It’s Time for BP Oil Spill Victims to Opt-Out of the Deepwater Horizon Class Action Settlements
The Only Beneficiaries Are BP and the Plaintiffs’ Steering Committee
Tampa, FL (August 29, 2012) – The deadline for BP oil spill victims (“Class Members”) to opt-out of the Deepwater Horizon Economic and Property Damages Class Action Settlement and the Deepwater Horizon Medical Benefits Class Action Settlement is November 1, 2012.
It is important to note that these class action settlements do not actually provide for funds to be distributed to Class Members; they merely give BP oil spill victims the right to submit, yet again, a claim for economic and property damages and medical benefits.
“BP has estimated the cost of the proposed settlement to be approximately $7.8 billion.” 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.” 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 Settlements 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).
Class Members who do not opt-out will be at the complete mercy of BP, Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Under Feinberg/GCCF, and now under Juneau/DHCC, this means payment will be denied to approximately 61.46% of the claimants who file claims; the average total amount that will be paid per claimant will be $27,466.47.
Who Should Opt-Out
All Class Members, not represented by legal counsel, who have not been fully compensated for damages resulting from the BP oil spill should opt-out. This includes any natural person or entity who or that made a claim to GCCF and was illegally forced to execute a “Release and Covenant Not to Sue” in order to receive a miniscule payment.
Each natural person or entity who or that has suffered damages resulting from the BP oil spill of April, 2010 has the legal right to, and should immediately seek, competent legal counsel to directly represent his, her, or its interests. BP oil spill victims must understand that the Plaintiffs’ Steering Committee, attorneys who unscrupulously signed-up hundreds or even thousands of class members for class action lawsuits immediately after the oil spill incident, and attorneys who represent industry coalitions and organizations do not represent their individual interests.
Given that the damages suffered by the vast majority of Class Members as a result of the BP oil spill of April, 2010 are potentially so great and will be on-going, class action lawsuits should not be necessary to permit effective litigation of these claims. Here, where the amount of damages suffered by the individual is so great, the filing of an individual lawsuit should be economically feasible and in the best interests of the plaintiff.
When Should Class Members Opt-Out
All Class Members who have not been fully compensated for damages resulting from the BP oil spill by September 1, 2012 should opt-out. This will allow sufficient time for Class Members to learn: (a) the legal rights provided to BP oil spill victims under the Oil Pollution Act of 1990 (“OPA”); (b) why BP oil spill victims should not be required to prematurely waive their right to sue in exchange for a miniscule final settlement payment; and (c) why class actions may not be in the best interests of BP oil spill victims.
Opting-out would be an excellent Labor Day weekend activity for all BP oil spill victims. A properly executed Opt-Out Notice for each of the two proposed class action settlements should be mailed by Class Members on September 4, 2012.
How to Opt-Out
Not surprisingly, the Class Action Settlement Notices do not provide Class Members with an “Opt-Out” form. Furthermore, the information required to properly opt-out of the Medical Benefits Class Action Settlement, and the mailing address to where the opt-out notice must be sent, differs from the information required and the mailing address to properly opt-out of the Economic and Property Damages Class Action Settlement.
Why Class Members Should Opt-Out
The standard for reviewing a proposed settlement of a class action is whether the proposed settlement is “fair, reasonable, and adequate” and whether it has been entered into without collusion between the parties.
The United States District Court for the Eastern District of Louisiana defines “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. See Dynamic Marine Consortium, SA v. Latini, MV, 179 F.3d 278 (5th Cir. 1999)
Kenneth R. Feinberg, the former administrator of the now defunct Gulf Coast Claims Facility (“GCCF”), during widely-reported town hall meetings organized to promote GCCF, repeatedly told victims of the BP oil spill that they did not need to hire a lawyer. Feinberg explained, “The litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers….I take the position, if I don’t find you eligible, no court will find you eligible….I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.”
The GCCF has been replaced by the Deepwater Horizon Claims Center (“DHCC”). Patrick Juneau, the court-appointed administrator of the DHCC, repeatedly tells victims of the BP oil spill, “If you’re in doubt, file the claim…..We’ll do the homework for you.” Juneau, with a very slight change in rhetoric, is obviously using the same “Delay, Deny, Defend” playbook which proved to be so successful for Feinberg.
