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Sign the Petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via Subrogation

Sign the Petition: The Intended Purpose of the OSLTF Is to Fully Compensate Oil Spill Victims via  Subrogation

DATE: March 28, 2014

PURPOSE OF THE PETITION
The purpose of this petition is to 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 Oil Spill Liability Trust Fund (“OSLTF’), as “an expenditure that is not reimbursed by the responsible party.”

PETITION SUMMARY
A primary purpose of the OSLTF is to compensate persons for removal costs and damages resulting from an oil spill incident. In essence, the OSLTF is an insurance policy, or backstop, for victims of an oil spill incident that are not fully compensated by the responsible party.

Any person, including the OSLTF, that pays compensation pursuant to the Oil Pollution Act of 1990 (“OPA”) to any claimant for damages [resulting from an oil spill] shall be subrogated to all rights, claims, and causes of action that the claimant has under any other law. 33 U.S.C. § 2715(a)

Moreover, at the request of the Secretary, the Attorney General shall commence an action on behalf of the OSLTF to recover any compensation paid by the OSLTF to any claimant pursuant to OPA, and all costs incurred by the OSLTF by reason of the claim, including interest (including prejudgment interest), administrative and adjudicative costs, and attorney’s fees. Such an action may be commenced against any responsible party or guarantor, or against any other person who is liable, pursuant to any law, to the compensated claimant or to the OSLTF, for the cost or damages for which the compensation was paid. 33 U.S.C. § 2715(c)

OPA established an expenditure cap of $1 billion per oil spill incident. This $1 billion expenditure limit includes $500 million for natural resource damage assessments and claims.

Victims of catastrophic oil spills 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.

PETITION BACKGROUND
I am writing in regard to the need to properly define the term “expenditure” under the Oil Spill Liability Trust Fund (“OSLTF”). Under the OSLTF, expenditure should mean “an expenditure that is not reimbursed by the responsible party.” Defining the term in any other manner ignores the legislative intent of Congress and the Internal Revenue Code.

The BP oil spill of 2010 is instructive.

The question is whether victims of the BP oil spill of April 22, 2010 will have to pay three times: (a) once for the oil spill, the environmental and economic damages of which will devastate their way of life and leave many in financial ruin; (b) again by being misled and undercompensated by GCCF and DHCC; and (c) a third time for daring to demand justice, which will consume their time, energy and hopes for years to come if they are held hostage by protracted individual lawsuits or class action lawsuits.

The damages suffered by victims of the BP oil spill incident of April 22, 2010 will be enormous and on-going. The livelihoods of all persons whose businesses rely on the natural resources of the Gulf Coast are at risk. Commercial fishermen, oyster harvesters, shrimpers, and businesses involved, directly or indirectly, in processing and packaging for the seafood industry will experience the end of a way of life that, in many cases, has been passed down from one generation to the next.

How will victims of this unprecedented oil spill be fully compensated for their losses? Theoretically, there are four potential avenues of compensation for victims of this oil spill: (a) the Gulf Coast Claims Facility (“GCCF”); (b) the Deepwater Horizon Claims Center (“DHCC”); (c) litigation; and (d) the OSLTF.

GCCF
GCCF was meant to replace the inefficient claims process which BP had established to fulfill its obligations as a responsible party pursuant to the Oil Pollution Act of 1990 (“OPA”). It was not the legislative intent of Congress for OPA to limit an oil spill victim’s right to seek full compensation from the responsible party. BP and Kenneth Feinberg, the GCCF claims administrator, allege that GCCF (and the protocols under which it operates) are structured to be compliant with OPA. However, GCCF is in violation of OPA. In lieu of ensuring that oil spill victims are made whole, GCCF’s primary goal appears to be the limitation of BP’s liability via the systematic postponement, reduction or denial of claims against 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.

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.

LITIGATION
BP, the responsible party, is a powerful and well-funded defendant, does not lack imagination or incentive to pose innumerable legal barriers, and will aggressively assert its legal rights and otherwise use the law, the courts and the judicial system to serve its interests. BP can afford to stall, and actually benefits from delay, but its victims cannot afford to wait for years to be fully compensated for their losses.

Kenneth Feinberg uses 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 tells 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 says. He adds, “I take the position, if I don’t find you eligible, no court will find you eligible.” Mr. Feinberg intentionally fails to mention that litigation is not the only alternative to GCCF.

OSLTF
As Representative Lent explained in urging passage of OPA, “The thrust of this legislation is to eliminate, to the extent possible, the need for an injured person to seek recourse through the litigation process.” See 135 Cong. Rec. H7962 (daily ed. Nov. 2, 1989) Prior to OPA, federal funding for oil spill damage recovery was difficult for private parties. To address this issue, Congress established the OSLTF under section 9509 of the Internal Revenue Code of 1986 (26 U.S.C. 9509).

The OSLTF is currently funded by: a per barrel tax of 8 cents on petroleum products either produced in the United States or imported from other countries, reimbursements from responsible parties for costs of removal and damages, fines and penalties paid pursuant to various statutes, and interest earned on U.S. Treasury investments.

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 either denied or not paid by the responsible party within 90 days, the claimant may elect to commence an action in court against the responsible party or to present the claim to the OSLTF. 33 U.S.C. § 2713(c)

Expenditure
The maximum amount which may be paid from the OSLTF with respect to any single incident shall not exceed $1 billion. 26 U.S.C. § 9509(c)(2)(A) Furthermore, except in the case of payments of removal costs, a payment may be made from the OSLTF only if the amount in the OSLTF after such payment will not be less than $30,000,000. 26 U.S.C. § 9509(c)(2)(B)

This is an incident of first impression for the OSLTF. The BP oil spill of April 22, 2010, a catastrophic oil spill incident, represents the first time that the viability of the OSLTF has been threatened. Federal statutes and relevant regulations neither specifically address such a scenario nor provide authority for further compensation. However, OPA legislative history and statements from OPA drafters indicate that drafters intended the OSLTF to cover “catastrophic spills.” See U.S. Congress, House Committee on Merchant Marine and Fisheries, Report accompanying H.R. 1465, Oil Pollution Prevention, Removal, Liability, and Compensation Act of 1989, 1989, H.Rept. 101-242, Part 2, 101st Cong., 1st sess., p. 36

If an expenditure is reimbursed, is it still an expenditure? The OSLTF is established under Internal Revenue Code. 26 U.S.C § 9509 Under the Internal Revenue Code, a reimbursed expenditure is not deductible. It is not considered to be an expenditure. Therefore, under the OSLTF, why should an expenditure, reimbursed by the responsible party, be defined as an expenditure?

