The Donovan Law Group

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

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Oil Spill Settlements, Especially the BP Oil Spill Settlement, Are Wrong For America!

The BP Oil Spill Settlement Is Wrong For America!

By

Brian J. Donovan

Tampa, FL (March 31, 2014) – Oil spill settlements, especially the BP oil spill settlement, are wrong for America!

The BP Oil Spill Multidistrict Litigation (“MDL 2179”) officially started on August 10, 2010. The Transfer Order issued on that date by the United States Judicial Panel on Multidistrict Litigation (“JPML”) clearly states: “…. Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” 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 would never have their day in court. Judicial economy, rather than justice, was 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 Plaintiffs’ Steering Committee, 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.

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.

In sum, the major oil companies own Congress and the federal judicial system.

However, we can change that in regard to catastrophic oil spills by demanding that Congress holds responsible parties accountable. Proper enforcement of the Oil Pollution Act of 1990 and the Oil Spill Liability Trust Fund (“OSLTF”) will eliminate the need for costly and protracted litigation.

Demand that Congress requires responsible parties to pay the full costs and damages resulting from an oil spill incident by defining the term “expenditure,” under the OSLTF, as “an expenditure that is not reimbursed by the responsible party.”

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”).

Spread the word and sign the petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via Subrogation

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The BP Oil Spill Multidistrict Litigation (“MDL 2179”) Is Not Right for America

The BP Oil Spill Multidistrict Litigation (“MDL 2179”) Is Not Right for America

MDL 2179 is a “Faux” Class Settlement Wrapped in a “Faux” MDL

By

Brian J. Donovan

Tampa, FL (August 12, 2013)  – Robert Dudley, CEO of BP, recently told Bloomberg Businessweek he believes the deal BP made with the MDL 2179 plaintiffs’ steering committee to complete the process of paying legitimate victims of the oil spill is “not right for America.” Dudley stated, “… millions of dollars are going out to pay people who suffered, in many cases, no losses from the spill. And this is just not right. I don’t think it’s right for America. When you make an agreement and you don’t have the faith and the trust that agreement is going to be interpreted the way you expect, it’s not good for America.”

MDL 2179 is not right for America, but not for the reasons set forth by Dudley.

The “Faux” MDL 2179

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, 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 United States Judicial Panel on Multidistrict Litigation (“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.

Feinberg’s Administration of the BP Compensation Fund

On August 10, 2010, the JPML formally established MDL 2179. In its Transfer Order, the JPML 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.

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 the Oil Pollution Act of 1990 (“OPA”).

In violation of OPA, GCCF‘s approach to determining claimant eligibility was driven by two factors: (1) loss location; and (2) claimant business type.

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, 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:

(a) 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;

(b) Only 15.32% of the claimants were not required to sign a “Release and Covenant Not to Sue” in order to be paid;

(c) GCCF denied payment to approximately 61.46% of the claimants who filed claims;

(d) The average total amount paid per claimant by GCCF was a paltry $27,466.47; and

(e) 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.

In sum, BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Expedited EAP Denial” strategy and “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining BP oil spill victims.

On March 8, 2012, the MDL 2179 Court terminated Feinberg and the GCCF claims process and appointed Patrick Juneau as the claims administrator for the transition to the court supervised claims program. On May 2, 2012, Juneau was appointed as Claims Administrator to oversee the claims administration vendors, that will process the claims in accordance with the class settlement agreement. Under Juneau, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is little reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under Juneau.

Gamesmanship of the Legal System by Defendants

Theoretically, the JPML does not have power over state courts. In reality, corporations with deep pockets, and politically well-connected defendants,  are easily able to circumvent this slight inconvenience through procedural gamesmanship – i.e., the baseless removal of a case from state to federal court for the sole purpose of subsequently being able to immediately file a Notice of Tag-Along Case with the JPML for the transfer of the case to an MDL before any court has the opportunity to either rule on the jurisdiction of the action or reach the merits of Plaintiff’s claims in the action. The JPML’s facilitation of this type of procedural gamesmanship, although politically expedient and judicially efficient, is unjust and makes a mockery of the U.S. judicial system.

Refusal by the MDL 2179 Court and the PSC to Hold Feinberg Accountable

Kenneth R. Feinberg and Feinberg Rozen, LLP, D.B.A. GCCF are neither named Defendants in any master complaint in MDL 2179 nor on the list of “Released Parties” in the Economic and Property Damages Settlement Agreement.

In sum, the MDL 2179 Court concedes that it never contemplated Feinberg, et al. would be Defendants in MDL 2179. Nevertheless, the MDL 2179 Court and the PSC effectively ensure that Feinberg, et al. will not be held accountable in the near future by the following means:

(a)  All pending and future motions to remand are continued without date in MDL 2179.

Pursuant to the MDL 2179 Court’s Pretrial Order No. 15 (Rec. Doc. 676), “Pending further orders of this Court, all pending and future motions, including Motions to Remand, are continued without date unless a motion is specifically excepted from the continuance by the Court.” Furthermore, pursuant to the MDL 2179 Court’s Pretrial Order No. 25 (Rec. Doc. 983), “All individual petitions or complaints that fall within Pleading Bundles B1, B3, D1, or D2, whether pre-existing or filed hereafter, are stayed until further order of the Court.”

In sum, any lawsuit filed against Feinberg, et al., in state or federal court, will be transferred to MDL 2179 and stayed (“warehoused”) indefinitely until Judge Barbier decides to remand the case to the transferor federal court.

(b) The MDL 2179 Court has declined to permit discovery on Feinberg or the GCCF.

On September 5, 2011, Stephen J. Herman, Plaintiffs’ Liaison Counsel in MDL 2179, stated, “please be advised that the [MDL 2179] Court has, thus far, declined to permit formal discovery on Feinberg or the GCCF.”

It is important to note that formal discovery on Feinberg and the GCCF, and the associated pressure of a trial, would have been required in order to have exerted sufficient pressure on the parties to negotiate a settlement which reflected the true value of the claims and not one which focuses on minimizing the liability of the defendants. This did not occur. 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 never be properly resolved.

Generally, Courts have held 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). MDL 2179 is an exception.

The MDL 2179 Court Has Overreached Its Authority.

The Supreme Court has held that a district court conducting pretrial proceedings pursuant to 28 U.S.C. §1407(a) has no authority to invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

Justice Souter, in delivering the opinion of the Court in Lexecon, explained “28 U. S. C. §1407(a) authorizes the JPML to transfer civil actions with common issues of fact ‘to any district for coordinated or consolidated pretrial proceedings,’ but imposes a duty on the Panel to remand any such action to the original district ‘at or before the conclusion of such pretrial proceedings.’ ‘Each 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). The issue here is whether a district court conducting such ‘pretrial proceedings’ may invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. We hold it has no such authority.”

