The Donovan Law Group

Second Lawsuit Filed Against Kenneth R. Feinberg, Feinberg Rozen, LLP and Gulf Coast Claims Facility

Second Lawsuit Filed Against Kenneth R. Feinberg, Feinberg Rozen, LLP and
Gulf Coast Claims Facility
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Complaint Alleges Gross Negligence, Fraud, Fraudulent Inducement and Unjust Enrichment

Tampa, FL (June 21, 2011) – A second lawsuit has been filed in state court in Florida against Kenneth R. Feinberg, Feinberg Rozen, LLP and Gulf Coast Claims Facility (“GCCF”). The 38-page complaint was filed on June 15, 2011 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. Selmer M. Salvesen. The complaint alleges, in part, gross negligence, fraud, fraudulent inducement and unjust enrichment on the part of the defendants (Case No. 11-CA-002008).

Mr. Salvesen 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. As a result of the actions of the defendants, Mr. Salvesen’s aquaculture business 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.

The complaint alleges, in part, that Defendants misled Mr. Salvesen by employing a “Delay, Deny, Defend” strategy against him. 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.”

On April 22, 2011, 274 days after Mr. Salvesen presented a claim for damages to BP, GCCF finally denied his claim. This is in keeping with the “Delay, Deny, Defend” strategy alleged by Mr. Salvesen in his complaint – delay 274 days, deny compensation, then say to the claimant, “sue us.”

Mr. Salvesen is not able to sue Defendants under the Oil Pollution Act of 1990 (“OPA”) because his damages did not “result from” the oil spill and Defendants are not “responsible parties.” Defendants are independent contractors that administer, settle and authorize the payment of certain claims asserted against BP, the “responsible party.” Here, Defendants’ “Delay, Deny, Defend” strategy and associated tortious acts, not acts by BP, resulted in the financial ruin of Mr. Salvesen.

Donovan believes GCCF, without any legal authority for doing so, circumvents many of the rights provided to victims of the BP oil spill under the OPA. Under OPA, responsible parties for an oil spill are strictly liable for the payment of claims for specified damages. In order to recover damages, a claimant merely needs to show that his or her damages “resulted from” the oil spill. OPA states, “The responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages that result from such incident.” These damages include, but are not limited to: “Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant.”

Defendants, who cannot cite to a single authority, statutory provision, or fragment of legislative history supporting their position, argue that (a) “OPA imposes no duty on responsible parties other than to establish and advertise a process for receiving claims, not that they actually settle claims;” and (b) “OPA says nothing about how a claims process should work. It simply requires that the claimant and the responsible party have a chance to consider a settlement before the claimant may sue.”

“The overarching purpose of OPA’s mandatory alternative dispute resolution process is ‘to encourage settlement and avoid litigation.'” Boca Ciega Hotel, Inc. v. Bouchard Trans. Co., 51 F. 3d 235, 240 (11th Cir. 1995).

Defendants’ “Delay, Deny, Defend” strategy avoids settlement and encourages litigation. In addition to Mr. Salvesen’s lawsuit, this strategy by GCCF has resulted in more than 130,000 BP oil spill victims being forced to become Plaintiffs in MDL 2179.

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

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Lawsuit Filed in State Court Against Kenneth R. Feinberg, Feinberg Rozen, LLP and Gulf Coast Claims Facility

Posted in BP, Feinberg, Fraud, GCCF, Gross Negligence, Gulf Coast Claims Facility, lawsuit by renergie on March 2, 2011

Lawsuit Filed Against Kenneth R. Feinberg, Feinberg Rozen, LLP and
Gulf Coast Claims Facility
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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.

UPDATE

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.

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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.

BP Oil Spill: Letter Requests Secretary Napolitano to Take Action

BP Oil Spill: Letter Requests Secretary Napolitano to Take Action
______________________

Gulf Coast Claims Facility and Litigation Are Not the Only
Avenues of Compensation Open to BP Oil Spill Victims

By Brian J. Donovan

October 29, 2010

Contrary to what BP, and the recently released documentary film titled Crude Justice, would like the American public to believe, the Gulf Coast Claims Facility and litigation are not the only avenues of compensation open to BP oil spill victims. A financially viable Oil Spill Liability Trust Fund is a third option.

On October 18, 2010, 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 Oil Spill Liability Trust Fund (the “Fund”) to recover any compensation paid by the Fund to any claimant pursuant to OPA.

The full text of the letter follows.

October 18, 2010

VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED

The Honorable Janet Napolitano
Office of the Secretary
Department of Homeland Security
245 Murray Lane, SW
Washington, DC 20528

Re: BP Oil Spill and the Oil Pollution Act of 1990 (OPA)
Subrogation Rights for Payments Made for Damages, 33 U.S.C. § 2715

Dear Secretary Napolitano:

I am writing in regard to the above-referenced matter.

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 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.” As explained below, I believe the Oil Spill Liability Trust Fund (the “Fund”), and not costly and protracted litigation, will ensure injured persons are fully compensated for damages which they suffered resulting from the oil spill caused by the blowout of the BP offshore oil well on April 20, 2010.

The following briefly discusses: (a) the Fund and subrogation rights under OPA; (b) how GCCF, without any legal authority for doing so, circumvents many of the rights provided to oil spill victims under OPA; and (c) why litigation, especially class action litigation, is not in the best interests of victims of the BP oil spill.

Secretary Janet Napolitano
October 18, 2010
Page 2

I. Subrogation

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)

In order to ensure the financial viability of the Fund, I ask you to immediately request the Attorney General 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.

The question is whether victims of the BP oil gusher 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 individual lawsuits or class action lawsuits.

II. How GCCF, Without Any Legal Authority For Doing So, Circumvents Many of the  Rights Provided to Oil Spill Victims Under OPA

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.

Secretary Janet Napolitano
October 18, 2010
Page 3

GCCF limits BP’s liability via circumventing OPA in the following ways:

A. Proximate Causation
The GCCF Protocol states, “The GCCF will only pay for harm or damage that is proximately caused by the Spill. The GCCF will take into account, among other things, geographic proximity, nature of industry, and dependence upon injured natural resources.”

GCCF’s requirement that a claimant has the increased burden of proving “proximate causation” between his or her damages and the Deepwater Horizon incident is a clear violation of OPA. Furthermore, paying for damages based on geographic proximity and nature of industry is also a clear violation of OPA.

OPA is a strict liability statute. In order to recover damages, a claimant merely needs to show that his or her damages “resulted from” the oil spill. OPA states, “The responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages that result from such incident.” See 33 U.S.C. § 2702(a)

B. Single Emergency Advance Payment
The GCCF Protocol provides, “Emergency Advance Payment applications may be submitted during the period August 23 – November 23, 2010. After that date, applications for Emergency Advance Payments will no longer be accepted.”

A single six-month emergency advance payment for lost income is in violation of OPA. Moreover, the lack of a procedure for the payment or settlement of claims for interim, short-term damages beyond 90 days, as required by 33 U.S.C. § 2705, is also in violation of OPA.

OPA specifically provides for interim partial payments. “The responsible party shall establish a procedure for the payment or settlement of claims for interim, short-term damages. Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a).  The fact that a single payment does not preclude recovery by the claimant for future damages demonstrates that the legislative intent of Congress was for the responsible party to pay a series of partial claims in order to ensure that victims of the oil spill are fully compensated. Each of these partial claims would be paid after the date on which the claimant discovers damages resulting from the oil spill.