Legislative history and the Internal Revenue Code strongly support the conclusion that, in the case of a catastrophic oil spill, the proper definition of the term “expenditure,” under the OSLTF, means “an expenditure that is not reimbursed by the responsible party.”

Subrogation
Any person, including the OSLTF, who pays compensation pursuant to OPA to any claimant for damages shall be subrogated to all rights, claims, and causes of action that the claimant has under any other law. 33 U.S.C. § 2715(a)

Moreover, at the request of the Secretary, the Attorney General shall commence an action on behalf of the OSLTF to recover any compensation paid by the OSLTF to any claimant pursuant to OPA, and all costs incurred by the OSLTF by reason of the claim, including interest (including prejudgment interest), administrative and adjudicative costs, and attorney’s fees. Such an action may be commenced against any responsible party or guarantor, or against any other person who is liable, pursuant to any law, to the compensated claimant or to the OSLTF, for the cost or damages for which the compensation was paid. 33 U.S.C. § 2715(c) Thus, a responsible party may ultimately pay a claim that was initially denied, or not addressed for more than 90 days, by the responsible party.

CONCLUSION
The advantage of defining an expenditure, under the OSLTF, as “an expenditure that is not reimbursed by the responsible party,” is threefold:

(a) It eliminates the $1 billion cap which may be paid from the OSLTF with respect to any single incident;

(b) It allows the OSLTF to maintain a balance of at least $1 billion for the purpose of paying claims for damages resulting from other oil spill incidents. As the OSLTF pool of $1 billion is depleted by payments made to catastrophic oil spill claimants, it is replenished, by virtue of subrogation, by reimbursements made to the OSLTF by the responsible party; and

(c) It ensures that the costs and damages resulting from a catastrophic oil spill incident shall be borne by the responsible party, not the federal taxpayer.

Thank you for your prompt attention to this issue.

Sincerely,
[Your name]

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 SIGN THE PETITION

 

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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 Litigation: The Compensation Paid to MDL 2179 Plaintiffs’ Attorneys is Excessive

BP Oil Spill Litigation: The Compensation Paid to MDL 2179 Plaintiffs’ Attorneys is Excessive

_________________________________

In Order to be Awarded a Common Benefit Fee of $600 million

the MDL 2179  Honorable Court Would Have to Believe that

the PSC Attorneys Worked Two Million Hours

Tampa, FL (July 26, 2013) – The question is whether the BP Oil Spill 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 approximately 61.46% of the claimants who filed claims. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012).

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 (“MDL”) 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 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 significant two 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 this 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.”

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 this 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.

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;

(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;

(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, “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. 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).

Average Amount Awarded = $312,000,000.00

Billable Hourly Rate = $300/hr.

Hours Required to Have Been Expended on This Litigation = 1,040,000 hours

Average Amount Awarded = $600,000,000.00

Billable Hourly Rate = $300/hr.

Hours Required to Have Been Expended on This Litigation = 2,000,000 hours

In sum, in order to be awarded a common benefit fee of $312 million, the MDL 2179 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, the MDL 2179  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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BP Oil Spill: Reply to PSC’s Response to the Open Letter Dated December 21, 2012

December 31, 2012

VIA Email

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

Re: Reply to PSC’s Response to the Open Letter Dated December 21, 2012

Dear Steve,

I refer to the open letter, dated December 21, 2012, wherein I requested the PSC’s answers to ten questions in regard to its representation of my clients and all similarly-situated BP oil spill and Gulf Coast Claims Facility (“GCCF”) victims in MDL 2179.

You promptly responded, via email, by stating, “I respectfully decline to respond to your questions, which seem argumentative and disingenuous. To the extent you sincerely seek answers to the questions you pose, I invite you to review the numerous pleadings, transcripts and orders which are available on PACER.”

As I have already explained, your decision not to address the issues raised in the open letter, although completely understandable, is disturbing.

On December 21, 2012, subsequent to your receipt of the open letter, Judge Barbier granted final approval to the E&PD class settlement agreement. Notwithstanding this fact, all victims of the BP oil spill and the “Delay, Deny, Defend” strategy employed by Kenneth R. Feinberg, et al. have a right to clearly understand how and why they were represented by the PSC in MDL 2179.

The PSC’s clients are not being “argumentative and disingenuous” when they demand to know why they have not been fully compensated for their damages. Furthermore, as you are well aware, the answers to the ten questions in the open letter are not available on PACER. Only the PSC is in a position to fully and properly respond to these questions.

On December 25, 2012, you further state via email, “I suppose that you are free to attack the PSC and/or the Court in whatever way you deem appropriate.”

Steve, as you are well aware, the open letter is not an attack on any individual or group of individuals involved in MDL 2179 anymore than it is “argumentative and disingenuous.” It is, however, an indictment of a judicial system in which: (a) multidistrict litigation has been allowed to devolve to the point where the “Lexecon Rule” has been supplanted by the “Heyburn Rule;” and (b) district courts permit settlement class actions to continue to erode the public’s faith in the federal judicial system.

A. Multidistrict Litigation

1. The “Lexecon Rule”

In In re: Vioxx Prods. Liab. Litig. (“MDL 1657”), Judge Fallon’s analysis in regard to Lexecon is instructive.

“Traditionally, the cases in any given MDL originate from two sources.

First, cases are filed in, or removed to, federal courts across the country and transferred to the MDL court by the Judicial Panel on Multidistrict Litigation. See 28 U.S.C. § 1407(a). In these cases, the MDL court must apply the law of the transferor forum, that is, the law of the state in which the action was filed, including the transferor forum’s choice-of-law rules. See Ferens v. John Deere Co., 494 U.S. 516, 524 (1990). While the precise limits of the MDL court’s authority over such cases is currently subject to debate, it is clear that the court cannot try these cases, but rather must remand them to the transferor forum when pretrial discovery is complete. See Lexecon, Inc. v. Miberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

Second, a number of cases are often filed directly into the MDL by citizens who reside in the MDL court’s judicial district. In these cases, the MDL court must apply its own state law, that is, the law of the state in which it sits. It is undisputed that the MDL court has complete authority over every aspect of these cases.”