Justice Souter pointed out that “the Panel’s instruction comes in terms of the mandatory ‘shall,’ which normally creates an obligation impervious to judicial discretion. Anderson v. Yungkau, 329 U. S. 482, 485 (1947). In the absence of any indication that there might be circumstances in which a transferred case would be neither ‘terminated’ nor subject to the remand obligation, then, the statutory instruction stands flatly at odds with reading the phrase ‘coordinated or consolidated pretrial proceedings’ so broadly as to reach its literal limits, allowing a transferee court’s self-assignment to trump the provision imposing the Panel’s remand duty. If we do our job of reading the statute whole, we have to give effect to this plain command, see Estate of Cowart v. Nicklos Drilling Co., 505 U. S. 469, 476 (1992), even if doing that will reverse the longstanding practice under the statute and the rule, see Metropolitan Stevedore Co. v. Rambo (1995) (“Age is no antidote to clear inconsistency with a statute.” (quoting Brown v. Gardner, 513 U. S 115, 122 (1994))).”

While the need to promote efficiency in litigation is real, “age is no antidote” to the clear promotion and facilitation of “faux” MDLs by the JPML.

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.

Professor Martin Redish of Northwestern University School of Law argues that settlement class actions undermine the important constitutional values underlying the requirement of adversary adjudication. In such classes, the parties expressly make class certification contingent on the entry of a settlement resolving the litigation. Thus, 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, according to Professor Redish, 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. Redish further argues settlement class actions are flat-out unconstitutional because there is no “case or controversy,” a constitutional requirement for making a federal case out of something. Since the lawyers are all on the same side, he says, the only losers are plaintiffs who are forever barred from suing over the matter again. This is precisely what has happened in MDL 2179.

The court in Georgine v. Amchem Products, Inc., 83 F.3d 610 (3rd Cir. 1996), noted that the presentation of class action cases in the form of negotiated settlements for approval by the courts under Rule 23(c) raises a constitutional issue whether there is a justiciable case or controversy. Such cases also raise practical concerns about potential collusion and inadequate representation, as well as the ability of the court to evaluate the merits of the settlement in a non-adversarial context. Georgine, 83 F.3d at 617.

Professor Redish also points out that the opt-out mechanism under Rule 23(b)(3) should be abandoned in favor of an opt-in mechanism that requires absent class members to take some affirmative action before being swept into a class action. Redish believes that allowing due process rights to be waived simply by inaction, as under the current version of the rule, does not sufficiently protect such constitutional rights.

If a class is certified and the class representatives are unsuccessful, the absent class members’ claims will be “legally obliterated” by the result of the litigation, even though they did not actively participate in the suit. Likewise, as many have observed, a class action can reduce the input any particular plaintiff has in the conduct of the case. Where thousands are represented in a single lawsuit, it is simply impossible for them to have the same level of input regarding the prosecution of their claims. Moreover, conflicts among class members inevitably emerge, rendering the class action mechanism an imperfect means of resolving large-scale litigation.

The standard for reviewing a proposed settlement of a class action by courts is whether the proposed settlement is “fair, adequate, and reasonable” and whether it has been entered into without collusion between the parties. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998) (“Settlement is the offspring of compromise; the question we address is not whether the final product could be prettier, smarter or snazzier, but whether it is fair, adequate, and free from collusion.”).

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.”

Conclusion

Dudley is correct. Individuals and businesses that did not suffer damages resulting from the BP oil spill should not be paid. It is important to note, however, that fraudulent claims represent a very small percentage of the total number of claims.

MDL 2179 is “not right for America” because:

(a) it is a “faux” MDL;

(b) it approves a “faux” class settlement agreement which is neither “fair, adequate, and reasonable” nor “free from collusion;”

(c) attorneys, with impunity, are permitted to advise BP to tell Congress, the National Incident Command, and the public that the oil spill flow rate was 5,000 barrels of oil per day when BP engineers were performing internal analyses showing that the flow rate could be up to 20 times greater;

(d) it permits members of the PSC, who are directly appointed by the transferee judge, and other counsel performing common benefit work to be excessively compensated for merely negotiating a settlement agreement;

(e) it allows BP to retain a third-party “claims administrator” to limit its liability, with impunity, via an “Expedited EAP Denial” strategy and a “Delay, Deny, Defend” strategy; and

(f) the JPML, which does not have power over state courts, promotes and facilitates the gamesmanship of the legal system by defendants, i.e., the baseless removal of a case from state to federal court for the sole purpose of subsequently being able to immediately file a Notice of Tag-Along Case with the JPML for the transfer of the case to MDL 2179. The JPML’s facilitation of this type of procedural gamesmanship, although politically expedient and judicially efficient, is unjust and makes a mockery of the U.S. judicial system.

In sum, MDL 2179 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.

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”).

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

December 21, 2012

VIA Email

Mr. Stephen J. Herman
Plaintiffs’ Liaison Counsel
Herman, Herman, Katz & Cotlar, LLP
820 O’Keefe Avenue
New Orleans, LA 70113

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

Dear Steve,

I am writing this open letter on behalf of my clients and all similarly-situated BP oil spill and Gulf Coast Claims Facility (“GCCF”) victims.

Background

On August 10, 2010, the United States Judicial Panel on Multidistrict Litigation (“JPML”) issued its Transfer Order (Rec. Doc. 1) wherein it clearly states:

“IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C. § 1407, the actions listed on Schedule A and pending outside the Eastern District of Louisiana are transferred to the Eastern District of Louisiana and, with the consent of that court, assigned to the Honorable Carl J. Barbier for coordinated or consolidated pretrial proceedings with the actions pending in that district and listed on Schedule A.” (Emphasis added)

In order to efficiently manage MDL 2179, Judge Barbier consolidated and organized the various types of claims into several “pleading bundles” for the purpose of the filing of complaints, answers and any Rule 12 motions. The “B1” pleading bundle includes all claims for private or non-governmental economic loss and property damages.

On December 15, 2010, the PSC filed a “B1” Master Complaint.

On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1” 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.”

In sum, my clients were forced to be represented by the PSC. Accordingly, since you have stepped into my shoes, I, and all similarly-situated attorneys representing BP oil spill and GCCF victims, hold the PSC strictly accountable to zealously advocate on behalf of all MDL 2179 Plaintiffs.

I look forward to receiving the PSC’s answers to the following 10 questions.

QUESTION NO. 1

Why did the PSC designate the “B1” Master Complaint as an admiralty or maritime case, and request 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”)?

On February 9, 2011, the PSC filed a First Amended Master Complaint. Rather than allege claims under the OPA (which governs the MDL 2179 cases alleging economic loss due to the BP oil spill) and the Outer Continental Shelf Lands Act (“OCSLA”) (which governs the MDL 2179 personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law), the PSC made the unfathomable decision to allege claims under admiralty law. In the “B1” First Amended Master Complaint, the PSC clearly 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).”

QUESTION NO. 2

Why has the PSC failed to inform Judge Barbier that the honorable MDL 2179 Court has overreached its authority?

The Supreme Court has held that a district court conducting pretrial proceedings pursuant to 28 U.S.C. §1407(a) has no authority to invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

Justice Souter, in delivering the opinion of the Court in Lexecon, explained 28 U. S. C. §1407(a) authorizes the Judicial Panel on Multidistrict Litigation (the “Panel”) to transfer civil actions with common issues of fact “to any district for coordinated or consolidated pretrial proceedings,” but imposes a duty on the Panel to remand any such action to the original district “at or before the conclusion of such pretrial proceedings.”

