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Order & Reasons

Before the Court are two motions for sanctions against Brian J. Donovan
(“Donovan”) filed by Stephen J. Herman (“Herman”), James P. Roy (“Roy”), and
Patrick A. Juneau (“Juneau”) (collectively, “Movers”). (Rec. Docs. 26999, 27003). The
motions were thoroughly briefed and then argued to the Court on July 23, 2021. At
the end of the hearing, the Court granted the motions, sanctioned Donovan, and
stated it would issue a written opinion in due course. (Minute Entry, Rec. Doc. 27178).
This is the contemplated opinion.

This Document Relates to: Donovan v. Barbier, et al. and this article.

Order and ReasonsDownload

How MDLs Have Morphed U.S. Federal Courts into Merely Administrative Agencies

Approximately 47% of the civil cases pending in the nation’s federal courts are consolidated in multidistrict litigations (MDLs).

A recently filed lawsuit against the lead counsel in the BP oil well blowout MDL demonstrates how MDLs have morphed U.S. federal courts into merely administrative agencies.

This lawsuit is brought against Defendant Stephen J. Herman under the following causes of action: (a) Gross Negligence; (b) Negligence; (c) Negligence Per Se; (d) Fraud; (e) Fraudulent Inducement; (f) Promissory Estoppel; (g) Unjust Enrichment; (h) Breach of Fiduciary Duty; (i) Fraudulent Concealment; (j) Constructive Fraud; (k) Breach of Fiduciary Duty of Loyalty (Breach of the Aggregate Settlement Rule); and (l) Fraudulent Concealment (MDL 2179 Is Unconstitutional).

The following are the headers in the 130-page complaint.

NATURE OF ACTION

JURISDICTION AND VENUE

PARTIES

BACKGROUND FACTS

   I. Defendant Herman’s 8-Step Plan to Limit BP’s Liability

   and Maximize His Compensation

   A. Step No. 1: Capture Market Share

   B. Step No. 2: The JPML Transfer Order

   C. Step No. 3: Establishment of Feinberg’s Victims’ Compensation Fund

   D. Step. No. 4: Appointment of “Cooperative” Attorneys to the PSC

   E. Step No. 5: Circumvention of OPA, a Strict Liability Statute

   F. Step No. 6: Approval of the Settlement Class Action

   G. Step No. 7: The Post-Settlement Mop-Up Procedures

   H. Step No. 8: Clawback

   II. Defendant Herman Breached His Fiduciary  and Ethical Duties to Plaintiff

   A. “Come Into the Fold,” Pay Us, and Keep Quiet

   B. Defendant Herman Refused to Answer Plaintiff’s Questions

   C. Defendant Herman Violated the Aggregate Settlement Rule

   D. Defendant Herman Colluded with the Members of the MDL 2179 PSC  and BP

   E. Defendant Herman Did Not Hold BP Accountable

   F. Defendant Herman Refuses to Be Fully Transparent and Defendant  Herman Refuses to Be Held Accountable

   G. Why It Is Difficult to Hold Defendant Herman and Self-Dealing PSC Attorneys Accountable

   III. Defendant Herman Intentionally and Systematically Misled Plaintiff, Plaintiff’s Clients, and All Others Similarly Situated

   A. The Agreement-in-Principle

   B. The Highly Compensated “Thought Leaders”

   IV. Defendant Herman Oversees and Steers a Multidistrict Litigation Which is Unconstitutional

   A. Where’s the Case or Controversy in MDL 2179?

   B. Where’s the Due Process in MDL 2179?

   C. Opt-Out vs. Opt-In

   V. Defendant Herman Excessively Compensated Himself and Members of the MDL 2179 PSC by “Quadruple Dipping”

   A. Compensation Paid to Kenneth R. Feinberg by BP

   B. Compensation Paid to BP Oil Well Blowout Victims by Kenneth R. Feinberg (GCCF Program Statistics)

   C. The Deepwater Horizon Claims Center (DHCC Program Statistics)

   D. Compensation Paid to Defendant Herman and MDL 2179 PSC Attorneys

   (1) Common Benefit Fees

   (2) Contingent Fees

   (3) Co-counsel Fees

   (4) Hold-Backs

   E. Calculation of Compensation Paid to Defendant Herman and MDL 2179 PSC Attorneys

   F. Calculation of Compensation Paid to 103 Non-PSC Attorneys

   G.How the Court Allocated the US$720.15 million to Common Benefit  Attorneys

COUNT I: GROSS NEGLIGENCE

COUNT II: NEGLIGENCE

COUNT III: NEGLIGENCE PER SE

COUNT IV: FRAUD

COUNT V: FRAUDULENT INDUCEMENT

COUNT VI: PROMISSORY ESTOPPEL

COUNT VII: UNJUST ENRICHMENT

COUNT VIII: BREACH OF FIDUCIARY DUTY

COUNT IX: FRAUDULENT CONCEALMENT

COUNT X: CONSTRUCTIVE FRAUD

COUNT XI: BREACH OF FIDUCIARY DUTY OF LOYALTY (BREACH OF THE AGGREGATE SETTLEMENT RULE)