Secretary Janet Napolitano
October 18, 2010
Page 4

C. Single Final Settlement
A single final settlement payment is in violation of OPA.

OPA provides: (a) “Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a); and (b) Any person, including the Oil Spill Liability Trust 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. Moreover, payment of such a claim shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under OPA or under any other law. See 33 U.S.C. § 2715(b)(2)

D. Period of Limitations
A limitation that no claim may be submitted to the GCCF “more than three years after the date the Protocol becomes operative,” is in violation of OPA.

Under OPA, an action for damages shall be barred unless the action is brought within three years after the date on which the loss and the connection of the loss with the discharge in question are reasonably discoverable with the exercise of due care. 33 U.S.C. § 2717(f)(1)(A)

The damages suffered by victims of the BP oil gusher 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.

It is too early to calculate the economic damages for many potential claimants. GCCF’s “take it or leave it” final settlement requires a financially stressed victim to file a claim before the individual or business knows, and is able to corroborate, the full extent of the damages incurred as a result of the oil spill.

More importantly, how can a person predict the long-term health effects of his or her exposure to the oil? The benzene in spilled oil can cause leukemia and lymphoma which may not be diagnosed for several years after the date the GCCF Protocol becomes operative.

Secretary Janet Napolitano
October 18, 2010
Page 5

E. Intentionally Misleading Claims Procedure
Under OPA, claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). The term “claim” means “a request, made in writing for a sum certain, for compensation for damages or removal costs resulting from an oil spill incident.” 33 U.S.C. § 2701(3) In the event that a claim for damages is 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.

The GCCF Protocol: (a) fails to acknowledge that the filing of a claim with GCCF satisfies 33 U.S.C. § 2713(a); and (b) is ambiguous as to when the 90-day OPA clock for payment starts. The GCCF Protocol states, “Whether or not a claim has been presented shall be governed by OPA and applicable law.” Moreover, GCCF requires that every claimant who has a pending claim with BP will have to refile his or her claim on an 18-page claims form. Does this refiling restart the 90-day clock? What if a claimant fails to refile his or her claim? GCCF is meant to facilitate settlement. It is not meant to confuse claimants or incite litigation as a result of an intentionally misleading claims procedure.

F. Interest on the Amount Paid
Pursuant to OPA, 33 U.S.C. § 2705(a), the responsible party or the responsible party’s guarantor is liable to a claimant for interest on the amount paid in satisfaction of a claim. The period for which interest shall be paid is the period beginning on the 30th day following the date on which the claim is presented to the responsible party or guarantor and ending on the date on which the claim is paid.

The GCCF Protocol, in violation of OPA, fails to provide for interest on the amount paid in satisfaction of a claim.

G. Waiver of Right to Sue
GCCF’s requirement that the claimant sign a general release of all rights the claimant may have against BP in order to receive the final settlement is in violation of OPA.

OPA provides: (a) “Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” 33 U.S.C. § 2705(a); and (b) 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. Moreover, payment of such a claim shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under OPA or under any other law. 33 U.S.C. § 2715(b)(2).

Secretary Janet Napolitano
October 18, 2010
Page 6

Partial payments, including a partial “final settlement” payment, do not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim. If the claimant must sign a general release of all rights the claimant may have against BP in order to receive this partial “final settlement” payment, this required GCCF waiver of the right to sue by the claimant is in violation of OPA.

III. Why Litigation, Especially Class Action Litigation, is Not in the Best Interests of Victims of the BP Oil Spill

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.

For a detailed discussion of why class action litigation may not be in the best interests of BP oil spill victims, visit: http://donovanlawgroup.wordpress.com/2010/05/09/bp-oil-spill-of-april-2010-why-class-action-lawsuits-may-not-be-in-the-best-interests-of-potential-plaintiffs/

IV. Conclusion

The question is whether victims of the BP oil gusher 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 individual lawsuits or class action lawsuits.

Proponents of the BP claims process and GCCF routinely ask, “But GCCF does not prohibit victims from rejecting the lump-sum payment in the hopes of attaining a larger settlement through litigation, correct?” This is true if the victims have not already starved to death. The BP claims process and GCCF have been a delaying tactic. Some claimants, including my clients, have already been waiting for over 90 days because BP, and now GCCF, have placed their claims on hold. Unfortunately, the purpose of GCCF is to limit BP’s liability, not to fully compensate victims as expeditiously as possible.

Secretary Janet Napolitano
October 18, 2010
Page 7

As of the date of this letter, it has been 181 days since the blowout of the BP offshore oil well in the Gulf of Mexico. Time is of the essence. The economic stress that victims of the BP oil spill continue to experience as a result of the disruption of their business activities caused by the BP oil spill is significant. GCCF’s tactics of: (a) delaying payment by placing claims “under review” for an indefinite period of time; (b) eventually denying claims; and (c) offering a “take it or leave it” final settlement which requires a financially stressed victim to file a claim before the individual or business knows, and is able to corroborate, the full extent of the damages incurred as a result of the oil spill are unacceptable.

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. As Secretary of DHS, OPA uniquely positions you to ensure that victims of the BP oil spill are: (a) made whole; (b) not victimized by GCCF; and (c) not forced into filing unnecessary lawsuits.

I ask you to immediately request the Attorney General 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.

Thank you for your prompt attention to this matter. If you have any questions, please do not hesitate to contact me at 352-328-7469 or via e-mail at BrianJDonovan@verizon.net.

Very truly yours,
Brian J. Donovan

BJD/rc

cc:   The Honorable Edward J. Markey
The Honorable Jeff Sessions
The Honorable Eric H. Holder, Jr.

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Will Victims of the BP Oil Gusher Also Be Victims of Class Action Lawsuits and the BP Oil Spill Victim Compensation Fund?

Will Victims of the BP Oil Gusher Also Be Victims of Class Action Lawsuits
and the BP Oil Spill Victim Compensation Fund?

By Brian J. Donovan

July 16, 2010

INTRODUCTION

The question is whether victims of the BP oil gusher 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 for daring to demand justice, which will consume their time, energy and hopes for years to come if they are held hostage by class action lawsuits; and (c) a third time by being mislead and undercompensated by the “BP Oil Spill Victim Compensation Fund (BPOSVCF).”

THE BP OIL GUSHER

The damages suffered by victims of the BP oil gusher 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.

Pursuant to the Oil Pollution Act of 1990 (OPA), for an offshore facility the total of the liability of a responsible party and any removal costs incurred by, or on behalf of, the responsible party, with respect to each incident shall not exceed the total of all removal costs plus $75,000,000.

However, this limit on liability “does not apply if the incident was proximately caused by gross negligence, willful misconduct of, or the violation of an applicable federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party.”

OPA broadened the scope of damages (i.e., costs) for which an oil spiller would be liable. Under OPA, a responsible party is liable for all cleanup costs incurred, not only by a government entity, but also by a private party. In addition to cleanup costs, OPA significantly increased the range of liable damages to include the following:

• injury to natural resources,
• loss of personal property (and resultant economic losses),
• loss of subsistence use of natural resources,
• lost revenues resulting from destruction of property or natural resource injury,
• lost profits resulting from property loss or natural resource injury, and
• costs of providing extra public services during or after spill response.

Given BP’s documented violation of federal safety regulations aboard the Deepwater Horizon, e.g., using an improper cementing technique to seal the well, failing to adequately test and maintain blowout prevention equipment and drilling deeper than BP’s federal permit allowed, there will be no limitation on BP’s liability. (Oil Pollution Act of 1990, 33 U.S.C. 2704).

