BP Oil Spill: A Pattern of Collusive Unfairness Permeates the Deepwater Horizon Proposed Class Action Settlement (Part II)
BP Oil Spill: A Pattern of Collusive Unfairness Permeates
the Deepwater Horizon Proposed Class Action Settlement (Part II)
Tampa, FL (July 25, 2012) – On May 2, 2012, the MDL 2179 Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement].
On July 13, 2012, Plaintiffs Pinellas Marine Salvage, Inc. and John Mavrogiannis filed a Motion to Vacate this Preliminary Approval Order.
The following is the second excerpt from this motion.
D. The Proposed Settlement Was Not Achieved in the Full Context of the Adversarial Process.
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……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. Douglas G. Smith, 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. 104:319 (2010); See also, e.g., John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669, 714 (1986) (“Often, the plaintiff’s attorneys and the defendants can settle on a basis that is adverse to the interests of the plaintiffs. At its worst, the settlement process may amount to a covert exchange of a cheap settlement for a high award of attorney’s fees.”).
The Proposed Settlement intends to resolve certain claims by private individuals and businesses for economic loss and property damage resulting from the “Deepwater Horizon Incident.” The Proposed Settlement defines “Deepwater Horizon Incident” as: the events, actions, inactions and omissions leading up to and including (i) the blowout of the MC252 Well; …………. (vii) the operation of the GCCF; and (viii) BP public statements relating to all of the foregoing. (Proposed Settlement ¶ 38.43, Rec. Doc. 6276-1 at 99).
Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. and Selmer M. Salvesen v. Kenneth R. Feinberg, et al. are the only two cases of their kind filed in any court in the country. In each case, the complaint alleges, in part, that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF misled Plaintiffs by employing a “Delay, Deny, Defend” strategy against them. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.” In sum, Plaintiffs allege that BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining Plaintiffs and other victims of the BP oil spill.
As noted above, the Pinellas case was transferred by the JPML to the MDL 2179 Court on August 9, 2011. Once the Pinellas and Salvesen cases were transferred to the MDL 2179 Court, not only were these cases automatically stayed, but the Pinellas and Salvesen claims were deemed “amended, restated, and superseded” by the allegations and claims of the Master Complaint in Pleading Bundle B1 (See Pre-Trial Order No. 25, Para. 5, Jan. 12, 2011), in which Feinberg, Feinberg Rozen, LLP, and GCCF are not even named as Defendants.
On August 29, 2011, Plaintiffs’ Counsel emailed a letter to James Parkerson Roy wherein he informed Mr. Roy that the Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. case had been transferred to MDL 2179. The letter, in pertinent part, stated “I would like to commence discovery as soon as possible. Since this action does not involve common questions of fact with actions previously transferred to MDL No. 2179, please advise as to how we may most expeditiously initiate and coordinate discovery……I look forward to working with you on this case.” On September 5, 2011, Plaintiffs’ Counsel received an email from Stephen J. Herman wherein Mr. Herman stated, “please be advised that the Court has, thus far, declined to permit formal discovery on Feinberg or the GCCF.”
Judge Barbier writes, “…the PSC has actively lobbied and argued for increased supervision and monitoring of the GCCF and Kenneth Feinberg/Feinberg Rozen, LLP. These efforts have met with at least partial success. For instance, on February 2, 2011 the Court granted the PSC’s motion (in part) and ordered the GCCF and BP to:
(1) Refrain from contacting directly any claimant that they know or reasonably should know is represented by counsel, whether or not said claimant has filed a lawsuit or formal claim.
(2) Refrain from referring to the GCCF, Ken Feinberg, or Feinberg Rozen, LLP (or their representatives), as “neutral” or completely “independent” from BP. It should be clearly disclosed in all communications, whether written or oral, that said parties are acting for and on behalf of BP in fulfilling its statutory obligations as the “responsible party” under the Oil Pollution Act of 1990.
(3) Begin any communication with a putative class member with the statement that the individual has a right to consult with an attorney of his/her own choosing prior to accepting any settlement or signing a release of legal rights.
(4) Refrain from giving or purporting to give legal advice to unrepresented claimants, including advising that claimants should not hire a lawyer.
(5) Fully disclose to claimants their options under OPA if they do not accept a final payment, including filing a claim in the pending MDL 2179 litigation.
(6) Advise claimants that the “pro bono” attorneys and “community representatives” retained to assist GCCF claimants are being compensated directly or indirectly by BP.” Rec. Doc. 1098 at 14.
Judge Barbier further writes, “The PSC has advocated for a full and transparent audit of the GCCF and its claims handling practices, and together with the U.S. Department of Justice, has persuaded Mr. Feinberg to agree to such an audit which is now in progress. The PSC has advocated, again with some success, for the GCCF to employ a more liberal causation standard in evaluating claims and has advanced similar causation arguments in this MDL proceeding.” See Order of Aug. 26, 2011, Rec. Doc. 3830 at 32-33. (pp. 4-5, Rec. Doc. 5022).
The PSC allegedly represents the Plaintiffs in MDL 2179. These Plaintiffs deserve more than the PSC merely: (a) “lobbying” for increased supervision and monitoring of Feinberg, et al.; (b) trying to “persuade” Mr. Feinberg to agree to an audit; and (c) “advocating,” again with some success, for the GCCF to employ a more liberal causation standard in evaluating claims.