The DHCC and the GCCF are virtually identical. Under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Under the DHCC, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, although Patrick Juneau has replaced Feinberg, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the DHCC.
Recently Feinberg said, “I think it’s a tribute to the GCCF that all the people we used have been retained. I take great satisfaction in that fact.” It is unlikely that Class Members will share Feinberg’s satisfaction.
Here is a perfect example of a “secret understanding between two or more persons” (BP, the PSC, the GCCF, and the DHCC) which is “prejudicial to another” (the Class Members).
The Miniscule Amount GCCF Paid to BP Oil Spill Victims
GCCF Overall Program Statistics
(Status Report as of March 7, 2012)
Total Amount Paid = $6,079,922,450.47
Total Number of Paid Claimants = 221,358
Average Total Amount Paid Per Claimant = $27,466.47
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.
These Class Action Settlements Provide for a Refund of Approximately $6 Billion to BP While Granting Excessive Compensation to the PSC and Other Counsel Performing “Common Benefit” Work
(1) The Refund to BP
Deepwater Horizon Oil Spill Trust $20.0 Billion
Approximate Amount Paid to Claimants by GCCF $ 6.2 Billion
Cost of the Proposed Settlement $ 7.8 Billion
Amount to be Refunded to BP $ 6.0 Billion
(2) The Excessive Compensation to the PSC, et al.
The PSC and other counsel allegedly performing common benefit work in MDL 2179 are not double-dipping; they are triple-dipping. The known sources of compensation received by attorneys allegedly doing common benefit work on behalf of BP oil spill victims in MDL 2179 are:
(a) Six percent (6%) of the gross monetary settlements, judgments or other payments made on or after December 30, 2011 through June 3, 2012 to any other plaintiff or claimant-in-limitation. (p. 3, Rec. Doc. 5274);
N.B. – The Donovan Law Group received a Final Payment Offer from GCCF on behalf of a client. This offer, dated June 3, 2012 and postmarked June 8, 2012, was received on June 11, 2012. This offer, along with probably hundreds of other offers made to Claimants by GCCF, is dated one day before Claimants are no longer required to pay six percent (6%) of the gross monetary settlement they receive to the MDL 2179 common benefit fund. June 3, 2012 was a Sunday. These offers were dated June 3rd in order to ensure that the PSC received the maximum amount of payment from the 6% hold-back provision.
(b) BP has agreed to pay any award for common benefit and/or Rule 23(h) attorneys’ fees, as determined by the Court, up to $600 million. (p. 10, Rec. Doc. 6418);
(c) Many attorneys doing common benefit work have their own clients and have also received or will also receive a fee directly from them. (N.B. – On June 15, 2012, the MDL 2179 Court ordered that “contingent fee arrangements for all attorneys representing claimants/plaintiffs that settle claims through either or both of the Settlements will be capped at 25% plus reasonable costs.”) (Rec. Doc. 6684); and
(d) Co-counsel fees received by member firms of the PSC for serving as co-counsel to non-member firms of the PSC. For example, on March 13, 2012, The Donovan Law Group received an unsolicited mass email from a member firm of the PSC. The email stated, in pertinent part, “Co-Counsel Opportunity for BP Oil Spill Cases: News of the recent BP Settlement has caused many individuals and businesses along the Gulf Coast to contemplate either filing a new claim or amending a claim that has already been submitted. If you receive inquiries of this nature we would like you to consider a co-counsel relationship with our firm. Even if someone has already filed a claim it is advisable to retain legal counsel to analyze the impact of this settlement on claimants and maximize recovery. If you receive inquiries and are interested in co-counseling with us on the BP claims, please email…”
In order to be awarded a common benefit fee of $600 million, the PSC attorneys and other counsel performing “common benefit” work would have to work two million hours. This fee amount, which does not include the aforementioned (a), (c), and (d) known sources of compensation, fails the reasonableness test.
The PSC, Not Class Members, Shall be Compensated “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.
These Class Action Settlements Were Not Achieved in the Context of the Adversarial Process
While class action settlements 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 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. “Often, the plaintiffs’ 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.” 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).