QUESTION NO. 3

Why has the PSC failed to inform Judge Barbier that the E&PD class settlement violates the Oil Pollution Act of 1990 (“OPA”)?

In violation of the OPA and contrary to the intent of Congress, the E&PD class settlement defines “Class Members” by geographic bounds and certain business activities while requiring proof of a heightened, vague standard of causation.

QUESTION NO. 4

Why has the PSC failed to inform Judge Barbier that the honorable MDL 2179 Court has illegally excluded approximately 200,000 BP oil spill victims from the E&PD class settlement thereby greatly decreasing the bargaining power of the remaining class members?

GCCF’s “Release and Covenant Not to Sue” violates the OPA:

(a) by requiring the release of future damages as requirement for receiving a payment from the GCCF claims process, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2); and

(b) by allowing Feinberg, et al. to intentionally fail to provide a process for presenting, processing and paying interim, short-term damages, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2).

The text and the legislative history of the OPA statute are clear. 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 a miniscule payment amount for all damages, including future damages, they incur as a result of the oil spill.

Furthermore, GCCF’s “Release and Covenant Not to Sue” violates State contract law because it:

(a) was obtained through the use of economic duress;

(b) was obtained without free consent (Claimants did not consent to the release by choice, because the only option for receiving payment required Claimants to sign a release, the terms of which they had no opportunity to negotiate.);

(c) was obtained through fraud;

(d) requires Claimants to discharge, waive and release future claims (including those resulting from gross negligence) for costs and damages (including punitive damages) that are unknown and have not yet arisen;

(e) was obtained in exchange for inadequate consideration; and

(f) has as its objective the circumvention of the OPA.

Accordingly, GCCF’s “Release and Covenant Not to Sue” is void ab initio.

In sum, GCCF’s “Release and Covenant Not to Sue” and the class settlement’s “Release and Covenant Not to Sue” violate federal law, State contract law, and are contrary to public policy. Illegally excluding approximately 200,000 Claimants from the E&PD class settlement also greatly decreases the bargaining power of the “Class Members” and results in an increased loss of faith in the federal judicial system.

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).

Requiring BP oil spill victims, PSC’s clients, to prematurely waive their right to sue in exchange for a miniscule single final settlement payment is unconscionable.

QUESTION NO. 5

Why has the PSC failed to inform Judge Barbier that the E&PD class settlement is not “fair, reasonable, and adequate” and has not been entered into without collusion between the parties?

For the following reasons, the E&PD class settlement is not “fair, adequate, and reasonable” (at least not for the “Class Members”) and has not been entered into without collusion between the parties:

(a) Prior to the class action settlements, 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 the GCCF for all “legitimate” claims.

(b) After the class action settlements, the proposed “Settlement Trust” has only a balance of $7.8 billion from which BP oil spill victims are being told they will be compensated by the DHCC “so long as they execute an individual release.”

(c) As noted above, under the class action settlements, BP will receive a refund of approximately $6 billion; the PSC and other counsel allegedly performing common benefit work will receive $600 million.

(d) The E&PD class action 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. The PSC and BP oil spill victims have to ask, “Where’s the settlement?

(e) “……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.” 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.

QUESTION NO. 6

Why has the PSC failed to inform Judge Barbier that a class action may not be brought in a limitation proceeding?

The MDL 2179 Court may not certify a class in the limitation action because it would contravene the Fifth Circuit’s holding in Lloyds Leasing Ltd. v. Bates, 902 F.2d 368 (5th Cir. 1990). In Lloyds Leasing, the Fifth Circuit squarely held that a class action may not be brought in a limitation proceeding. Id. at 370. In affirming the district court’s denial of class certification, the Fifth Circuit reasoned as follows: First, the class action interferes with the concursus contemplated by the limitation of liability proceeding. . . . Second, the notice requirements of the limitation proceeding are more restrictive than the notice requirements of the class action. . . . Third, the entire thrust of Supplemental Rule F is that each claimant must appear individually and this is obviously inconsistent with the class action. Staring, Limitation Practice and Procedure, 53 Tul.L.Rev. 1134, 1150 (1979). In sum, “[t]he two rules are incompatible, and class representation in the sense of Rule 23 should therefore not be allowed in limitation proceedings.” Id.

Following Lloyd’s Leasing, courts in this district have routinely stricken class action allegations when they are filed within a limitation proceeding or dismissed class action complaints when they are filed after a limitation proceeding has been instituted. See, e.g., In re: Ingram Barge Co., No. 05-4419, 2006 U.S. Dist. LEXIS 79403, 2006 WL 5377855, at *1 (E.D. La. Oct. 19, 2006) (striking class allegations pursuant to Lloyd’s Leasing); In re: River City Towing Servs., Inc., 204 F.R.D. 94, 97 (E.D. La. 2001) (same); Humphreys v. Antillen, N.V., Nos. 93-3799, 93-3714, 1994 WL 682811, at *3 (E.D. La. Jan. 31, 1994) (dismissing class action complaint filed after limitation proceeding). The limitation proceedings need not be resolved and limitation of liability upheld in order to dismiss class action allegations. For example, Judge Berrigan in Ingram Barge and Judge Feldman in Humphreys struck or dismissed class action allegations before deciding the limitation issue. See Gabarick v. Laurin Mar. (America), Inc., 2009 U.S. Dist. LEXIS 27180.

QUESTION NO. 7

Why has the PSC allowed the MDL 2179 Court to decline to permit formal discovery on Feinberg, et al?

On June 15, 2011, Plaintiff Salvesen, one of my clients, filed his action against Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, GCCF, and William G. Green, Jr. in the Circuit Court of the Twentieth Judicial Circuit in and for Lee County, Florida asserting claims for gross negligence, negligence, negligence per se, fraud, fraudulent inducement, promissory estoppel, and unjust enrichment under Florida state law. The case was subsequently transferred by the JPML to the MDL 2179 Court on October 6, 2011. See Salvesen v. Feinberg, et al., 2:11-cv-02533.

Once the Salvesen case was transferred to the MDL 2179 Court, not only was the case automatically stayed, but the Salvesen claims, as explained supra, were inexplicably 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).

It is important to note that Kenneth R. Feinberg and Feinberg Rozen, LLP, d/b/a Gulf Coast Claims Facility, are not named Defendants in any Master Complaint or Class Action Complaint in MDL 2179.

On August 29, 2011, I emailed a letter to James Parkerson Roy wherein I 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, I received an email from you wherein you 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).

Again, and please correct me if I am wrong, the PSC represents all 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 the defendants. Certainly, as has occurred in MDL 2179, 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 never be properly resolved.

QUESTION NO. 8

Why does the PSC allow its BP oil spill victim clients to receive grossly inadequate compensation?

The Gulf Coast Claims Facility (“GCCF”)

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. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012, p. 1).

The Deepwater Horizon Claims Center (“DHCC”)

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 {“PwC”). Under the DHCC, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PwC. Accordingly, although Patrick Juneau has replaced Ken 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.

The DHCC Data

The DHCC data indicates that a total of 36,468 claimants filed Individual and Business 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! (DHCC Status Report, Oct. 5, 2012).

