The BP Oil Spill Settlement Is Wrong For America!
Brian J. Donovan
Tampa, FL (September 16, 2013) – 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.
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).
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
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.
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.
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.
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.
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.
Florida Plaintiffs Vow to Hold Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF Accountable for “Delay, Deny, Defend” Strategy
Florida Plaintiffs Vow to Hold Kenneth R. Feinberg, Feinberg Rozen, LLP,
and GCCF Accountable for “Delay, Deny, Defend” Strategy
Plaintiffs Refile Motions to Remand With MDL 2179 Court
Tampa, FL (November 10, 2011) – Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. and Salvesen v. Kenneth R. Feinberg, et al. were originally filed in Florida state court. Since the Judicial Panel on Multidistrict Litigation (“JPML”) has no power over cases pending in state courts, Defendants removed each case to federal court (“Middle District of Florida Court”). Defendants removed each case to federal court solely for the purpose of being able to subsequently file a “tag-along” notice with the JPML for the hopeful transfer of the cases to MDL 2179 in the United States District Court for the Eastern District of Louisiana. A Motion to Remand to State Court was filed by Plaintiffs in each case. Each case was transferred to MDL 2179 by the JPML before the Middle District of Florida Court determined the threshold jurisdictional issue: whether removal from state court was proper.
Earlier today, Plaintiffs’ counsel refiled the Pinellas and Salvesen motions to remand with the MDL 2179 Court.
In order to efficiently manage MDL 2179, the Court consolidated and organized the various types of claims into several “pleading bundles.” The “B1” pleading bundle includes all claims for private or “non-governmental economic loss and property damages.” There are in excess of 100,000 individual claims encompassed within the “B1″ bundle.
On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1″ bundle Master Complaint. The Court held that any individual plaintiff who is a named plaintiff in a case that falls within pleading bundle “B1″ “is deemed to be a plaintiff in the “B1″ Master Complaint.” Also, “the allegations, claims, theories of recovery and/or prayers for relief contained within the pre-existing petition or complaint are deemed to be amended, restated, and superseded by the allegations, claims, theories of recovery, and/or prayers for relief in the respective “B1″ Master Complaint(s) in which the Defendant is named.”
“B1″ Master Complaint
In the “B1″ Master Complaint, the Plaintiffs’ Steering Committee (“PSC”) alleged claims under general maritime law, the Oil Pollution Act of 1990 (“OPA”), 33 U.S.C. § 2701, et seq., and various state laws. Under general maritime law, PSC alleged claims for negligence, gross negligence, and strict liability for manufacturing and/or design defect. Under various state laws, PSC alleged claims for nuisance, trespass, and fraudulent concealment, and also alleged a claim for strict liability under the Florida Pollutant Discharge Prevention and Control Act, Fla. Stat.
§ 376.011, et seq. Additionally, PSC sought punitive damages under all claims and requested declaratory relief regarding any settlement provisions that purport to affect the calculation of punitive damages.
On August 26, 2011, the MDL 2179 Court granted in part Defendants’ Motions to Dismiss the “B1″ Master Complaint. The Court ruled: (a) Admiralty jurisdiction is present because the alleged tort occurred upon navigable waters of the Gulf of Mexico, disrupted maritime commerce, and the operations of the vessel bore a substantial relationship to traditional maritime activity. With admiralty jurisdiction comes the application of substantive maritime law; (b) State law, both statutory and common, is preempted by maritime law, notwithstanding OPA’s savings provisions. All claims brought under state law are dismissed; and (c) General maritime law claims that do not allege physical damage to a proprietary interest are dismissed under the Robins Dry Dock rule, unless the claim falls into the commercial fishermen exception. In re Oil Spill by the Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, – - F. Supp. 2d – -, 2011 WL 3805746 (Aug. 26, 2011 E.D. La.).
Pinellas, et al. v. Feinberg, et al. and Salvesen v. Feinberg, et al.
Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. and Selmer M. Salvesen v. Kenneth R. Feinberg, et al. are the only two cases of their kind filed in any court in the country. In each case, the complaint alleges, in part, that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and Gulf Coast Claims Facility (“GCCF”) misled Plaintiffs by employing a “Delay, Deny, Defend” strategy against them. 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.”
Both cases, originally filed in Florida state court, are brought by Plaintiffs under the following seven identical causes of action: (a) Gross Negligence; (b) Negligence; (c) Negligence Per Se; (d) Fraud; (e) Fraudulent Inducement; (f) Promissory Estoppel; and (g) Unjust Enrichment. Defendants in both cases are the same, with the exception that William G. Green, Jr. (“Overseer” of all seafood claims for Defendant GCCF in the State of Florida and “Liaison” to GCCF who is in charge of implementing Defendants’ “Delay, Deny, Defend” strategy) has also been named as a defendant in the Salvesen case.
Plaintiffs do not assert any claims under OPA and rely solely on state law. Plaintiffs’ allegation that Defendants are in violation of OPA is merely evidence of, at the very least, Defendants’ negligence.