Furthermore, BP may be liable to the United States and to Louisiana for damages resulting from lost royalties. Pursuant to Section 2702 of OPA, “Notwithstanding any other provision or rule of law, and subject to the provisions of this Act, each responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident…”, including revenue losses such as “taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political subdivision thereof.” (Oil Pollution Act of 1990, 33 U.S.C. 2702(b)(2)(D)).

BP also faces uncapped liability under a little-known Clean Water Act (CWA) civil damages provision.

Pursuant to Section 1321 of the CWA, “Any person who is the owner, operator, or person in charge of any vessel, onshore facility, or offshore facility from which oil or a hazardous substance is discharged in violation of paragraph (3), shall be subject to a civil penalty in an amount up to $25,000 per day of violation or an amount up to $1,000 per barrel of oil or unit of reportable quantity of hazardous substances discharged. In any case in which a violation of paragraph (3) was the result of gross negligence or willful misconduct of a person described in subparagraph (A), the person shall be subject to a civil penalty of not less than $100,000, and not more than $3,000 per barrel of oil or unit of reportable quantity of hazardous substance discharged.” (Clean Water Act, 33 U.S.C. 1321).

Under the CWA, the basic fine is $1,100 per barrel spilled. But the penalty can rise to $4,300 a barrel if a federal court rules the spill resulted from gross negligence. As noted above, the fines were originally set at $1,000 to $3,000 but that was raised in 2004 to keep up with inflation. Accordingly, the number of barrels of oil being released from the well is going to be critical.

If the government pursues civil fines based on the volume of oil spilled, it would take into consideration whether BP has made its best effort to mitigate the spill, its prior history of offenses, if any, and whether BP can bear the cost of fines, among other factors. BP received the third-largest criminal penalty, of $50 million, for an environmental offense in U.S. history for a Texas City refinery fire in 2005. BP subsidiaries remain under federal probation for prior offenses in Texas and Alaska.

As of July 16, 2010, regardless of whether you prefer to say “spill” or “gusher,” these are the numbers to consider:

Total Amount of Oil Released to Date: 4,675,000 barrels
Amount of Oil Recovered by BP to Date (via Containment Cap): 826,800 barrels
Oily Water Recovered (via Skimming): 792,857 barrels of oily water = 79,286 barrels of oil
Oil Consumed by Controlled Burns: 261,191 barrels
Total Amount of Unrecovered Oil in the Gulf of Mexico to Date: 3,507,743 barrels

In this case, “Barrels Spilled” means “Oil Consumed by Controlled Burns” + “Total Amount of Unrecovered Oil in the Gulf of Mexico” = 261,191 + 3,507,743 = 3,768,934 barrels of oil spilled.

Under the CWA alone, gross negligence penalties based upon 3,768,934 barrels of oil spilled would equal $16,206,416,200. This equates to a penalty of approximately $191 million per day. BP’s net profits in the first quarter of 2010 were approximately $6.7 million per day.

It is obvious why BP, despite having the ability to obtain a very accurate flow rate, does not want a more accurate oil spill measurement. It is also very obvious why BP does not want to collect a great deal of the oil spill. Since April 22, 2010, BP admits that its skimming operations have been able to recover only 792,857 barrels of oily water. This equates to collecting a total of only 79,286 barrels of oil from the Gulf of Mexico since April 22, 2010.

The federal government has abdicated its responsibility. Pursuant to OPA Section 4201, and given that the BP oil spill is a “discharge posing substantial threat to public health or welfare,” President Obama should have federalized the collection of the oil that is in the sea and the restoration of the coastal areas impacted by the oil. Both of these activities could be done without having to federalize the operational priority of stopping the flow of oil from the well.

The Obama administration has no intention of holding BP accountable under either OPA 90 or CWA. Under the CWA, BP faces fines of up to $4,300 for each barrel spilled. Furthermore, pursuant to Section 2702 of OPA 90, BP would be required to pay royalties (18.75%) owed to the federal government for the oil gushing from the well.

If the federal government intended to collect $4,300 and a royalty of 18.75% for each barrel spilled, it would:

(a) try to have at least a very rough estimate of the number of barrels gushing from the BP well. This estimate does not exist. From April 28th to May 27th, the official estimated flow rate was 5,000 bbl/day. This intentionally underestimated amount of oil being released from the BP well was from NOAA, not BP. NOAA fully supported, and continues to fully support, BP’s strategy to underestimate the amount of oil being released from the well. “I think the estimate at the time was, and remains, a reasonable estimate,” said Dr. Lubchenco, the NOAA administrator. “Having greater precision about the flow rate would not really help in any way. We would be doing the same things.”

(b) collect every barrel of oil that is released into the Gulf of Mexico before it reaches the marshes of Louisiana and the beaches of Alabama, Mississippi and Florida. This would require stopping the use of dispersants to allow the oil to reach the surface and using tankers to collect the oil. To date, the federal government has allowed BP to use more than 1,840,000 gallons of oil dispersant.

An accurate measurement of the flow of oil and collection of the oil spilled into the Gulf of Mexico could change the way people remember this gusher and their opinion of BP.  Once the leak is plugged and the oil is dispersed throughout the oceans of the world, who’s to say for certain whether BP’s oil well blowout gushed an average of 1,000 or 100,000 bbl/day of oil?

CLASS ACTION LAWSUITS

Teams of lawyers from across the country have descended on the Gulf Coast to file potential class-action lawsuits to recover damages suffered by the lead plaintiff(s) and absent class members as a result of the BP oil gusher.

A class action is a procedural device that permits one or more plaintiffs to file and prosecute a lawsuit on behalf of a larger group. The larger group consists of the class members who have suffered the same wrong at the hands of the defendant but who are too numerous for the court to adequately manage the lawsuit if each class member were required to be joined as named plaintiffs.

In order to proceed as a class action, the case must be “certified” as a class action: that is, a court must determine that the class action criteria set forth in Rule 23 of the Federal Rules of Civil Procedure have been met. A class certified under Rule 23(b)(3) is distinct from a class certified under Rule 23(b)(1) or (2) in one important way. If a Rule 23(b)(3) class is certified, “notice” of the class action must be sent to class members and an opportunity to “opt-out” of the class must be provided. In contrast, a class certified under Rule 23(b)(1) or (2) is “mandatory,” notice is not required, and no class member may opt-out. Despite requirements regarding the notice that must be given to absent class members, there is always the possibility that many class members will not receive notice of the litigation or that such notice will be insufficient to fully inform them of their rights, thereby depriving them of any meaningful opportunity to opt-out.

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.

The Supreme Court has observed that, while the text of Rule 23 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.

Given that the damages suffered by the vast majority of individual potential plaintiffs as a result of the BP oil gusher 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 would: (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 class action 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.

BP Plc, 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.

Victims of the BP oil gusher who have suffered significant losses should dare to demand justice by immediately seeking competent legal counsel, filing individual lawsuits, and actively participating in the litigation of their claims.

BP OIL SPILL VICTIM COMPENSATION FUND

On June 16, 2010 President Obama announced that BP has agreed to set aside $20 billion to pay economic damage claims to people and businesses that have been affected by the BP oil gusher. President Obama stated, “This $20 billion will provide substantial assurance that the claims people and businesses have will be honored. It’s also important to emphasize this is not a cap.  The people of the Gulf have my commitment that BP will meet its obligations to them. BP has publicly pledged to make good on the claims that it owes to the people in the Gulf, and so the agreement we reached sets up a financial and legal framework to do it.