The DHCC data, dated October 26, 2012, indicates that a total of 41,235 claimants have filed the above types of claims with the DHCC. The DHCC paid only 407 of these claimants. In sum, the DHCC paid only 0.99% of the claimants who filed claims. Of the 21,058 Individual Economic Loss claims submitted, 204 claimants have received payment offers totaling $2,190,404, resulting in 43 payments totaling $599,428. This equates to an average payment of only $13,940.19 per Individual Economic Loss Claimant!

The DHCC data, dated November 16, 2012, indicates that a total of 46,159 claimants have filed the above types of claims with the DHCC. The DHCC paid only 996 of these claimants. In sum, the DHCC paid only 2.16% of the claimants who filed claims. Of the 22,571 Individual Economic Loss claims submitted, 354 claimants have received payment offers totaling $3,893,028, resulting in 143 payments totaling $1,777,080. This equates to an average payment of only $12,427.13 per Individual Economic Loss Claimant!

“I think it’s a tribute to the GCCF that all the people we used have been retained [by the DHCC],” Feinberg said. “I take great satisfaction in that fact.” David Hammer, Louisiana lawyer set to take Kenneth Feinberg’s role in BP oil spill claims process, The Times-Picayune (March 9, 2012).

My clients and all similarly-situated BP oil spill and GCCF victims do not share Feinberg’s great satisfaction.

QUESTION NO. 9

Why does the PSC allow for the E&PD class settlement to provide for a refund of approximately $6 billion to BP while granting excessive compensation to the PSC and other counsel allegedly performing “common benefit” work?

(a) The Refund

Deepwater Horizon Oil Spill Trust                                                                             $20  Billion

(Amount set aside by BP to allegedly pay economic

damage claims to individuals and businesses affected

by the Deepwater Horizon oil spill.)

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

(b) The Excessive Compensation

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;

N.B. – Plaintiffs’ Counsel received a Final Payment Offer from GCCF on behalf of Plaintiff Pinellas Marine Salvage, Inc. This offer, dated June 3, 2012 and postmarked June 8, 2012, was received by Plaintiffs’ Counsel 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. Plaintiffs respectfully point out to the Court that 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. In order to be awarded a common benefit fee of $600 million, the MDL 2179 Court would have to believe that the PSC attorneys worked two million hours;

(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.”); 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, Counsel for Plaintiff Salvesen 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…”

The Court has been fully briefed in regard to the excessive compensation being paid to the PSC and other counsel performing common benefit work in MDL 2179. (Rec. Doc. 6831-1)

QUESTION NO. 10

Given the above-referenced was not merely the result of poor legal strategy, do you believe the MDL 2179 PSC’s actions constitute legal malpractice?

Since April 8, 2012, our firm has filed: (a) a Motion to Vacate Order and Reasons [As to Motions to Dismiss the B1 Master Complaint]; (b) three Motions to Vacate Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement]; and (c) a Motion to Nullify Each and Every Gulf Coast Claims Facility (“GCCF”) “Release and Covenant Not to Sue.”

In contrast, as noted supra, the PSC appears to be more interested in maximizing its compensation and ensuring significant economy and efficiency in the judicial administration of the MDL 2179 Court rather than in obtaining justice for the MDL 2179 plaintiffs.

If you have any questions, please do not hesitate to contact me at 352-328-7469 or via e-mail at BrianJDonovan@verizon.net. I would be happy to provide the PSC with any and all supporting documentation.

Very truly yours,

/s/ Brian J. Donovan

Brian J. Donovan

cc:        James Parkerson Roy (jimr@wrightroy.com), Brian H. Barr (bbarr@levinlaw.com), Scott Summy (ssummy@baronbudd.com)

Click here to download a copy of this letter.

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BP Oil Spill: A Pattern of Collusive Unfairness Permeates the Deepwater Horizon Proposed Class Action Settlement (Part I)

BP Oil Spill: A Pattern of Collusive Unfairness Permeates

the Deepwater Horizon Proposed Class Action Settlement (Part I)

Tampa, FL (July 24, 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 an excerpt from this motion.

INTRODUCTION

On February 25, 2011, Pinellas Marine Salvage, Inc. and John Mavrogiannis filed their action against Defendants Kenneth R. Feinberg and Feinberg Rozen, LLP, d/b/a Gulf Coast Claims Facility, in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida asserting claims for gross negligence, negligence, negligence per se, fraud, fraudulent inducement, promissory estoppel, and unjust enrichment under Florida state law. On March 18, 2011, Defendants removed the Pinellas Marine case to the U.S. District Court for the Middle District of Florida. Plaintiffs filed their Motion to Remand on March 30, 2011. The case was subsequently transferred by the JPML to the MDL 2179 Court on August 9, 2011. See Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al., 2:11-cv-01987.

Phase I of a multi-phase trial in Transocean’s Limitation and Liability Action, Case No. 10-2771, was scheduled for February 27, 2012. On February 26, 2012, the eve of the Limitation and Liability Trial, the Court adjourned proceedings for one week to allow BP and the PSC to make further progress on their settlement talks. (Rec. Doc. 5887). On March 2, 2012, the Court was informed that BP and the PSC had reached an Agreement-in-Principle on the proposed settlements. Consequently, the Court adjourned Phase I of the trial, because of the potential for realignment of the parties in this litigation and substantial changes to the current trial plan. (Rec. Doc. 5955).

On March 8, 2012, at the parties’ request, the Court entered an Order creating a process to facilitate the transition from the GCCF to the “Court Supervised Settlement Program” envisioned by the settlement. (Rec. 5995). On April 16, 2012, the PSC filed a new class action complaint to serve as the vehicle for the proposed Economic and Property Damage Settlement. See No. 12-970, Bon Secour Fisheries, Inc., et al. v. BP Exploration & Production Inc., et al. The class action complaint was amended on May 2, 2012. (Rec. Doc. 6412). On April 18, 2012, the PSC and BP filed their Proposed Settlement (Rec. Doc. 6276). On May 2, 2012, the Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement] (Rec. Doc. 6418).

Plaintiffs re-filed their Motion to Remand and Memorandum in Support with this Honorable Court on November 14, 2011 (Rec. Doc. 4574). On December 1, 2011, Plaintiffs filed their Motion in Opposition to Class Certification of Any Action in MDL No. 2179 and Memorandum in Support (Rec. Doc. 4782). Both motions remain pending in this Court.

LAW AND ARGUMENT

The standard for reviewing a proposed settlement of a class action by courts in this Circuit, as in other circuits, is whether the proposed settlement is “fair, adequate, and reasonable” and whether it has been entered into without collusion between the parties. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998) (“Settlement is the offspring of compromise; the question we address is not whether the final product could be prettier, smarter or snazzier, but whether it is fair, adequate, and free from collusion.”); and In re OCA, Inc. Sec. & Derivative Litig., No. 05-2165, 2009 U.S. Dist. LEXIS 19210, at *32 (E.D. La. Mar. 2, 2009). To do this in the Fifth Circuit, courts evaluate the six Reed factors. The Reed factors are “(1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of plaintiffs’ success on the merits; (5) the range of possible recovery; and (6) the opinions of the class counsel, class representatives, and absent class members.” Reed v. Gen. Motors Corp., 703 F.2d 170, 172 (5th Cir. 1983).

