solutions had been previously utilized in deep water: (1) a blowout in Malaysia in 1988, and (2) the JIM CUNNINGHAM incident in the eastern Mediterranean in 2004, where a BOP-on-BOP technique was used. There was also evidence that Shell and Senta Drilling had capping devices available for a deepwater project off the coast of Brazil. And BP itself recognized the potential use of capping stacks in deepwater environments, identifying them as a “Level 3: Phase 2” solution in the January 2010 Gulf of Mexico Deepwater SPU Well Control response guide.

BP Violated Regulatory Standards

As set forth in Plaintiffs’ Phase One Post-Trial submissions, a defendant’s compliance with regulatory standards does not preclude a finding of gross or egregious conduct. Moreover, in Phase Two as in Phase One: (a) The Government relied largely on information that was provided (or not provided) by BP; (b)The MMS and Coast Guard officials were frequently overtaxed, understaffed, and of limited training; (c) There were several instances where BP’s conduct (or failure to act) went beyond the scope of what was ostensibly permitted under the specific regulation, application, or approval in question; (d) There were several instances where BP provided insufficient, inaccurate or misleading information to the Government; and (e) BP clearly violated MMS regulations.

Specifically, it was clear that the Oil Spill Response Plan (OSRP) ostensibly approved by the Government was directed toward efforts to try to contain and collect the oil once it reached the surface. The Oil Spill Response Plan was not intended to be a source control plan, and the regulations concerning the plan requirements expressly state: “Nothing in this part relieves you from taking all appropriate actions necessary to immediately abate the source of a spill.” As a factual matter, moreover, the evidence is clear that the Government expected BP to be able to abate the source of an oil spill as soon as possible. “The federal government has neither the skilled personnel nor the appropriate equipment to respond independently to an oil blowout in deepwater and must rely wholly on the responsible party.”

The Phase Two evidence further establishes that the Federal Government was relying on BP to provide the Government with source control information. In addition to lying to the Government with respect to the flow rate (to which BP pleaded guilty), BP also failed to comply with its pre-spill representation to the MMS regarding the training of its employees in source control response.

Far from establishing some type of a defense based on the alleged “approval” of its OSRP by the Government, BP clearly violated the regulatory requirements to: (i) take necessary precautions to keep the well under control at all times, 30 C.F.R. ¶250.401; (ii) immediately abate the source of a spill, 30 C.F.R. ¶254.5(c); and (iii) use the Best Available and Safest Technology (BAST), 30 C.F.R. ¶¶250.105, 107 and 401(a). At the end of the day, BP certified to the Federal Government in its Initial Exploration Plan for the Macondo well that it was capable of responding at the source to a worst-case discharge of up to 162,000 barrels of oil per day. BP was clearly not in compliance with respect to that regulatory certification.

Advance Preparation Would Have Unquestionably Allowed BP to Mitigate the Length and Extent of the Spill, Irrespective of the Particular Circumstances Surrounding a Blowout

Aside from the fact that a similar post-spill situation was specifically predicted by the Drilling Engineers Association in 1991, the evidence is clear that efforts prior to the spill would have reduced the duration and extent of the post-blowout event. BP representatives admitted that “it’s much better to have a plan in place” than to “create a plan … in the middle of a crisis.” Former CEO Tony Hayward and the leaders of the post-spill source control effort, Charles Holt and James Dupree, all admitted that BP did not have the equipment it needed in place, and were essentially creating plans on how to kill the well as they went along. It is because BP “didn’t have the equipment to attack a Macondo-type event” that “we had to engineer so many things simultaneously on the fly.”

Cameron personnel similarly confirmed that the lack of pre-spill planning resulted in “paralysis by analysis,” “running this show like a game of Scrabble,” having “no clue what to do next,” and “running around like chickens with their heads cut off.”

In sum, the evidence establishes that, had BP prepared for a deepwater blowout, with a capping stack available on April 20, 2010, the well could have likely been shut in within 24 days or less.

BP’s Intentional Misrepresentations and Omissions Combined with Multiple Other Causative Factors – including BP’s Own Reckless Failure to Prepare for a Blowout and Post-Spill Miscalculations and Mistakes – to Extend the Duration and Expanse of the Spill

The General Maritime Law clearly recognizes that multiple causative factors can combine and contribute to a harmful series of results. And, as set forth in Plaintiffs’ Phase One Post-Trial submissions, an accumulation or series of negligent acts or omissions are properly viewed together in order to determine whether the defendant has acted out of gross negligence, willful misconduct, or a wanton or reckless disregard.

Plaintiffs allege that BP’s intentional misconduct in concealing material facts, overtly misstating facts it knew were not true, and otherwise misleading the Government, together with other factors, including BP’s own pre-spill failure to prepare for an uncontrolled blowout, as well as BP’s (and/or perhaps the Government’s) post-spill misjudgments and miscalculations, all conspired to significantly delay the capping of the well.

BP’s Willful Misconduct in Lying to the U.S. Government (and Others) After the Spill is Relevant to the Overall Question of BP’s State of Mind, Even If It Were Found Not to be a Direct Cause of Any Delay

The Phase Two evidence establishes that BP’s willful misconduct in lying to the Government after the spill extended the blowout by a number of weeks. Yet, even assuming arguendo that there were no causal relationship between BP’s lies and the length or extent of the spill, (which is denied), such intentional misconduct would nevertheless be relevant to the ultimate question of whether BP acted with a willful, wanton or reckless disregard. See, e.g., Clements v. Steele, 792 F.2d 515, 516-517 (5th Cir. 1986) (“the ‘mental attitude of the defendant’ is what turns ordinary negligence into gross negligence” and can be inferred from the totality of the circumstances).

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Oil Spill Settlements, Especially the BP Oil Spill Settlement, Are Wrong For America!

The BP Oil Spill Settlement Is Wrong For America!

By

Brian J. Donovan

Tampa, FL (March 31, 2014) – Oil spill settlements, especially the BP oil spill settlement, are wrong for America!

The BP Oil Spill Multidistrict Litigation (“MDL 2179”) officially started on August 10, 2010. The Transfer Order issued on that date by the United States Judicial Panel on Multidistrict Litigation (“JPML”) clearly states: “…. Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” From the very beginning, the purpose of MDL 2179 was to replace democratic adversarial litigation with a fund approach to compensating victims of the BP oil spill. The vast majority of BP oil spill victims would never have their day in court. Judicial economy, rather than justice, was the primary objective.

The fund approach to resolving mass claims, i.e., those claims resulting from the BP oil spill incident, ought to be viewed with a significant degree of concern. The precedent established by the JPML and the MDL 2179 Court is clear: A “Responsible Party” under the Oil Pollution Act of 1990 (“OPA 90”) may now enter into a contract with a politically well-connected third party “Claims Administrator,” i.e., Kenneth R. Feinberg and Feinberg Rozen, LLP, d/b/a Gulf Coast Claims Facility (“GCCF”). This third party “Administrator / Straw Person,” directly and excessively compensated by the party responsible for the oil spill incident, may totally disregard OPA 90, operate the claims process of the responsible party as fraudulently and negligently as it desires for the sole purpose of limiting the liability of, and providing closure to, the responsible party, and the third party “Administrator / Straw Person” shall never be held accountable for its tortious acts.

The operation of the GCCF has allowed BP to control, manage, and settle its liabilities on highly preferential terms; has permitted members of the MDL 2179 Plaintiffs’ Steering Committee, who are directly appointed by Judge Barbier, to be excessively compensated for merely negotiating a collusive settlement agreement; and has enabled judges to clear their dockets of large numbers of cases. In sum, fund approaches to resolving massive liabilities shift power over claims resolution entirely into the hands of self-interested parties and largely evade judicial scrutiny and oversight.

Judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Nevertheless, the excessive delay and marginalization of juror fact finding (i.e., dearth of jury trials) associated with traditional MDL practice are developments that cannot be defended. The appropriate focus for fund resolution of mass claims should be justice for the claimants, not merely judicial economy and closure for the corporate misfeasor.

In sum, the major oil companies own Congress and the federal judicial system.

However, we can change that in regard to catastrophic oil spills by demanding that Congress holds responsible parties accountable. Proper enforcement of the Oil Pollution Act of 1990 and the Oil Spill Liability Trust Fund (“OSLTF”) will eliminate the need for costly and protracted litigation.

Demand that Congress requires responsible parties to pay the full costs and damages resulting from an oil spill incident by defining the term “expenditure,” under the OSLTF, as “an expenditure that is not reimbursed by the responsible party.”

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

Spread the word and sign the petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via Subrogation

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The BP Oil Spill Multidistrict Litigation (“MDL 2179”) Is Not Right for America

The BP Oil Spill Multidistrict Litigation (“MDL 2179”) Is Not Right for America

MDL 2179 is a “Faux” Class Settlement Wrapped in a “Faux” MDL

By

Brian J. Donovan

Tampa, FL (August 12, 2013)  – Robert Dudley, CEO of BP, recently told Bloomberg Businessweek he believes the deal BP made with the MDL 2179 plaintiffs’ steering committee to complete the process of paying legitimate victims of the oil spill is “not right for America.” Dudley stated, “… millions of dollars are going out to pay people who suffered, in many cases, no losses from the spill. And this is just not right. I don’t think it’s right for America. When you make an agreement and you don’t have the faith and the trust that agreement is going to be interpreted the way you expect, it’s not good for America.”