The JPML believes, “Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” However, formal discovery on Feinberg and the GCCF, and the associated pressure of a trial, are required in order exert pressure on the parties to negotiate a settlement which reflects the true value of the claims and not one which focuses on minimizing the liability of BP. Certainly, without formal discovery on Feinberg and the GCCF, “certain claims by private individuals and businesses for economic loss resulting from the operation of the GCCF” may not be properly resolved.
E. The Proposed Settlement Makes a Mockery of the Oil Pollution Act of 1990 (“OPA”).
Plaintiffs respectfully point out to this Honorable Court that the Proposed Settlement makes a mockery of the OPA for at least the following four reasons:
1. The Proposed Settlement defines Class Members by geographic bounds and certain business activities while requiring proof of a heightened, vague standard of causation.
2. The Proposed Settlement requires Class Members to waive their right to sue in exchange for a miniscule single final settlement payment.
3. The Proposed Settlement provides for a shortened Period of Limitations.
4. The Proposed Settlement fails to pay interest on the amount paid.
This Honorable Court has already been fully briefed on these issues. See, e.g., Plaintiff’s Memorandum in Support of His Motion to Vacate Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement] filed in this Court on July 2, 2012 by Plaintiff Selmer M. Salvesen (pp. 15-23, Rec. Doc. 6831-1).
Plaintiffs respectfully bring to the Court’s attention that on April 25, 2012 Mississippi Attorney General Jim Hood filed his Statement of Interest, also objecting to the use of the illegal and illegally-obtained GCCF Releases as an eligibility criteria to exclude 200,000 individuals and entities from the “Economic and Property Damages Settlement Class” definition and from the benefits of the proposed “Deepwater Horizon Economic and Property Damages Settlement,” and renewing his request to nullify the illegal, illegally-obtained and unconscionable GCCF Releases. (Rec. Doc. 6356).
As Judge Barbier aptly stated in his Order of August 26, 2011, “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p.31, Rec. Doc. 3830) (Emphasis added). Requiring Class Members to prematurely waive their right to sue in exchange for a miniscule single final settlement payment is unconscionable.
Notwithstanding the utter failure of the Proposed Settlement to comply with the OPA, Interim Class Counsel and the PSC state, “To give it utmost credit, the GCCF can be said to be a good faith effort to fulfill BP’s OPA obligations……………..” (p. 29, Rec. Doc. 6269-1).
F. A Pattern of Collusive Unfairness Permeates the Proposed Settlement.
For the following reasons, Plaintiffs respectfully point out to this Honorable Court that the Proposed Settlement is not a “fair, adequate, and reasonable” settlement (at least not for the Class Members) which has been entered into without collusion between the parties.
(1) Prior to the Settlement, the Deepwater Horizon Oil Spill Trust had a balance of approximately $13.8 billion from which BP oil spill victims believed they would be compensated by GCCF for all “legitimate” claims.
(2) After the Settlement, the proposed “Settlement Trust” will only have a balance of $7.8 billion from which BP oil spill victims are being told they will be compensated by the CSSP “so long as they execute an individual release.” (p. 7, Rec. Doc. 6418).
(3) Under the Proposed Settlement, BP will receive a refund of approximately $6 billion; the PSC and other counsel allegedly performing common benefit work will receive $600 million.
(4) The Proposed Settlement doesn’t actually provide for funds to be distributed to Class Members; it merely gives BP oil spill victims the right to submit, yet again, a claim for economic and property damages. Plaintiffs respectfully ask, “Where’s the settlement?”
(5) Prior to the Proposed Settlement, under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. 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.
(6) After the Proposed Settlement, under the CSSP, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant under the GCCF will increase under the CSCP.
(7) “BP has estimated the cost of the proposed settlement to be approximately $7.8 billion.” (p. 156, Rec. Doc. 6266-2). Here, Judge Barbier’s admonition in his Order of August 26, 2011 is instructive: “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p. 31, Rec. Doc. 3830) (Emphasis added). Since, as Judge Barbier points out, the long term effects, and therefore the associated costs, of the BP oil spill on the environment and fisheries may not be known for many years, BP can only estimate its cost by multiplying the approximate number of Claimants by an average amount BP is willing to pay each claimant.
The average amount BP proposes to pay each Claimant under the Proposed Settlement is not difficult to surmise. “The BP Parties may appeal a final compensation award determination only where the compensation amount determined by the settlement program is in excess of $25,000.” (p. 58, Rec. Doc. 6276-1).
(8) “The BP Parties shall make a non-refundable payment of $75 million (the “Initial Payment”) into the Common Benefit Fee and Costs Fund on the first date on which all of the following have occurred: (i) 30 days have elapsed after the Court has granted preliminary approval of the Economic Agreement, and (ii) the Court has entered an Order modifying the Holdback Order to provide that it shall not apply to any Settlement Payments or Other Economic Benefits paid pursuant to the Economic Agreement…..” “……within 15 days after the end of each calendar quarter, the BP Parties shall irrevocably pay into the Common Benefit Fee and Costs Fund an amount equal to 6 % (six percent) of the aggregate Settlement Payments paid under the Economic Agreement in respect of Claimants that have executed an Individual Release.” (pp. 3-4, Rec. Doc. 6276-46). In sum, the PSC and other counsel allegedly performing common benefit work are financially motivated to have as many Claimants execute an Individual Release as expeditiously as possible regardless of whether the negotiated settlements reflect the true value of the claims.