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 the Pinellas and Salvesen plaintiffs and over 100,000 other victims.
The Pinellas and Salvesen plaintiffs, and all victims of the BP oil spill, continue to suffer damages from three separate sources: (a) once from the oil spill, the environmental and economic damages of which have devastated their way of life; (b) again by being left in financial ruin as a direct result of Defendants’ tortious acts; 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 litigation.
The passage of time is the defendant’s best friend. Memories fade, witnesses are more difficult to locate, and plaintiffs lose the desire to continue to fight and either “move on” or settle for less. By declining to permit formal discovery on Kenneth R. Feinberg and the GCCF, the MDL 2179 Court is ensuring that the defendants will not be held accountable and, more importantly, the claimants-turned-plaintiffs will not be fully compensated for damages.
Discovery on Feinberg/GCCF and the associated pressure of a trial are required in order exert pressure on the parties to negotiate a settlement which reflects the true value of the claims and not one which focuses on minimizing the liability of Feinberg Rozen, LLP, Feinberg/GCCF, and the responsible parties.
Neither the Pinellas nor the Salvesen case has been dismissed by the MDL 2179 Court. Plaintiffs in both cases look forward to eventually having their cases remanded to Florida state court where they will be able to hold Defendants accountable.
Lawsuit Filed in State Court Against Kenneth R. Feinberg, Feinberg Rozen, LLP and Gulf Coast Claims Facility
Lawsuit Filed Against Kenneth R. Feinberg, Feinberg Rozen, LLP and
Gulf Coast Claims Facility
Complaint Alleges Gross Negligence, Fraud, Fraudulent Inducement and Unjust Enrichment
Tampa, FL (March 2, 2011) – A first-of-its-kind lawsuit has been filed in state court in Florida against Kenneth R. Feinberg, Feinberg Rozen, LLP and Gulf Coast Claims Facility (“GCCF”). The 42-page complaint, filed by Attorney Brian J. Donovan on behalf of Pinellas Marine Salvage, Inc. and Mr. John Mavrogiannis alleges, in part, gross negligence, fraud, fraudulent inducement and unjust enrichment on the part of the defendants.
Pinellas Marine Salvage, Inc., a corporation organized under the laws of the State of Florida, is a full-service marine salvage facility on the west coast of Florida serving the Gulf Coast states of Louisiana, Mississippi, Alabama and Florida. The company was founded in January, 1997 by Mavrogiannis for the purpose of addressing a strong market need for used and refurbished marine parts, supplies and vessels. As a result of the actions of the defendants, the company is struggling to survive.
Feinberg, acting through and as Managing Partner of Feinberg Rozen, established GCCF to independently administer and where appropriate settle and authorize the payment of certain claims asserted against BP as a result of the explosion at the Deepwater Horizon rig and consequent spillage of oil into the Gulf of Mexico.
In their lawsuit, the plaintiffs allege, in part: (a) the defendants, without any legal authority for doing so, circumvent many of the rights provided to victims of the BP oil spill under the Oil Pollution Act of 1990; (b) the defendants employ a “Delay, Deny, Defend” strategy against claimants. 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; (c) the defendants delay payment by telling claimants, “claims will be paid within 90 days after substantiation.” Unbeknownst to the claimants, substantiation means “the claim has been received and reviewed by GCCF.” This definition of substantiation allows a claim to be received and held “under review” indefinitely by GCCF. When GCCF finally “substantiates” the claim, the claimant is told he or she will be paid within 90 days; (d) Feinberg uses the fear of costly and protracted litigation to coerce claimants to accept grossly inadequate settlements from GCCF. During widely-reported 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.” and “I take the position, if I don’t find you eligible, no court will find you eligible;” and (e) Feinberg misleads claimants by advising during well-reported town hall meetings, on a number of occasions, potential claimants that the fund which he administers is fully funded in the amount of $20 billion. At the end of 2010, the most the fund would have had in its escrow account would have been $5 billion.
Pinellas Marine Salvage, Inc. and Mavrogiannis seek economic and compensatory damages, in amounts to be determined at trial, and punitive damages.
Brian J. Donovan can be reached at BrianJDonovan@verizon.net.
A very different perspective is provided in the following excerpt from an article titled “Pinellas Marine Salvage sues Feinberg over oil spill claim” which appeared in the Tampa Bay Business Journal on March 11, 2011:
Carl Nelson, a shareholder at Fowler White in Tampa, represents 450 businesses – including national companies with nearly 2000 locations – bringing claims related to the spill. His experiences are counter to those outlined in the Mavrogiannis complaint.
“We’ve been treated quite nicely,” Nelson said. “We know how to do it. We’re using economists and forensic accountants.”
Under OPA, the party responsible for a spill is obligated to set up a claims process and to pay claimants that satisfy the conditions set up in the process, Nelson said. The remedy allowed in the law for claimants that satisfy the requirements but are not paid is to sue the responsible party.
“If my clients are not satisfied, then we’ll sue BP,” he said. “Feinberg has no duty to pay anybody.“