MDL 2179 is not right for America, but not for the reasons set forth by Dudley.

The “Faux” MDL 2179

Judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Regrettably, for victims of the BP oil spill, MDL 2179 is a “faux” MDL – i.e., an MDL that limits the liability of the defendants, grants excessive compensation to the members of the Plaintiffs’ Steering Committee (“PSC”) and other counsel performing common benefit work, and fails to adequately compensate the plaintiffs.

MDL 2179 is a “faux” MDL primarily because of: (a) the manner in which Kenneth R. Feinberg was permitted by the United States Judicial Panel on Multidistrict Litigation (“JPML”) and the MDL 2179 Court to administer the BP compensation fund; and (b) the terms and conditions of the BP/PSC class settlement agreement.

Feinberg’s Administration of the BP Compensation Fund

On August 10, 2010, the JPML formally established MDL 2179. In its Transfer Order, the JPML states, “Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” The JPML made it clear, from the very beginning, that the purpose of centralization was not merely to eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel, and the judiciary; and serve the convenience of the parties and witnesses and promote the more just and efficient conduct of the BP oil spill cases. Here, the purpose of centralization was to maximize judicial economy via the creation of a “faux” class settlement wrapped in a “faux” MDL.

On August 23, 2010, Feinberg Rozen, LLP, doing business as GCCF, replaced the claims process which BP had established to fulfill its obligations as a responsible party pursuant to the Oil Pollution Act of 1990 (“OPA”).

In violation of OPA, GCCF‘s approach to determining claimant eligibility was driven by two factors: (1) loss location; and (2) claimant business type.

GCCF employed two strategies to limit BP’s liability:

(a) an “Expedited Emergency Advance Payment (EAP) Denial” strategy. This strategy is as follows: “Fail to verify, investigate, and appraise the amount of loss claimed by the claimant in the EAP claim and deny the EAP claim without ever requesting supporting documentation from the claimant;” and

(b) a “Delay, Deny, Defend” strategy against legitimate oil spill victims. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.”

The ultimate objective of Feinberg’s “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy was to limit BP’s liability by obtaining a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible.

The “Release and Covenant Not to Sue” requirement forces economically and emotionally-stressed victims of the BP oil spill to sign a release and covenant not to sue in order to receive a miniscule payment amount for all damages, including future damages, they incur as a result of the BP oil spill. Feinberg’s “Release and Covenant Not to Sue” requirement violates OPA, State contract law, and is contrary to public policy.

The “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy, although unconscionable, have proven to be very effective for Feinberg and BP:

(a) GCCF forced 84.68% of the claimants to sign a “Release and Covenant Not to Sue” in which the claimant agreed not to sue BP and all other potentially liable parties;

(b) Only 15.32% of the claimants were not required to sign a “Release and Covenant Not to Sue” in order to be paid;

(c) GCCF denied payment to approximately 61.46% of the claimants who filed claims;

(d) The average total amount paid per claimant by GCCF was a paltry $27,466.47; and

(e) Feinberg’s “Release and Covenant Not to Sue” excluded approximately 200,000 BP oil spill victims from the MDL 2179 Economic and Property Damages Class Settlement Agreement.

In sum, BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining BP oil spill victims.

On March 8, 2012, the MDL 2179 Court terminated Feinberg and the GCCF claims process and appointed Patrick Juneau as the claims administrator for the transition to the court supervised claims program. On May 2, 2012, Juneau was appointed as Claims Administrator to oversee the claims administration vendors, that will process the claims in accordance with the class settlement agreement. Under Juneau, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is little reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under Juneau.

Gamesmanship of the Legal System by Defendants

Theoretically, the JPML does not have power over state courts. In reality, corporations with deep pockets, and politically well-connected defendants,  are easily able to circumvent this slight inconvenience through procedural gamesmanship – i.e., the baseless removal of a case from state to federal court for the sole purpose of subsequently being able to immediately file a Notice of Tag-Along Case with the JPML for the transfer of the case to an MDL before any court has the opportunity to either rule on the jurisdiction of the action or reach the merits of Plaintiff’s claims in the action. The JPML’s facilitation of this type of procedural gamesmanship, although politically expedient and judicially efficient, is unjust and makes a mockery of the U.S. judicial system.

Refusal by the MDL 2179 Court and the PSC to Hold Feinberg Accountable

Kenneth R. Feinberg and Feinberg Rozen, LLP, D.B.A. GCCF are neither named Defendants in any master complaint in MDL 2179 nor on the list of “Released Parties” in the Economic and Property Damages Settlement Agreement.

In sum, the MDL 2179 Court concedes that it never contemplated Feinberg, et al. would be Defendants in MDL 2179. Nevertheless, the MDL 2179 Court and the PSC effectively ensure that Feinberg, et al. will not be held accountable in the near future by the following means:

(a)  All pending and future motions to remand are continued without date in MDL 2179.

Pursuant to the MDL 2179 Court’s Pretrial Order No. 15 (Rec. Doc. 676), “Pending further orders of this Court, all pending and future motions, including Motions to Remand, are continued without date unless a motion is specifically excepted from the continuance by the Court.” Furthermore, pursuant to the MDL 2179 Court’s Pretrial Order No. 25 (Rec. Doc. 983), “All individual petitions or complaints that fall within Pleading Bundles B1, B3, D1, or D2, whether pre-existing or filed hereafter, are stayed until further order of the Court.”

In sum, any lawsuit filed against Feinberg, et al., in state or federal court, will be transferred to MDL 2179 and stayed (“warehoused”) indefinitely until Judge Barbier decides to remand the case to the transferor federal court.

(b) The MDL 2179 Court has declined to permit discovery on Feinberg or the GCCF.

On September 5, 2011, Stephen J. Herman, Plaintiffs’ Liaison Counsel in MDL 2179, stated, “please be advised that the [MDL 2179] Court has, thus far, declined to permit formal discovery on Feinberg or the GCCF.”

It is important to note that formal discovery on Feinberg and the GCCF, and the associated pressure of a trial, would have been required in order to have exerted sufficient pressure on the parties to negotiate a settlement which reflected the true value of the claims and not one which focuses on minimizing the liability of the defendants. This did not occur. Without formal discovery on Feinberg and the GCCF certain claims by private individuals and businesses for economic loss resulting from the operation of the GCCF may never be properly resolved.

Generally, Courts have held the excessive delay and “marginalization of juror fact finding” (i.e., dearth of jury trials) sometimes associated with traditional MDL practice are developments that cannot be defended. Delaventura v. Columbia Acorn Trust, 417 F. Supp. 2d at 153 (D. Mass. 2006). MDL 2179 is an exception.

The MDL 2179 Court Has Overreached Its Authority.

The Supreme Court has held that a district court conducting pretrial proceedings pursuant to 28 U.S.C. §1407(a) has no authority to invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

Justice Souter, in delivering the opinion of the Court in Lexecon, explained “28 U. S. C. §1407(a) authorizes the JPML to transfer civil actions with common issues of fact ‘to any district for coordinated or consolidated pretrial proceedings,’ but imposes a duty on the Panel to remand any such action to the original district ‘at or before the conclusion of such pretrial proceedings.’ ‘Each action so transferred shall be remanded by the Panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated.’ 28 U.S.C. §1407(a). The issue here is whether a district court conducting such ‘pretrial proceedings’ may invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. We hold it has no such authority.”

Justice Souter pointed out that “the Panel’s instruction comes in terms of the mandatory ‘shall,’ which normally creates an obligation impervious to judicial discretion. Anderson v. Yungkau, 329 U. S. 482, 485 (1947). In the absence of any indication that there might be circumstances in which a transferred case would be neither ‘terminated’ nor subject to the remand obligation, then, the statutory instruction stands flatly at odds with reading the phrase ‘coordinated or consolidated pretrial proceedings’ so broadly as to reach its literal limits, allowing a transferee court’s self-assignment to trump the provision imposing the Panel’s remand duty. If we do our job of reading the statute whole, we have to give effect to this plain command, see Estate of Cowart v. Nicklos Drilling Co., 505 U. S. 469, 476 (1992), even if doing that will reverse the longstanding practice under the statute and the rule, see Metropolitan Stevedore Co. v. Rambo (1995) (“Age is no antidote to clear inconsistency with a statute.” (quoting Brown v. Gardner, 513 U. S 115, 122 (1994))).”

While the need to promote efficiency in litigation is real, “age is no antidote” to the clear promotion and facilitation of “faux” MDLs by the JPML.

The BP/PSC Class Settlement Agreement

BP and the PSC reported settlement negotiations began “in earnest” in February 2011 for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” In sum, the PSC initiated settlement negotiations “in earnest” merely four (4) months after Judge Barbier appointed members to the PSC. Clearly, the MDL 2179 class settlement was not achieved in the full context of adversarial litigation.

Professor Martin Redish of Northwestern University School of Law argues that settlement class actions undermine the important constitutional values underlying the requirement of adversary adjudication. In such classes, the parties expressly make class certification contingent on the entry of a settlement resolving the litigation. Thus, while settlement classes may have certain attractive aspects, such as reducing litigation expenses, many of the traditional aspects of adversarial litigation are missing. As a result, according to Professor Redish, the settlement class is potentially the product of collusion among the parties: defendants who wish to rid themselves of the burden of litigation and plaintiffs‘ counsel who wish to receive immediate compensation. Redish further argues settlement class actions are flat-out unconstitutional because there is no “case or controversy,” a constitutional requirement for making a federal case out of something. Since the lawyers are all on the same side, he says, the only losers are plaintiffs who are forever barred from suing over the matter again. This is precisely what has happened in MDL 2179.