BP and the PSC report that in February 2011 settlement negotiations began in earnest for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” (p. 3, Rec. Doc. 6418). In sum, the PSC and other counsel allegedly performing common benefit work in MDL initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179.
The Oil Pollution Act of 1990 (‘OPA”), a strict liability statute, governs cases alleging economic loss due to the BP oil spill. The Outer Continental Shelf Lands Act (“OCSLA”) governs personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law.
In order to recover damages under OPA, 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).
Rather than allege claims under OPA, the PSC made the unfathomable decision to allege claims under a hodgepodge of statutes. On February 9, 2011, in the B1 First Amended Master Complaint, the PSC states, “The claims presented herein are admiralty or maritime claims within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiffs hereby designate this case as an admiralty or maritime case, and request a non-jury trial, pursuant to Rule 9(h).”
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. As noted above, in its B1 First Amended Master Complaint, the PSC alleges claims under general maritime law, not under OPA and OCSLA, thereby assisting the MDL 2179 Court to expeditiously:
(a) Find, “The Deepwater Horizon was at all material times a vessel in navigation.”
(b) Find, “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.”
(c) 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.”
(d) 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.”
(e) 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.”
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.).
In sum, in February, 2011, the PSC: (a) initiated settlement negotiations “in earnest” with BP for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement; and (b) filed the B1 First Amended Master Complaint under general maritime law, rather than OPA and OCSLA, thereby ensuring that BP would not be held strictly liable in the bench trial.
For the foregoing reasons, the Deepwater Horizon Economic and Property Damages Class Action Settlement and the Deepwater Horizon Medical Benefits Class Action Settlement are neither “fair, reasonable, and adequate” nor have they been entered into without collusion between the parties.
The motto for Class Members should be: “If in doubt, opt-out!”
OPT-OUT UPDATE No. 1
Beginning on September 10, 2012, some BP oil spill victims filed requests for discovery with the MDL 2179 Court regarding the economic class action settlement. These individuals are objecting to the economic class action settlement entered into between the PSC and BP. Accordingly, the Court refers to them as “Objectors.”
These victims contend, in part, that: (1) much of the evidence submitted by the PSC and BP on August 13, 2012 in support of the motions for final approval of the settlement was not published or otherwise available prior thereto; (2) communications between the PSC and BP relating to the propriety of the proposed settlement were not shared with counsel for Objectors; (3) the PSC and BP did not produce any of the evidence on which their experts’ opinions are based; (4) it is impossible for the Objectors to evaluate the proposed settlement without “limited discovery;” (5) the Court has discretion to grant their requests for “limited discovery;” (6) the Phase One and Phase Two discovery concerns only the issue of liability; (7) the rationale and bases for the terms of the settlement cannot be found in the record; and (8) discovery is required because the Economic Loss Zones are arbitrary and capricious.
On September 25, 2012, these requests were denied by the MDL 2179 Court. The Court held:
Objectors Have No Absolute Right to Discovery.
There is no “absolute right” to conduct discovery or present evidence simply because a person is a class member. In re Domestic Air Transp. Antitrust Litig., 144 F.R.D. 421, 424 (N.D. Ga. 1992). In evaluating settlements for approval, the fundamental question is whether the Court has sufficient facts before it to approve or disapprove the settlement. In re Gen. Tire & Rubber Co. Sec. Litig., 726 F.2d 1075, 1084 n.6 (6th Cir. 1984). The Court has broad discretion to permit or deny objector discovery requests. Cotton v. Hinton, 559 F.2d 1326, 1333 (5th Cir. 1977).
Objectors’ Discovery Requests Are Unnecessary.
In Newby v. Enron, Corp., 394 F.3d 296 (5th Cir. 2004), the Fifth Circuit held that “formal discovery is not necessary as long as (1) the interests of the class are not prejudiced by the settlement negotiations and (2) there are substantial factual bases on which to premise settlement.” Id. at 306. The “critical question” to determine whether independent discovery by objectors is necessary is whether the Court has “sufficient facts before it to intelligently consider the proposed settlement.” In re Ford Motor Co. Bronco II Prods. Liab. Litig., 1994 WL 593998 at *3 (E.D. La. Oct. 28, 1994). Where significant documentation has already been produced and testimony taken, “independent discovery should generally not be allowed.” In re Ford Motor Co. Bronco II, 1994 WL 593998 at *3.