COUNT XII: FRAUDULENT CONCEALMENT (MDL 2179 IS UNCONSTITUTIONAL)

The collusive nature of MDLs has devolved to the point where: (a) justice is replaced by judicial efficiency, (b) federal judges sanction fund approaches and settlement class actions which limit the liability of defendants, and (c) a relatively small group of self-interested “cooperative” attorneys are permitted to be grossly over-compensated for merely acting as dealmakers.

As the lawsuit against Defendant Herman moves forward, many articles will be written by investigative reporters and other interested parties. Most of these articles will be the result of honest and unbiased reporting. Unfortunately, as BP has demonstrated since 2010, some of the articles will be written in a biased manner in order to protect the interests of BP and other parties involved in the BP oil well blowout MDL.

Before you read any article, I advise you to first read the complaint. Yes, the complaint is 130 pages in length but it is double-spaced and written in plain English. The above headers are analogous to the chapters in a novel’s table of contents.

A copy of the complaint is available here.

The Definition of Collusion

The U.S. District Court for the Eastern District of Louisiana has defined collusion as the “lawful means for the accomplishment of an unlawful purpose” and as a “secret understanding between two or more persons prejudicial to another, or a secret understanding to appear as adversaries, though in agreement.”

Collusion does not require fraudulent conduct.

It is beyond cavil that a reasonable, objective observer would not conclude that collusion permeates the BP oil well blowout multidistrict litigation (MDL 2179) and any MDL which incorporates a Feinberg-administered victims’ compensation “fund” and/or a settlement class action.

An in depth analysis of multidistrict litigation collusion is available in bookstores and online. https://www.barnesandnoble.com/w/1127702938

Follow us on Twitter: @MDLCOLLUSION

Collusion – Judicial Discretion vs. Judicial Deception: The Impending Meltdown of the United States Federal Judicial System

Collusion – Judicial Discretion vs. Judicial Deception: The Impending Meltdown of the United States Federal Judicial System

By Brian J. Donovan

The U.S. Judicial Panel on Multidistrict Litigation (“JPML”) was created by an Act of Congress in 1968 (28 U.S.C. §1407). The job of the JPML, as set forth in the multidistrict litigation (“MDL”) statute, is to determine whether civil actions pending in different federal districts involve one or more common questions of fact such that the actions should be transferred to one federal district for coordinated or consolidated pretrial proceedings. The purpose of this “centralization” process is to avoid duplication of discovery, to prevent inconsistent pretrial rulings, and to conserve the resources of the parties, their counsel and the judiciary. Theoretically, transferred actions are remanded to their originating transferor districts by the JPML at or before the conclusion of centralized pretrial proceedings.

Since its creation in 1968, the JPML has centralized 553,249 civil actions for pretrial proceedings. By the end of 2015, a total of 15,844 actions had been remanded for trial. In short, the JPML remanded only 2.86% of cases to their original districts.

Few judges and attorneys are aware of the number of cases in MDLs. As of September 30, 2015, there were a total of 341,813 civil cases pending in federal court of which 132,788 cases were pending in MDLs. In other words, 38.9% of the civil cases pending in the nation’s federal courts were consolidated in MDLs. As of September 2017, more than 40% of the civil cases pending in the nation’s federal courts were consolidated in MDLs. That percentage will only continue to increase.

This book, which represents the first effort to view MDL from a legal practitioner’s perspective, is the product of the last seven years of legal representation that Donovan devoted to victims of MDL. Donovan examines how the collusive nature of MDL has devolved to the point where: (a) justice is replaced by judicial efficiency, (b) federal judges sanction fund approaches and settlement class actions which limit the liability of defendants, and (c) a relatively small group of elite and self-interested “cooperative” attorneys are permitted to be grossly over-compensated for merely acting as dealmakers. One of the most egregious examples of blatant collusion in MDL involves the well-known BP oil well blowout in the Gulf of Mexico on April 20, 2010. Donovan uses this on-going judicial disaster as a case study.