Another important element is that this $20 billion fund will not be controlled by either BP or by the government. It will be put in a escrow account, administered by an impartial, independent third party. So if you or your business has suffered an economic loss as a result of this spill, you’ll be eligible to file a claim for part of this $20 billion. This fund does not supersede either individuals’ rights or states’ rights to present claims in court. BP will also continue to be liable for the environmental disaster it has caused, and we’re going to continue to work to make sure that they address it.”

The Obama administration indicated any money paid to claimants will be counted against future settlements, to prevent double-dipping.

BP and the Obama administration agreed to appoint Kenneth Feinberg, a Washington lawyer and Democratic Party supporter who administered the claims process for victims of 9/11, to run the independent claims process commonly referred to as the BP Oil Spill Victim Compensation Fund.  Feinberg declined to comment on how much BP is paying him to run the fund.

BP’s offer to settle quickly might be a savvy move if Feinberg can obtain ironclad releases from the shrimpers, hotel owners and thousands of other people who claim they’ve lost money because of the gusher. BP could save hundreds of millions of dollars in legal fees by preemptively funding the settlement. Feinberg said that at his request, lawyers for BP will be involved in drafting releases that exempt BP – but not other potential defendants – from any future liability for the spill. “This makes sense, since the release is designed to provide BP protection from lawsuits, and BP is paying $20 billion to satisfy claims,” Feinberg said in an e-mail message.

In theory, Feinberg and BP’s lawyers can craft an ironclad release, like the ones used to settle car-accident lawsuits every day. However, that could be a difficult proposition. “In practice, with this incident not only is there an ongoing catastrophe today, but its full effects won’t be felt for years,” said Burton LeBlanc, an attorney in the Baton Rouge, La., office of Baron & Budd, a Dallas firm that is prominent in asbestos and toxic-tort litigation. “The damages for some constituencies can’t be calculated yet.” Baron & Budd has even issued a news release reminding potential plaintiffs that the benzene in spilled oil can cause leukemia and lymphoma and pose “a serious health impact that can last for half a century.”

The BP fund is an attempt to buy peace by overwhelming potential plaintiffs with “easy” money. Companies have tried that before, with mixed success. Asbestos manufacturers failed miserably when they negotiated a global settlement with plaintiff lawyers in the early 1990s under which they’d pay out $300 million to injured workers in exchange for having cases of workers who were exposed, but not sick, valued at zero. The Supreme Court rejected the settlement in 1997 because it bound future claimants to terms they had no part in negotiating. The companies were out the $300 million and still faced thousands of asbestos lawsuits.

Feinberg’s Roadshow
On July 15, 2010, Feinberg, flying on a private jet paid for by BP, toured Louisiana and tried to assure affected residents they would be fairly compensated. He announced that he expects to set up shop for the independent BPOSVCF within the next two to three weeks. The BPOSVCF will operate for three years.

Feinberg explained the compensation plan includes two components: a no-obligation six month emergency payment for lost income and a final lump-sum payment with acceptance of release for BP. All victims can apply for the six month payment, up until ninety days after the well is capped. However, if claimants choose to accept the second and final BPOSVCF offer, they waive any right to bring further court proceedings against BP.

If victims do not consider the final offer sufficient, they may turn it down and pursue higher payments through the courts. However, Feinberg views the lack of court proceedings associated with his facility as a win-win for both sides. “Everyone should come in,” and the matter will be over with, in a matter of weeks or months, rather than years.

“When the oil has stopped, and we all know where it is heading, then I really urge you to come forward with a lump-sum request for payment,” Mr. Feinberg said on July 15th at a town-hall meeting attended by hundreds in Houma, La. Fielding repeated queries about how long-term damage from the spill will be measured, he said that his team would make its best estimates in calculating its final reimbursement offers.

Feinberg plans to apply tort-law principles in weighing claims, meaning plaintiffs will have to show that their losses wouldn’t have occurred “but for” the oil spill. “I am determined to come up with a system more generous and more beneficial than if you file a lawsuit,” Feinberg said.

Opposition to the BPOSVCF
On July 13, 2010, Alabama Attorney General Troy King wrote a letter to President Obama, urging the president to scrap Feinberg’s proposals for administering the BPOSVCF. “The document appears collusive at best and contrary to the public interest at worst,” King wrote to Obama. King said he was shocked that the Gulf states hadn’t been asked for input before Feinberg and BP reached the ninth draft of the plan. He called it “an illegal attempt” to limit BP’s liability under federal law. He also said that it aimed to keep people who have suffered damage out of state courts by making them sign a release waiving lawsuits or additional claims against BP.

“The federal government, especially the executive branch, has no business usurping state court jurisdiction and meddling in the state law liability arising from the oil spill,” King wrote.

Given that losses could continue for months or years after the gusher is stopped, King is justifiably concerned that the BPOSVCF would terminate interim claims ninety days after the well is capped and allow just one final claim thereafter.

On July 14, 2010, attorneys general from the five Gulf states met with U.S. Attorney General Eric Holder in Mobile, Alabama. Attorney General  Jim Hood of Mississippi and Attorney General Troy King of Alabama said the meeting was dominated by talk of a proposal Feinberg sent to the Gulf states that would have ended claims payments ninety days after the well is capped and required people to sign a release of liability before collecting their last payment from the BPOSVCF.

Hood said Holder recognized the flaws in the current BPOSVCF plan. “This is going to go on for three, five, ten years after the spill is stopped,” Hood said. Mr. Feinberg “can’t treat it like 9/11,” which, Hood said, for all of its horror, took place on a single day.

King said Holder would put together a panel of attorneys and officials, with heavy representation from the Gulf Coast, to draft a new proposal to submit to Feinberg. “The focus should be on protecting the Gulf states and making sure everyone is made whole,” said King.

Issues BP Victims Must Consider
Many businesses are concerned it will be difficult, if not impossible, to forecast the long-term recovery of the crab and shrimp populations, or how quickly U.S. consumers will re-embrace Gulf seafood, among other things.

Gary Bauer, president of Pontchartrain Blue Crab Inc., a seafood wholesaler and processor on Salt Bayou east of New Orleans, said his sales of blue crab and shrimp have dropped to 20% of their normal $8 million-a-year pace. In addition, foreign seafood suppliers are moving in on his network of grocers, restaurants and other buyers, further denting his long-term prospects. “Are we going to have a crab season next year, and are there going to be fishermen who will fish next year?” Mr. Bauer said. “How does BP reimburse for that? I spent 10 years of my life building a brand, and they destroyed it.”

Wayne Hess, manager of American Seafood Inc., a processor and wholesaler in New Orleans, said his sales were down roughly 30% from their annual average of $5 million to $7 million. “How am I supposed to project my losses not knowing how all of the different species we carry will be affected in the next year to five years?” he said. “The female crabs that are mating right now don’t drop their eggs until October or December. Those larvae may not make it.”

How can those in the tourism and fishing industries possibly know the extent of the damage to their business without knowing what next year’s season will be like? How can a person predict the long-term health effects of his or her exposure to the oil? As noted above, the benzene in spilled oil can cause leukemia and lymphoma and pose “a serious health impact that can last for half a century.”

So far, economic damage estimates vary widely. Greater New Orleans Inc., the economic-development agency for the 10-parish area, published preliminary estimates that the region’s fishing industry stands to suffer annual losses ranging from $900 million to $3.3 billion.