The Court’s task is to consider the record that appears before it to determine if, on the basis of that record, it may make the findings necessary to certify the settlement class and determine that the settlement agreement is fair, reasonable, and adequate under Rule 23. It is not the role of the Objectors to renegotiate the agreement, nor determine whether the class would receive more compensation in contested litigation. None of the Objectors demonstrate how their discovery is required to enable them to support their objections, to decide whether to remain in the settlement class, or to aid the Court. The Objectors’ discovery is unnecessary because it is not relevant to the Court’s review.
The settlement compensates each and every class member according to frameworks that are transparent and which were filed nearly five months ago. Any class member seeking to determine his compensation may simply read the settlement agreements and determine how his circumstances fit into the frameworks. There is no reason that any objector needs to know the estimated size of the class, because the settlement is uncapped for the majority of claimants. An objector does not need to know the total amount of losses of the class when the settlement agreement provides for the payment of all compensatory damages. The Court may determine that the settlement agreement is fair, reasonable, and adequate without this information.
Since April 18, the Objectors were able to review the settlement agreement, analyze the benefits under the agreement, evaluate the strengths and weaknesses of their own claims and determine whether they are better off participating in the settlement or opting out. By opting out, those who are not satisfied with the settlement’s provisions escape their binding effect, and thus are free to pursue their claims and seek the relief they desire. In re Vitamins Antitrust Class Actions, 215 F.3d 26, 28-29 (D.C. Cir. 2000).
The bottom line is that the proposed discovery will neither materially advance the objectors’ objections nor assist the Court’s consideration of the fairness, reasonableness, and adequacy of the settlement agreement.
The Settlement Agreement is the Product of Arms-Length Negotiations.
The Settlement Agreement was negotiated in good faith and at arm’s length over many months. All told, BP and the PSC engaged in more than 145 days of face-to-face meetings. Rec. Doc. 6418 at 3. The negotiations were extensive and highly contested. In the final months the negotiations were conducted under the supervision of the undersigned as Court mediator.
Because the settlement agreement was reached through arm’s length negotiations, information sought by the movers on why the parties negotiated the terms that they did is unnecessary. See Manual for Complex Litigation (4th), p. 328 (“A court should not allow discovery into the settlement negotiation process unless the objector makes a preliminary showing of collusion or other improper behavior.”)
OPT-OUT UPDATE No. 2
DHCC Overall Program Statistics
(Status Report as of October 5, 2012)
Individual Economic Loss
19,338 claim forms were submitted,
DHCC made 79 payment offers in the total amount of $860,968,
24 offers were accepted, and
DHCC made 6 payments in the total amount of $38,173.
Individual Periodic Vendor or Festival Vendor Economic Loss
132 claim forms were submitted,
DHCC made 0 payment offers,
0 offers were accepted, and
DHCC made 0 payments.
Business Economic Loss
14,558 claim forms were submitted,
DHCC made 485 payment offers in the total amount of $86,962,974,
280 offers were accepted, and
DHCC made 65 payments in the total amount of $10,181,973.
Start-Up Business Economic Loss
1,202 claim forms were submitted,
DHCC made 7 payment offers in the total amount of $1,235,483,
2 offers were accepted, and
DHCC made 0 payments.
Failed Business Economic Loss
1,238 claim forms were submitted,
DHCC made 0 payment offers,
0 offers were accepted, and
DHCC made 0 payments.
The DHCC data indicates that a total of 36,468 claimants filed the above types of claims with the DHCC during the period from approximately June 4, 2012 to October 5, 2012. The DHCC paid only 71 of these claimants. In sum, the DHCC paid only 0.19% of the claimants who filed claims.
Of the 19,338 Individual Economic Loss claims submitted, 79 claimants have received payment offers totaling $860,968, resulting in 6 payments totaling $38,173. This equates to an average payment of only $6,362.17 per Individual Economic Loss Claimant!
What is life worth?
According to BP and Feinberg, et al., the life of an individual BP oil spill victim wasn’t worth very much. According to BP/PSC and Juneau, et al., the life of an individual BP oil spill victim is worth even less!