The United States 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. See Dynamic Marine Consortium, SA v. Latini, MV, 179 F.3d 278 (5th Cir. 1999) (Emphasis added).

In his Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement], Judge Barbier writes, “The Court preliminarily approves the Economic and Property Damages Settlement Agreement filed with this Court on April 18, 2012 (Rec. Doc. 6276-1), as amended as set forth in Interim Class Counsel’s and BP’s Joint Supplemental Motion Related to the Economic and Property Damages Settlement, as fair, reasonable, adequate, entered in good faith, free of collusion, and within the range of possible judicial approval……The Parties engaged in a multi-month, extensive, arms-length settlement process, free of collusion, and overseen by Magistrate Judge Shushan.” (p. 29, Rec. Doc. 6418) (Emphasis added). Plaintiffs respectfully disagree; collusion permeates MDL 2179 and this Proposed Settlement.

The following are merely a few examples of the hallmarks of collusive unfairness which are present in MDL 2179 and this Proposed Settlement.

A.  “Centralization May Also Facilitate Closer Coordination with Kenneth Feinberg’s Administration of the BP Compensation Fund.”

On June 16, 2010, President Obama announced that BP agreed to set aside $20 billion to pay economic damage claims to individuals and businesses affected by the Deepwater Horizon oil spill. At the request of the White House and BP, Kenneth R. Feinberg (“Feinberg”), acting through and as Managing Partner of Feinberg Rozen, LLP, established the Gulf Coast Claims Facility (“GCCF”) for the alleged purpose of administering, settling, and authorizing the payment of certain claims asserted against BP as a result of the explosion at the Deepwater Horizon rig and consequent spillage of oil into the Gulf of Mexico.

On August 10, 2010, the Judicial Panel on Multidistrict Litigation (“JPML”) centralized all federal actions (excluding securities suits) in this Court pursuant to 28 U.S.C. § 1407. In its Transfer Order, the JPML clearly stated, “Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” (p. 3, Rec. Doc. 1).

On August 23, 2010, the GCCF replaced the original BP claims process and commenced performing BP’s obligations under the Oil Pollution Act of 1990 (‘OPA”) with respect to private economic loss claims. Feinberg Rozen, LLP was paid $1.25 million per month by Defendant BP to administer the GCCF claims process.

In sum, the JPML sought to “facilitate closer coordination” between Feinberg (who was an agent of, and being directly compensated by, Defendant BP) and the MDL 2179 Plaintiffs’ Steering Committee (“PSC”) (which allegedly represents the plaintiffs in MDL 2179). BP, by and through Feinberg, et al., and the PSC entered into “a secret understanding to appear as adversaries, though in agreement.” This secret understanding has been, and continues to be, prejudicial to all BP oil spill victims. Plaintiffs respectfully point out to this Honorable Court that this collusion was accomplished with the imprimatur of the JPML.

B.  The Court Supervised Settlement Program and the Gulf Coast Claims Facility Are Virtually Identical.

On March 8, 2012, the Court entered an Order creating a process to facilitate the transition from the GCCF to the “Court Supervised Settlement Program” (“CSSP”) envisioned by the Proposed Settlement. Claims submitted to the CSSP will be evaluated and processed by Claims Administration Vendors pursuant to the frameworks detailed in the Proposed Settlement for the various damage categories. Those who accept payments under the Proposed Settlement are required to release their claims against BP, government oil spill liability funds, and all other Defendants in MDL 2179 (except Transocean and Halliburton). (p. 6, Rec. Doc. 6418).

Under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP.

On May 2, 2012, Patrick Juneau was appointed as Claims Administrator to oversee the Claims Administration Vendors, who will process the claims in accordance with 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, 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 CSSP.

“I think it’s a tribute to the GCCF that all the people we used have been retained,” Feinberg said. “I take great satisfaction in that fact.”  David Hammer, Louisiana lawyer set to take Kenneth Feinberg’s role in BP oil spill claims process, The Times-Picayune (March 9, 2012). It is unlikely that BP oil spill victims will share Feinberg’s satisfaction.

GCCF Overall Program Statistics (Status Report as of March 7, 2012)

Total Amount Paid                                           = $6,079,922,450.47

Total No. 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. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012). (Rec. Doc. 6831-1).

Here again is an example of a “secret understanding between two or more persons” (BP, the GCCF, and the PSC) which is “prejudicial to another” (the BP oil spill victims).

C.  The Proposed Settlement Provides 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

Deepwater Horizon Oil Spill Trust                                                                                                                   $20 Billion

(Amount set aside by BP to allegedly pay economic damage claims

to individuals and businesses affected by the Deepwater Horizon oil spill.)

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

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. – Plaintiffs’ Counsel received a Final Payment Offer from GCCF on behalf of Plaintiff Pinellas Marine Salvage, Inc. This offer, dated June 3, 2012 and postmarked June 8, 2012, was received by Plaintiffs’ Counsel 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. Plaintiffs respectfully point out to the Court that 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, Counsel for Plaintiffs 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…”

On November 7, 2011, the PSC reported: “In all, 340 lawyers from ninety different law firms have invested over 230,000 hours and contributed over $11.54 million in out-of-pocket held and shared expenses for the common benefit of claimants and litigants . . . In addition, the PSC members and other Common Benefit Work Group Members and Coordinators have incurred approximately $1.5 million in unpaid expenses, which are still being processed. At the same time, PSC members and other Common Benefit Attorneys have contributed and additional $1.8 million to a joint account for payment of further shared expenses, as incurred.” (PSC’s Memo. in Supp. p. 9 & n.10, Rec. Doc. 4507-1 at 12 & n.10).

This Court has previously used a range of $300 to $400 per hour for members of a Plaintiffs’ Steering Committee and $100 to $200 per hour for associates to “reasonably reflect the prevailing [billable time] rates in this jurisdiction.” Turner v. Murphy Oil USA, Inc., 472 F. Supp. 2d at 868-69 (E.D. La. 2007).

Amount Awarded                      Billable Hourly Rate                      Hours Required to Have Been Expended

$600,000,000.00                            $300/hr.                                                2,000,000 hours

In sum, in order to be awarded a common benefit fee of $600 million, this Honorable Court would have to believe that the PSC attorneys worked two million hours. This fee amount, which does not include the aforementioned (a), (c), and (d) known sources of compensation, fails the reasonableness test. (Rec. Doc. 6831-1).

“The Total Recovery that BP Has Agreed to Provide is Uncapped.”

In his Preliminary Approval Order Judge Barbier writes, “The comprehensive system of claims frameworks featured in the Settlement Agreement is the product of many months of intensive negotiation, provides for class recovery unlimited by any aggregate cap, does not constitute a limited fund to be divided among competing claimants (with the sole exception of the $2.3 billion Seafood Compensation Program, whose allocation was placed with a court-appointed neutral)..” (p. 31, Rec. Doc. 6418). “With the exception of the Seafood Compensation Program, there is no limit or “cap” on the amount to be paid by BP under these programs. Rather, all claims that meet the criteria for each program will be paid in full. Such claims will be paid without delay – claimants need not await final settlement approval for payment.” (p. 5, Rec. Doc. 6266-1). “In this settlement, the total recovery that BP has agreed to provide is uncapped; BP’s initial estimates place its cost at approximately $7.8 billion.” (p. 28, Rec. Doc. 6266-1).