According to estimates from bond rating agency Moody’s, BP has total proven reserves of approximately 18 billion barrels of oil in the ground. BP has the ability and responsibility to fully compensate each and every BP oil gusher victim.

Conflict of Interest
“I’m working for you,” Feinberg repeatedly stated to the crowds of victims in Louisiana, and he called for local collaboration.

Feinberg is being compensated by BP, travels on a private jet paid for by BP, and has requested that lawyers for BP, not attorneys general from the Gulf states, be involved in drafting releases that exempt BP – but not other potential defendants – from any future liability for the spill.

An important rule of interpretation in administrative law is the “duck rule” – if it walks like a duck and quacks like a duck, it’s probably a duck. Abraham Lincoln reportedly explained a stronger version of this rule in his answer to the question, “If you call a dog’s tail a leg, how many legs does a dog have? Four. Just because you call the tail a leg doesn’t make it one.” Feinberg is a BP duck. Just because he says he is working for you doesn’t mean he is.

Councilman Thomas Capella from Jefferson Parish, Louisiana asked Feinberg if claimants should hire an attorney. Feinberg said that’s not necessary because his office will have attorneys on staff to provide free services to individuals and businesses. The fact that Feinberg’s attorneys intend to represent both BP and BP’s victims is an egregious conflict of interest.

“I am determined to come up with a system more generous and more beneficial than if you file a lawsuit,” Feinberg said. The question is whether the system will be more generous and more beneficial for BP or BP’s victims.

Animated and lively, with a little Bostonian humor, it has been reported Feinberg held the attention of the overflowing crowds during his recent roadshow in Louisiana. A reporter stated, “He jabs the air, punches up words to drive home a point and gets laughs with self-deprecating references to his Boston accent.” Rather than saying “cheese” when he posed for a photo with four police officers, he said, “Everybody file a claim?”

The following joke may be more appropriate for Feinberg’s BPOSVCF plan:

Question: What is the name of the bayou that is most representative of the federal government’s response to the victims of the BP oil gusher?
Answer: Bayou Self

CONCLUSION

Under the CWA alone, gross negligence penalties based upon 3,768,934 barrels of oil spilled would equal $16,206,416,200. Unfortunately, the federal government has no intention of holding BP accountable under either OPA 90 or CWA. Pursuant to OPA Section 4201, and given that the BP oil spill is a “discharge posing substantial threat to public health or welfare,” President Obama should have federalized the collection of the oil that is in the sea and the restoration of the coastal areas impacted by the oil. Both of these activities could be done without having to federalize the operational priority of stopping the flow of oil from the well. To date, the federal government has allowed BP to use more than 1,840,000 gallons of oil dispersant. Once the well is capped and the oil is dispersed throughout the oceans of the world, who’s to say for certain whether BP’s oil well blowout gushed an average of 1,000 or 100,000 bbl/day of oil?

Each individual potential plaintiff who has suffered damages as a result of the BP oil gusher should immediately seek competent legal counsel to directly represent his or her interests. If the amount of damages suffered by the individual potential plaintiff is small, it may not be economically feasible for the plaintiff to file an individual lawsuit. Accordingly, a class action lawsuit may be in the best interests of this plaintiff. However, given that the damages suffered by the vast majority of individual potential plaintiffs as a result of the BP oil gusher are potentially so great and will be on-going, class treatment would not be necessary to permit effective litigation of the claim. Here, when the amount of damages suffered by the individual is so great, the filing of an individual lawsuit should be economically feasible and may be in the best interests of the plaintiff. This decision should be made by the potential plaintiff only after a thorough consultation with his or her legal counsel.

The BPOSVCF is not administered by an impartial, independent third party. However, claimants will only waive their right to sue if they accept a final lump-sum payment. They can still sue if they only accept an initial emergency payment. Therefore, acceptance of a no-obligation six month emergency payment for lost income may be in the best interests of victims of the BP oil gusher. The decision to accept a final lump-sum payment, and thereby waive any right to bring further court proceedings against BP, should be made by the BP oil gusher victim only after a thorough consultation with his or her legal counsel.

APPENDICES

References
Adams, Mike, “First Amendment suspended in the Gulf of Mexico as spill cover-up goes Orwellian,” NaturalNews (July 3, 2010), available at: http://www.naturalnews.com/029130_Gulf_of_Mexico_censorship.html

Bhattacharyya, S., P.L. Klerks, and J.A. Nyman. 2003. Toxicity to freshwater organisms from oils and oil spill chemical treatments in laboratory microcosms. Environmental Pollution 122:205-215.

BP is Not the Only Responsible Party, available at: http://renergie.wordpress.com/2010/05/25/bp-is-not-the-only-responsible-party/

Chokkavelu, Anand, “The BP Stat That Will Shock You,” Motley Fool (July 9, 2010), available at: http://www.msnbc.msn.com/id/38165954/ns/business-motley_fool/

Clean Water Act

EPA: http://www.epa.gov/oem/content/lawsregs/opaover.htm

Fisher, Daniel and Hawkins, Asher, “BP’s Legal Blowout,” Forbes.com (July 14, 2010)

Greenwald, Glenn, “The BP/Government police state,” Salon (July 5, 2010), available at:
http://www.salon.com/news/opinion/glenn_greenwald/2010/07/05/bp/index.html

Hals, Tom, “Analysis: BP investors face tough road in court fights,” Reuters (July 16, 2010)

Hudson, Kris and Baskin, Brian, “Fears Mount That Fund Won’t Cover All Damages,” The Wall Street Journal (July 15, 2010)

Kindy, Kimberly, “Recovery effort falls vastly short of BP’s promises,” Washington Post
(July 6, 2010), available at:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/05/AR2010070502937.html

Lustgarten, Abrahm, “Chemicals Meant To Break Up BP Oil Spill Present New Environmental Concerns,” ProPublica (April 30, 2010), available at: http://www.propublica.org/article/bp-gulf-oil-spill-dispersants-0430

MMS: http://www.mms.gov/

Murtaugh, Dan, “Attorney General Eric Holder says he’ll try to address oil spill claims concerns,” Press-Register (July 15, 2010)

National Contingency Plan

NOAA: http://www.noaa.gov/

Oil Pollution Act of 1990

Peters, Jeremy W., “Efforts to Limit the Flow of Spill News,” The New York Times (June 9, 2010)

Philips, Matthew, “BP’s Photo Blockade of the Gulf Oil Spill,” Newsweek (May 26, 2010), available at: http://www.newsweek.com/2010/05/26/the-missing-oil-spill-photos.html

Schoof, Renee and Bolstad, Erika, “BP well may be spewing 100,000 barrels a day, scientist says,” McClatchy Newspapers (June 7, 2010), available at: http://www.mcclatchydc.com/2010/06/07/95467/bp-well-may-be-spewing.html

Schoof, Renee, “Scientists propose big experiment to study Gulf oil spill,” McClatchy Newspapers (July 11, 20100, available at:
http://www.miamiherald.com/2010/07/11/1725271/scientists-propose-big-experiment.html

Schwartz, John, “More Delicate Diplomacy for the Overseer of the Compensation Fund,” The New York Times (July 16, 2010)

USA Today: http://content.usatoday.com/communities/greenhouse/post/2010/05/how-responsible-is-us-government-for-gulf-oil-spill/

USCG: http://www.uscg.mil/

Walsh, Bryan, “The Oil Spill and the Perils of Losing Trust,” Time (July 7, 2010), available at:
http://ecocentric.blogs.time.com/2010/07/07/the-oil-spill-and-the-perils-of-losing-trust/
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.