The court in Georgine v. Amchem Products, Inc., 83 F.3d 610 (3rd Cir. 1996), noted that the presentation of class action cases in the form of negotiated settlements for approval by the courts under Rule 23(c) raises a constitutional issue whether there is a justiciable case or controversy. Such cases also raise practical concerns about potential collusion and inadequate representation, as well as the ability of the court to evaluate the merits of the settlement in a non-adversarial context. Georgine, 83 F.3d at 617.

Professor Redish also points out that the opt-out mechanism under Rule 23(b)(3) should be abandoned in favor of an opt-in mechanism that requires absent class members to take some affirmative action before being swept into a class action. Redish believes that allowing due process rights to be waived simply by inaction, as under the current version of the rule, does not sufficiently protect such constitutional rights.

If a class is certified and the class representatives are unsuccessful, the absent class members’ claims will be “legally obliterated” by the result of the litigation, even though they did not actively participate in the suit. Likewise, as many have observed, a class action can reduce the input any particular plaintiff has in the conduct of the case. Where thousands are represented in a single lawsuit, it is simply impossible for them to have the same level of input regarding the prosecution of their claims. Moreover, conflicts among class members inevitably emerge, rendering the class action mechanism an imperfect means of resolving large-scale litigation.

The standard for reviewing a proposed settlement of a class action by courts is whether the proposed settlement is “fair, adequate, and reasonable” and whether it has been entered into without collusion between the parties. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998) (“Settlement is the offspring of compromise; the question we address is not whether the final product could be prettier, smarter or snazzier, but whether it is fair, adequate, and free from collusion.”).

There is little doubt that any class settlement agreement which: (a) excludes approximately 200,000 claimants from the settlement benefits because they had been forced to sign an unconscionable “Release and Covenant Not to Sue;” and (b) excessively compensates members of the PSC and other counsel performing common benefit work is neither “fair, adequate, and reasonable” nor “free from collusion.”

Conclusion

Dudley is correct. Individuals and businesses that did not suffer damages resulting from the BP oil spill should not be paid. It is important to note, however, that fraudulent claims represent a very small percentage of the total number of claims.

MDL 2179 is “not right for America” because:

(a) it is a “faux” MDL;

(b) it approves a “faux” class settlement agreement which is neither “fair, adequate, and reasonable” nor “free from collusion;”

(c) attorneys, with impunity, are permitted to advise BP to tell Congress, the National Incident Command, and the public that the oil spill flow rate was 5,000 barrels of oil per day when BP engineers were performing internal analyses showing that the flow rate could be up to 20 times greater;

(d) it permits members of the PSC, who are directly appointed by the transferee judge, and other counsel performing common benefit work to be excessively compensated for merely negotiating a settlement agreement;

(e) it allows BP to retain a third-party “claims administrator” to limit its liability, with impunity, via an “Expedited EAP Denial” strategy and a “Delay, Deny, Defend” strategy; and

(f) the JPML, which does not have power over state courts, promotes and facilitates the gamesmanship of the legal system by defendants, i.e., the baseless removal of a case from state to federal court for the sole purpose of subsequently being able to immediately file a Notice of Tag-Along Case with the JPML for the transfer of the case to MDL 2179. The JPML’s facilitation of this type of procedural gamesmanship, although politically expedient and judicially efficient, is unjust and makes a mockery of the U.S. judicial system.

In sum, MDL 2179 is not right for America because it:

(a) allows judicial economy to replace justice; and

(b) denies access to the courts by permitting the desires and influence of corporations with deep pockets, and politically well-connected defendants, to trump the legal rights of the individual.

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

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BP Oil Spill Litigation: The Compensation Paid to MDL 2179 Plaintiffs’ Attorneys is Excessive

BP Oil Spill Litigation: The Compensation Paid to MDL 2179 Plaintiffs’ Attorneys is Excessive

_________________________________

In Order to be Awarded a Common Benefit Fee of $600 million

the MDL 2179  Honorable Court Would Have to Believe that

the PSC Attorneys Worked Two Million Hours

Tampa, FL (July 26, 2013) – The question is whether the BP Oil Spill Settlement grants excessive compensation to the PSC and other counsel performing common benefit work in MDL 2179. This issue can be determined by a simple two-prong comparison test: First, by comparing the common benefit fees received by attorneys in MDL 2179 with the average total payment amount received by the claimants; and Second, by comparing the common benefit fees received by attorneys in MDL 2179 with the common benefit fees received by attorneys in comparable MDLs.

(a)  The Average Total Payment Amount Received From GCCF by Claimants

GCCF Overall Program Statistics (Status Report as of March 7, 2012)

Total Amount Paid = $6,079,922,450.47

Total No. of Paid Claimants = 221,358

Average Total Amount Paid Per Claimant = $27,466.47

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012.  The GCCF paid only 221,358 of these Claimants. In sum, the GCCF denied approximately 61.46% of the claimants who filed claims. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012).

On March 8, 2012, this Honorable Court terminated the GCCF claims process and appointed Patrick Juneau as the Claims Administrator of the Transition Process and the proposed Court Supervised Claims Program (“CSCP”). On May 2, 2012, Patrick Juneau was appointed as Claims Administrator to oversee the Claims Administration Vendors, who will process the claims in accordance with the Proposed Settlement. Under the CSCP, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the CSCP.

(b)  The Common Benefit Fees Received by Attorneys in Comparable MDLs

In order to determine an appropriate common benefit fee, this Court looks to comparable MDL set-aside assessments and awards of common benefit fees. E.g., In re Diet Drugs Prods. Liab. Litig., 553 F. Supp. 2d at 442, 457-58, 491-96 (E.D. Pa. 2008) (describing 9% federal and 6% state assessments later reduced to 6% and 4%, respectively; awarding less than total fund created by assessments); In re Zyprexa, 467 F. Supp. 2d at 261-63 (E.D.N.Y. Aug. 17, 2007)(1% and 3% of separate settlement amounts); In re Sulzer Hip Prosthesis & Knee Prosthesis Liab. Litig., 268 F. Supp. 2d at 907, 909, 919 n.19 (N.D. Ohio 2003) (awarding common benefit fees out of $50,000,000 fund created through assessment representing 4.8% of settlement value);

In re Protegen Sling & Vesica Sys. Prods. Liab. Litig., MDL No. 1387, 2002 WL 31834446, at *1, *3 (D. Md. Apr. 12, 2002) (9% federal, 6% coordinated state assessments); In re Rezulin Prods. Liab. Litig., MDL No. 1348, 2002 WL 441342, at *1 (S.D.N.Y. Mar. 20, 2002) (6% withholding in federal cases, 4% in participating state cases); See also William B. Rubenstein, On What a “Common Benefit Fee” Is, Is Not, and Should Be, 3 Class Action Att’y Fee Dig. at 87 (2009) (collecting cases and concluding that most common benefit assessments range from 4% to 6%); 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 14:9 (4th ed. 2002) (“Most [MDL] courts have assessed common benefit fees at about a 4-6% level, generally 4% for a fee and 2% for costs.”); Paul D. Rheingold, Litigating Mass Tort Cases § 7:35 (2010) (“[P]ercentages awarded for common funds in recent MDLS … were in the 4-6% range.”) (citation omitted). In re Vioxx Prods. Liab. Litig., 760 F. Supp. 2d 640 (E.D. La. 2010) (“October 19, 2010 Order and Reasons”).

The Court’s analysis in the Vioxx MDL case is instructive. In re Vioxx Prods. Liab. Litig. (“MDL 1657”) involves the prescription drug Vioxx. Merck, a New Jersey corporation, researched, designed, manufactured, marketed and distributed Vioxx to relieve pain and inflammation resulting from osteoarthritis, rheumatoid arthritis, menstrual pain, and migraine headaches. On September 20, 2004, Merck withdrew it from the market after data indicated that the use of Vioxx increased the risk of cardiovascular thrombotic events such as myocardial infarction (heart attack) and ischemic stroke. Thereafter, thousands of individual suits and numerous class actions were filed against Merck in state and federal courts throughout the country.

On February 16, 2005, the Judicial Panel on Multidistrict Litigation (“MDL”) conferred MDL status on Vioxx lawsuits filed in various federal courts throughout the country and transferred all such cases to this Court to coordinate discovery and to consolidate pretrial matters pursuant to 28 U.S.C. § 1407. See In re Vioxx Prods. Liab. Litig., 360 F. Supp. 2d 1352 (J.P.M.L. 2005).

On November 9, 2007, Merck and the NPC formally announced that they had reached a Settlement Agreement. The private Settlement Agreement established a pre-funded program for resolving pending or tolled state and federal Vioxx claims against Merck as of the date of the settlement, involving claims of heart attack (“MI”), ischemic stroke (“IS”), and sudden cardiac death (“SCD”), for an overall amount of $4.85 billion.