In re: Vioxx Prods. Liab. Litig., Case 2:05-md-01657 (E.D. La.) (“March 22, 2007 Order and Reasons”) (Rec. Doc. 10488).

2. The “Heyburn Rule”

The Heyburn Rule, in pertinent part, states, “To be sure, the Lexecon imperative does create severe inefficiencies in some cases as the transferor judge must re-familiarize himself or herself with the remanded action (perhaps many months after it was transferred out of the district under § 1407). However, the Heyburn Rule points out that “transferee judges are nothing if not resourceful where necessity dictates and several appropriate strategies are available by which the Lexecon conundrum may be avoided.”

Although Judge Barbier, the PSC, and BP refer to the MDL 2179 court’s “broad discretionary authority,” a “special-procedure” should not be crafted where a mandatory procedure already exists. It is important to remember that the very MDL procedures Judge Barbier, the PSC, and BP wish to circumvent were specifically enacted to reduce costs and promote judicial economy. Allowing the MDL 2179 trial plan is inconsistent with the clear statutory mandate of the multidistrict litigation enabling statute, 28 U.S.C. § 1407(a), and the Supreme Court’s holding in Lexecon. While the need to promote efficiency in litigation is real, it cannot be accomplished by overriding the applicable provisions set forth by Congress. In re: FEMA Trailer Formaldehyde Products Liability Litigation, 2009 WL 2390668 (E.D. La.).

The Heyburn Rule describes the Lexecon decision as a “conundrum” which may be avoided by “resourceful” transferee judges. My clients (who are now PSC’s clients) respectfully disagree. The Lexecon decision is not a conundrum. It is not an obstacle which judicial discretion may circumvent in the name of judicial efficiency/economy or political expediency. It is the law.

B. Settlement Class Actions

Settlement class actions are inherently flawed because they lack the “case” or “controversy” necessary to confer federal jurisdiction under Article III. The settlement class action court is asked not to resolve a real dispute between a litigant class and a party opposing that class, but rather merely to approve and implement a prearranged legal arrangement between the parties that was reached prior to the seeking of class certification.

While settlement class actions may have certain attractive aspects, such as reducing litigation expenses (MANUAL FOR COMPLEX LITIGATION, note 32, at § 21.612 (4th ed. 2004)), many of the traditional aspects of adversarial litigation are missing. As a result, the settlement class action is potentially the product of collusion among the parties: defendants who wish to rid themselves of the burden of litigation and plaintiffs’ counsel who wish to receive immediate compensation. Douglas G. Smith, The Intersection of Constitutional Law and Civil Procedure: Review of Wholesale Justice – Constitutional Democracy and the Problem of the Class Action Lawsuit, Northwestern University Law Review Colloquy, Vol. 104:319 (2010); See also, e.g., John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669, 714 (1986) (“Often, the plaintiffs’ attorneys and the defendants can settle on a basis that is adverse to the interests of the plaintiffs. At its worst, the settlement process may amount to a covert exchange of a cheap settlement for a high award of attorney’s fees.”). (Rec. Doc. 6902-1).

“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 initiated settlement negotiations “in earnest” merely four (4) months after Judge Barbier appointed members to the PSC. (See Rec. Doc. 6831-1). Clearly, the MDL 2179 settlement class action was not achieved in the full context of adversarial litigation.

Furthermore, after the Supreme Court‘s decisions in Amchem and Ortiz it has become exceedingly difficult to certify a class in the context of a mass tort. (See MANUAL, supra note 22, § 22.7, at 413–14 (“After experimentation with class treatment of some mass torts during the 1980s and 1990s, the courts have greatly restricted its use in mass torts litigation.”); RICHARD A. NAGAREDA, MASS TORTS IN A WORLD OF SETTLEMENT 72 (2007) (“As embodied in Rule 23 of the Federal Rules of Civil Procedure in 1966, the modern class action seemed on its face a device with little applicability to mass torts.”)).

The American Law Institute‘s draft Principles of the Law of Aggregate Litigation summarizes the state of the law: “As a doctrinal matter, the class action has fallen into disfavor as a means of resolving mass-tort claims. This development reflects many factors, including concerns about the quality of the representation received by members of settlement classes, difficulties presented by choice-of-law problems, and the need for individual evidence of exposure, injury, and damages.” A.L.I., PRINCIPLES OF THE LAW OF AGGREGATE LITIGATION: PROPOSED FINAL DRAFT, note 7, § 1.02, notes to cmt. b(1)(B), at 26 (Apr. 1, 2009).

Indeed, even before the Amchem and Ortiz decisions, courts had recognized that there was a national trend to deny class certification in drug or medical product liability/personal injury cases. This resistance to certification in such cases can be traced to the 1966 amendments to Rule 23, which specifically noted that the class action device was “ordinarily not appropriate” in a “mass accident” case where there would be “significant questions . . . affecting the individuals in different ways.” (See FED. R. CIV. P. 23, Notes of Advisory Committee on Rules, 1966 Amend. See also In re “Agent Orange” Prod. Liab. Litig., 818 F.2d 145, 164 (2d Cir. 1987) (“The comment to Rule 23(b)(3) explicitly cautions against use of the class action device in mass tort cases. Moreover, most courts have denied certification in those circumstances.” (citation omitted)).

Presentment

In your email of December 25, 2012, you also state, “…….I would suggest that your clients not participating in the Economic Settlement will best be served if you: (i) ensure that you and/or they make Presentment of what you and/or they believe to be their full damages before January 18, 2013; and then, having made such presentment, (ii) file (or re-file) (and/or amend) suit on their behalf by April 20, 2013….”

I appreciate your advice and sudden concern for my clients. However, whenever our firm filed a claim on behalf of a client with GCCF, a copy of the claim was also filed directly with BP. In each case, BP provided a letter confirming its receipt of the claim. I understood that if a lawsuit was to be brought against BP, it should be brought under OPA and, therefore, the OPA Presentment requirement would have to be fulfilled.

GCCF Release and Covenant Not to Sue

In your email of December 25, 2012, you further advise, “…. (iii) with respect to any client whom you believe to have executed an invalid GCCF Release, assemble and prepare the best case you can to support the argument that such Release was procured under fraud, error or duress.”