BP Oil Spill of April, 2010: Why Class Action Lawsuits May Not be in the Best Interests of Potential Plaintiffs

BP Oil Spill of April, 2010

Why Class Action Lawsuits May Not be in the Best Interests of Potential Plaintiffs

By Brian J. Donovan

May 9, 2010

INTRODUCTION

On April 20, 2010, the Transocean semi-submersible drilling unit Deepwater Horizon explodes and catches fire, approximately 51 miles southeast of Venice, Louisiana, while finishing a well for British Petroleum (BP). On April 22, 2010, a second explosion occurs causing the Deepwater Horizon to sink. Kinks in the riser (a long pipe that connects the wellhead to the rig), created as the rig sank to the seafloor, may be all that is preventing the Deepwater Horizon well from releasing its maximum flow. Sand is an integral part of the formations that hold oil under the Gulf. This abrasive sand, carried in the oil as it shoots through the pipe at high velocity, is resulting in the ongoing erosion of the riser. Under a worst-case scenario, if the riser were to disintegrate due to this internal sandblaster-like erosion, the resulting catastrophic failure could easily release 60,000 to 160,000 barrels of oil per day. The formation that was being drilled by Deepwater Horizon when it sank is reported to have tens of millions of barrels of oil.

The media is reporting that teams of lawyers from across the country are descending 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 oil rig Deepwater Horizon on April 22, 2010.

This article discusses the origin and evolution of the class action, the benefits and concerns of a class action, and whether a class action lawsuit would be in the best interests of plaintiffs when the damages suffered by each individual plaintiff as a result of the BP oil spill of April, 2010 are potentially so great.

CLASS ACTION: ORIGIN and EVOLUTION

In simplistic terms, a class action is a procedural device that permits one or more plaintiffs to file and prosecute a lawsuit on behalf of a larger group. The larger group consists of the class members who have suffered the same wrong at the hands of the defendant but who are too numerous for the court to adequately manage the lawsuit if each class member were required to be joined as named plaintiffs.

The class action may be traced to the “bill of peace,” a proceeding that originated in England’s equity courts in the seventeenth century. The bill of peace was used when the parties to a dispute were too numerous to be easily managed and when all parties shared a common interest in the issues. It permitted the case to be tried by representative parties, with the judgment rendered binding all. This was more efficient than trying each case individually and was more consistent with equity’s goal of doing complete justice.

American courts continued to use the bill of peace. Its most eloquent spokesman was Justice Joseph Story. In his Equity Jurisprudence (1836) and his Equity Pleadings (1838), Story stated that the purpose of the bill of peace was to promote finality. Law courts could only try issues between the plaintiff and the defendant in a particular case. Equity courts possessed a “power to bring all the parties before them, … at once to proceed to the ascertainment of the general right, … and then to make a decree finally binding upon all the parties.” The bill of peace provided a way to resolve multiparty disputes quickly and effectively.

Class actions are an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. The “usual rule” is more commonly referred to as the “necessary parties rule,” and it required that all persons materially interested, either as plaintiffs or defendants in the subject matter of the bill ought to be made parties to the suit, however numerous they may be.

The common law models of litigation that envision one plaintiff sparring with one defendant were not designed to cope with harm experienced by huge numbers of geographically dispersed people.

Equity Rule 48 and Rule 38
Originally, American courts followed the example of our British brethren, using their power in equity to avoid multiplicity of actions where numerous individuals sued a common defendant for the same legal wrong. In 1842, the Supreme Court promulgated Equity Rule 48, officially recognizing representative suits where the parties were too numerous to be conveniently brought before the court, but refused to bind absent parties to any resulting judgments.” The Supreme Court explained this new rule as follows:

Where the parties interested in the suit are numerous, their rights and liabilities are so subject to change and fluctuation by death or otherwise, that it would not be possible, without very great inconvenience, to make all of them parties, and would oftentimes prevent the prosecution of the suit to a hearing. For convenience, therefore, and to prevent a failure of justice, a court of equity permits a portion of the parties in interest to represent the entire body, and the decree binds all of them the same as if all were before the court. The legal and equitable rights and liabilities of all being before the court by representation, and especially where the subject-matter of the suit is common to all, there can be very little danger but that the interest of all will be properly protected and maintained. It was not until 1912, some 70 years later, that Equity Rule 48 was rewritten, becoming Rule 38. The new rule maintained representative actions, but additionally allowed absent parties to be bound by judgments entered thereunder.

Rule 23
In 1938, Congress promulgated the Federal Rules of Civil Procedure, finally bringing into life the class action device pursuant to the original version of Rule 23. However, it was not until 1966, that the class action mechanism gained its current shape in an innovative 1966 revision. Thus, while it has its origins in equity, a class action is now a procedural litigation device that permits a small number of plaintiffs to represent and legally bind an entire class through a single lawsuit.

Rule 23(a)
To proceed as a class action, Rule 23 requires that the district court make the following findings: (1) Numerosity – the number of class members renders it impracticable to join them in the action;
(2) Commonality – the class members’ claims share common questions of law or fact;
(3) Typicality – the claims or defenses of the proposed class representatives are typical of those for the rest of the class; and
(4) Adequacy of Representation – the proposed class representatives will fairly and adequately protect the interests of the entire class.

Rule 23(b)
Furthermore, in addition to the numerosity, commonality, typicality and adequacy of representation requirements of Rule 23(a), the district court must make at least one of the following findings:
(1) prosecuting separate actions by or against individual class members would create a risk of:
(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or
(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;
(2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or
(3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

Rule 23(c)
(1) Certification Order.
(A) At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.
(2) Notice.
(A) For any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.
(B) For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.

CLASS ACTION: BENEFITS and CONCERNS

Benefits

The benefits of a class action allegedly include: (a) the facilitation of litigation that otherwise would not be brought because the value of individual claims is so small that it is not economically feasible to bring individual lawsuits. Such negative value claims may be feasible only when grouped in a class action, where the overhead of bringing the lawsuit is shared among all class members. Some academic commentators argue even if the class members do not ultimately receive much in the way of compensation, such lawsuits can have value in deterring conduct that is harmful to society; (b) the protection of the defendant from inconsistent obligations; (c) the protection of the interests of absentees; (d) the provision of a convenient and economical means for disposing of similar lawsuits; and (e) the facilitation of the spreading of litigation costs among numerous litigants with similar claims. Moreover, the class action device saves the resources of both the courts and the parties by permitting an issue potentially affecting every class member to be litigated in an economical fashion.

Concerns for Plaintiffs

A. “Faux” Class Actions
Recognizing the potential practical pitfalls of a certification decision (if not the significant constitutional concerns), the Supreme Court has made clear that courts should undertake a rigorous analysis under Rule 23 before a class action is certified.

Moreover, Professor Martin Redish of Northwestern University School of Law argues that courts should be required to scrutinize proposed class actions to weed out so-called “faux” class action cases, i.e., cases in which individual class members receive little or no compensation and only plaintiffs‘ counsel stand to benefit from class certification.