“There Can Be No Question that the PSC Has Taken Seriously Its Fiduciary Obligations in the Best Interests of all Claimants.”

Judge Barbier writes, “There can be no question that the PSC has taken seriously its fiduciary obligations in the best interests of all claimants, both private and governmental.” (p. 3, Rec. Doc. 5022). See also, “The Parties engaged in substantial discovery and motion practice to evaluate the merits of the claims and defenses and extensively investigated and analyzed the facts and legal issues surrounding those claims and defenses.” (pp. 29, 30, Rec. Doc. 6418). “In the 20 months that have passed since the JPML’s centralization order, the parties have engaged in extensive discovery and motion practice, including taking 311 depositions, producing approximately 90 million pages of documents, and exchanging more than 80 expert reports on an intense and demanding schedule. Depositions were conducted on multiple tracks and on two continents. Discovery was kept on course by weekly discovery conferences before Magistrate Judge Shushan. The Court also held monthly status conferences with the parties.” (p. 3, Rec. Doc. 6418).

In class actions where the attorneys’ fee is negotiated by counsel, courts “must be particularly vigilant in evaluating [class counsel’s] recommendations because there may be a bias toward settlements in which the class attorney agrees to trade off a smaller total award by the defendant for a larger fee.” Wright, et al., supra, § 1797.1; see also Kent A. Lambert, Class Action Settlements in Louisiana, 61 La. L. Rev. 89, 102-04 (2000) (noting that “mixing negotiation of the overall settlement with discussions of attorneys’ fees” can, at a minimum, create “an appearance of impropriety”). Pecuniary self-interest of class counsel has long been cited by courts and scholars as a threat to performance of counsel’s professional and fiduciary obligations to class members. See, e.g., Reynolds, 288 F.3d at 279-80; John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 Colum. L. Rev. 370, 385-93 (2002); David L. Shapiro, Class Actions: The Class as Party and Client, 73 Notre Dame L. Rev. 913, 958-60 & n.132 (1998). It should also be noted that “clear-sailing clauses,” which are essentially nothing more than negotiated ceilings on fee awards, have also been subjected to criticism. See, e.g., William D. Henderson, Clear Sailing Agreements: A Special Form of Collusion in Class Action Settlements, 77 Tul. L. Rev. 813 (2003) (arguing that courts should reject class action settlements containing clear sailing clauses). Turner v. Murphy Oil USA, Inc., Case 2:05-cv-04206, (p. 20, Rec. Doc. 1072) (E.D. La. 2007).

Given that (a) “the total recovery that BP has agreed to provide is uncapped,” and (b) “there can be no question that the PSC has taken seriously its fiduciary obligations in the best interests of all claimants,” Plaintiffs respectfully request that this Honorable Court ask this simple question:

Why has the PSC negotiated a settlement wherein BP receives a $6 billion refund from the Deepwater Horizon Oil Spill Trust when it is clear that the Proposed Settlement will not fully compensate all class members?

Is the BP Oil Spill Proposed Class Action Settlement Fair, Reasonable, and Adequate?

Is the BP Oil Spill Proposed Class Action Settlement Fair, Reasonable, and Adequate?

_____________________________

Plaintiff Files Motion to Vacate Preliminary Approval Order

Tampa, FL (July 4, 2012) – On April 18, 2012, the MDL 2179 Plaintiffs’ Steering Committee (“PSC”) and BP filed their Proposed Settlement. The Proposed Settlement allegedly 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; (ii) the explosions and fire on board the Deepwater Horizon on or about April 20, 2010; (iii) the sinking of the Deepwater Horizon on or about April 22, 2010; (iv) the release of oil, other hydrocarbons and other substances from the MC252 Well and/or the Deepwater Horizon and its appurtenances; (v) the efforts to contain the MC252 Well; (vi) Response Activities, including the VoO Program; (vii) the operation of the GCCF; and (viii) BP public statements relating to all of the foregoing.

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 2, 2012, Plaintiff Selmer M. Salvesen, a clam farmer in Florida, filed a Motion to Vacate Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement], Rec. Doc. 6418 dated May 2, 2012, with the MDL 2179 Court.

The following is an excerpt from Plaintiff Salvesen’s Motion to Vacate.

A. The Proposed Settlement Is Not Fair, Reasonable, and Adequate.

Rule 23(e) places the burden of persuasion on the movers that the proposed settlement is “fair, reasonable, and adequate.”  In re Chinese-Manufactured Drywall Prods. Liab. Litig., 2012 WL 92498, at *7 (E.D. La. Jan. 10, 2012). If the proposed settlement “discloses no reason to doubt its fairness, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, does not grant excessive compensation to attorneys, and appears to fall within the range of possible approval, the court should grant preliminary approval.” In re OCA, Inc. Sec. & Deriv. Litig., No. 05-2165, 2008 WL 4681369, at *11 (E.D. La. Oct. 17, 2008).

1.  The Proposed Settlement Provides Misleading Information to Class Members.

Under the Oil Pollution Act of 1990 (‘OPA”), claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). 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. 33 U.S.C. § 2713(c).

“The Court is satisfied that, pursuant to the terms of the Proposed Settlement, Class Members who opt out or who possess reserved claims will be able to pursue those claims effectively outside the Class Settlement.” (p. 26, Rec. Doc. 6418). BP and the PSC have misled this Honorable Court and Class Members.

(a)  The Oil Spill Liability Trust Fund

The OPA provides the Oil Spill Liability Trust Fund (“OSLTF”) to pay for oil spill costs when the responsible party cannot or does not pay. The OSLTF, administered by the U.S. Coast Guard through its National Pollution Funds Center (“NPFC”), is primarily financed through a tax on petroleum products, and is subject to a $1 billion cap on the amount of expenditures from the OSLTF per incident. For any one oil pollution incident, the OSLTF may pay up to $1 billion. Victims of the BP oil spill are at risk as a result of this cap. The cap is for total expenditures. This $1 billion expenditure limit applies even if the OSLTF is fully reimbursed by the responsible party and net expenditures are zero. OSLTF expenditures for natural resource damage assessments and claims in connection with a single incident are limited to $500 million of that $1 billion. NPFC administers the OSLTF by disbursing funds to government agencies to reimburse them for their oil spill cleanup costs (cost reimbursements), monitoring the sources and uses of funds, adjudicating claims submitted by individuals and businesses to the OSLTF for payment (claims), and pursuing reimbursement from the responsible party for costs and damages paid from the OSLTF (billing the responsible party).

On March 9, 2012, Mr. Craig A. Bennett, Director – NPFC, provided the following OSLTF status report in regard to the Deepwater Horizon oil spill incident:

Deepwater Horizon OSLTF Costs     =          $619 million

Deepwater Horizon Pending Claims =          $410 million (for 1,659 claims received)

On March 9, 2012, total OSLTF expenditures (paid + pending claims) in regard to the Deepwater Horizon was $1.019 billion. In sum, since the OSLTF has exceeded, or will very shortly exceed, its $1 billion expenditure cap for the Deepwater Horizon oil spill incident, the OSLTF cannot pay valid individual or business claims which are not paid by BP.