In Vioxx, Judge Fallon stated, “The Settlement Agreement created a $4.85 billion fund for the compensation of Vioxx claimants. The Court finds no reason to omit any portion of that settlement fund from consideration with respect to the reasonable amount of common benefit fees. Accordingly, $4.85 billion is the appropriate amount for calculation of a reasonable percentage of common benefit fees.”

The Vioxx Court awarded a common benefit fee of $315,250,000, which is equivalent to 6.5% of $4,850,000,000. In Vioxx, unlike MDL 2179, the attorneys came from states across the country. Accordingly, the Court found that an average hourly billable rate of $443.29 was reasonable.

There are significant two differences between MDL 1657 and MDL 2179:

(i)  The Time and Labor Required

The PSC and other counsel performing common benefit work in MDL 1657 documented and submitted over 560,000 hours of work during the course of this litigation. The PSC operated on many fronts, preparing pleadings and Master Class Action complaints, taking over 2,000 depositions, reviewing and compiling over 50,000,000 documents, briefing and arguing over 1,000 discovery motions, assembling a trial package, conducting bellwether trials, negotiating the global Settlement Agreement, and implementing the payout under the Agreement.

In contrast, “In the 20 months that have passed since the JPML’s centralization order, the parties [in MDL 2179] have engaged in extensive discovery and motion practice, including taking 311 depositions, producing approximately 90 million pages of documents, and exchanging more than 80 expert reports on an intense and demanding schedule……..BP and the PSC report that in February 2011 settlement negotiations began in earnest for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.”

In sum, the PSC and other counsel allegedly performing common benefit work in MDL 2179 only took 311 depositions and initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179.

The MDL 1657 Court conducted six Vioxx bellwether trials. During the same period that this Court was conducting six bellwether trials, approximately thirteen additional Vioxx-related cases were tried before juries in various state courts.

The MDL 2179 Court did not conduct a single bellwether trial.

(ii)  The Results Obtained

Attorneys doing common benefit work on behalf of Vioxx users in MDL 1657 achieved a favorable and meaningful global resolution. The Settlement Agreement ensured fair and comprehensive compensation to all qualified participants. In only 31 months, the parties to the Vioxx case were able to reach a global settlement and distribute $4,353,152,064 to 32,886 claimants, out of a pool of 49,893 eligible and enrolled claimants.

In contrast, attorneys doing common benefit work on behalf of BP oil spill victims in MDL 2179 did not remotely achieve “a favorable and meaningful global resolution.” The MDL 2179 Proposed Settlement does not ensure fair and comprehensive compensation to all qualified participants.

Average Total Amount Paid Per Claimant in MDL 1657 =  $132,370.98 Average Total Amount Paid Per Claimant in MDL 2179 =  $ 27,466.47

(c)  The Common Benefit Fees Received by Attorneys in MDL 2179

The PSC and other counsel allegedly performing common benefit work in MDL 2179 are not double-dipping; they are triple-dipping.

The known sources of compensation received by attorneys allegedly doing common benefit work on behalf of BP oil spill victims in MDL 2179 are:

(a) Six percent (6%) of the gross monetary settlements, judgments or other payments made on or after December 30, 2011 through June 3, 2012 to any other plaintiff or claimant-in-limitation;

(b) BP has agreed to pay any award for common benefit and/or Rule 23(h) attorneys’ fees, as determined by the Court, up to $600 million;

(c) Many attorneys doing common benefit work have their own clients and have also received or will also receive a fee directly from them. (N.B. – On June 15, 2012, the MDL 2179 Court ordered that “contingent fee arrangements for all attorneys representing claimants/plaintiffs that settle claims through either or both of the Settlements will be capped at 25% plus reasonable costs.”); and

(d) Co-counsel fees received by member firms of the PSC for serving as co-counsel to non-member firms of the PSC. For example, on March 13, 2012, Counsel for Plaintiff Salvesen received an unsolicited mass email from a member firm of the PSC. The email stated, “Co-Counsel Opportunity for BP Oil Spill Cases: News of the recent BP Settlement has caused many individuals and businesses along the Gulf Coast to contemplate either filing a new claim or amending a claim that has already been submitted. If you receive inquiries of this nature we would like you to consider a co-counsel relationship with our firm. Even if someone has already filed a claim it is advisable to retain legal counsel to analyze the impact of this settlement on claimants and maximize recovery. If you receive inquiries and are interested in co-counseling with us on the BP claims, please email…”

Over the years courts have employed various methods to determine the reasonableness of an award of attorneys’ fees. These methods include the “lodestar” method, which entails multiplying the reasonable hours expended on the litigation by an adjusted reasonable hourly rate, Copper Liquor, Inc. v. Adolph Coors Co., 624 F.2d 575, 583 & n.15 (5th Cir. 1980); the percentage method, in which the Court compensates attorneys who recovered some identifiable sum by awarding them a fraction of that sum; or, more recently, a combination of both methods in which a percentage is awarded and checked for reasonableness by use of the lodestar method.

(i)  The Percentage Method

As noted above, “percentages awarded for common funds in recent MDLS … were in the 4-6% range.” Given that the PSC and other counsel allegedly performing common benefit work in MDL 2179 only took 311 depositions and initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179, the appropriate percentage should be no greater than 4%.

BP has estimated the cost of the proposed settlement to be approximately $7.8 billion. A 4% award would yield $312 million for common funds.

(ii)  The Lodestar Cross-Check

The lodestar analysis is not undertaken to calculate a specific fee, but only to provide a broad cross check on the reasonableness of the fee arrived at by the percentage method.

This Court has previously used a range of $300 to $400 per hour for members of a Plaintiffs’ Steering Committee and $100 to $200 per hour for associates to “reasonably reflect the prevailing [billable time] rates in this jurisdiction.” Turner v. Murphy Oil USA, Inc., 472 F. Supp. 2d at 868-69 (E.D. La. 2007).

Average Amount Awarded = $312,000,000.00

Billable Hourly Rate = $300/hr.

Hours Required to Have Been Expended on This Litigation = 1,040,000 hours

Average Amount Awarded = $600,000,000.00

Billable Hourly Rate = $300/hr.

Hours Required to Have Been Expended on This Litigation = 2,000,000 hours

In sum, in order to be awarded a common benefit fee of $312 million, the MDL 2179 Honorable Court would have to believe that the PSC attorneys worked more than one million hours; in order to be awarded a common benefit fee of $600 million, the MDL 2179  Honorable Court would have to believe that the PSC attorneys worked two million hours. Both of these fee amounts, which do not include the aforementioned (a), (c), and (d) known sources of compensation, fail the reasonableness test.

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Third Lawsuit Filed Against Kenneth R. Feinberg and Feinberg Rozen, LLP

Third Lawsuit Filed Against Kenneth R. Feinberg and Feinberg Rozen, LLP
__________________

Complaint Alleges Gross Negligence and Fraud by BP Oil Spill Fund Administrator

Tampa, FL (June 20, 2013) – A third lawsuit has been filed in state court in Florida against Kenneth R. Feinberg and Feinberg Rozen, LLP, D.B.A. Gulf Coast Claims Facility (“GCCF”). William G. Green, Jr. is also named as a Defendant. Mr. Green, a resident of the State of Florida and an “Independent Adjuster – All Lines” licensed by the State of Florida, was “Liaison” to GCCF and the “Overseer” of all seafood claims for GCCF in the State of Florida who trained accountants to specifically handle claims of clam farmers. The 31-page complaint was filed in the Circuit Court of the Twentieth Judicial Circuit in and for Lee County, Florida by Tampa attorney Brian J. Donovan on behalf of Mr. Andrew J. Ditch. The complaint alleges, in part, gross negligence, fraud, fraudulent inducement and unjust enrichment on the part of the defendants (Case No. 13-CA-001612).

Background

On August 23, 2010, Defendant Feinberg Rozen, doing business as GCCF, replaced the claims process which BP had established to fulfill its obligations as a responsible party pursuant to the Oil Pollution Act of 1990 (hereinafter “OPA”). The protocol established by the defendants sets forth the procedure for the submission and resolution by GCCF of claims by individuals and businesses for costs and damages incurred as a result of the BP oil spill incident.

Mr. Ditch is the sole proprietor of a business engaged in aquaculture, specifically the growing of farm-raised hard-shell clams on sovereignty submerged land leased from the State of Florida.

GCCF Payment Methodology

Phase I
During GCCF Phase I, which operated from August 23, 2010 through November 23, 2010, GCCF accepted Emergency Advance Payment (“EAP”) claims. Over 475,000 EAP claims were filed with GCCF by BP oil spill victims from August 23, 2010 through November 23, 2010. GCCF paid in excess of $2.5 billion to more than 169,000 Phase I claimants. In sum, the average total amount paid per EAP claimant by GCCF was a paltry $14,793.00. A claimant who received an EAP during Phase I was not required to execute a “Release and Covenant Not to Sue” BP or any other party.

Phase II
During GCCF Phase II, known as the “Interim Payment/Final Payment” claims process, GCCF received the following three types of claims: Quick Payment Final Claim, Interim Payment Claim, and Full Review Final Payment Claim.

Under the “Quick Payment Final Claim,” a claimant who had received a prior EAP or Interim Payment from GCCF could receive, without further documentation of losses caused by the BP oil spill, a one-time final payment of $5,000 for individuals and $25,000 for businesses. Claimants seeking a Quick Payment were required to submit with their claim form a “Release and Covenant Not to Sue.”