Professor Redish criticizes such actions on the ground that they effectively represent a transformation of the substantive law under Rule 23: As a result of the class action procedure, what purports to be a substantive compensatory framework has been furtively transformed into a structure in which it is quite possible that virtually no victim receives compensation through enforcement of the underlying substantive law. While he acknowledges that such a suit may “further the public interest” if it exposes, punishes, and deters illegal corporate behavior, he suggests that an amendment to Rule 23 dictating that attorneys‘ fees be measured by reference to the value of the total number of class member claims actually filed, rather than by the total amount of settlement or potential claims, would go far toward deterring pure bounty hunter class actions.

B. Waiving Due Process Rights Simply by Inaction
Class action procedures under Rule 23 often infringe the due process right to individual autonomy by sweeping large numbers of individuals into litigation – either through mandatory class action procedures under Rule 23(b)(1) and (b)(2) or through the opt-out procedure embodied in Rule 23(b)(3) – without explicit consent. Many commentators further argue 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. 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. The opt-out procedure allows waiver through inaction under circumstances in which inaction is highly likely given that the effort it takes to affirmatively opt-out is outweighed by the marginal benefits of simply doing nothing.

C. Lack of Notice
Under Rule 23, notice is required under certain specified circumstances, including to inform absent class members that they have the ability to opt-out of a Rule 23(b)(3) class or that the court has been asked to approve a class settlement. Even beyond the required notice provisions, however, the rules authorize federal courts to require the parties to provide absent class members notice in other circumstances. Thus, for example, Rule 23(d)(1)(B) authorizes the court to require notice to protect class members and fairly conduct . . . any step in the action; the proposed extent of the judgment; or the members‘ opportunity to signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or to otherwise to come into the action.

Despite requirements regarding the notice that must be given to absent class members, there is always the possibility that many class members will not receive notice of the litigation or that such notice will be insufficient to fully inform them of their rights, thereby depriving them of any meaningful opportunity to opt-out. “You have injured people, but they’re basically comatose,” says Professor Redish. “They don’t know about the class action, they don’t care, and they are unlikely to be compensated.”

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.

D. Lack of Input by Class Members
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.

E. Settlement Class Actions
Finally, settlement class actions undermine both the formalistic dictates of Article III and the important constitutional values underlying the requirement of adversary adjudication. In such classes, the parties expressly make 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 argues these 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.

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.

Concerns for Defendants

The potential downside of the class action procedure for defendants is also significant. Certification of a class may bring pressure to settle weak or frivolous claims. Indeed, it may increase the filing of dubious claims.

In In the matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995), the court expressed strong reservations about the inappropriate pressure class certification places on defendants in a mass tort context. The court also observed that certification of a class can cause irreparable injury because if the case settles, the ruling that forced the defendant to settle will never be reviewed.

In Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996), the court observed that class certification in the mass tort context dramatically affected the stakes for defendants, magnifying and strengthening the number of unmeritorious claims and creating insurmountable pressure to settle that is not present in individual trials.

The risk associated with bringing the case to trial is increased commensurably when a class is certified. Aggregation of claims makes it more likely that a defendant will be found liable and results in significantly higher damage awards. Furthermore, the ability to defend against weak claims is reduced where weaker claims are aggregated with claims of greater merit. These dynamics can often lead to a situation where the class action is employed as a form of legalized blackmail, by which an unscrupulous group of plaintiffs‘ attorneys effectively extort money from large companies by threatening their very existence with business-crushing class awards.

Concerns for Settlements

In the settlement context, the class action device may have equally perverse effects. Settlements may be the result of collusive deals among the defendants and certain plaintiffs, designed to achieve peace for defendants while extracting fees for the plaintiffs‘ attorneys. Such agreements potentially prejudice the interests of the class as a whole or at least those of certain class members.

Professor Redish notes that the class action device, while purportedly purely procedural, often has the practical effect of making significant alterations in substantive law. One way in which class actions essentially alter substantive rules is by effectively requiring absent class members to bring claims against a defendant. Under traditional notions of substantive law, the choice as to whether to bring a claim is solely that of the plaintiff, who is “master of the complaint.” In class actions, however, if a non-opt-out class is certified under Rule 23(b)(1) or 23(b)(2), absent class members are compelled to bring their claims as part of the litigation. Likewise, even in opt-out classes certified under Rule 23(b)(3), there is an element of coercion given that inertia may lead absent class members to refrain from taking action to affirmatively opt-out of a class. As a result, what purports to be a class action, brought primarily to enforce private individuals‘ substantive rights to compensatory relief, in reality amounts to little more than private attorneys acting as bounty hunters, protecting the public interest by enforcing the public policies embodied in controlling statutes.

Professor Redish argues that these constitutional problems result from Rule 23‘s deviation from the traditional conception of aggregate litigation, which was characterized by “substantively cohesive and interconnected groups.” It was only in the context of “group-held rights” that such representative procedures traditionally were employed, and only in that context that they could have potential res judicata effect. Thus, for example, the cases in which such procedural mechanisms historically were employed tended to involve “pre-litigation groups and cases involving separate claims into a common fund.” The device was not originally envisioned as en-compassing situations in which what are essentially individual claims are bundled as a result of the litigation process.

CLASS ACTION: BP OIL SPILL OF APRIL, 2010

A discussion of 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 fire aboard, and subsequent sinking of the oil rig Deepwater Horizon on April 22, 2010, should focus on two primary issues: (a) whether the district court would certify the class action; and (b) if certified, whether a class action lawsuit would be in the best interests of plaintiffs when the damages suffered by each individual plaintiff are potentially so great.

Whether the District Court Would Certify the Class Action

A. Mass Torts
After the Supreme Court‘s decisions in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), it has become exceedingly difficult to certify a class in the context of a mass tort. Indeed, even before these decisions, courts had recognized that there was a national trend to deny class certification in mass tort 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. When the Rule Advisory Committee proposed its 1966 revisions to Rule 23, it wrote: “A ‘mass accident’ resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses of liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried.”

The individual factual and legal differences among individual claims in mass tort cases generally make it impossible to demonstrate the typicality or adequacy necessary for certification under Rule 23(a). Likewise, they make it difficult to demonstrate that a class has the requisite cohesiveness for certification under Rule 23(b)(2) or that common issues “predominate” as required under Rule 23(b). Moreover, in mass tort cases, absent class members may have a particularly acute interest in personally determining whether to file litigation in the first instance and the course the litigation takes.

Rule 23(b)(3) was not intended to address mass torts. The 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. The Court recited the 1966 Advisory Committee Note that mass tort cases are “ordinarily not appropriate” for class certification, id. at 2250, saying, “The Committee’s warning continues to call for caution when individual stakes are high and disparities among class members great.” Id. The Court did not rule out any possible certification of a class in a mass tort context, but clearly called for a return to the original concept of Rule 23(b)(3) in which mass torts were treated as presumptively uncertifiable.

The court has further held that immature torts are not appropriate for class certification. The Fifth Circuit held that prior individual adjudication of a significant number of mass tort claims are necessary to ascertain whether common or individual issues will predominate at trial. Until a sufficient number of cases have been tried individually to verdict the court simply lacks the information necessary to make an informed decision and about predominance and superiority. Castano, 84 F.3d at 749-750.

The BP oil spill of April, 2010 has the potential to become the mass tort of all mass torts cases. As noted in the introduction, under a worst-case scenario, if the riser were to disintegrate due to the internal sandblaster-like erosion, the resulting catastrophic failure could easily release 60,000 to 160,000 barrels of oil per day. The formation that was being drilled by Deepwater Horizon when it exploded and sank is reported to have tens of millions of barrels of oil.