(b)  The Litigation Option

OPA, a strict liability statute, governs the MDL 2179 cases alleging economic loss due to the BP oil spill. The Outer Continental Shelf Lands Act (“OCSLA”) governs the MDL 2179 personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law.

Judge Barbier aptly stated in his Order dated August 26, 2011, “The Court finds that the text of OPA clearly requires that OPA claimants must first “present” their OPA claim to the Responsible Party before filing suit….The text of the statute is clear. Congress intended presentment to be a mandatory condition precedent to filing suit….There are likely large numbers of B1 claimants who have completely bypassed the OPA claim presentation requirement, others who have attempted to present their claims but may not have complied with OPA, and others who have properly presented their claims but have been denied for various reasons. Claimants who have not complied with the presentment requirement are subject to dismissal without prejudice, allowing them to exhaust the presentment of their claims before returning to court. In the ordinary case, the Court would simply dismiss those claims without prejudice. However, as the Court has previously noted, this is no ordinary case….. A judge handling an MDL often must employ special procedures and case management tools in order to have the MDL operate in an orderly and efficient manner. In this massive and complex MDL, the Court is faced with a significant practical problem. It would be impractical, time-consuming, and disruptive to the orderly conduct of this MDL and the current scheduling orders if the Court or the parties were required to sort through in excess of 100,000 individual B1 claims to determine which ones should be dismissed at the current time. Moreover, such a diversion at this time would be unproductive and would not advance towards the goal of allowing the parties and the Court to be ready for the limitation and liability trial scheduled to commence in February 2012. No matter how many of the individual B1 claims might be dismissed without prejudice, the trial scheduled for February would still go forward with essentially the same evidence…..In summary on this issue, the Court finds that presentment is a mandatory condition precedent with respect to Plaintiffs’ OPA claims. The Court finds that Plaintiffs have sufficiently alleged presentment in their B1 Master Complaint, at least with respect to some of the Claimants.” (pp. 29, 30, 31, Rec. Doc. 3830) (Emphasis added).

Pursuant to the terms of the Proposed Settlement, “Regardless of whether the Agreement becomes effective, Claims with a sum certain and some documentation and/or other proof that are submitted to the Settlement Program shall be deemed to satisfy presentment and all requirements of 33 U.S.C. § 2713.” (pp. 62-63, Rec. Doc. 6276-1); “OPA Process shall mean the claims presentment procedure pursuant to the OPA, including claims that have been submitted to the BP Parties or claims that have been submitted to the GCCF as part of the OPA Process.” (p. 104, Rec. Doc. 6276-1); “Economic Class Members with expired offers from the GCCF who Opt-Out of the Economic Class shall be deemed to have satisfied the presentment requirements under the Oil Pollution Act of 1990 (“OPA”).” (p. 15, Rec. Doc. 6276-1).

BP and the PSC clearly understand that, under OPA, Congress intended presentment to be a mandatory condition precedent to filing suit. However, yet again, the parties mislead this Honorable Court and Class Members by intentionally failing to counsel those Claimants who may opt-out of the Proposed Settlement that, under OPA, claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). 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. 33 U.S.C. § 2713(c). If a Claimant files a Complaint against BP under OPA prior to first presenting his, her, or its claim to BP and then waiting 90 days, the case will be subject to dismissal and the claimant will again be left out in the cold.

BP and the PSC are obviously aware that the OSLTF is not a viable alternative for Claimants who opt-out and, for many opt-out Claimants, filing a suit against BP under OPA will be either thwarted or delayed by the OPA presentment requirement. However, the Proposed Settlement “generously” provides that, “Any Economic Class Member may revoke his, her or its Opt Out from the Economic Class and thereby receive the benefit of this Economic and Property Damage Settlement up until three (3) days prior to the Fairness Hearing; or later, if the BP Parties consent in their sole and unilateral discretion..” (p. 40, Rec. Doc. 6418).

(i)  The Statute of Limitations

The PSC further misleads Class Members by intentionally failing to counsel those Claimants who may opt-out of the Proposed Settlement that a lawsuit brought against a non-Responsible Party, e.g., a lawsuit asserting claims for gross negligence, fraud, etc. against Kenneth R. Feinberg, et al, may be barred by the statute of limitations. In federal question cases, the federal court will apply the specific statute of limitations period established by the federal statute under which the plaintiff is seeking relief. Federal courts that are hearing a controversy based on diversity of citizenship of the parties must apply the applicable state law of the forum state. In this case, the statute of limitations for a suit brought against a non-Responsible Party may be only two years.

2.  The Proposed Settlement Grants Excessive Compensation to Attorneys.

The question is whether the Proposed Settlement grants excessive compensation to the PSC and other counsel performing common benefit work in MDL 2179. This issue can be determined by a simple two-prong comparison test: First, by comparing the common benefit fees received by attorneys in MDL 2179 with the average total payment amount received by the claimants; and Second, by comparing the common benefit fees received by attorneys in MDL 2179 with the common benefit fees received by attorneys in comparable MDLs.

(a)  The Average Total Payment Amount Received From GCCF by Claimants

GCCF Overall Program Statistics (Status Report as of March 7, 2012)

Total Amount Paid                                           = $6,079,922,450.47

Total No. 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. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012) (a copy is attached hereto as Exhibit A).

On March 8, 2012, this Honorable Court terminated the GCCF claims process and appointed Patrick Juneau as the Claims Administrator of the Transition Process and the proposed Court Supervised Claims Program (“CSCP”). On May 2, 2012, Patrick Juneau was appointed as Claims Administrator to oversee the Claims Administration Vendors, who will process the claims in accordance with the Proposed Settlement. Under the CSCP, 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 will change under the CSCP.

(b)  The Common Benefit Fees Received by Attorneys in Comparable MDLs

In order to determine an appropriate common benefit fee, this Court looks to comparable MDL set-aside assessments and awards of common benefit fees. E.g., In re Diet Drugs Prods. Liab. Litig., 553 F. Supp. 2d at 442, 457-58, 491-96 (E.D. Pa. 2008) (describing 9% federal and 6% state assessments later reduced to 6% and 4%, respectively; awarding less than total fund created by assessments); In re Zyprexa, 467 F. Supp. 2d at 261-63 (E.D.N.Y. Aug. 17, 2007) (1% and 3% of separate settlement amounts); In re Sulzer Hip Prosthesis & Knee Prosthesis Liab. Litig., 268 F. Supp. 2d at 907, 909, 919 n.19 (N.D. Ohio 2003) (awarding common benefit fees out of $50,000,000 fund created through assessment representing 4.8% of settlement value); In re Protegen Sling & Vesica Sys. Prods. Liab. Litig., MDL No. 1387, 2002 WL 31834446, at *1, *3 (D. Md. Apr. 12, 2002) (9% federal, 6% coordinated state assessments); In re Rezulin Prods. Liab. Litig., MDL No. 1348, 2002 WL 441342, at *1 (S.D.N.Y. Mar. 20, 2002) (6% withholding in federal cases, 4% in participating state cases); See also William B. Rubenstein, On What a “Common Benefit Fee” Is, Is Not, and Should Be, 3 Class Action Att’y Fee Dig. at 87 (2009) (collecting cases and concluding that most common benefit assessments range from 4% to 6%); 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 14:9 (4th ed. 2002) (“Most [MDL] courts have assessed common benefit fees at about a 4-6% level, generally 4% for a fee and 2% for costs.”); Paul D. Rheingold, Litigating Mass Tort Cases § 7:35 (2010) (“[P]ercentages awarded for common funds in recent MDLS … were in the 4-6% range.”)(citation omitted). In re Vioxx Prods. Liab. Litig., 760 F. Supp. 2d 640 (E.D. La. 2010) (“October 19, 2010 Order and Reasons”).