As you are aware, our firm’s position is that every GCCF Release and Covenant Not to Sue violates federal law, State contract law, and is contrary to public policy. We shall address this matter at the proper time.

Steve, the PSC response generated the following additional questions.

QUESTION NO. 11

Why did the PSC wait until one month before the claim filing deadline to notify all BP oil spill and GCCF victims (its clients) of the OPA “Presentment” requirement?

On October 8, 2010, Judge Barbier appointed the members to the PSC (Rec. Doc. 506). The PSC sent a letter, dated December 13, 2012 and filed with LexisNexis on December 17, 2012, to all BP oil spill and GCCF victims wherein it finally advises its clients: “you must make ‘Presentment’ under the Oil Pollution Act for your Short Form Joinder, lawsuit or other claim to be valid…..before January 20, 2013. ”

The PSC should have notified all BP oil spill and GCCF victims (its clients) of the “Presentment” requirement in October, 2010, not in December, 2012.

QUESTION NO. 12

Why has the PSC failed to notify all BP oil spill and GCCF victims (its clients) that a lawsuit may be filed against Kenneth R. Feinberg, et al. without having to fulfill the OPA “Presentment” requirement?

GCCF victims may file an action alleging that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF misled them by employing a “Delay, Deny, Defend” strategy. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.” In sum, Plaintiffs would allege that BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining Plaintiffs. See Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al., 2:11-cv-01987 and Salvesen v. Feinberg, et al., 2:11-cv-02533. Motions to Remand for both cases remain pending in this Honorable Court.

Since Feinberg, et al is not a “Responsible Party” and therefore may not be sued under OPA, a lawsuit against Feinberg, et al. may be filed immediately because it does not require Presentment. The PSC would, however, need to advise all GCCF victims in regard to the statute of limitations and the associated tolling of the statute of limitations for class actions and fraudulent concealment or a misrepresentation by the defendant.

QUESTION NO. 13

Why does the PSC, which failed to adequately challenge the legality of the GCCF Release and Covenant Not to Sue for the past two years, suddenly advise non-PSC attorneys to “assemble and prepare the best case you can to support the argument that such Release was procured under fraud, error or duress?”

The ultimate objective of the “Delay, Deny, Defend” strategy of Feinberg, et al. was to obtain a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible. Here, the GCCF Status Report as of March 07, 2012 is instructive. (See background information for “QUESTION NO. 8.”).

Feinberg, et al. cannot justify limiting payments under the Quick Payment Final Claim program to just $5,000 for individuals and $25,000 for businesses. There is no evidence that these amounts even remotely represent adequate consideration to compensate Claimants for the damages that Claimants did or will suffer as a result of the BP oil spill.

Steve, if the PSC had properly filed the B1 Master Complaint under OPA rather than alleging claims under admiralty law, Feinberg, et al. would never have been allowed to use the Release and Covenant Not to Sue to illegally exclude approximately 200,000 BP oil spill victims from the E&PD class settlement.

It has been, and remains, the responsibility of the PSC to “assemble and prepare the best case to support the argument that such Release was procured under fraud, error or duress.” On September 25, 2012, my clients filed their Motion to Nullify Each and Every Gulf Coast Claims Facility Release and Covenant Not to Sue. (See Rec. Doc. 7473-1). Please feel free to use the legal argument in this motion to assist with the preparation of the PSC case.

QUESTION NO. 14

Are you declining to answer these questions because you believe that an attorney-client relationship does not exist between the PSC and all BP oil spill and GCCF victims?

BP is extremely happy with the settlement. In a December 21, 2012 statement, BP said “it was pleased that the court approved the plaintiff steering committee’s settlement.” The PSC is ecstatic. Attorneys and CPA firms submitting claims for BP oil spill victims are giggling with delight over their new revenue stream. Unfortunately, the vast majority of BP oil spill victims are left scratching their heads over the entire MDL process and settlement class action. The numbers do not lie (See background information for “QUESTION NO. 8” and “QUESTION NO. 9”).

The combination of a settlement class action and MDL, which in this case appears to be “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,” has resulted in BP oil spill and GCCF victims receiving, if they are very fortunate, grossly inadequate compensation.

Steve, please understand that these fourteen questions are directed to the PSC by me on behalf of my clients (now PSC’s clients) and all similarly-situated BP oil spill and GCCF victims. These questions are not directed to the MDL 2179 Court. In sum, the PSC’s clients merely seek a better understanding of their representation by the PSC.

If you have any questions, please do not hesitate to contact me at 352-328-7469 or via e-mail at BrianJDonovan@verizon.net. Again, 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.

Click here to read the open letter.

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 Victims Opt-Out of the Deepwater Horizon Class Action Settlements

BP Oil Spill Victims Opt-Out of the Deepwater Horizon Class Action Settlements

__________________

DHCC Status Report Proves that the Only Beneficiaries Are BP, the Plaintiffs’ Steering Committee, and Other “Common Benefit” Attorneys

Tampa, FL (October 15, 2012) – Victims of the BP oil spill have elected to opt-out of the Deepwater Horizon Economic and Property Damages Class Action Settlement and the Deepwater Horizon Medical Benefits Class Action Settlement. These victims, represented by The Donovan Law Group, Tampa, FL, decided not to be held as class action hostages by settlements which will never adequately compensate them for their losses.

REASONS TO OPT-OUT

The following is a partial list of reasons why these Claimants/Plaintiffs/Class Action Hostages decided to opt-out. The list will be updated daily until November 1, 2012. After that date, the list will no longer matter.

(1) BP oil spill victims receive grossly inadequate compensation.

The Gulf Coast Claims Facility (“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”) and the GCCF are virtually identical. Under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Under the DHCC, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, although Patrick Juneau has replaced 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 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).

“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.

(2) The class action settlements 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…”

Click here for a list of the attorneys appointed to the PSC by Judge Barbier.

(3)  These class action settlements are not “fair, reasonable, and adequate” and have not been entered into without collusion between the parties.

For the following reasons, these class action settlements are not “fair, adequate, and reasonable” (at least not for the “Class Members”) and have 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. 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.

Click here to read the PSC’s INCOMPREHENSIBLE Reply in Response to Objections and in Further Support of Final Approval of the E&PD Class Settlement (Dated: October 22, 2012). 