The precedent established by the BP oil well blowout MDL ensures that the offshore oil and gas industry will never be held strictly liable for damages resulting from an oil well blowout in the Gulf of Mexico. Based on little more than empty air, a transferee judge and his cooperative band of Plaintiffs’ Steering Committee attorneys have decided that an offshore oil well blowout incident is governed by admiralty law rather than the Oil Pollution Act of 1990.

Brian J. Donovan is the founder of Donovan Law Group, PLLC and the co-founder of ChinAmerica Legal Advisors, PLLC. Donovan, a graduate of the U.S. Merchant Marine Academy and Syracuse University College of Law, has over forty years of international legal experience. His practice focuses on international business development and complex business litigation. Donovan is considered to be a leading authority on multidistrict litigation.

COLLUSION is available in bookstores and online. https://www.barnesandnoble.com/w/1127702938

 

Kenneth R. Feinberg to SCOTUS: “The BP Oil Spill Fund has been extraordinarily effective, by any measure, at efficiently and fairly compensating victims!”

Kenneth R. Feinberg to SCOTUS: “The BP Oil Spill Fund has been extraordinarily effective, by any measure, at efficiently and fairly compensating victims!”

Tampa, FL (May 10, 2015) – On September 4, 2014, Kenneth R. Feinberg filed an amicus brief with the U.S. Supreme Court in support of BP. In his brief, Feinberg asks the Supreme Court to grant cert because claim facilities, like the Gulf Coast Claims Facility, [allegedly] apply a causation requirement that parallels that of the tort system. Feinberg argues the settlement agreed to by BP does not include as strong a causation requirement, and this threatens the possibility of future compensation funds to solve mass torts. Feinberg’s argument is flawed. Yes, the BP oil spill settlement imposes a looser causation requirement than tort law requires. However, that causation requirement was agreed to by BP in order for claimants to be able to try to collect under the settlement and obtain closure for BP.

Although his basic SCOTUS argument is flawed, two statements made by Feinberg in his amicus brief are instructive.

Statement No. 1: “Kenneth R. Feinberg was selected by Executive Branch officials.”

“Amicus Kenneth R. Feinberg was selected by Executive Branch officials to help design, implement, and administer two successful alternatives to the conventional tort litigation system.” This is true for the 9/11 fund, not for the BP oil spill fund.  It is important to note that Feinberg was “selected” by BP and merely presented at a June 2010 White House press conference. Yes, Feinberg mislead (“blatantly lied to”) the U.S. Supreme Court. However, “selected by Executive Branch officials…….” does sound a great deal more impressive than “hired by Defendant BP to limit its liability.”

Statement No. 2: “Administrative claims programs like the 9/11 and Deepwater Horizon funds provide much-needed alternatives to conventional mass tort litigation.”

Feinberg’s brief is replete with statements which are intended to support this statement. The following are a few examples.

(a) The Gulf Coast Claims Facility program “demonstrates that principled, transparent, and effectively administered claims programs can fairly compensate victims, conserve judicial resources, and efficiently resolve claims without the uncertainty and cost associated with conventional litigation.”

(b) “Mr. Feinberg offers a unique perspective on effective alternatives to mass tort litigation – and has an interest in the continued viability of those alternatives. The September 11th Victim Compensation Fund and the Gulf Coast Claims Facility administered by Mr. Feinberg demonstrate that when designed and implemented appropriately, these alternatives to mass tort litigation can secure fair compensation for eligible victims, avoid delay, and alleviate crowded court dockets.”

(c) “Given scarce judicial resources, these alternatives to conventional mass tort litigation – the shortcomings of which are well-documented – are essential because they provide expedited relief for injured parties and relieve overburdened courts clogged with mass tort filings.”

(d) “The Court should therefore grant the petition to ensure that a key alternative to the conventional tort system remains viable for the fair, efficient, and expeditious compensation of injured victims.”

(e) “While these programs (the 9/11 Victim Compensation Fund and the GCCF Fund) have been extraordinarily effective, by any measure, at efficiently and fairly compensating individual victims, the Fifth Circuit’s decisions in this case affecting the causation standard, if permitted to stand, threaten to make these sorely needed alternatives to mass tort litigation unlikely to be replicated.”

(f) “The 9/11 Victim Compensation Fund and the Gulf Coast Claims Facility, both designed and administered by Mr. Feinberg, successfully compensated thousands of victims with billions of dollars in claims in a streamlined and efficient fashion.”

(g) “The numbers confirm the success of both the 9/11 Fund and the Gulf Coast Claims Facility. An overwhelming percentage of eligible claimants chose to file a claim and receive compensation from the funds rather than litigate in court. And both programs worked precisely as intended. If a claimant could demonstrate causation – i.e., that the death, physical injury, or business loss was caused, respectively, by the terrorist attacks or the oil rig explosion – payment was authorized without having to resort to litigation. Instead of waiting years for an uncertain litigation outcome, hundreds of thousands of claimants received prompt, certain, and fair compensation with relatively minimal delay and cost.”

(h) “The success of the 9/11 Fund and the Gulf Coast Claims Facility demonstrate that fair compensation can be efficiently delivered to thousands of eligible victims without the necessity of litigating for years in federal and state courts throughout the Nation.”

These statements are false and misleading.

The 9/11 victim compensation fund was established because Congress was concerned that conventional mass tort litigation would threaten the financial viability of the Nation’s airline industry. The purpose of this fund, funded entirely by federal taxpayer dollars, was not to compensate victims of the attacks in a prompt and fair manner.  See HERE and HERE.

The purpose of the Gulf Coast Claims Facility (GCCF) was not to ensure that victims of the BP oil spill received prompt, certain, and fair compensation with relatively minimal delay and cost. The numbers confirm that the principal purpose of the GCCF, funded entirely by BP, was to limit BP’s liability.

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

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

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

There is no doubt that the above statements made by Kenneth R. Feinberg in his amicus brief are false and misleading (“blatant lies”). However, this is not the first time that Feinberg has played so fast and loose with the court. See HERE and HERE.

Enough is enough.

Let’s be very clear:

(a) A Feinberg-administered claims program like the 9/11 Fund and the GCCF does not provide the much-needed alternative to conventional mass tort litigation;

(b) Kenneth R. Feinberg was BP’s defense attorney. He was not a “Fund Administrator.” BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to have Ken Feinberg limit its liability;

(c) Kenneth R. Feinberg was appointed (“hired by BP”) due to his political connections and his willingness to do whatever was necessary to limit BP’s liability; and

(d) Kenneth R. Feinberg is not the “Master of Disasters.” Kenneth is a “Master of Deception” and a “Master of Self-Promotion.”

Kenneth R. Feinberg’s latest self-promotional video is hosted by David Hammer on WWL-TV.

Kenneth R. Feinberg: “BP oil spill victims were never under financial duress!”

Tampa, FL (April 21, 2015) – Clint Guidry, the president of the Louisiana Shrimp Association, recently said many fishermen who were BP oil spill victims took Ken Feinberg’s “Quick Payments,” settlements that required no additional documentation from the claimants but also required them to sign away any further claims against BP, under duress.

But Feinberg refuses to believe that. Feinberg incredulously states,

“I’ve never seen any evidence of duress.” “I can either get a great deal more money with documentation, or I don’t even need documentation and I can get a check in the next couple of weeks or months. I’m not surprised at all, human nature being what it is. I see no duress. I see each fisherman making the decision of what’s best for the fisherman.”

“…when it comes to compensating innocent people, I think that what we [Feinberg Rozen, et al.] did and what BP did deserves a great deal of praise.”

I believe Kenneth meant to say,

“I was never under any financial duress. I think that I deserve a great deal of praise for limiting BP’s liability.”

The Feinberg Payment Methodology

The purpose of the Feinberg payment methodology was to generate as much financial duress as possible in order to maximize the number of signed releases.

Phase I

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

Phase II

During GCCF Phase II, known as the “Interim Payment/Final Payment” claims process, GCCF received the following three types of claims:

• Quick Payment Final Claim,
• Interim Payment Claim, and
• Full Review Final Payment Claim.

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

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

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

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

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

The GCCF status report data further indicates that the GCCF:

(a) paid a total of 230,370 claimants who filed claims with the GCCF during the “Phase II” period;

(b) of these, 195,109 were either Quick Pay or Full Review Final payments; and

(c) only 35,261 were Interim payments.

In sum, Kenneth R. Feinberg forced 84.68% of the claimants to sign a “Release and Covenant Not to Sue” in which the claimant agreed not to sue BP and all other potentially liable parties; only 15.31% of the claimants were not required to sign a “Release and Covenant Not to Sue” in order to be paid.

Enough is enough.

Let’s be very clear:

(a) Kenneth R. Feinberg was BP’s defense attorney. He was not a “Fund Administrator.” BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to have Ken Feinberg limit its liability;

(b) Kenneth R. Feinberg was appointed due to his political connections and his willingness to do whatever was necessary to limit BP’s liability; and

(c) Kenneth R. Feinberg is not the “Master of Disasters.” Kenneth is a “Master of Deception” and a “Master of Self-Promotion.”

Kenneth R. Feinberg’s latest self-promotional video is hosted by David Hammer on WWL-TV.

The Principal Reason Why BP Got Off

The Principal Reason Why BP Got Off

Tampa, FL (March 25, 2015) – An article titled, “10 Reasons Why BP Got Off and Offshore Oil Drilling Just Got More Dangerous,” was recently published by Rolling Stone magazine. The author of the article, Antonia Juhasz, correctly points out, “Recent judgments in the civil trial against BP, which has entered its third and final phase in a New Orleans court, will not only result in a significantly reduced fine for BP, but may also mean that no meaningful regulatory changes are implemented to reduce the likelihood of another similar disaster.”

The article focuses on misguided court rulings which suggest that critical safety improvements for offshore drilling are now far less likely to occur. However, the principal reason why BP “got off” goes far deeper than the Clean Water Act decisions.

The principal reason why BP got off is the collusive nature of the BP oil spill litigation. The PSC, the collusive BP/PSC settlement, questionable MDL 2179 rulings, and Kenneth R. Feinberg’s “Fund Approach” and illegal “Release and Covenant Not to Sue” have all contributed to ensuring the limitation of BP’s liability at the expense of the BP oil spill victims.

In essence, BP won the MDL 2179 case on February 9, 2011 when the PSC designated the B1 Master Complaint as an admiralty or maritime case, and requested a non-jury trial pursuant to Rule 9(h), rather than properly allege claims under the Oil Pollution Act of 1990 (OPA), a strict liability statute, and the Outer Continental Shelf Lands Act (OCSLA€).

Again, 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, in pertinent part, 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).

The damages referred to in 33 U.S.C. § 2702(a) 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.” 33 U.S.C. § 2702(b)(2)(E) (Emphasis added).

OPA further 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) (Emphasis added); and (b) “Payment of such a claim [i.e. payment to a claimant for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled] shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under this Act or under any other law.’’ 33 U.S.C. §§ 2715(b)(1) and (2) (Emphasis added).

Congress never intended that a claimant’s recovery of damages under OPA be limited by geographic bounds, pertain solely to certain business activities, or require a heightened, and in this case vague, proof of causation between his or her damages and the oil spill incident. Moreover, OPA expressly prohibits Responsible Parties from engaging in a “Delay, Deny, Defend” strategy wherein the victims of an oil spill are starved and ultimately forced to sign a “Release and Covenant Not to Sue” in order to receive an inadequate, miniscule payment amount for the damages they incurred as a result of the oil spill.

It is important to note that Ken Feinberg was BP’s defense attorney. He was not merely a “Fund Administrator.” Feinberg was retained by BP to limit BP’s liability.

We are the only law firm to file suit against Kenneth R. Feinberg, et al. asserting claims for gross negligence, negligence, negligence per se, fraud, fraudulent inducement, promissory estoppel, and unjust enrichment.

The MDL 2179 court has inexplicably refused to permit formal discovery on Feinberg, et al. The PSC also refuses to conduct formal discovery on Feinberg.

In sum, the more important story is how the collusive nature of MDL 2179 has resulted in America’s loss of faith in the federal judicial system.

The following articles may be of interest.

The BP Oil Spill Settlement and Fund Approach Are Wrong For America!

Plaintiffs File Motion in MDL 2179 to Hold Feinberg, et al. Accountable for Financially Ruining Them.

BP Oil Spill: An Open Letter to the MDL 2179 Plaintiffs’ Steering Committee (“PSC”)

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

Plaintiffs’ Memorandum of Law in Support of Their Motion to Remand or, in the Alternative, Motion to Commence Formal Discovery

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

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

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

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

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

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

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

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

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

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

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

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

 

UPDATE

CLICK HERE TO READ KENNETH R. FEINBERG’S SELF-SERVING BRIEF AS AMICUS CURIAE IN SUPPORT OF BP, ET AL.

In his brief, Kenneth R. Feinberg self-servingly argues that the U.S. Supreme Court’s review is needed to ensure that the Fifth Circuit’s rulings in this case do not compromise the ability of future programs like the Deepwater Horizon Fund “to serve as viable, much-needed alternatives to conventional mass tort litigation.”

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

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

 

April 3, 2014

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(a) allows judicial economy to replace justice; and

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

GM victims and BP victims deserve better!

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

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

CLICK HERE TO SIGN THE PETITION FOR GM VICTIMS

CLICK HERE TO SIGN THE PETITION FOR BP VICTIMS