The Court’s analysis in the Vioxx MDL case is instructive. In re Vioxx Prods. Liab. Litig. (“MDL 1657”) involves the prescription drug Vioxx. Merck, a New Jersey corporation, researched, designed, manufactured, marketed and distributed Vioxx to relieve pain and inflammation resulting from osteoarthritis, rheumatoid arthritis, menstrual pain, and migraine headaches. On September 20, 2004, Merck withdrew it from the market after data indicated that the use of Vioxx increased the risk of cardiovascular thrombotic events such as myocardial infarction (heart attack) and ischemic stroke. Thereafter, thousands of individual suits and numerous class actions were filed against Merck in state and federal courts throughout the country.

On February 16, 2005, the Judicial Panel on Multidistrict Litigation (“JPML”) conferred MDL status on Vioxx lawsuits filed in various federal courts throughout the country and transferred all such cases to this Court to coordinate discovery and to consolidate pretrial matters pursuant to 28 U.S.C. § 1407. See In re Vioxx Prods. Liab. Litig., 360 F. Supp. 2d 1352 (J.P.M.L. 2005).

On November 9, 2007, Merck and the Negotiating Plaintiffs’ Counsel (“NPC”) formally announced that they had reached a Settlement Agreement. The private Settlement Agreement established a pre-funded program for resolving pending or tolled state and federal Vioxx claims against Merck as of the date of the settlement, involving claims of heart attack (“MI”), ischemic stroke (“IS”), and sudden cardiac death (“SCD”), for an overall amount of $4.85 billion. In Vioxx, Judge Fallon stated, “The Settlement Agreement created a $4.85 billion fund for the compensation of Vioxx claimants. The Court finds no reason to omit any portion of that settlement fund from consideration with respect to the reasonable amount of common benefit fees. Accordingly, $4.85 billion is the appropriate amount for calculation of a reasonable percentage of common benefit fees.”

The Vioxx Court awarded a common benefit fee of $315,250,000, which is equivalent to 6.5% of $4,850,000,000. In Vioxx, unlike MDL 2179, the attorneys came from states across the country. Accordingly, the Court found that an average hourly billable rate of $443.29 was reasonable.

There are two significant differences between MDL 1657 and MDL 2179:

(i)  The Time and Labor Required

The PSC and other counsel performing common benefit work in MDL 1657 documented and submitted over 560,000 hours of work during the course of the litigation. The PSC operated on many fronts, preparing pleadings and Master Class Action complaints, taking over 2,000 depositions, reviewing and compiling over 50,000,000 documents, briefing and arguing over 1,000 discovery motions, assembling a trial package, conducting bellwether trials, negotiating the global Settlement Agreement, and implementing the payout under the Agreement.

In contrast, “In the 20 months that have passed since the JPML’s centralization order, the parties [in MDL 2179] have engaged in extensive discovery and motion practice, including taking 311 depositions, producing approximately 90 million pages of documents, and exchanging more than 80 expert reports on an intense and demanding schedule……..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 2179 only took 311 depositions and initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179.

The MDL 1657 Court conducted six Vioxx bellwether trials. During the same period that the Court was conducting six bellwether trials, approximately thirteen additional Vioxx-related cases were tried before juries in various state courts.

The MDL 2179 Court did not conduct a single bellwether trial.

(ii)  The Results Obtained

Attorneys doing common benefit work on behalf of Vioxx users in MDL 1657 achieved a favorable and meaningful global resolution. The Settlement Agreement ensured fair and comprehensive compensation to all qualified participants. In only 31 months, the parties to the Vioxx case were able to reach a global settlement and distribute $4,353,152,064 to 32,886 claimants, out of a pool of 49,893 eligible and enrolled claimants.

In contrast, attorneys doing common benefit work on behalf of BP oil spill victims in MDL 2179 did not remotely achieve “a favorable and meaningful global resolution.” The MDL 2179 Proposed Settlement does not ensure fair and comprehensive compensation to all qualified participants. This conclusion is supported by the following comparison:

Average Total Amount Paid Per Claimant in MDL 1657 =  $132,370.98

Average Total Amount Paid Per Claimant in MDL 2179 =  $  27,466.47

(c)  The Common Benefit Fees Received by Attorneys in MDL 2179

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);

(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, Counsel for Plaintiff Salvesen 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…”

Over the years courts have employed various methods to determine the reasonableness of an award of attorneys’ fees. These methods include the “lodestar” method, which entails multiplying the reasonable hours expended on the litigation by an adjusted reasonable hourly rate, Copper Liquor, Inc. v. Adolph Coors Co., 624 F.2d 575, 583 & n.15 (5th Cir. 1980); the percentage method, in which the Court compensates attorneys who recovered some identifiable sum by awarding them a fraction of that sum; or, more recently, a combination of both methods in which a percentage is awarded and checked for reasonableness by use of the lodestar method.

(i)  The Percentage Method

As noted above, “percentages awarded for common funds in recent MDLS … were in the 4-6% range.” Given that the PSC and other counsel allegedly performing common benefit work in MDL 2179 only took 311 depositions and initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179, the appropriate percentage should be no greater than 4%.

BP has estimated the cost of the proposed settlement to be approximately $7.8 billion. (p. 156, Rec. Doc. 6266-2). A 4% award would yield $312 million for common funds.

(ii)  The Lodestar Cross-Check

The lodestar analysis is not undertaken to calculate a specific fee, but only to provide a broad cross-check on the reasonableness of the fee arrived at by the percentage method.

This Court has previously used a range of $300 to $400 per hour for members of a Plaintiffs’ Steering Committee and $100 to $200 per hour for associates to “reasonably reflect the prevailing [billable time] rates in this jurisdiction.” Turner v. Murphy Oil USA, Inc., 472 F. Supp. 2d at 868-69 (E.D. La. 2007).

Amount Awarded                      Billable Hourly Rate                      Hours Required to Have Been Expended

$312,000,000.00                             $300/hr.                                                       1,040,000 hours

$600,000,000.00                            $300/hr.                                                       2,000,000 hours

In sum, in order to be awarded a common benefit fee of $312 million, this Honorable Court would have to believe that the PSC attorneys worked more than one million hours; in order to be awarded a common benefit fee of $600 million, this Honorable Court would have to believe that the PSC attorneys worked two million hours. Both of these fee amounts, which do not include the aforementioned (a), (c), and (d) known sources of compensation, fail the reasonableness test.

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