Defendants cannot justify limiting payments under the “Quick Payment Final Claim” program to just $5,000 for individuals and $25,000 for businesses. There is no evidence that these amounts even remotely represent adequate consideration to compensate claimants for the damages that claimants did or will suffer as a result of the BP oil spill.

Under the “Interim Payment Claim,” a claimant allegedly could elect to receive compensation for documented past losses or damages caused by the BP oil spill for which the claimant previously had not been compensated. A claimant seeking an Interim Payment was not required to sign a “Release and Covenant Not to Sue.” A claimant was permitted to file only one Interim Payment Claim per quarter.

Under the “Full Review Final Payment Claim,” a claimant could receive payment for all documented past damages and estimated future damages resulting from the BP oil spill. Claimants wishing to accept a Final Payment were required to sign and submit a “Release and Covenant Not to Sue.” Any Full Review Final Payment awarded to a claimant was decreased by the amount of any previous payments received.

Claim forms for Phase II became available to the public on December 18, 2010. The assessment of claimant eligibility and calculation of losses for those claims did not begin until February 18, 2011.

GCCF’s “Expedited EAP Denial” Strategy
The complaint alleges, in part, that:

(a) Defendants misled Plaintiff by fraudulently, recklessly, negligently and/or knowingly stating the protocol under which GCCF operates is structured to be compliant with OPA and apply the standards of OPA;

(b) in violation of OPA, GCCF‘s approach to determining claimant eligibility was driven by two factors: (1) loss location; and (2) claimant business type;

(c) Defendants misled Mr. Ditch by fraudulently, recklessly, negligently and/or knowingly employing an “Expedited EAP Denial” strategy against him. This strategy is as follows: “Fail to verify, investigate, and appraise the amount of loss claimed by the claimant in the EAP claim and deny the EAP claim without ever requesting supporting documentation from the claimant;” and

(d) Defendant Feinberg has misled Plaintiff by fraudulently, recklessly, negligently and/or knowingly using the fear of costly and protracted litigation to coerce Plaintiff Ditch to file a claim in GCCF Phase II rather than file a lawsuit.

More than 74,000 unique claimants that filed EAP claims received denial letters from GCCF during Phase I.

Feinberg’s “Release and Covenant Not to Sue” Requirement
The ultimate objective of Defendants’ “Expedited EAP Denial” strategy was to limit BP’s liability by obtaining a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible.

GCCF’s “Release and Covenant Not to Sue” requirement forces economically and emotionally-stressed victims of the BP oil spill to sign a release and covenant not to sue in order to receive a miniscule payment amount for all damages, including future damages, they incur as a result of the BP oil spill. GCCF’s “Release and Covenant Not to Sue” requirement violates OPA, State contract law, and is contrary to public policy. Forcing BP oil spill victims to sign a “Release and Covenant Not to Sue” in order to be compensated for their damages was the idea of Defendant Kenneth R. Feinberg.

Plaintiff’s Experience with Feinberg, et al.
On November 23, 2010, Plaintiff Ditch submitted an EAP claim to GCCF. This EAP claim was for lost earnings or profits for six months. On December 6, 2010, merely thirteen (13) days after Plaintiff Ditch submitted his EAP claim, GCCF sent Plaintiff Ditch its boilerplate denial letter wherein GCCF states, “You submitted a claim to the Gulf Coast Claims Facility (“GCCF”) for an Emergency Advance Payment for damages relating to the Deepwater Horizon incident on April 20, 2010. Your submission did not provide sufficient documentation to support your claim and consequently, your request for an Emergency Advance Payment has been denied.”

GCCF Phase I protocols did not include a process by which a claimant could appeal an adverse resolution or have its claim re-reviewed by GCCF. Prior to issuing its denial letter, GCCF never requested supplemental supporting documentation from Plaintiff Ditch which would support his EAP claim.

After GCCF denied his EAP claim, Plaintiff Ditch refused to be forced by Defendants into filing a claim during GCCF Phase II which would ultimately require him to sign a “Release and Covenant Not to Sue” in exchange for a miniscule percent of all damages to which he is entitled under OPA.

As a direct result of Defendants’ “Expedited EAP Denial” strategy, after approximately 10 years of successful operation, Plaintiff Ditch lost his market share for hard-shell clams in upstate New York.

As of the date of the filing of this Complaint, Plaintiff Ditch now estimates the extent of damages directly resulting from Defendants’ “Expedited EAP Denial” strategy to be approximately $1,570,357.00.

Unconscionable But Very Effective
Defendants’ “Expedited EAP Denial” strategy and overall “Delay, Deny, Defend” strategy, although unconscionable, have proven to be very effective for Defendants and BP:

(a) GCCF forced 84.68% of the claimants to sign a “Release and Covenant Not to Sue” in which the claimant agreed not to sue BP and all other potentially liable parties;

(b) only 15.32% of the claimants were not required to sign a “Release and Covenant Not to Sue” in order to be paid;

(c) GCCF denied payment to approximately 61.46% of the claimants who filed claims; and

(d) the average total amount paid per claimant by GCCF was a paltry $27,466.47.

In sum, Plaintiff Ditch alleges that BP is responsible for the oil spill incident; Defendants Feinberg, Feinberg Rozen, and Green (independent contractors), via employment of their “Expedited EAP Denial” strategy, are responsible for not compensating, and thereby damaging the economic interests of Plaintiff Ditch and more than 74,000 other unique claimants that filed EAP claims with GCCF during Phase I.

This case is brought by Plaintiff under the following causes of action: (a) Gross Negligence; (b) Negligence; (c) Negligence Per Se; (d) Fraud; (e) Fraudulent Inducement; (f) Promissory Estoppel; and (g) Unjust Enrichment.

Mr. Ditch seeks economic and compensatory damages, in amounts to be determined at trial, and punitive damages.

Click here to download the complaint.

CLICK HERE TO READ AN UPDATE. (more…)

BP Oil Spill Litigation: U.S. Appeals Judge’s Decision on Motion to Compel BP to Produce Documents Based on the Crime-Fraud Exception

BP Oil Spill Litigation: U.S. Appeals Judge’s Decision on Motion to Compel BP to Produce Documents

Based on the Crime-Fraud Exception to the Attorney-Client Privilege

Tampa, FL (June 3, 2013) – BP pled guilty to the crime of obstructing justice by providing false and misleading flow rate information to Congress during the BP oil spill response. The company provided that same false information to the National Incident Command by email and to the public through filings with the SEC. BP’s false flow rate statements were developed under the direction of the company’s attorneys, as BP itself explained to the Court in multiple filings. Accordingly, the U.S. argues that under blackletter law BP’s use of attorneys to aid in its wrongdoing destroys any privilege for the communications BP used in its criminal or fraudulent activity. This bedrock principle of privilege law is known as the crime-fraud exception to the attorney-client privilege.

In its motion to compel, the U.S. sought all documents related to the preparation of seven statements BP made to government officials and the public regarding the flow rate during the response, specifically (1) fraudulent communications to Congress on May 4, 2010 and fraudulent letters to Congressman Markey dated May 24 and June 25, 2010; (2) a fraudulent statement to Federal On-Scene Coordinator Admiral Mary Landry on May 19, 2010; and (3) fraudulent securities statements on April 29 and 30 and May 4, 2010 (collectively referred to here as the “Crime-Fraud Communications”). On April 30, 2013, Magistrate Judge Sally Shushan ruled on the United States’ motion by ordering production of 22 documents sought by the United States and finding that 84 additional documents identified by BP as related to the Crime-Fraud Communications did not fall within the crime-fraud exception.

The U.S. submits that the Magistrate Judge used the incorrect legal standard and applied the standard incorrectly. A court reviewing a crime-fraud assertion conducts a two-step analysis in the Fifth Circuit. First, the reviewing court determines whether the party asserting crime-fraud has made a prima facie case that its opponent “intended to further an ongoing crime or fraud during the attorney-client relationship.” In re Grand Jury Subpoena, 419 F.3d 329, 346 (5th Cir. 2005). Once that showing is made, “the crime-fraud exception applies.” Id. The second step addresses which documents must be produced – those “reasonably related to the furtherance of the ongoing or future crime or fraud at issue.” Id. at 347. The U.S. argues that the Magistrate Judge made three errors in her opinion. At the first step of the analysis, she applied the law to the facts incorrectly in concluding that the U.S. failed to make a prima facie showing of a crime or fraud with respect to BP’s false statements to the SEC. At the second step of the analysis, she both used an incorrect legal standard not briefed by the Parties and then applied it incorrectly.

The U.S. requests, since the Magistrate Judge’s decision was contrary to law, that the Court overturn the decision and grant the United States’ motion to compel in full. Specifically, the U.S. requests that the Court order the production of all documents reasonably related to the preparation of the Crime-Fraud Communications.

Background

As oil gushed from the Macondo 252 well during 2010, BP told Congress, the National Incident Command, and the public that the flow rate was 5,000 barrels of oil per day (“BOPD”). Meanwhile, company engineers were performing internal analyses showing that the flow rate could be up to 20 times greater.

BP’s false flow rate statements were developed under the direction of the company’s attorneys, as BP itself explained to the Magistrate Judge in multiple filings. The letters to Congress that formed the basis of BP’s guilty plea were the results of “a process organized and directed by lawyers.” See Exhibit 1, July 19, 2012 Letter from R. Gasaway to Judge Shushan at 5.