(4) Judicial efficiency has replaced justice in MDL 2179.

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.”

On February 9, 2011, the PSC filed a First Amended Master Complaint. Rather than allege claims under the Oil Pollution Act of 1990 (“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).”

The PSC appears to be more interested in ensuring significant economy and efficiency in the judicial administration of the MDL 2179 court rather than in obtaining justice for the MDL 2179 plaintiffs.

As noted above, in its B1 First Amended Master Complaint, the PSC alleges claims under general maritime law, not under OPA and OCSLA, thereby assisting the MDL 2179 Court in expeditiously being able to:

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

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

(5) 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 Class Members to prematurely waive their right to sue in exchange for a miniscule single final settlement payment is unconscionable.

(6) The E&PD class action settlement violates the Oil Pollution Act of 1990 (“OPA”).

BP and the PSC cherry-pick OPA’s provisions for their benefit at the detriment to Plaintiffs. Contrary to the intent of Congress, the E&PD class action settlement defines “Class Members” by geographic bounds and certain business activities while requiring proof of a heightened, vague standard of causation.

(7) The “Plaintiffs'” Steering Committee (“PSC”) misleads “Class Members.”

(a) Statute of Limitations

The PSC intentionally fails to counsel those claimants who may opt-out of the Proposed Settlements that a lawsuit brought against BP and/or 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.

Under OPA, an action for damages shall be barred unless the action is brought within three years after the date on which the loss and the connection of the loss with the discharge in question are reasonably discoverable with the exercise of due care. 33 U.S.C. § 2717(f)(1)(A).

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, a lawsuit which could be brought against a non-Responsible Party may be barred by the statute of limitations.

(b) The Oil Spill Liability Trust Fund (“OSLTF”)

The PSC intentionally fails to counsel those claimants who may opt-out of the Proposed Settlements that they will not be able to pursue their claims via the OSLTF.

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.

(8) The MDL 2179 Court has inexplicably reaffirmed its ruling that the E&PD class action settlement is “fair, reasonable, and adequate” and “free of collusion.”

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.”

Click here to read the memorandum in support of Motion (a).

Click here to read the first memorandum in support of Motion (b).

Click here to read the second memorandum in support of Motion (b).

On October 10, 2012, Judge Barbier issued the following two-sentence Order:

“Before the Court are Plaintiffs’ Motions to Nullify Each and Every Gulf Coast Claims Facility “Release and Covenant Not to Sue” and Vacate Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement]. (Rec. Docs. 7473, 6902, 6831). Having considered the motion, the applicable law, and the relevant record, IT IS ORDERED that the Motions (Rec. Docs. 7473, 6902, 6831) are DENIED.”

(9) 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).

(10) Illegally excluding approximately 200,000 claimants from the proposed settlement greatly decreases the bargaining power of the “Class Members.”

GCCF’s “Release and Covenant Not to Sue” violates 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) Feinberg, et al. intentionally failed 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.

GCCF’s “Release and Covenant Not to Sue” violates State contract law because it: (1) was obtained through the use of economic duress; (2) 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.); (3) was obtained through fraud; (4) 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; (5) was obtained in exchange for inadequate consideration; and (6) 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 Proposed 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 Proposed Settlement also greatly decreases the bargaining power of the Class Members and results in an increased loss of faith in the federal judicial system.

Click here to read the Memorandum in Support of the Motion to Nullify Each and Every Gulf Coast Claims Facility (GCCF”) “Release and Covenant Not to Sue.”

(11) 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.

(12) The DHCC Data

The DHCC data, dated October 26, 2012, indicates that a total of 41,235 claimants have filed Individual Economic Loss, Individual Periodic Vendor or Festival Vendor Economic Loss, Business Economic Loss, Start-Up Business Economic Loss, and Failed Business Economic Loss 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!

What is life worth? According to BP and Feinberg, et al., the life of an individual BP oil spill victim wasn’t worth very much. According to BP/PSC and Juneau, et al., the life of an individual BP oil spill victim is worth even less!

CONCLUSION

The opt-out deadline for the Deepwater Horizon class action settlements is November 1, 2012. After that date, the game is over; BP has won, BP oil spill victims who do not opt-out are left out in the cold, and the PSC and other “common benefit” attorneys are extremely well-compensated.

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HOW TO OPT-OUT

Not surprisingly, the Class Action Settlement Notices do not provide “Class Members” with an “Opt-Out” form. Furthermore, the information required to properly opt-out of the Medical Benefits Class Action Settlement, and the mailing address to where the opt-out notice must be sent, differs from the information required and the mailing address to properly opt-out of the Economic and Property Damages Class Action Settlement.

Click here to download a sample Deepwater Horizon Economic and Property Damages Class Action Settlement Opt-Out Notice.

Click here to download a sample Deepwater Horizon Medical Benefits Class Action Settlement Opt-Out Notice.

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It’s Time for BP Oil Spill Victims to Opt-Out of the Deepwater Horizon Class Action Settlements

It’s Time for BP Oil Spill Victims to Opt-Out of the Deepwater Horizon Class Action Settlements

The Only Beneficiaries Are BP and the Plaintiffs’ Steering Committee

Tampa, FL (August 29, 2012) – The deadline for BP oil spill victims (“Class Members”) to opt-out of the Deepwater Horizon Economic and Property Damages Class Action Settlement and the Deepwater Horizon Medical Benefits Class Action Settlement is November 1, 2012.

It is important to note that these class action settlements do not actually provide for funds to be distributed to Class Members; they merely give BP oil spill victims the right to submit, yet again, a claim for economic and property damages and medical benefits.

“BP has estimated the cost of the proposed settlement to be approximately $7.8 billion.” Judge Barbier’s admonition in his Order of August 26, 2011 is instructive: “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” Since, as Judge Barbier points out, the long term effects, and therefore the associated costs, of the BP oil spill on the environment and fisheries may not be known for many years, BP can only estimate its cost by multiplying the approximate number of claimants by an average amount BP is willing to pay each claimant. The average amount BP proposes to pay each claimant under the Proposed Settlements is not difficult to surmise: “The BP Parties may appeal a final compensation award determination only where the compensation amount determined by the settlement program is in excess of $25,000.” (p. 58, Rec. Doc. 6276-1).

