The Donovan Law Group

GCCF Claimants Should Not be Required to Pay the Litigation Fees and Expenses Incurred by the MDL 2179 Plaintiffs’ Steering Committee

GCCF Claimants Should Not be Required to Pay the Litigation Fees and Expenses Incurred by the MDL 2179 Plaintiffs’ Steering Committee

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BP Oil Spill Victims Should Not be Taxed on the Miniscule Monetary Settlements They Receive from GCCF

Tampa, FL (January 12, 2012) – The amended MDL 2179 court order, dated January 4, 2012, provides:

“ORDERED that Defendants, or any agent or representative acting on a Defendant’s behalf, shall withhold and deposit an amount equivalent to six percent (6%) of the gross monetary settlements, judgments or other payments made after December 30, 2011, by or on behalf of one or more Defendants to any other plaintiff, putative class member or other claimant, arising out of the Macondo / Deepwater Horizon disaster, (with the exception of settlements, judgments or other payments to the United States), into a court-supervised escrow account, in order to establish a fund from which common benefit litigation fees and expenses may be paid, if and as awarded by the Court, at an appropriate time, pursuant to procedures to be determined by future order of the Court. Specifically, this hold back requirement applies to all actions filed in or removed to federal court that have been or become a part of the MDL, whether or not a motion to remand has been filed, claimants who settle directly with the Gulf Coast Claims Facility, or state court plaintiffs represented by counsel who have participated in or had access to the discovery conducted in this MDL. Exempt from this hold back requirement are state court counsel who have or had no cases in this MDL and who have never had access to any of the discovery undertaken in the MDL.”

The Impact of the Court’s Order on Private Claimants Receiving Settlements from the GCCF

The court’s amended order of January 4, 2012 will mean private claimants receiving settlements from the GCCF will be impacted by an unjustifiable financial loss and, more importantly, by their resultant loss of faith in the judicial system.

UNJUSTIFIABLE FINANCIAL LOSS

On January 3, 2012, The Louisiana Record reported that as of December 31, 2011 the GCCF had paid $2.3 billion to about 160,000 individuals, and $3.5 billion to about 60,000 businesses. Assuming BP fully funds its $20 billion commitment to the GCCF, and the GCCF fully utilizes the $20 billion to compensate victims of the BP oil spill, the monetary impact of the court order on private claimants would be approximately $852 million.

Claims which are settled through the GCCF should not be subject to the six percent (6%) hold-back because these settlements are not the result of any common benefit work. The Plaintiffs’ Steering Committee (“PSC”) itself states that, “The only work entitled to compensation from a common benefit fund is work that has demonstrably provided a benefit to all plaintiffs, or to a defined group of plaintiffs as a whole – the common benefit work.” The PSC has not performed work that has “demonstrably provided a benefit” to claimants who resolve their claims under the OPA through negotiations with the GCCF.

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)

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 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 OSLTF. 33 U.S.C. § 2713(c)

“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). Unfortunately, GCCF’s “Delay, Deny, Defend” strategy avoids settlement and encourages litigation.

BP oil spill victims who submit claims and settle them through negotiations with the GCCF are simply following the law. The PSC cannot take credit for the passing of OPA and its “presentment” requirement any more than it can take credit for creation of the GCCF itself, established as a result BP’s designation as a “Responsible Party” under OPA. Both of these factors, OPA’s statutory requirements and the creation of the GCCF, have led to the resolution of many claims and will lead to more in the future. The PSC cannot legitimately claim responsibility for either. See Opposition to PSC’s “Motion to Establish Account and Reserve for Litigation Expenses,” In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010 (10-02179), Doc. R. 4682 at p. 5.

The PSC alleges it has “exerted an enormous litigation pressure, risk, leverage and incentive for BP, through the GCCF, to try to settle its liabilities, in advance of trial.” The PSC further contends its work has “common benefit” for all plaintiffs. As explained below, this is inaccurate.