Under blackletter law, BP’s use of attorneys to aid in its wrongdoing destroys any privilege for the communications BP used in its criminal or fraudulent activity. As the Supreme Court has explained, “[a] client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told.” Clark v. United States, 289 U.S. 1, 15 (1933) (emphasis added). The exception applies whether the attorneys had knowledge of the crime or not. See e.g., In re Grand Jury Proceedings, 680 F.2d 1026, 1028 (5th Cir. 1982) (“The crime or fraud exception applies even where the attorney is completely unaware that his advice is sought in furtherance of such an improper purpose.”).

I. The Criminal And Fraudulent Communications At Issue

A. False and Misleading Statements to the Public through SEC Filings

One week after the Deepwater Horizon blowout, BP submitted a form 6-K to the SEC. In that filing, BP stated that the oil flow was “currently estimated at up to 5,000 barrels a day.” Ex. 7, April 29, 2010 Form 6-K at 6. The following day, BP issued a press release as a SEC Form 6-K and included the flow estimate as “up to 5,000 barrels a day.” Ex. 8, April 30, 2010 Form 6-K. On May 4, 2010, BP issued another press release as a Form 6-K and stated that “current estimates by [NOAA] suggest some 5,000 barrels . . . of oil per day are escaping from the well.” Ex. 9, May 4, 2010 Form 6-K.

The SEC filed a civil complaint against BP that alleged “material misrepresentations and omissions” in the three Form 6-K statements. Securities and Exchange Commission v. BP p.l.c., Civil Action No. 2:12-cv-02774 (E.D. La.). BP later agreed to pay $525 million to settle the SEC civil action.

B. False and Misleading Statements to Congress

1. May 4, 2010 presentation to Congressional Subcommittee claiming flow rate was 5,000 BOPD

On May 4, 2010, BP Vice President David Rainey made a presentation to a House Subcommittee (“Subcommittee”) in which he stated that 5,000 BOPD was the best estimate of the flow rate, and that the worst case discharge was 60,000 BOPD. See Ex. 10, May 14, 2010 Letter E. Markey to L. Mackay. Subcommittee Chairman Markey responded by letter on May 14, 2010. Chairman Markey noted that other, public estimates of the spill were greater than BP’s alleged worst case discharge figure, and stated, “I am concerned that an underestimation of the flow may be impeding the ability to solve the leak and handle management of the disaster. We have already had one estimate that grossly underestimated the amount of oil being released and we cannot afford to have another.” Id. (emphasis added). The import of Chairman Markey’s letter was that BP misled the Subcommittee in the May 4, 2010 briefing.

2. May 24, 2010 letter to Congressional Subcommittee claiming flow rate was 5,000 BOPD

BP responded with a letter signed by BP attorney Kevin Bailey to Chairman Markey on May 24, 2010. In that letter, BP represented that the 5,000 BOPD flow rate was the “most scientifically informed judgment” and that subsequent flow rate estimates had “yielded consistent results.” Ex. 11, May 24, 2010 Letter, K. Bailey to E. Markey. In fact, BP later admitted that its own internal estimates at the time showed the flow rate was as high as 96,000 BOPD.

In pleading guilty to obstruction of Congress based in part upon the May 24 letter, BP stated that it “agree[d] that if the case were to proceed to trial, the Government could establish beyond a reasonable doubt” the following facts related to the May 24 letter:

On or about May 24, 2010, in the Eastern District of Louisiana and elsewhere, BP did corruptly, that is, with an improper purpose, endeavor to influence, obstruct, and impede the due and proper exercise of the power of inquiry under which an inquiry and investigation was being had by a Committee of the United States House of Representatives into the amount of oil flowing from the Macondo Well (“flow rate”) through the following omissions and false and misleading statements in its May 24, 2010 response (“Markey Response”) to the Committee on Energy and Commerce:

(a) BP, through a former vice president, withheld information and documents relating to multiple flow-rate estimates prepared by BP engineers that showed flow rates far higher than 5,000 BOPD, including as high as 96,000 BOPD.

(b) BP, through a former vice president, withheld information and documents relating to internal flow-rate estimates he prepared using the Bonn Agreement analysis, that showed flow rates far higher than 5,000 BOPD, and that went as high as 92,000 BOPD.

(c) BP, through a former vice president, falsely represented that the flow-rate estimates included in the Response were the product of the generally-accepted ASTM methodology. At the time that this false representation was made, BP’s former vice president knew that those estimates were the product of a methodology he devised after, among other things, a review of a Wikipedia entry about oil spill estimation.

(d) BP, through a former vice president, falsely represented that the flow-rate estimates included in the Markey Response had played “an important part” in Unified Command’s decision on April 28, 2010, to raise its own flow-rate estimate to 5,000 BOPD. At the time this false representation was made, BP’s former vice president knew that those flow-rate estimates had not played “an important part” in Unified Command’s decision to raise its flow-rate estimate and had not even been distributed outside of BP prior to that decision.

(e) BP falsely suggested, in its May 24, 2010 letter, that the Unified Command’s flow rate estimate of 5,000 barrels of oil per day (“BOPD”) was the “most scientifically informed judgment” and that subsequent flow rate estimates had “yielded consistent results.” In fact, as set forth above, BP had multiple internal documents with flow rate estimates that were significantly greater than 5,000 BOPD that it did not share with the Unified Command.

3. June 25, 2010 letter to Congressional Subcommittee misstating basis for BP’s worst case discharge estimate

On June 25, 2010, BP sent another letter to the Subcommittee, this time from David Nagle, who at the time led BP’s government relations group. In the June 25 letter, BP attempted to explain why the company had told the Subcommittee on May 4 that the worst case discharge was 60,000 BOPD, while later saying it was 100,000 BOPD. The June 25 letter stated that the 100,000 BOPD worst case discharge estimate was developed after subsequent “pressure data was obtained from the BOP stack.” Ex. 13, June 25, 2010 Letter, D. Nagle to E. Markey at 1. This statement too was false, as BP admitted in its plea agreement:

On or about June 25, 2010, in a BP letter to Congressman Markey, BP’s former vice president inserted language that falsely stated that BP’s worst case discharge estimate was raised from 60,000 BOPD to 100,000 BOPD after subsequent “pressure data was obtained from the BOP stack.” At the time this false representation was made, BP’s former vice president knew that the 100,000 BOPD figure was not first derived after subsequent pressure data had been obtained, but instead, he had been aware of a 100,000 BOPD worst case discharge since as early as on or about April 21, 2010.

C. False and Misleading Statements to the National Incident Command

In the midst of BP’s false statements to Congress, it provided the same false information to the National Incident Command. On May 17, 2010, then-Rear Admiral Mary Landry, the Federal On-Scene Coordinator (“FOSC”) for the Macondo oil spill appealed to Doug Suttles, BP America Inc.’s Chief Operating Officer and BP’s representative to the Unified Command, to provide the Unified Command with “full access to all information related to the oil discharge rate as soon as possible,” in order to “help us continue to hone our efforts to respond most effectively to the spill and to mitigate the ongoing threat to our environment and coastal communities.” See Ex. 14, May 17, 2010 Letter, Admiral Landry to D. Suttles.

Mr. Suttles took the Rainey Memo and sent it to Admiral Landry by email on May 19, 2010. Ex. 18, May 19, 2010 Email, D. Suttles to Admiral Landry. The Rainey Memo was also submitted as part of BP’s May 24 letter to the Subcommittee. As described above, BP admitted that it obstructed justice by omitting relevant internal information and making false representations in the May 24 letter, including the Rainey Memo.

II. BP Used Attorneys to Direct Its Crime-Fraud Communications

There can be no doubt that BP’s attorneys played a leading role in the Crime-Fraud Communications – BP repeatedly told the Magistrate Judge precisely that. In defending against earlier privilege challenges before the Magistrate Judge, BP made clear that the company’s responses to Congressional inquiries were led and directed by attorneys:

Congressional requests received by the company in this time period were handled through a process organized and directed by lawyers in which information was gathered from personnel within the company. Congressional responses were then drafted in a collaborative process led by WilmerHale and involving both in-house and external lawyers along with appropriate BP personnel. Although not every communication regarding the effort to collect information and to respond to requests involved the direct participation of an attorney, the overall process was a lawyer-directed effort.

III. BP’s Internal Flow Rate Estimates Were Far Higher Than Those Shared With The Government And The Public

At the same time BP was telling Congress, the National Incident Command, and the public that the flow rate was 5,000 BOPD, BP was performing internal modeling showing the flow rate could be as high as 100,000 BOPD. BP employees recognized the difference between the company’s public statements and its private modeling. On May 15, 2010, then company Vice President Mike Mason, who led various well performance and modeling efforts during the blowout response, wrote an email to BP Chief Executive Andy Inglis warning against “standing behind” the 5,000 BPD estimate. Ex. 19, May 15, 2010 Email, M. Mason to A. Inglis. Mason added that “our modelling shows that this well could be making anything up to ~ 100,000 bopd depending on a number of unknown variables . . . We can make the case for 5,000 bopd only based on certain assumptions.” Id. Mr. Mason’s email was forwarded to BP General Counsel John Lynch Jr. Id.