Class Members who do not opt-out will be at the complete mercy of BP, Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Under Feinberg/GCCF, and now under Juneau/DHCC, this means payment will be denied to approximately 61.46% of the claimants who file claims; the average total amount that will be paid per claimant will be $27,466.47.

Who Should Opt-Out

All Class Members, not represented by legal counsel, who have not been fully compensated for damages resulting from the BP oil spill should opt-out. This includes any natural person or entity who or that made a claim to GCCF and was illegally forced to execute a “Release and Covenant Not to Sue” in order to receive a miniscule payment.

Each natural person or entity who or that has suffered damages resulting from the BP oil spill of April, 2010 has the legal right to, and should immediately seek, competent legal counsel to directly represent his, her, or its interests. BP oil spill victims must understand that the Plaintiffs’ Steering Committee, attorneys who unscrupulously signed-up hundreds or even thousands of class members for class action lawsuits immediately after the oil spill incident, and attorneys who represent industry coalitions and organizations do not represent their individual interests.

Given that the damages suffered by the vast majority of Class Members as a result of the BP oil spill of April, 2010 are potentially so great and will be on-going, class action lawsuits should not be necessary to permit effective litigation of these claims. Here, where the amount of damages suffered by the individual is so great, the filing of an individual lawsuit should be economically feasible and in the best interests of the plaintiff.

When Should Class Members Opt-Out

All Class Members who have not been fully compensated for damages resulting from the BP oil spill by September 1, 2012 should opt-out. This will allow sufficient time for Class Members to learn: (a) the legal rights provided to BP oil spill victims under the Oil Pollution Act of 1990 (“OPA”); (b) why BP oil spill victims should not be required to prematurely waive their right to sue in exchange for a miniscule final settlement payment; and (c) why class actions may not be in the best interests of BP oil spill victims.

Opting-out would be an excellent Labor Day weekend activity for all BP oil spill victims. A properly executed Opt-Out Notice for each of the two proposed class action settlements should be mailed by Class Members on September 4, 2012.

How to Opt-Out

Not surprisingly, the Class Action Settlement Notices do not provide Class Members with an “Opt-Out” form. Furthermore, the information required to properly opt-out of the Medical Benefits Class Action Settlement, and the mailing address to where the opt-out notice must be sent, differs from the information required and the mailing address to properly opt-out of the Economic and Property Damages Class Action Settlement.

Click here to download a sample Deepwater Horizon Economic and Property Damages Class Action Settlement Opt-Out Notice.

Click here to download a sample Deepwater Horizon Medical Benefits Class Action Settlement Opt-Out Notice.

Why Class Members Should Opt-Out

The standard for reviewing a proposed settlement of a class action is whether the proposed settlement is “fair, reasonable, and adequate” and whether it has been entered into without collusion between the parties.

The United States District Court for the Eastern District of Louisiana defines “collusion” as the “lawful means for the accomplishment of an unlawful purpose” and as a “secret understanding between two or more persons prejudicial to another, or a secret understanding to appear as adversaries, though in agreement.” Collusion does not require fraudulent conduct. See Dynamic Marine Consortium, SA v. Latini, MV, 179 F.3d 278 (5th Cir. 1999)

These Class Action Settlements Are Not Fair, Reasonable, and Adequate

Kenneth R. Feinberg, the former administrator of the now defunct Gulf Coast Claims Facility (“GCCF”), during widely-reported town hall meetings organized to promote GCCF, repeatedly told victims of the BP oil spill that they did not need to hire a lawyer. Feinberg explained, “The litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers….I take the position, if I don’t find you eligible, no court will find you eligible….I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.”

The GCCF has been replaced by the Deepwater Horizon Claims Center (“DHCC”). Patrick Juneau, the court-appointed administrator of the DHCC, repeatedly tells victims of the BP oil spill, “If you’re in doubt, file the claim…..We’ll do the homework for you.” Juneau, with a very slight change in rhetoric, is obviously using the same “Delay, Deny, Defend” playbook which proved to be so successful for Feinberg.

The DHCC and the GCCF are virtually identical. Under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Under the DHCC, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP.  Accordingly, although Patrick Juneau has replaced Feinberg, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the DHCC.

Recently Feinberg said, “I think it’s a tribute to the GCCF that all the people we used have been retained. I take great satisfaction in that fact.” It is unlikely that Class Members will share Feinberg’s satisfaction.

Here is a perfect example of a “secret understanding between two or more persons” (BP, the PSC, the GCCF, and the DHCC) which is “prejudicial to another” (the Class Members).

The Miniscule Amount GCCF Paid to BP Oil Spill Victims

GCCF Overall Program Statistics

(Status Report as of March 7, 2012)

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

Total Number of Paid Claimants = 221,358

Average Total Amount Paid Per Claimant = $27,466.47

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012.  The GCCF paid only 221,358 of these Claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims.

These Class Action Settlements Provide for a Refund of Approximately $6 Billion to BP While Granting Excessive Compensation to the PSC and Other Counsel Performing “Common Benefit” Work

(1) The Refund to BP

Deepwater Horizon Oil Spill Trust     $20.0 Billion

Approximate Amount Paid to Claimants by GCCF   $ 6.2 Billion

Cost of the Proposed Settlement     $ 7.8 Billion

Amount to be Refunded to BP     $ 6.0 Billion

(2) The Excessive Compensation to the PSC, et al.

The PSC and other counsel allegedly performing common benefit work in MDL 2179 are not double-dipping; they are triple-dipping. The known sources of compensation received by attorneys allegedly doing common benefit work on behalf of BP oil spill victims in MDL 2179 are:

(a) Six percent (6%) of the gross monetary settlements, judgments or other payments made on or after December 30, 2011 through June 3, 2012 to any other plaintiff or claimant-in-limitation. (p. 3, Rec. Doc. 5274);

N.B. – The Donovan Law Group received a Final Payment Offer from GCCF on behalf of a client. This offer, dated June 3, 2012 and postmarked June 8, 2012, was received on June 11, 2012. This offer, along with probably hundreds of other offers made to Claimants by GCCF, is dated one day before Claimants are no longer required to pay six percent (6%) of the gross monetary settlement they receive to the MDL 2179 common benefit fund. June 3, 2012 was a Sunday. These offers were dated June 3rd in order to ensure that the PSC received the maximum amount of payment from the 6% hold-back provision.