LOSS OF FAITH IN THE JUDICIAL SYSTEM

Multidistrict Litigation (“MDL”)

The Multidistrict Litigation Act passed by Congress in 1968, codified at 28 U.S.C. § 1407, states that civil actions pending in different districts and involving one or more common questions of fact may be transferred to any district for coordinated or consolidated pretrial proceedings.

The purpose of consolidation is to promote the “just and efficient” conduct of the action. See 28 U.S.C. § 1407(a); see also H.R. Rep. No. 1130, 90th Cong. 2nd Session, 1968 USCCAN 1898, 1900 (explaining that “pretrial consolidation must promote the just and efficient conduct of such actions and be for the convenience of the parties and witnesses”). Congress intended for consolidation to be ordered “only where significant economy and efficiency in judicial administration may be obtained.” See H.R. Rep. No. 1130, 1968 U.S.C.C.A.N. at 1900 (emphasis added).

In the MDL No. 2179 Transfer Order, dated August 10, 2010, the J.P.M.L. held that the Eastern District of Louisiana was an appropriate Section 1407 forum for actions which “indisputably share factual issues concerning the cause (or causes) of the Deepwater Horizon explosion/fire and the role, if any, that each defendant played in it. Centralization under Section 1407 will eliminate duplicative discovery, prevent inconsistent pretrial rulings, including rulings on class certification and other issues, and conserve the resources of the parties, their counsel, and the judiciary. In all these respects, centralization will serve the convenience of the parties and witnesses and promote the more just and efficient conduct of these cases, taken as a whole.” See In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 731 F. Supp. 2d 1352, 1354 (J.P.M.L. 2010).

U.S. District Judge Carl J. Barbier, who has been appointed by the J.P.M.L. to serve as the transferee judge in MDL 2179, is responsible for ensuring that significant economy and efficiency in judicial administration is obtained. Judge Barbier appointed each member of the PSC and, via the court’s amended order of January 4, 2012, established a fund of potentially $852 million from which PSC’s common benefit litigation fees and expenses may be paid.

The appointment and compensation of the PSC by Judge Barbier raises an important question for GCCF claimants and MDL 2179 plaintiffs: Does PSC’s loyalty rest with: (a) ensuring justice is obtained for the plaintiffs, or (b) ensuring significant economy and efficiency in the judicial administration of the MDL 2179 Court?

OCSLA and OPA, Not General Maritime Law, Govern MDL 2179

The Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331 et seq., governs those cases involving personal injury and wrongful death actions. The Oil Pollution Act of 1990 (“OPA”),  33 U.S.C. § 2701 et seq, governs those cases alleging economic loss due to the BP oil spill. See “BP Oil Spill: Is the MDL 2179 Trial Plan Unconstitutional?” available online at https://donovanlawgroup.wordpress.com/2012/01/03/bp-oil-spill-is-the-mdl-2179-trial-plan-unconstitutional/

Background

In order to efficiently manage MDL 2179, the Court consolidated and organized the various types of claims into several “pleading bundles.” The “B1” pleading bundle includes all claims for private or “non-governmental economic loss and property damages.” There are in excess of 100,000 individual claims encompassed within the “B1″ bundle.

On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1″ bundle Master Complaint. The Court held that any individual plaintiff who is a named plaintiff in a case that falls within pleading bundle “B1″ “is deemed to be a plaintiff in the “B1″ Master Complaint.” Also, “the allegations, claims, theories of recovery and/or prayers for relief contained within the pre-existing petition or complaint are deemed to be amended, restated, and superseded by the allegations, claims, theories of recovery, and/or prayers for relief in the respective “B1″ Master Complaint(s) in which the Defendant is named.”

