The Donovan Law Group

BP Oil Spill Victims: Gulf Coast Claims Facility, Litigation or Oil Spill Liability Trust Fund?

BP Oil Spill Victims: Gulf Coast Claims Facility, Litigation or Oil Spill Liability Trust Fund?

By Brian J. Donovan

November 3, 2010

INTRODUCTION

During town hall meetings organized to promote the Gulf Coast Claims Facility (GCCF), Kenneth 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.

The recently released documentary film Crude Justice, produced by the Alliance for Justice (AFJ), explores the difficulties victims of the BP oil spill will face when seeking access to justice “in the face of corporate domination of the courts, statutes favoring big business, judges with ties to the oil and gas industries, and the uncertainties that accompany an incident where the long-term effects may not be known for years.” According to Nan Aron, the president of the AFJ, victims of the BP oil spill “have two basic paths toward just and fair compensation. On the one hand, a victim can take BP’s offer of short-term help for current losses and then, later, a final payment, one condition of which is that he or she forgoes the right to sue BP in the future. On the other, victims have the right to pursue their claims through the courts, which have the advantage of having rules and procedures that theoretically should level the playing field, but which have the disadvantage of being in a region well stocked with judges who are thoroughly embedded in an oil culture. The route through the courts also takes plaintiffs on a path that leads ultimately to a strongly pro-corporate Supreme Court.” Ms. Aron also fails to mention that litigation is not the only alternative to GCCF.

Contrary to what BP and AFJ would like the American public to believe, GCCF and litigation are not the only avenues of compensation open to BP oil spill victims. A financially viable Oil Spill Liability Trust Fund (the “Fund”) is a third, and probably the best, avenue.

This article briefly discusses: (a) how GCCF, without any legal authority for doing so, circumvents many of the rights provided to oil spill victims under the Oil Pollution Act of 1990 (OPA); (b) why litigation, especially class action litigation, is not in the best interests of victims of the BP oil spill; and (c) why the Fund is probably the best avenue of compensation open to BP oil spill victims.

GULF COAST CLAIMS FACILITY

GCCF was meant to replace the inefficient claims process which BP had established to fulfill its obligations as a responsible party pursuant to OPA. Unfortunately, in lieu of making oil spill victims 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.

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 Feinberg allege that GCCF (and the protocols under which it operates) are structured to be compliant with OPA. The truth is that GCCF violates OPA, and thereby limits BP’s liability, in the following eight ways:
(a) paying only for harm or damage that is proximately caused by the BP oil spill and taking into account geographic proximity, nature of industry, and dependence upon injured natural resources;
(b) a single six-month emergency advance payment for lost income;
(c) a single final settlement payment;
(d) a limitation that no claim may be submitted to the GCCF “more than three years after the date the Protocol becomes operative;”
(e) an intentionally misleading claims procedure;
(f) failure to provide for interest on the amount paid in satisfaction of a claim;
(g) requirement that the claimant sign a general release of all rights the claimant may have against BP in order to receive the final settlement; and
(h) the intentional and systematic delay of payment of legitimate claims.

LITIGATION

Class Action Lawsuit
Teams of lawyers from across the country have descended on the Gulf Coast to file potential class action lawsuits, brought pursuant to Rule 23 of the Federal Rules of Civil Procedure, to recover damages suffered by plaintiffs and the class members as a result of the oil spill that resulted from the explosion and subsequent sinking of the Deepwater Horizon on April 22, 2010.

A class action lawsuit, brought pursuant to Rule 23 of the Federal Rules of Civil Procedure, was never intended to address mass torts. The Supreme Court observed that, while the text of Rule 23(b)(3) does not preclude certification in cases with significant damages, the drafters “had dominantly in mind” the use of the class action to aggregate relatively small individual recoveries into a case that would be worthwhile for an attorney to litigate. Amchem Products, Inc. v. Windsor, 117 S.Ct. at 2244.

Individual Lawsuit
Given that the damages suffered by the vast majority of individual potential plaintiffs as a result of the BP oil spill of April, 2010 are potentially so great, it should be economically feasible for many individual plaintiffs to file individual lawsuits. Here, class treatment would not be necessary to permit effective litigation of the claim. An individual lawsuit will: (a) ensure the plaintiff that the plaintiff’s attorney has his or her best interests in mind; (b) protect the plaintiff’s due process rights; (c) ensure that the plaintiff is not a victim of a so-called “faux” class action case, i.e., a case in which individual class members receive little or no compensation and only plaintiffs‘ counsel stand to benefit from class certification; (d) give the plaintiff control over the prosecution of the case; (e) allow the plaintiff to present evidence of exposure, injury, and damages relating to his or her particular claim; and (f) allow the plaintiff to make the decision on whether or when to settle.

Victims of the BP oil spill must realize that BP p.l.c., 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.

OIL SPILL LIABILITY TRUST FUND

The intent of Congress when it enacted OPA was “to eliminate, to the extent possible, the need for an injured person to seek recourse through the litigation process.” Prior to OPA, federal funding for oil spill damage recovery was difficult for private parties. To help address this issue, Congress established the Fund. The Fund, and not BP’s GCCF or costly and protracted litigation, will ensure BP oil spill victims are made whole.

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 Fund. 33 U.S.C. § 2713(c)

The maximum amount of money that may be withdrawn from the Fund is $1 billion per incident. 26 U.S.C. § 9509(c)(2)(A) However, any person, including the Fund, 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 Fund to recover any compensation paid by the Fund to any claimant pursuant to OPA, and all costs incurred by the Fund 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 Fund, for the cost or damages for which the compensation was paid. 33 U.S.C. § 2715(c)

On October 18, 2010, in order to ensure the financial viability of the Fund, The Donovan Law Group sent a letter to the Honorable Janet Napolitano, Secretary of the Department of Homeland Security, asking the Secretary to immediately request the Attorney General, pursuant to 33 U.S.C. § 2715, to commence an action against BP on behalf of the Fund to recover any compensation paid by the Fund to any claimant pursuant to OPA.

CONCLUSION

As of the date of this article, it has been 197 days since the blowout of the BP offshore oil well in the Gulf of Mexico.

The question is whether victims of the BP oil spill will have to pay thrice: (a) once for the  gusher, the environmental and economic damages of which will devastate their way of life and leave many in financial ruin; (b) again by being mislead and undercompensated by GCCF; 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 class action or individual lawsuits.

It is the federal government’s duty to guarantee the claims process established by BP provides at least the same protections and rights mandated by OPA. The Secretary of DHS is uniquely positioned, and has a duty pursuant to 33 U.S.C. § 2715(c), to ensure that victims of the BP oil spill are: (a) not victimized by GCCF; (b) not forced into filing unnecessary lawsuits; and (c) made whole by the Fund.
 

About the Author
Brian J. Donovan is an attorney and marine engineer with thirty-five years of international business experience.

Mr. Donovan, a member of The Florida Bar, The U.S. District Court, Middle District of Florida and The United States Court of Appeals for the Eleventh Circuit, holds a J.D. from Syracuse University College of Law (where he was recipient of the “Global Law & Practice Award” as the outstanding graduate in the areas of International Law and International Business Law) and a B.S., with honors, in Marine/Mechanical and Nuclear Engineering from the United States Merchant Marine Academy.

Mr. Donovan, with deep family roots in southern Louisiana, has first-hand knowledge of the catastrophic devastation of the Louisiana Gulf Coast caused by hurricanes Katrina and Rita. He fully appreciates that the damage caused by Katrina and Rita may pale in comparison to the massive and potentially unprecedented environmental and economic impact of the BP oil gusher of April, 2010.

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