(b) BP has agreed to pay any award for common benefit and/or Rule 23(h) attorneys’ fees, as determined by the Court, up to $600 million. (p. 10, Rec. Doc. 6418);

(c) Many attorneys doing common benefit work have their own clients and have also received or will also receive a fee directly from them. (N.B. – On June 15, 2012, the MDL 2179 Court ordered that “contingent fee arrangements for all attorneys representing claimants/plaintiffs that settle claims through either or both of the Settlements will be capped at 25% plus reasonable costs.”) (Rec. Doc. 6684); and

(d) Co-counsel fees received by member firms of the PSC for serving as co-counsel to non-member firms of the PSC. For example, on March 13, 2012, The Donovan Law Group received an unsolicited mass email from a member firm of the PSC. The email stated, in pertinent part, “Co-Counsel Opportunity for BP Oil Spill Cases: News of the recent BP Settlement has caused many individuals and businesses along the Gulf Coast to contemplate either filing a new claim or amending a claim that has already been submitted. If you receive inquiries of this nature we would like you to consider a co-counsel relationship with our firm. Even if someone has already filed a claim it is advisable to retain legal counsel to analyze the impact of this settlement on claimants and maximize recovery. If you receive inquiries and are interested in co-counseling with us on the BP claims, please email…”

In order to be awarded a common benefit fee of $600 million, the PSC attorneys and other counsel performing “common benefit” work would have to work two million hours. This fee amount, which does not include the aforementioned (a), (c), and (d) known sources of compensation, fails the reasonableness test.

The PSC, Not Class Members, Shall be Compensated “The BP Parties shall make a non-refundable payment of $75 million (the “Initial Payment”) into the Common Benefit Fee and Costs Fund on the first date on which all of the following have occurred: (i) 30 days have elapsed after the Court has granted preliminary approval of the Economic Agreement, and (ii) the Court has entered an Order modifying the Holdback Order to provide that it shall not apply to any Settlement Payments or Other Economic Benefits paid pursuant to the Economic Agreement…..” “……within 15 days after the end of each calendar quarter, the BP Parties shall irrevocably pay into the Common Benefit Fee and Costs Fund an amount equal to 6 % (six percent) of the aggregate Settlement Payments paid under the Economic Agreement in respect of Claimants that have executed an Individual Release.” (pp. 3-4, Rec. Doc. 6276-46).

In sum, the PSC and other counsel allegedly performing common benefit work are financially motivated to have as many Claimants execute an Individual Release as expeditiously as possible regardless of whether the negotiated settlements reflect the true value of the claims.

Collusion Permeates MDL 2179 and These Class Action Settlements

These Class Action Settlements Were Not Achieved in the Context of the Adversarial Process

While class action settlements may have certain attractive aspects, such as reducing litigation expenses, many of the traditional aspects of adversarial litigation are missing. As a result, the settlement is potentially the product of collusion among the parties: defendants who wish to rid themselves of the burden of litigation and plaintiffs’ counsel who wish to receive immediate compensation. “Often, the plaintiffs’ attorneys and the defendants can settle on a basis that is adverse to the interests of the plaintiffs. At its worst, the settlement process may amount to a covert exchange of a cheap settlement for a high award of attorney’s fees.” John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669, 714 (1986).

BP and the PSC report that in February 2011 settlement negotiations began in earnest for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” (p. 3, Rec. Doc. 6418). In sum, the PSC and other counsel allegedly performing common benefit work in MDL initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179.

The Oil Pollution Act of 1990 (‘OPA”), a strict liability statute, governs cases alleging economic loss due to the BP oil spill. The Outer Continental Shelf Lands Act (“OCSLA”) governs personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law.

In order to recover damages under OPA, a claimant merely needs to show that his or her damages “resulted from” the oil spill. OPA, in pertinent part, states:

“The responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages that result from such incident.” See 33 U.S.C. § 2702(a).

The damages referred to in 33 U.S.C. § 2702(a) include, but are not limited to:

“Damages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by any claimant.” 33 U.S.C. § 2702(b)(2)(E) (Emphasis added).

Rather than allege claims under OPA, the PSC made the unfathomable decision to allege claims under a hodgepodge of statutes. On February 9, 2011, in the B1 First Amended Master Complaint, the PSC states, “The claims presented herein are admiralty or maritime claims within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiffs hereby designate this case as an admiralty or maritime case, and request a non-jury trial, pursuant to Rule 9(h).”

The PSC appears to be more interested in ensuring significant economy and efficiency in the judicial administration of the MDL 2179 court rather than in obtaining justice for the MDL 2179 plaintiffs. As noted above, in its B1 First Amended Master Complaint, the PSC alleges claims under general maritime law, not under OPA and OCSLA, thereby assisting the MDL 2179 Court to expeditiously:

(a) Find, “The Deepwater Horizon was at all material times a vessel in navigation.”

(b) Find, “Admiralty jurisdiction is present because the alleged tort occurred upon navigable waters of the Gulf of Mexico, disrupted maritime commerce, and the operations of the vessel bore a substantial relationship to traditional maritime activity. With admiralty jurisdiction comes the application of substantive maritime law.”

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

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

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

In re Oil Spill by the Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, – F. Supp. 2d -, 2011 WL 3805746 (Aug. 26, 2011 E.D. La.).

In sum, in February, 2011, the PSC: (a) initiated settlement negotiations “in earnest” with BP for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement; and (b) filed the B1 First Amended Master Complaint under general maritime law, rather than OPA and OCSLA, thereby ensuring that BP would not be held strictly liable in the bench trial.

Conclusion

For the foregoing reasons, the Deepwater Horizon Economic and Property Damages Class Action Settlement and the Deepwater Horizon Medical Benefits Class Action Settlement are neither “fair, reasonable, and adequate” nor have they been entered into without collusion between the parties.

The motto for Class Members should be: “If in doubt, opt-out!”

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OPT-OUT UPDATE No. 1

Beginning on September 10, 2012, some BP oil spill victims filed requests for discovery with the MDL 2179 Court regarding the economic class action settlement. These individuals are objecting to the economic class action settlement entered into between the PSC and BP. Accordingly, the Court refers to them as “Objectors.”

