The Donovan Law Group

Is The Gulf Coast Claims Facility in Violation of The Oil Pollution Act of 1990?

Is The Gulf Coast Claims Facility in Violation of The Oil Pollution Act of 1990?

By Brian J. Donovan

August 10, 2010

INTRODUCTION

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.”

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 known as the Gulf Coast Claims Facility (GCCF). The GCCF is also commonly referred to as the BP Oil Spill Victim Compensation Fund (BPOSVCF).

This article addresses the issue of whether the proposed GCCF protocol is in violation of the Oil Pollution Act of 1990 (OPA).

THE OIL POLLUTION ACT OF 1990

Elements of Liability
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)

Covered Damages
Under OPA, “damages” means “damages specified in 33 U.S.C. § 2702(b), and includes the cost of assessing these damages.” 33 U.S.C. § 2701(5)

The damages to people and businesses specified in 33 U.S.C. § 2702(b) include, but are not limited to, the following:

(A) Real or Personal Property
Damages for injury to, or economic losses resulting from destruction of, real or personal property, which shall be recoverable by a claimant who owns or leases that property. 33 U.S.C. § 2702(b)(2)(B)

(B) Subsistence Use
Damages for loss of subsistence use of natural resources, which shall be recoverable by any claimant who so uses natural resources which have been injured, destroyed, or lost, without regard to the ownership or management of the resources. 33 U.S.C. § 2702(b)(2)(C)

Under OPA, “natural resources” includes land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States (including the resources of the exclusive economic zone), any State or local government or Indian tribe, or any foreign government. 33 U.S.C. § 2701(20)

(C) Profits and Earning Capacity
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)

Partial Payment of Claims
Pursuant to the Oil Pollution Act of 1990 (OPA), “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)

Period of Limitations
An action for damages under OPA shall be barred unless the action is brought within 3 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. See 33 U.S.C. § 2717(f)(1)(A)

Subrogation
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)

Interest
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 under the OPA.  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. However, if in any period a claimant is not paid due to reasons beyond the control of the responsible party or because it would not serve the interests of justice, no interest shall accrue during that period.

OPA Claims Procedure
Claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). Under OPA, 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 Oil Spill Liability Trust Fund.

Loan Program
The President shall establish a loan program under the Oil Spill Liability Trust Fund to provide interim assistance to fishermen and aquaculture producer claimants during the claims procedure. A loan may be made only to a fisherman or aquaculture producer that: (a) has incurred damages for which claims are authorized under OPA; (b) has made a claim pursuant to OPA that is pending; and (c) has not received an interim payment for the amount of the claim, or part thereof, that is pending.

GCCF VIOLATIONS OF OPA

GCCF will operate for three years. Feinberg explains 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. A claim for the six month emergency payment must be made within 90 days from the day the well is capped. If claimants choose to accept the second and final GCCF offer, they waive any right to bring further court proceedings against BP.

Single Emergency Payment
A single six month emergency 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.

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.

The OPA specifically provides for interim partial payments. As noted above, “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.

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

It was not the legislative intent of Congress for OPA to limit an oil spill victim’s right to seek full compensation from the responsible party.

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)

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 3 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. See 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 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.

For example, 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. 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.

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.”

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.

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.

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.

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).

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.

GCCF is an attempt to buy peace by overwhelming potential claimants/plaintiffs with “easy” money. Companies have tried this 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. Similarly in this case, claimants have no way to predict or negotiate the full extent of the damages, including the long-term health effects, incurred as a result of the oil spill.

Intentional and Systematic Delay of Payment
The intentional and systematic delay of payment of claims that has been employed by BP is in violation of OPA. There is no reason to believe that GCCF will be any different.

As of August 10, 2010, BP has made 146,000 payments to claimants for a total amount of $330 million. This equates to an average of only $2,260 per payment!

“Delay, deny, defend” is a strategy commonly employed by unscrupulous insurance companies. The strategy currently being employed by BP is similar: “Delay payment, starve claimant, and offer claimant five to ten percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the final settlement offer, he or she may sue.”

Four Tactics Currently Used by BP to Delay Payments
(1) Providing documentation that is acceptable to BP has been a significant challenge for claimants so far. Arbitrarily requesting unnecessary additional corroborating documentation after a claim has been filed is merely one tactic BP uses to delay payment to claimants.