Notably, when BP’s source control efforts required a “best estimate” of flow rate for internal modeling work, the company used not 5,000 but 70,000 BOPD. Early in the response, BP hired Stress Engineering to perform computation fluid dynamics modeling (known as “CFD”) in order to consider the potential for the “BOP on BOP” source control option. Ex. 25, Charles Holt Deposition at 261:1-18. Stress Engineering needed a flow rate estimate to do the work, and Stress Engineering Principal Christopher Matice stated that the computer runs would take 10-12 hours each. He added: “We should start with our best [flow rate] estimate.” At that point, BP employee Richard Simpson replied: “For the first run, use 70,000 bpd[.] For the second run, 35,000 bpd[.] Third run, 17,500 bpd.” Id. In that April 30, 2010 exchange, BP demonstrates that, when BP needed a flow rate estimate for important work, the company used a much higher flow rate than it was reporting to the public. As Mr. Lockett said in a May 17 email about Top Kill modeling, the 5,000 BOPD number had “little if no origin. . . . From all the different ways we have looked at flow rate, [5,000 BOPD] would appear to err on the low side.” Ex. 27, May 17, 2010 Email, T. Lockett to T. Hill.

Argument

When a party seeks to involve its attorney in an ongoing or future crime or fraud, any privilege is destroyed. For the crime-fraud exception to apply, the party challenging privilege must show two things: evidence of a crime or fraud and that the underlying communications relate to the illicit activity. The United States has made that showing here for all documents reasonably related to preparation of the Crime-Fraud Communications, and all such documents should be ordered produced.

The Magistrate Judge found that the United States had demonstrated a crime or fraud for all Crime-Fraud Communications except those made to the SEC. However, she found that many of the documents identified by BP as related to preparation of the Crime-Fraud Communications did not qualify for the exception. In doing so, the Magistrate Judge made three errors that merit reversal. First, all of the Crime-Fraud Communications involved BP publically providing a flow rate estimate that bore little relation to the company’s best, internal estimates. All of the Crime-Fraud Communications, including the SEC 6-K statements, should qualify for application of the crime-fraud doctrine. Second, and even more important, the Magistrate Judge used the wrong standard for determining whether a given document was sufficiently related to the crime or fraud to qualify for the crime-fraud exception. Finally, she applied the legal standard incorrectly at step two by focusing on Mr. Rainey’s involvement with the documents, rather than how they were related to the Crime-Fraud Communications at issue. Evaluated correctly, all documents related to the preparation of the Crime-Fraud Communications should be produced, including all the documents identified by BP and others yet to be identified.

Legal Standard Applicable To The Crime-Fraud Exception

The crime-fraud exception is a “generally recognized exception” to the attorney-client privilege. United States v. Zolin, 491 U.S. 554, 556 (1989). Once established, the crime-fraud exception renders communications that otherwise were privileged subject to disclosure – “the privilege takes flight if the relation is abused.” Clark v. United States, 289 U.S. 1, 15 (1933). As the Court noted in Zolin, “courts long have viewed [the attorney-client privilege’s] central concern as one to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” 491 U.S. at 562. This rationale applies to clients making “full disclosure to their attorneys of past wrongdoings.” Id. However, the reason for the protection of attorney-client communications “ceas[es] to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing.” Id. at 562-63. Where the attorney-client privilege communication relates to “future wrongdoing,” the privilege is destroyed. See, e.g., United States v. Ballard, 779 F.2d 287, 292-293 (5th Cir. 1987) (“Once the party seeking disclosure makes a prima facie case that the attorney-client relationship was used to promote an intended criminal activity, the confidences within the relationship are no longer shielded.”).

Demonstrating that the crime-fraud doctrine applies to a particular communication requires a two-step analysis. First, the party challenging privilege must make a prima facie case “that the client intended to further an ongoing crime or fraud during the attorney-client relationship.” In re Grand Jury Subpoena, 419 F.3d 329, 346 (5th Cir. 2005). Once that showing is made, “the crime-fraud doctrine applies.” Id. The second element establishes which communications must be produced as a result of the crime or fraud shown in the first step.

The communications captured by the crime-fraud exception are those that “hold some valid relationship to the prima facie violation such that they reasonably relate to the fraudulent activity.” Id. To summarize the analysis, the first question is whether the crime-fraud doctrine applies at all. If it does, the second question addresses what set of communications must be produced.

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BP Oil Spill: Reply to PSC’s Response to the Open Letter Dated December 21, 2012

December 31, 2012

VIA Email

Mr. Stephen J. Herman
Plaintiffs’ Liaison Counsel
Herman, Herman, Katz & Cotlar, LLP
820 O’Keefe Avenue
New Orleans, LA 70113

Re: Reply to PSC’s Response to the Open Letter Dated December 21, 2012

Dear Steve,

I refer to the open letter, dated December 21, 2012, wherein I requested the PSC’s answers to ten questions in regard to its representation of my clients and all similarly-situated BP oil spill and Gulf Coast Claims Facility (“GCCF”) victims in MDL 2179.

You promptly responded, via email, by stating, “I respectfully decline to respond to your questions, which seem argumentative and disingenuous. To the extent you sincerely seek answers to the questions you pose, I invite you to review the numerous pleadings, transcripts and orders which are available on PACER.”

As I have already explained, your decision not to address the issues raised in the open letter, although completely understandable, is disturbing.

On December 21, 2012, subsequent to your receipt of the open letter, Judge Barbier granted final approval to the E&PD class settlement agreement. Notwithstanding this fact, all victims of the BP oil spill and the “Delay, Deny, Defend” strategy employed by Kenneth R. Feinberg, et al. have a right to clearly understand how and why they were represented by the PSC in MDL 2179.

The PSC’s clients are not being “argumentative and disingenuous” when they demand to know why they have not been fully compensated for their damages. Furthermore, as you are well aware, the answers to the ten questions in the open letter are not available on PACER. Only the PSC is in a position to fully and properly respond to these questions.

On December 25, 2012, you further state via email, “I suppose that you are free to attack the PSC and/or the Court in whatever way you deem appropriate.”

Steve, as you are well aware, the open letter is not an attack on any individual or group of individuals involved in MDL 2179 anymore than it is “argumentative and disingenuous.” It is, however, an indictment of a judicial system in which: (a) multidistrict litigation has been allowed to devolve to the point where the “Lexecon Rule” has been supplanted by the “Heyburn Rule;” and (b) district courts permit settlement class actions to continue to erode the public’s faith in the federal judicial system.

A. Multidistrict Litigation

1. The “Lexecon Rule”

In In re: Vioxx Prods. Liab. Litig. (“MDL 1657”), Judge Fallon’s analysis in regard to Lexecon is instructive.

“Traditionally, the cases in any given MDL originate from two sources.

First, cases are filed in, or removed to, federal courts across the country and transferred to the MDL court by the Judicial Panel on Multidistrict Litigation. See 28 U.S.C. § 1407(a). In these cases, the MDL court must apply the law of the transferor forum, that is, the law of the state in which the action was filed, including the transferor forum’s choice-of-law rules. See Ferens v. John Deere Co., 494 U.S. 516, 524 (1990). While the precise limits of the MDL court’s authority over such cases is currently subject to debate, it is clear that the court cannot try these cases, but rather must remand them to the transferor forum when pretrial discovery is complete. See Lexecon, Inc. v. Miberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

Second, a number of cases are often filed directly into the MDL by citizens who reside in the MDL court’s judicial district. In these cases, the MDL court must apply its own state law, that is, the law of the state in which it sits. It is undisputed that the MDL court has complete authority over every aspect of these cases.”

In re: Vioxx Prods. Liab. Litig., Case 2:05-md-01657 (E.D. La.) (“March 22, 2007 Order and Reasons”) (Rec. Doc. 10488).

2. The “Heyburn Rule”

The Heyburn Rule, in pertinent part, states, “To be sure, the Lexecon imperative does create severe inefficiencies in some cases as the transferor judge must re-familiarize himself or herself with the remanded action (perhaps many months after it was transferred out of the district under § 1407). However, the Heyburn Rule points out that “transferee judges are nothing if not resourceful where necessity dictates and several appropriate strategies are available by which the Lexecon conundrum may be avoided.”

Although Judge Barbier, the PSC, and BP refer to the MDL 2179 court’s “broad discretionary authority,” a “special-procedure” should not be crafted where a mandatory procedure already exists. It is important to remember that the very MDL procedures Judge Barbier, the PSC, and BP wish to circumvent were specifically enacted to reduce costs and promote judicial economy. Allowing the MDL 2179 trial plan is inconsistent with the clear statutory mandate of the multidistrict litigation enabling statute, 28 U.S.C. § 1407(a), and the Supreme Court’s holding in Lexecon. While the need to promote efficiency in litigation is real, it cannot be accomplished by overriding the applicable provisions set forth by Congress. In re: FEMA Trailer Formaldehyde Products Liability Litigation, 2009 WL 2390668 (E.D. La.).

The Heyburn Rule describes the Lexecon decision as a “conundrum” which may be avoided by “resourceful” transferee judges. My clients (who are now PSC’s clients) respectfully disagree. The Lexecon decision is not a conundrum. It is not an obstacle which judicial discretion may circumvent in the name of judicial efficiency/economy or political expediency. It is the law.

B. Settlement Class Actions

Settlement class actions are inherently flawed because they lack the “case” or “controversy” necessary to confer federal jurisdiction under Article III. The settlement class action court is asked not to resolve a real dispute between a litigant class and a party opposing that class, but rather merely to approve and implement a prearranged legal arrangement between the parties that was reached prior to the seeking of class certification.

While settlement class actions may have certain attractive aspects, such as reducing litigation expenses (MANUAL FOR COMPLEX LITIGATION, note 32, at § 21.612 (4th ed. 2004)), many of the traditional aspects of adversarial litigation are missing. As a result, the settlement class action is potentially the product of collusion among the parties: defendants who wish to rid themselves of the burden of litigation and plaintiffs’ counsel who wish to receive immediate compensation. Douglas G. Smith, The Intersection of Constitutional Law and Civil Procedure: Review of Wholesale Justice – Constitutional Democracy and the Problem of the Class Action Lawsuit, Northwestern University Law Review Colloquy, Vol. 104:319 (2010); See also, e.g., John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669, 714 (1986) (“Often, the plaintiffs’ attorneys and the defendants can settle on a basis that is adverse to the interests of the plaintiffs. At its worst, the settlement process may amount to a covert exchange of a cheap settlement for a high award of attorney’s fees.”). (Rec. Doc. 6902-1).

“BP and the PSC report that in February 2011 settlement negotiations began in earnest for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” (p. 3, Rec. Doc. 6418).

In sum, the PSC and other counsel allegedly performing common benefit work in MDL 2179 initiated settlement negotiations “in earnest” merely four (4) months after Judge Barbier appointed members to the PSC. (See Rec. Doc. 6831-1). Clearly, the MDL 2179 settlement class action was not achieved in the full context of adversarial litigation.

Furthermore, after the Supreme Court‘s decisions in Amchem and Ortiz it has become exceedingly difficult to certify a class in the context of a mass tort. (See MANUAL, supra note 22, § 22.7, at 413–14 (“After experimentation with class treatment of some mass torts during the 1980s and 1990s, the courts have greatly restricted its use in mass torts litigation.”); RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT 72 (2007) (“As embodied in Rule 23 of the Federal Rules of Civil Procedure in 1966, the modern class action seemed on its face a device with little applicability to mass torts.”)).

The American Law Institute‘s draft Principles of the Law of Aggregate Litigation summarizes the state of the law: “As a doctrinal matter, the class action has fallen into disfavor as a means of resolving mass-tort claims. This development reflects many factors, including concerns about the quality of the representation received by members of settlement classes, difficulties presented by choice-of-law problems, and the need for individual evidence of exposure, injury, and damages.” A.L.I., PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION: PROPOSED FINAL DRAFT, note 7, § 1.02, notes to cmt. b(1)(B), at 26 (Apr. 1, 2009).

Indeed, even before the Amchem and Ortiz decisions, courts had recognized that there was a national trend to deny class certification in drug or medical product liability/personal injury cases. This resistance to certification in such cases can be traced to the 1966 amendments to Rule 23, which specifically noted that the class action device was “ordinarily not appropriate” in a “mass accident” case where there would be “significant questions . . . affecting the individuals in different ways.” (See FED. R. CIV. P. 23, Notes of Advisory Committee on Rules, 1966 Amend. See also In re “Agent Orange” Prod. Liab. Litig., 818 F.2d 145, 164 (2d Cir. 1987) (“The comment to Rule 23(b)(3) explicitly cautions against use of the class action device in mass tort cases. Moreover, most courts have denied certification in those circumstances.” (citation omitted)).

Presentment

In your email of December 25, 2012, you also state, “…….I would suggest that your clients not participating in the Economic Settlement will best be served if you: (i) ensure that you and/or they make Presentment of what you and/or they believe to be their full damages before January 18, 2013; and then, having made such presentment, (ii) file (or re-file) (and/or amend) suit on their behalf by April 20, 2013….”

I appreciate your advice and sudden concern for my clients. However, whenever our firm filed a claim on behalf of a client with GCCF, a copy of the claim was also filed directly with BP. In each case, BP provided a letter confirming its receipt of the claim. I understood that if a lawsuit was to be brought against BP, it should be brought under OPA and, therefore, the OPA Presentment requirement would have to be fulfilled.

GCCF Release and Covenant Not to Sue

In your email of December 25, 2012, you further advise, “…. (iii) with respect to any client whom you believe to have executed an invalid GCCF Release, assemble and prepare the best case you can to support the argument that such Release was procured under fraud, error or duress.”

As you are aware, our firm’s position is that every GCCF Release and Covenant Not to Sue violates federal law, State contract law, and is contrary to public policy. We shall address this matter at the proper time.

Steve, the PSC response generated the following additional questions.

QUESTION NO. 11

Why did the PSC wait until one month before the claim filing deadline to notify all BP oil spill and GCCF victims (its clients) of the OPA “Presentment” requirement?

On October 8, 2010, Judge Barbier appointed the members to the PSC (Rec. Doc. 506). The PSC sent a letter, dated December 13, 2012 and filed with LexisNexis on December 17, 2012, to all BP oil spill and GCCF victims wherein it finally advises its clients: “you must make ‘Presentment’ under the Oil Pollution Act for your Short Form Joinder, lawsuit or other claim to be valid…..before January 20, 2013. ”

The PSC should have notified all BP oil spill and GCCF victims (its clients) of the “Presentment” requirement in October, 2010, not in December, 2012.

QUESTION NO. 12

Why has the PSC failed to notify all BP oil spill and GCCF victims (its clients) that a lawsuit may be filed against Kenneth R. Feinberg, et al. without having to fulfill the OPA “Presentment” requirement?

GCCF victims may file an action alleging that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF misled them by employing a “Delay, Deny, Defend” strategy. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.” In sum, Plaintiffs would allege that BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining Plaintiffs. See Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al., 2:11-cv-01987 and Salvesen v. Feinberg, et al., 2:11-cv-02533. Motions to Remand for both cases remain pending in this Honorable Court.

Since Feinberg, et al is not a “Responsible Party” and therefore may not be sued under OPA, a lawsuit against Feinberg, et al. may be filed immediately because it does not require Presentment. The PSC would, however, need to advise all GCCF victims in regard to the statute of limitations and the associated tolling of the statute of limitations for class actions and fraudulent concealment or a misrepresentation by the defendant.

QUESTION NO. 13

Why does the PSC, which failed to adequately challenge the legality of the GCCF Release and Covenant Not to Sue for the past two years, suddenly advise non-PSC attorneys to “assemble and prepare the best case you can to support the argument that such Release was procured under fraud, error or duress?”

The ultimate objective of the “Delay, Deny, Defend” strategy of Feinberg, et al. was to obtain a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible. Here, the GCCF Status Report as of March 07, 2012 is instructive. (See background information for “QUESTION NO. 8.”).

Feinberg, et al. cannot justify limiting payments under the Quick Payment Final Claim program to just $5,000 for individuals and $25,000 for businesses. There is no evidence that these amounts even remotely represent adequate consideration to compensate Claimants for the damages that Claimants did or will suffer as a result of the BP oil spill.

Steve, if the PSC had properly filed the B1 Master Complaint under OPA rather than alleging claims under admiralty law, Feinberg, et al. would never have been allowed to use the Release and Covenant Not to Sue to illegally exclude approximately 200,000 BP oil spill victims from the E&PD class settlement.

It has been, and remains, the responsibility of the PSC to “assemble and prepare the best case to support the argument that such Release was procured under fraud, error or duress.” On September 25, 2012, my clients filed their Motion to Nullify Each and Every Gulf Coast Claims Facility Release and Covenant Not to Sue. (See Rec. Doc. 7473-1). Please feel free to use the legal argument in this motion to assist with the preparation of the PSC case.

QUESTION NO. 14

Are you declining to answer these questions because you believe that an attorney-client relationship does not exist between the PSC and all BP oil spill and GCCF victims?

BP is extremely happy with the settlement. In a December 21, 2012 statement, BP said “it was pleased that the court approved the plaintiff steering committee’s settlement.” The PSC is ecstatic. Attorneys and CPA firms submitting claims for BP oil spill victims are giggling with delight over their new revenue stream. Unfortunately, the vast majority of BP oil spill victims are left scratching their heads over the entire MDL process and settlement class action. The numbers do not lie (See background information for “QUESTION NO. 8” and “QUESTION NO. 9”).

The combination of a settlement class action and MDL, which in this case appears to be “the product of collusion among the parties: defendants who wish to rid themselves of the burden of litigation and plaintiffs’ counsel who wish to receive immediate compensation,” has resulted in BP oil spill and GCCF victims receiving, if they are very fortunate, grossly inadequate compensation.

Steve, please understand that these fourteen questions are directed to the PSC by me on behalf of my clients (now PSC’s clients) and all similarly-situated BP oil spill and GCCF victims. These questions are not directed to the MDL 2179 Court. In sum, the PSC’s clients merely seek a better understanding of their representation by the PSC.

If you have any questions, please do not hesitate to contact me at 352-328-7469 or via e-mail at BrianJDonovan@verizon.net. Again, I would be happy to provide the PSC with any and all supporting documentation.

Very truly yours,

/s/ Brian J. Donovan

Brian J. Donovan

cc: James Parkerson Roy (jimr@wrightroy.com), Brian H. Barr (bbarr@levinlaw.com), Scott Summy (ssummy@baronbudd.com)

Click here to download a copy of this letter.

Click here to read the open letter.

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