The District Court may ultimately deny class certification because the individual factual and legal differences among individual claims of potential plaintiffs to recover damages suffered as a result of the BP oil spill of April, 2010 will make it difficult to demonstrate:
(a) the typicality necessary for certification under Rule 23(a);
(b) adequacy of representation necessary for certification under Rule 23(a);
(c) that a class has the requisite cohesiveness for certification under Rule 23(b)(2); and
(d) that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy as required under Rule 23(b).

Given that the personal injuries and environmental and economic damages suffered by each individual plaintiff as a result of the BP oil spill of April, 2010 are potentially so great, absent class members would have a particularly acute interest in personally determining whether to file litigation in the first instance and the course the litigation takes.

Moreover, since the damages claimed by each individual plaintiff in the BP oil spill case would be so great, such claims may not be certifiable under Rule 23(b)(3) because they do not meet the necessity requirement. That is, a class action would not be superior to other available methods for fairly and efficiently adjudicating the controversy.

B. Scrutiny of Class Definition
Typically, a proposed class cannot be certified unless it is adequately defined and clearly ascertainable under objective criteria. Defining the class is of critical importance because it identifies the persons: (1) entitled to relief, (2) bound by a final judgment, and (3) entitled under Rule 23(c)(2) to the best notice practicable in a Rule 23(b)(3) action. Courts have observed that an adequate class definition is crucial because the outcome of a class action suit is res judicata as to all unnamed class members. Where a plaintiff fails to present a workable class definition, the class allegations are properly stricken or dismissed as a matter of law.

The damages suffered by victims of the BP oil spill 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.

Potential plaintiffs which may have a claim for damages as a result of the BP oil spill include but are not limited to:
1. Commercial and recreational fishermen, oyster harvesters, and shrimpers;
2. Businesses involved, directly or indirectly, in processing and packaging for the fishing industry;
3. Owners, operators, crew members and shore-side employees of charter and private boats;
4. Owners, operators and employees of restaurants, marinas and docks;
5. Persons involved in the tourism industry;
6. Owners of real estate; and
7. City, county/parish and state governments.

It is precisely this sort of case in which constitutional concerns may be particularly significant. Given that it is impossible to define who exactly will be bound by a class determination, there are obvious concerns regarding due process. Absent class members will not be able to determine whether they must assert their right to opt-out of a proposed class where the class definition is vague. Accordingly, they may be held to have effectively waived any due process right not only merely through inaction, but where their objection to inclusion is rendered effectively impossible due to a vague class definition.

Whether a Class Action Lawsuit Would be in the Best Interests of Plaintiffs
When the Damages Suffered by Each Individual Plaintiff are Potentially so Great

If the court certifies an action as a class action in any lawsuit relating to the BP oil spill of April, 2010, each individual potential plaintiff should undertake a rigorous analysis to determine the amount of damages he or she suffered as a result of the BP oil spill. These damages may include, but are not limited to, real property damages, personal property damages, loss of profits and earning capacity, loss of commercial and subsistence use of natural resources, increased costs of public services, and loss of revenues. Victims of the BP oil spill may also have personal injury claims stemming from the oil spill, i.e., respiratory problems and illnesses, sinus damage, difficulty breathing, and burning of the throat and nasal passages. The extent to which victims of the BP oil spill may suffer long-term serious illnesses has yet to be determined.

Class Action Lawsuit
If the amount of damages suffered by the individual potential plaintiff is small, it may not be economically feasible for the plaintiff to file an individual lawsuit. Accordingly, a class action lawsuit may be in the best interests of this plaintiff.  The class action would aggregate the relatively small individual recoveries into a case that would be worthwhile for an attorney to litigate.

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.

The potential causes of action in this case would include, but not be limited to: negligence, the Oil Pollution Act (33 U.S.C. Section 2702), strict liability for abnormally dangerous activity, strict products liability for manufacturing defect, and strict liability pursuant to the applicable state statute for the prohibited discharge of pollutants.

The potential defendants in this case would include: BP Plc, BP Products North America, Inc., BP America, Inc., Transocean Ltd., Transocean Offshore Deepwater Drilling, Inc., Transocean Deepwater, Inc., Halliburton Energy Services, Inc., Cameron International Corporation f/k/a Cooper Cameron Corporation, and Hyundai Heavy Industries Co., Ltd.

CONCLUSION

Each individual potential plaintiff who has suffered damages as a result of the BP oil spill of April, 2010 should immediately seek competent legal counsel to directly represent his or her interests. Many victims of the BP oil spill may not be acquainted with a lawyer. Other potential plaintiffs may hesitate to see a lawyer because they have never used a lawyer’s services before. Each state bar association has a  lawyer referral service designed to make it easy for potential plaintiffs to contact a lawyer. A victim of the BP oil spill should not hesitate to contact his or her state bar association lawyer referral service to obtain the contact information of an experienced attorney. If the amount of damages suffered by the individual potential plaintiff is small, it may not be economically feasible for the plaintiff to file an individual lawsuit. Accordingly, a class action lawsuit may be in the best interests of this plaintiff. However, 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 and will be on-going, class treatment would not be necessary to permit effective litigation of the claim. Here, when the amount of damages suffered by the individual is so great, the filing of an individual lawsuit should be economically feasible and may be in the best interests of the plaintiff. This decision should be made by the potential plaintiff only after a thorough consultation with his or her legal counsel.

APPENDICES

References
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613, 117 S.Ct. 2231 (1997).

Califano v. Yamasaki, 442 U.S. 682, 700-701, 99 S.Ct. 2545, 2557-2558 (1979).

Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996).

Coffee, J., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum.L.Rev. 1343, 1356-58 (1995).

Fischer, Daniel, Are Class Actions Unconstitutional?, Forbes.com (January 21, 2010).

General Telephone Co. v. Falcon, 457 U.S. 147, 155, 102 S.Ct. 2364, 2369, 72 L.Ed.2d 740 (1982).

Georgine v. Amchem Prods., Inc., 83 F.3d 610, 633 (3d Cir. 1996).

Haley v. Medtronic, Inc., 169 F.R.D. 643, 652 (C.D. Cal. 1996).

Hansberry v. Lee, 311 U.S. 32, 41, 61 S.Ct. 115, 118 (1940).

In re Agent Orange Prod. Liab. Litig., 818 F.2d 145, 164 (2d Cir. 1987).

In re Joint Eastern & Southern Dist. Asbestos Litigation, 129 B.R. 710, 803 (E.D.N.Y. 1991), judgment vacated, 982 F.2d 721 (2d Cir. 1992).

In the matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995).

Nagareda, Richard, Mass Torts in a World of Settlement 72 (2007).

Ortiz v. Fibreboard Corp., 527 U.S. 815, 832, 119 S.Ct. 2295, 2308 (1999).

Redish, Martin, Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit (Stanford University Press, 2009).

Smith v. Swormstedt, 57 U.S. 288, 303 (1853).

Smith, Douglas, 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, 2010).

Trangsrud, Roger, Joinder Alternatives in Mass Tort Litigation, 70 Cornell L. Rev. 779, 834 (1985).

United States Parole Comm’n v. Geraghty, 445 U.S. 388, 402-03, 100 S.Ct. 1202, 1211-12 (1980).

West v. Randall, 29 F. Cas. 718, 721 (No. 17,424) (C.C.D.R.I. 1820).
 

 

About the Author
Brian J. Donovan is an attorney and marine engineer with over thirty-four 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 spill of April, 2010.

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