These victims contend, in part, that: (1) much of the evidence submitted by the PSC and BP on August 13, 2012 in support of the motions for final approval of the settlement was not published or otherwise available prior thereto; (2) communications between the PSC and BP relating to the propriety of the proposed settlement were not shared with counsel for Objectors; (3) the PSC and BP did not produce any of the evidence on which their experts’ opinions are based; (4) it is impossible for the Objectors to evaluate the proposed settlement without “limited discovery;” (5) the Court has discretion to grant their requests for “limited discovery;” (6) the Phase One and Phase Two discovery concerns only the issue of liability; (7) the rationale and bases for the terms of the settlement cannot be found in the record; and (8) discovery is required because the Economic Loss Zones are arbitrary and capricious.

On September 25, 2012, these requests were denied by the MDL 2179 Court. The Court held:

Objectors Have No Absolute Right to Discovery.

There is no “absolute right” to conduct discovery or present evidence simply because a person is a class member. In re Domestic Air Transp. Antitrust Litig., 144 F.R.D. 421, 424 (N.D. Ga. 1992). In evaluating settlements for approval, the fundamental question is whether the Court has sufficient facts before it to approve or disapprove the settlement. In re Gen. Tire & Rubber Co. Sec. Litig., 726 F.2d 1075, 1084 n.6 (6th Cir. 1984). The Court has broad discretion to permit or deny objector discovery requests. Cotton v. Hinton, 559 F.2d 1326, 1333 (5th Cir. 1977).

Objectors’ Discovery Requests Are Unnecessary.

In Newby v. Enron, Corp., 394 F.3d 296 (5th Cir. 2004), the Fifth Circuit held that “formal discovery is not necessary as long as (1) the interests of the class are not prejudiced by the settlement negotiations and (2) there are substantial factual bases on which to premise settlement.” Id. at 306. The “critical question” to determine whether independent discovery by objectors is necessary is whether the Court has “sufficient facts before it to intelligently consider the proposed settlement.” In re Ford Motor Co. Bronco II Prods. Liab. Litig., 1994 WL 593998 at *3 (E.D. La. Oct. 28, 1994). Where significant documentation has already been produced and testimony taken, “independent discovery should generally not be allowed.” In re Ford Motor Co. Bronco II, 1994 WL 593998 at *3.

The Court’s task is to consider the record that appears before it to determine if, on the basis of that record, it may make the findings necessary to certify the settlement class and determine that the settlement agreement is fair, reasonable, and adequate under Rule 23. It is not the role of the Objectors to renegotiate the agreement, nor determine whether the class would receive more compensation in contested litigation. None of the Objectors demonstrate how their discovery is required to enable them to support their objections, to decide whether to remain in the settlement class, or to aid the Court. The Objectors’ discovery is unnecessary because it is not relevant to the Court’s review.

The settlement compensates each and every class member according to frameworks that are transparent and which were filed nearly five months ago. Any class member seeking to determine his compensation may simply read the settlement agreements and determine how his circumstances fit into the frameworks. There is no reason that any objector needs to know the estimated size of the class, because the settlement is uncapped for the majority of claimants. An objector does not need to know the total amount of losses of the class when the settlement agreement provides for the payment of all compensatory damages. The Court may determine that the settlement agreement is fair, reasonable, and adequate without this information.

Since April 18, the Objectors were able to review the settlement agreement, analyze the benefits under the agreement, evaluate the strengths and weaknesses of their own claims and determine whether they are better off participating in the settlement or opting out. By opting out, those who are not satisfied with the settlement’s provisions escape their binding effect, and thus are free to pursue their claims and seek the relief they desire. In re Vitamins Antitrust Class Actions, 215 F.3d 26, 28-29 (D.C. Cir. 2000).

The bottom line is that the proposed discovery will neither materially advance the objectors’ objections nor assist the Court’s consideration of the fairness, reasonableness, and adequacy of the settlement agreement.

The Settlement Agreement is the Product of Arms-Length Negotiations.

The Settlement Agreement was negotiated in good faith and at arm’s length over many months. All told, BP and the PSC engaged in more than 145 days of face-to-face meetings. Rec. Doc. 6418 at 3. The negotiations were extensive and highly contested. In the final months the negotiations were conducted under the supervision of the undersigned as Court mediator.

Because the settlement agreement was reached through arm’s length negotiations, information sought by the movers on why the parties negotiated the terms that they did is unnecessary. See Manual for Complex Litigation (4th), p. 328 (“A court should not allow discovery into the settlement negotiation process unless the objector makes a preliminary showing of collusion or other improper behavior.”)

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OPT-OUT UPDATE No. 2

DHCC Overall Program Statistics

(Status Report as of October 5, 2012)

Individual Economic Loss

19,338 claim forms were submitted,

DHCC made 79 payment offers in the total amount of $860,968,

24 offers were accepted, and

DHCC made 6 payments in the total amount of $38,173.

Individual Periodic Vendor or Festival Vendor Economic Loss

132 claim forms were submitted,

DHCC made 0 payment offers,

0 offers were accepted, and

DHCC made 0 payments.

Business Economic Loss

14,558 claim forms were submitted,

DHCC made 485 payment offers in the total amount of $86,962,974,

280 offers were accepted, and

DHCC made 65 payments in the total amount of $10,181,973.

Start-Up Business Economic Loss

1,202 claim forms were submitted,

DHCC made 7 payment offers in the total amount of $1,235,483,

2 offers were accepted, and

DHCC made 0 payments.

Failed Business Economic Loss

1,238 claim forms were submitted,

DHCC made 0 payment offers,

0 offers were accepted, and

DHCC made 0 payments.

The DHCC data indicates that a total of 36,468 claimants filed the above types of claims with the DHCC during the period from approximately June 4, 2012 to October 5, 2012. The DHCC paid only 71 of these claimants. In sum, the DHCC paid only 0.19% of the claimants who filed claims.

Of the 19,338 Individual Economic Loss claims submitted, 79 claimants have received payment offers totaling $860,968, resulting in 6 payments totaling $38,173. This equates to an average payment of only $6,362.17 per Individual Economic Loss Claimant!

What is life worth?

According to BP and Feinberg, et al., the life of an individual BP oil spill victim wasn’t worth very much. According to BP/PSC and Juneau, et al., the life of an individual BP oil spill victim is worth even less!

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