The “B1” Master Complaint

In the “B1” Master Complaint, the PSC alleged claims under general maritime law, various state laws, and OPA. Under general maritime law, PSC alleged claims for negligence, gross negligence, and strict liability for manufacturing and/or design defect. Under various state laws, PSC alleged claims for nuisance, trespass, and fraudulent concealment, and also alleged a claim for strict liability under the Florida Pollutant Discharge Prevention and Control Act, Fla. Stat. § 376.011, et seq. Additionally, PSC sought punitive damages under all claims and requested declaratory relief regarding any settlement provisions that purport to affect the calculation of punitive damages.

The Court’s Order and Reasons [As to Motions to Dismiss the B1 Master Complaint]

On August 26, 2011, the MDL 2179 Court granted in part Defendants’ Motions to Dismiss the “B1″ Master Complaint. The Court ruled: (a) Admiralty jurisdiction is present because the alleged tort occurred upon navigable waters of the Gulf of Mexico, disrupted maritime commerce, and the operations of the vessel bore a substantial relationship to traditional maritime activity. With admiralty jurisdiction comes the application of substantive maritime law; (b) State law, both statutory and common, is preempted by maritime law, notwithstanding OPA’s savings provisions. All claims brought under state law are dismissed; and (c) General maritime law claims that do not allege physical damage to a proprietary interest are dismissed under the Robins Dry Dock rule, unless the claim falls into the commercial fishermen exception. In re Oil Spill by the Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, –  F. Supp. 2d -, 2011 WL 3805746 (Aug. 26, 2011 E.D. La.).

The Rule of Lexecon

The rule of Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) holds that an MDL judge may not try the actions transferred from other judicial districts under 28 U.S.C. § 1407. When the J.P.M.L. transfers a matter to an MDL judge, “[e]ach action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated.” 28 U.S.C. § 1407(a). In Lexecon, the Supreme Court read that language strictly and reversed a judgment entered after trial of a matter that the J.P.M.L. had transferred pursuant to § 1407. The Court held that “considerations of ‘finality, efficiency and economy”‘ do not justify “defiance of the congressional condition” that such an action be remanded to the transferor court for trial. Lexecon applies to MDL 2179.

Potential Reasons for the Loss of Faith in the Judicial System by GCCF Claimants

I. Private claimants receiving settlements directly from the GCCF are being forced by the MDL 2179 court to pay the litigation fees and expenses of a PSC from which the claimants will receive no benefit whatsoever. Moreover, the actions by this PSC ensure that the GCCF has no incentive to settle claims.

II. The PSC appears to be more interested in ensuring significant economy and efficiency in the judicial administration of the MDL 2179 court rather than in obtaining justice for the MDL 2179 plaintiffs. In its “B1” Master Complaint, the PSC alleged claims under general maritime law, not under OCSLA and OPA, thereby assisting the court in expeditiously being able to:

(a)  Find, “…. that nothing prohibits Defendants from settling claims for economic loss. While OPA does not specifically address the use of waivers and releases by Responsible Parties, the statute also does not clearly prohibit it. In fact, as the Court has recognized in this Order, one of the goals of OPA was to allow for speedy and efficient recovery by victims of an oil spill.”

(b)  Find, “State law, both statutory and common, is preempted by maritime law, notwithstanding OPA’s savings provisions. All claims brought under state law are dismissed.”

(c)  Find, “General maritime law claims that do not allege physical damage to a proprietary interest are dismissed under the Robins Dry Dock rule, unless the claim falls into the commercial fishermen exception.” and

(d)  Develop a trial plan that dispenses with trial by jury and instead conducts a bench trial applying general maritime law.

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) sometimes associated with traditional MDL practice are developments that cannot be defended. Delaventura v. Columbia Acorn Trust, 417 F. Supp. 2d at 153 (D. Mass. 2006). By forcing Plaintiffs in the instant case to await resolution of irrelevant discovery and factual disputes relating to completely different parties, theories of recovery and remedies, consolidation with MDL No. 2179 unreasonably delays Plaintiffs’ pursuit of their claims.

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