(2) A second tactic employed by BP is to delay a claim by arguing “the oil is not physically at the claimant’s location.” This is in violation of OPA. In the case of an OPA claim, the claimant is simply required to demonstrate that the damages incurred resulted from the BP oil release. See 33 U.S.C. § 2702(a)

(3) A third delaying tactic is a requirement by BP for claimants who seek lost profits to demonstrate that their loss was caused by damage or loss to property or resources “that are used by the Claimant.” This is in violation of OPA. 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” are recoverable by any claimant against the responsible party under OPA. 33 U.S.C. § 2702(b)(2)(E). Moreover, “the responsible party is liable for damages that result from such incident.” See 33 U.S.C. § 2702(a)

(4) Furthermore, a limitation that payment on claims will be reduced by payments received from collateral sources is inconsistent with the liability of a responsible party under OPA. In no event should a collateral source limitation interfere with the expeditious and complete recovery by any individual or business claimant.

Appeals Process
A panel of three judges will be available to hear appeals of the GCCF administrator’s decisions. The panel will review claims that are denied or offers deemed to be insufficient by a claimant.

Under the proposed GCCF protocol, a claimant only has seven days to appeal a decision to the Appeals Board. This is insufficient time and in violation of OPA.

Interest
Pursuant to OPA, 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. However, if in any period a claimant is not paid due to reasons beyond the control of the responsible party, no interest shall accrue during that period. Here, GCCF will argue that the “insufficient documentation” submitted by the claimant was beyond BP’s control.

Kenneth Feinberg has promised to pay claims as expeditiously as possible. Therefore, (a) interest should to be factored into the total amount of damages filed by the claimant. This is interest from the date of financial loss to the date on which the claim is presented; and (b) a claim should also stipulate that GCCF will pay a per diem penalty if the claim is not paid within 30 days from the date on which the claim is presented.

CONCLUSION

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.

The proposed GCCF protocol is in violation of OPA for the following seven reasons:
(a) a single six month emergency payment for lost income;
(b) a single final settlement payment;
(c) a limitation that no claim may be submitted to the GCCF “more than three years after the date the Protocol becomes operative;”
(d) 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;
(e) BP’s current intentional and systematic delay of payment of claims which GCCF will most likely continue;
(f) insufficient time to appeal a GCCF decision; and
(g) GCCF’s failure to provide for interest on the amount paid in satisfaction of a claim and penalties for delayed payment of a claim.

Memories fade with the passage of time. If GCCF is merely a delaying tactic on the part of BP to postpone the day of financial judgment, lawsuits should be filed by BP’s victims and witnesses should be deposed as soon as possible. In the absence of a well-funded and transparent GCCF that fully compensates oil spill victims in an expeditious manner, postponing litigation will only benefit BP.

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.

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

Coleman, Leigh and Younglai, Rachelle, “Spill puts Obama’s oil fund chief on hostile turf,” Reuters (July 27, 2010)

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

Fed. R. Civ. Proc. 23(h), Federal Rules of Civil Procedure

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

Kirby, Brendan, “BP, federal government remain silent on when company will fund Gulf oil spill account,” Press-Register (July 26, 2010)

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)

Murtaugh, Dan, “Feinberg says BP hasn’t put money in escrow account yet,” Press-Register (July 24, 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)

Stier, Byron G., “Ken Feinberg Compensation for Administering BP Fund – A Problem and Possible Solution,” available at: http://lawprofessors.typepad.com/mass_tort_litigation/2010/07/ken-feinberg-compensation-for-administering-bp-fund-a-problem-and-possible-solution.html

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/
 

 

Further Reading
The Gulf Coast Claims Facility Limits BP’s Liability and Guarantees the Oil Company’s Continued Operation in the Gulf of Mexico

Is the BP Oil Spill Victim Compensation Fund Legitimate?

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

BP’s Strategy to Limit Liability in Regard to Its Gulf Oil Gusher

Why BP Does Not Want an Accurate Measurement of the Gulf Oil Spill

The Oil Pollution Act Provides for the Federalization of the BP Oil Spill

BP is Not the Only Responsible Party

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

 

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.

Advertisements

4 Responses

Subscribe to comments with RSS.

  1. Beverly Callis said, on January 17, 2013 at 9:25 pm

    Mr. Donavan, I would love to talk to you about this article because I believe the ones who were co-ersed into taking that quick claim money has been royaly you know what. Could you please call me at 337-905-0370. My name is Beverly Callis. Live in Cameron , Louisiana

  2. rich said, on January 18, 2013 at 4:46 am

    i kno an insider who may have some input…i am a paralegal as well

  3. Beverly Callis said, on April 14, 2013 at 12:29 am

    could you please contact me at 337-905-0370 as soon as possible. Thank you

    Beverly Callis

    • Beverly Callis said, on May 9, 2013 at 7:37 pm

      I did not know to check back on here until I was showing my daughter this web page, If you have information about someone who could help us PLEASE give me their name and Number lots of people who feel as I do that we were done wrong

      Thanking you in Advance
      Beverly Callis


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: