The Donovan Law Group

Plaintiffs File Motion to Hold Kenneth R. Feinberg, et al. Accountable for Financially Ruining Them

Plaintiffs File Motion to Hold Kenneth R. Feinberg, et al. Accountable for Financially Ruining Them

Tampa, FL (April 25, 2014) – Plaintiffs Pinellas Marine Salvage, Inc., John Mavrogiannis, Selmer M. Salvesen, and Andrew J. Ditch have filed a Motion to Remand or, in the Alternative, Motion to Commence Formal Discovery in the BP Oil Spill multidistrict litigation (MDL 2179).

On August 23, 2010, Feinberg Rozen, LLP, doing business as GCCF, replaced the claims process which BP had established to fulfill its obligations as a responsible party under OPA 90.

According to the plaintiffs, Feinberg used the fear of costly and protracted litigation to coerce victims of the BP oil spill to accept grossly inadequate settlements from GCCF. During town hall meetings organized to promote GCCF, Feinberg repeatedly told victims of the BP oil spill, “the litigation route in court will mean uncertainty, years of delay and a big cut for the lawyers.” “I am determined to come up with a system that will be more generous, more beneficial, than if you go and file a lawsuit.” “It is not in your interest to tie up you and the courts in years of uncertain protracted litigation when there is an alternative that has been created,” Feinberg said. He added, “I take the position, if I don’t find you eligible, no court will find you eligible.”

To limit BP’s liability, Feinberg, et al. employed two strategies against oil spill victims with legitimate damage claims: (a) an “Expedited Emergency Advance Payment (“EAP”) Denial” strategy, and (b) a “Delay, Deny, Defend” strategy. This resulted in tens of thousands of BP oil spill victims and GCCF victims, including Plaintiffs, being financially ruined by Feinberg, et al.

Plaintiffs filed their actions against Feinberg, et al. in Florida state courts asserting claims for gross negligence, negligence, negligence per se, fraud, fraudulent inducement, promissory estoppel, and unjust enrichment under Florida state law. The cases were subsequently transferred by the United States Judicial Panel on Multidistrict Litigation (JPML) to the MDL 2179 Court.

Because all Motions to Remand are stayed and Plaintiffs are not permitted to propound discovery by the MDL 2179 Court, Plaintiffs essentially have no recourse through the legal process.

Plaintiffs pointed out in their motion that the purpose of the Federal Rules of Civil Procedure is “to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. As of the date of the filing of this motion, approximately 38 months have passed since Plaintiffs filed their complaint against Feinberg, et al.

Plaintiffs also explained that the JPML transferred, albeit inappropriately, their actions to MDL 2179 for coordinated or consolidated pretrial proceedings. These actions were not transferred in order to be indefinitely stayed (in essence, “warehoused”) for the purpose of ensuring that Feinberg, et al. are never held accountable for their tortious acts.

N.B. – BP paid Feinberg Rozen, LLP a sum of $1.25 million per month to limit its liability (“administer the BP oil spill victims’ compensation fund”).

CLICK HERE TO READ THE MEMORANDUM OF LAW IN SUPPORT OF THE MOTION.

 

UPDATE

CLICK HERE TO READ KENNETH R. FEINBERG’S SELF-SERVING BRIEF AS AMICUS CURIAE IN SUPPORT OF BP, ET AL.

In his brief, Kenneth R. Feinberg self-servingly argues that the U.S. Supreme Court’s review is needed to ensure that the Fifth Circuit’s rulings in this case do not compromise the ability of future programs like the Deepwater Horizon Fund “to serve as viable, much-needed alternatives to conventional mass tort litigation.”

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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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BP Oil Spill: Is the MDL 2179 Trial Plan Unconstitutional?

Posted in BP, Cameron, Fifth Circuit, Judge Barbier, MDL 2179, OCSLA, OPA, OSLTF, responsible party, Seventh Amendment by renergie on January 3, 2012

BP Oil Spill: Is the MDL 2179 Trial Plan Unconstitutional?

_________________________

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

Tampa, FL (January 3, 2012) – On October 18, 2011, Cameron International Corporation (“Cameron”) filed a Petition for Writ of Mandamus in the United States Court of Appeals for the Fifth Circuit.

INTRODUCTION

Cameron believes there are two controversial facets of the trial plan proposed by Judge Carl Barbier for trial in the Gulf oil spill litigation:

1. Bench Trial vs. Trial by Jury

Judge Barbier proposes to dispense with trial by jury and instead to conduct a bench trial applying general maritime law. But the claims against Cameron are all governed by the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331 et seq., which borrows the law of the adjacent state as surrogate federal law. Cameron is entitled under the Seventh Amendment to have those statutory tort claims for money damages tried before a jury.

2. “Allocation of Fault Issues” Without Reference to the Claim of Any Individual Plaintiff and in a Manner Contrary to the Federal Rules and the Oil Pollution Act of 1990 (“OPA”)

This bench trial will adjudicate “allocation of fault issues” without determining whether there is underlying liability to any individual plaintiff and, indeed, will proceed without the participation of any identified private plaintiff. That proposal is incompatible with the federal rules, the Fifth Circuit Court’s precedent, and the comprehensive scheme mandated by Congress in OPA, 33 U.S.C. § 2701 et seq.

CAMERON’S ARGUMENT

OCSLA

Cameron argues that the first false premise is that general maritime law, not OCSLA, governs the whole case. For some, the oil spill might be associated with images of the Deepwater Horizon on the surface of the ocean, rather than an oil well 5000 feet below the surface. But unlike other high-profile cases involving vessels (such as the Exxon Valdez), this litigation is not about an oil spill from a vessel; it is about a blowout and spill from an oil well erected on the seabed.

OCSLA extends federal sovereignty “to the subsoil and seabed of the outer Continental Shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing or producing resources therefrom, .. .to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction located within a state.” 43 U.S.C. § 1333(a)(1).

Recognition of OCSLA jurisdiction is decisive for the choice-of-law inquiry, because OCSLA acts “to define a body of law applicable” to activities on the outer continental shelf. Rodrigue v. Aetna Cas. & Surety Co., 395 U.S. 352, 356 (1969). To do so, it mandates “adoption of state law as surrogate federal law.” OCSLA establishes the preemptive reach of federal law, 43 U.S.C. § 1333(a)(1), then fills any gaps in federal law by borrowing the law “of each adjacent State.” 43 U.S.C. § 1333(a)(2)(A).

The PLT Test

In Union Texas Petroleum Corp. v. PLT Engineering, Inc., 895 F.2d 1043 (5th Cir. 1990), the Fifth Circuit set forth a three-part choice-of-law test for OCSLA:

(1) The controversy must arise on a situs covered by OCSLA (i.e. the subsoil, seabed, or artificial structures permanently or temporarily attached thereto).

(2) Federal maritime law must not apply of its own force.

(3) The state law must not be inconsistent with Federal law.

As in PLT, all of these conditions are met in the MDL 2179 case.

1. The situs test is satisfied.

This controversy arose on an OCSLA situs. The Fifth Circuit recently noted that the situs requirement is satisfied if the events took place on “a fixed platform or other structure attached to the seabed.” Grand Isle Shipyard, Inc. v. Seacor Marine, L.L.C., 589 F.3d 778, 784 (5th Cir. 2009) (en banc) (emphasis added). Thus, the district court correctly acknowledged that “the PLT test incorporates into § 1333(a)(2)(A) the locations referenced in § 1333(a)(1), specifically `temporarily attached’ structures.”

2. Maritime law does not apply of its own force.

Maritime law does not “apply of its own force.” PLT, 895 F.2d at 1047. Two separate lines of reasoning compel this conclusion.

In the first place, the Supreme Court has held consistently that drilling activities in water are not subject to maritime law. Over 100 years ago, the Court “specifically held that drilling platforms are not within admiralty jurisdiction.” Rodrigue v. Aetna Cas. & Surety Co., 395 U.S. 352, 360 (1969) (citing Phoenix Constr. Co. v. The Steamer Poughkeepsie, 212 U.S. 558 (1908)).

This long-standing principle forecloses any competition between OCSLA and general maritime law. As the Court held in Rodrigue, when enacting OCSLA “Congress assumed that the admiralty law would not apply unless Congress made it apply, and then Congress decided not to make it apply.” The Court rested this conclusion on its “careful scrutiny” of OCSLA’s legislative history, which revealed that Congress had considered at length what body of law should govern the facilities identified in the statute; Congress understood that those exploration and production facilities “were not themselves to be considered within maritime jurisdiction” and therefore had “deliberately eschewed the application of admiralty principles.” Instead, Congress selected the law of the adjacent state.

Twice since Rodrigue, the Court has reiterated “the operative assumption underlying the statute: that admiralty jurisdiction generally should not be extended to accidents in areas covered by OCSLA.” Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 218 (1985); see Chevron Oil Co. v. Huson, 404 U.S. 97, 101 (1971) (“comprehensive admiralty law remedies [do not] apply under § 1333(a)(1)”). Thus, general maritime law does not apply “of its own force” to the federal enclave defined by OCSLA. If OCSLA applies, then general maritime law does not.

In any event, maritime law does not apply “of its own force” to this case for a second reason: Mineral production activities on the outer continental shelf are not “traditional maritime activities,” and as such are not subject to maritime law. At one time, this Court had suggested that offshore drilling is maritime commerce, but the Supreme Court decisively held otherwise in Herb’s Welding, v. Gray, 470 U.S. 414 (1985). In that case, the Court reiterated that “drilling platforms [are] not even suggestive of traditional maritime affairs” and stated explicitly that “exploration and development of the Continental Shelf are not themselves maritime commerce.

In PLT, therefore, this Court recognized that maritime law applies only if “the subject matter of the controversy bears significant relationship to traditional maritime activities.”

By the standard of PLT, general maritime law is inapplicable to the claims related to Cameron’s BOP, which is the subject of oil and gas exploration and production when attached to an exploration well.

This conclusion is best illustrated by Texaco Exploration & Production, Inc. v. AmClyde Engineered Production Co., 448 F.3d 760 (5th Cir. 2006), a case involving an accident during construction of a tower for an offshore drilling rig. Because the accident occurred on a vessel that was not itself attached to the seabed, the parties assumed that maritime law governed. But this Court did “not rely upon the parties’ bare conclusion that substantive maritime law applies.” Instead, it held that activities “connected with the development of the Outer Continental Shelf and an installation for the production of resources there … are insufficiently connected to traditional maritime activity to support the application of admiralty law.” Of special import here, the Court held that even the involvement of a vessel “in the accident and other elements of maritime activity that precede or surround the compliant tower’s construction on the Shelf are insufficient to support either admiralty jurisdiction or the application of substantive maritime law.” That holding fits this case like a glove. Maritime law does not apply “of its own force” to the claims against Cameron.

3. State law is not inconsistent with federal law.

With respect to the third prong of the test, Louisiana is the “adjacent State” within the meaning of § 1333(a)(2)(A), and neither the district court nor any party has suggested that the applicable substantive Louisiana tort law is inconsistent with federal law. The third prong of the PLT test is satisfied.

The District Court’s Effort to Evade OCSLA Is Unsound

The district court apparently determined that general maritime law applies “of its own force” to the claims against Cameron under the second prong of the PLT test. The court reasoned that (i) the discharge of oil emanated from the Deepwater Horizon; (ii) the fact that the Deepwater Horizon was a “vessel” was independently sufficient to invoke admiralty jurisdiction; and (iii) admiralty jurisdiction supports the application of maritime law. Id. at 4-8. There are many flaws in this chain of logic, but the fundamental error rests in the district court’s assumption that the Deepwater Horizon’s status as a “vessel” is legally dispositive of any significant issue in this case.

First, as a matter of law, this Court has held explicitly that “vessel” status is not dispositive of either the OCSLA situs or maritime activity issues. Demette v. Falcon Drilling Co., 280 F.3d 492, 497-98 (5th Cir. 2002) (OCSLA situs not controlled by vessel status); AmClyde, 448 F.3d at 775 (involvement of vessel does not make petroleum exploration a traditional maritime activity). The district court relied on Demette and suggested that this Court “rejected the very same argument that Cameron makes in this case,” but that is precisely backwards. Actually, this Court acknowledged vessel status yet it still proceeded to hold that the situs requirement was satisfied – following the same statutory construction that Cameron has advocated in this case. See Demette, 280 F.3d at 497-98.

Second, as a matter of indisputable fact, Cameron’s BOP was affixed to the wellhead on the seafloor and was being used for mineral resource development. The claims against Cameron all revolve around that BOP erected on the seabed. Therefore, with respect to the claims against Cameron, this is a classic case for OCSLA jurisdiction.

The district court dismissed this point summarily, noting that the BOP was “part of the vessel’s gear or appurtenances” and declaring that “[m]aritime law ordinarily treats an `appurtenance’ attached to a vessel in navigable waters as part of the vessel itself”‘ (citing Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 535 (1995)). But Grubart was not even an OCSLA case; it involved the Admiralty Extension Act, and it simply reaffirmed the principle that an injury caused by an appurtenance attached to a vessel (there, a crane) is caused “by a vessel” within the meaning of that Act. Grubart, 513 U.S. at 535. That rationale is irrelevant here, because the fact that the BOP was attached to the vessel does not alter the fact that it was a “fixed structure” and “attached to the seabed” within the meaning of OCSLA.

Indeed, this fact also exposes the district court’s error as to the drilling rig. The district court’s discussion of “vessel status” is founded on the premise that the oil spill emanated from the drilling unit instead of the well, but that is not the case. This is not a case like the Exxon Valdez litigation, where oil was spilling out of a grounded tanker; here, the oil was gushing out of a well and well equipment affixed to the seabed. Under these circumstances, vessel status is wholly irrelevant.

Furthermore, that the drilling unit was a “vessel” does not, standing alone, have any jurisdictional or choice-of-law significance. A basic requirement of admiralty jurisdiction is “that the wrong have a significant connection with traditional maritime activity.” Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674 (1982). Grubart itself reiterated that admiralty jurisdiction may be invoked only “if the general character of the activity giving rise to the incident shows a substantial relationship to traditional maritime activity.” Grubart, 513 U.S. at 534; see also Sisson v. Ruby, 497 U.S. 358, 364 (1990) (same).

At the time of the Macondo well blowout, the Deepwater Horizon “was stationary and physically attached to the seabed by means of 5,000 feet of drill pipe.” It was engaged in well completion, not maritime navigation. Well completion is not a traditional maritime activity and thus does not satisfy the essential requirement for admiralty jurisdiction. That conclusion is supported and affirmed by a line of Supreme Court and Fifth Circuit cases. Even with its fixation on the Deepwater Horizon, therefore, the district court reached the wrong conclusion. The claims against Cameron are governed entirely by OCSLA, so there is no room for the district court’s sweeping conclusion that “‘the case is to be governed by maritime law.”‘

The district court sidestepped all these authorities by quoting, out of context, this Court’s observation 25 years ago that “‘oil and gas drilling on navigable waters aboard a vessel is recognized to be maritime commerce.”‘ (quoting Theriot v. Bay Drilling Corp., 783 F.2d 527, 538-39 (5th Cir. 1986)). That misreads Theriot, which was carefully written to avoid being misunderstood. In the cited passage, Theriot distinguished a Supreme Court case on the basis that “the Court’s holding must be read in the context of the opinion.” The district court should have heeded that same advice.

Before finalizing plans for the bench trial, the district court ruled on motions to dismiss the private oil pollution claims. Those motions raised choice-of-law issues that impact the right to a jury trial. Although the court had “already held in this MDL that it has OCSLA jurisdiction,” it declined to follow OCSLA’s choice-of-law provisions. Instead, the court chose to apply general maritime law to Cameron.

Application of OCSLA rather than general maritime law is crucial because it forecloses the MDL 2179 court’s effort to try all the liability questions in a bench trial. The district court’s trial plan is founded on the tradition that maritime claims are tried to the bench. But money damage claims governed by Louisiana law as borrowed federal law trigger the right to a jury under the Seventh Amendment. Thus, the trial plan violates the Seventh Amendment, and it is settled that mandamus will lie to correct this constitutional error.

OPA

Unlike the personal injury and wrongful death actions, the cases alleging economic loss due to the oil spill are governed by OPA. Moreover, all actions were consolidated solely for “pretrial proceedings” before the Hon. Carl Barbier. see 28 U.S.C. § 1407(a) (MDL consolidation only for “pretrial proceedings”).

The MDL 2179 court did rule that OPA displaces general maritime law for the oil pollution claims, but only as to procedure. The MDL 2179 court correctly noted that “OPA clearly requires that OPA claimants must first `present’ their OPA claim to the Responsible Party before filing suit.” But the court decided that it “would be impractical, time-consuming, and disruptive to the orderly conduct of this MDL and the current scheduling orders if the Court or the parties were required to sort through in excess of 100,000 individual B1 claims” to resolve whether any one of them had satisfied the statutory requirement of presentment. It explained that “[n]o matter how many of the individual B1 claims might be dismissed without prejudice” for lack of presentment, “the trial scheduled in February would still go forward with essentially the same evidence.”

The vast majority of the claims (both numerically and financially) arise under OPA, but with respect to the choice-of-law question it is only necessary to know that Cameron is not a statutorily defined “responsible party” made liable under OPA. See 33 U.S.C. §§ 2701(32), 2702(a). Instead, OPA subjects Cameron only to claims brought by responsible parties in subrogation or for contribution, and those claims are governed not by OPA but by “other law.” 33 U.S.C. §§ 2715(a), 2709. Here, that “other law” is dictated by OCSLA. Consequently, borrowing adjacent state law is not “inconsistent with federal law;” it is called for by OPA.

The Trial Plan

Pursuant to the court’s trial plan, which “applies to all cases,” the trial will address “bases of liability,” not actual liability to any individual claimant. This novel approach to an aggregate trial of “allocation of fault issues” will entail a staged investigation that focuses on the chronology of events, rather than the claims of particular litigants:

Phase I “will address issues arising out of the well blowout and spill “initiation” as of April 22, 2010;

Phase II “will address Source Control and Quantification of Discharge issues” from April 22, 2010 and thereafter; and

Phase III “will address issues” pertaining to the efforts to contain the spill.

The MDL 2179 court’s trial plan, when read together with its previous orders, provides for a bench trial to address issues related to allocation of fault among all defendants in this litigation (who are alleged to have caused, in any way, the deaths, injuries, property damages, or economic losses resulting from the explosion of the Deepwater Horizon and the spill from the Macondo well) based on the false premise that general maritime law governs this case. This judicial determination is to be made apart from any finding of an actual injury suffered by any plaintiff. In short, this “trial” of liability for monetary damages will not include a plaintiff, nor will it include a jury. It is squarely contrary to the federal rules and/or federal statutes and the Constitution in each respect.

Cameron manufactured and sold equipment that was later affixed to the wellhead on the seafloor on the outer continental shelf; the claims against it have nothing to do with general maritime law. Instead, the claims against Cameron arise under and are subject to OCSLA. That conclusion is dictated by controlling decisions of the Supreme Court and the Fifth Circuit’s own precedent. OCSLA, in turn, adopts the law of the adjacent state (here, Louisiana) as surrogate federal law. In short, all the injury, death, property damage, and economic loss claims against Cameron are governed by OCSLA, and thus by the substantive standards of Louisiana tort law.

The trial plan suffers from a second set of serious procedural flaws, which also have constitutional implications.

First, in divorcing the claims of individual plaintiffs from the questions of “liability” and “allocation of fault,” this plan departs from the most cherished traditions of the Anglo-American adversarial system, which are embodied in the Federal Rules of Civil Procedure and the Rules Enabling Act. It is impossible to adjudicate “allocation of fault” in a vacuum without adjudicating the underlying claim of an individual plaintiff. The Fifth Circuit’s Fibreboard and Castano decisions, and the Rhone-Poulenc decision from the Seventh Circuit, forbid “innovations” that exceed the rules and alter substantive rights. Indeed, this trial plan goes so far afield that it crosses the boundaries of Article III.

Second, this plan radically departs from OPA’s carefully structured and comprehensive remedial scheme. As a condition precedent to suit, OPA requires presentment to a designated “responsible party” of all claims for response costs and economic losses caused by the discharge of oil in navigable waters. If the responsible party settles the claim, it may seek recovery from third parties like Cameron as subrogee of the paid claim. If it cannot settle a claim and is then sued, it may then seek contribution from third parties like Cameron. But the trial plan inverts the Congressional order, dispensing with presentment entirely, deferring compensation of verifiable claims, and forcing Cameron’s potential liability to be determined in the abstract and in the first instance.

The District Court Cannot Try All the Plaintiffs’ Claims Without Violating Rule 23, Lloyd’s Leasing, and Lexecon

The order of proceedings envisioned by the trial plan is extremely curious. To begin the trial, “the Claimants, through the Plaintiffs’ Steering Committee” (along with counsel for the governmental parties) will offer “evidence in support of those parties’ claims against all defendants” in the aggregate. Later, defendants will present “evidence in support of their defenses to plaintiffs’ claims” in the aggregate. Yet the trial plan does not actually propose to adjudicate those claims in the aggregate. The district court has structured the trial in this way because it cannot actually try all of the claimants’ claims in this limitation action, for three reasons.

First, the only device that would permit a trial of all the claimants’ claims in the aggregate would be a class action under Rule 23, but the district court has stayed all class action proceedings and has not appointed a class representative. As such, trying all plaintiffs’ claims in the aggregate would be a blatant violation of Rule 23 by permitting a class-wide adjudication without establishing the mandatory prerequisites for a class action.

Second, the court could not have certified a class in the limitation action even if it had wanted to do so, because it would contravene this Court’s holding in Lloyds Leasing Ltd. v. Bates, 902 F.2d 368 (5th Cir. 1990), that class actions are not permitted in limitation proceedings.

The Supreme Court has explained that a core purpose of the limitation action under Admiralty Rule F is to “marshal[] claims,” which can then be adjudicated. Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 448 (2001). In that context, the Fifth Circuit has held that “the entire thrust of Supplemental Rule F is that each claimant must appear individually.” In re Lloyd’s Leasing, 902 F.2d 368, 370 (5th Cir. 1990). Each claim must be prosecuted “individually” and liability must be resolved on the basis of individual claims.

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

In this case the JPML has transferred over 300 cases filed in other districts. Those actions, which include the claims of thousands of plaintiffs, were transferred to Judge Barbier for “coordinated or consolidated pretrial proceedings.” Because Judge Barbier cannot try the cases transferred for “pretrial proceedings,” he could not try all of the plaintiffs’ claims in the aggregate in this proceeding. Nor can the rule of Lexecon be circumvented by the device of permitting claimants to file “short-form joinders” injecting themselves into the limitation action on the theory that it was transferred to the district court under 28 U.S.C. § 1404 for trial. That would make a mockery of Lexecon.

The district judge, a seasoned and able jurist, recognized that he was not free to fashion a trial plan that is flawed in these fundamental respects. For that reason, the trial plan does not seek to adjudicate all the plaintiffs’ claims in the aggregate. Instead, it plans a trial of “issues” related to “allocation of fault” in the abstract. Unable to try all the plaintiffs’ claims, the judge has chosen to try none of them. This proposal is still defective, as a trial of “issues” would try parts of actions that under Lexecon the MDL judge must not try and would amount to a class action in a limitations proceeding contrary to Rule 23 and Lloyd’s Leasing. Indeed, such a trial would resemble an unsanctioned class action in almost everything but name. But even on its own terms, this plan exceeds the boundaries of the federal rules and contravenes the prior decisions of the Fifth Circuit.

The District Court’s Plan to Try “Issues” Without Trying Any Plaintiffs’ Claims Violates Rule 42, Fibreboard, and Article III

The district court evidently grounded its decision to order a trial of “issues” in Rule 42. But that trial plan cannot be sustained under the Fifth Circuit’s precedent. The Fifth Circuit recognizes that “separation of issues is not the usual course that should be followed.” Castano v. American Tobacco Co., 84 F.3d 734, 750 (5th Cir. 1996) (quoting Alabama v. Blue Bird Body Co., 573 F.2d 309, 318 (5th Cir. 1978)). When a district court proposes to depart from the usual practice, “the issue to be tried must be so distinct and separable from the others that a trial of it alone may be had without injustice.”

Here, the “allocation of fault issues” that the district court intends to try are not “distinct and separable” from the underlying claims of individual plaintiffs. Just the opposite. It is impossible to decide “allocation of fault” in the abstract; these questions cannot be decided without addressing liability, proximate cause, and comparative fault with reference to the claims of an individual plaintiff. Castano rejected a trial plan “to divide core liability from other issues such as comparative negligence,” Castano, 84 F.3d at 749, and this plan suffers from the same flaw. Rule 42(b) does not permit a separate trial on those issues in a vacuum, and the effort to use it in this way violates the Rules Enabling Act: “Such rules shall not abridge, enlarge or modify any substantive right.” 28 U.S.C. § 2072.

In a series of decisions, the Fifth Circuit (and others) has emphasized that courts cannot order separate trials of “issues” that aggregate individualized questions, such as causation, simply because it would be “convenient” or “efficient.” E.g., Castano, 84 F.3d at 751; In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1302-04 (7th Cir. 1995); In re Fibreboard Corp., 893 F.2d 706, 709-12 (5th Cir. 1990). Fibreboard was a seminal case, rejecting a trial plan that proposed to try the claims of 41 representative plaintiffs as a means to secure percentage findings that would then be extrapolated to an entire class of plaintiffs. By this device, the claims of the plaintiffs were to be aggregated and “the claim of a unit of 2,990 persons will be presented.” This procedure would mean the defendants “are exposed to liability not only in 41 cases actually tried with success to the jury, but in 2,990 additional cases whose claims are indexed to those tried.” “[E]ach plaintiff will be present in a theoretical, if not practical, sense.”

The Fifth Circuit held that such an aggregate trial plan “cannot focus upon such issues as individual causation,” and as a result, it would not permit a trial of individual claims. “This is the inevitable consequence of treating discrete claims as fungible claims.” Such a plan could proceed “only by lifting the description of the claims to a level of generality that tears them from their substantively required moorings to actual causation and discrete injury.” This, the Court held, was “alteration of substantive principle.”

The innovative plan proposed by the district court violates these principles. By planning a “trial” of all defendants’ “bases of liability” and “allocation of fault” in the abstract, without reference to any individual plaintiff’s claim, this trial plan goes even further than the one rejected by Fibreboard. In the name of efficiency, it alters Cameron’s substantive rights in precisely the way the Fifth Circuit has forbidden. “There is a point … where cumulative changes in procedure work a change in the very character of a trial.” Id. at 711. This plan has crossed that line.

This conclusion is inescapable regardless of the controlling substantive law. The claims against Cameron all turn on allegations that its product was defective, and Cameron cannot be liable on such a claim without proof that an alleged defect proximately caused some plaintiffs injury. Under Louisiana law, borrowed as surrogate federal law under OCSLA, Cameron could be “liable to a claimant” only “for damage proximately caused by” its product. LA. REV. STAT. 9:2800.54.A. Likewise, even if the district court were correct that general maritime law governs, “there is properly no application of comparative fault where there is an absence of proximate causation.” Exxon Co. v. Sofec, Inc., 517 U.S. 830, 838 (1996). Thus, the causation inquiry cannot proceed without reference to some plaintiff’s claim. See United States v. Atlantic Research Corp., 127 S. Ct. 2331, 2337-38 (2007) (statutory claims for contribution, like the cross-claims here, require a finding that the parties are “responsible for the same tort”).

Furthermore, no liability can be imposed on Cameron under Louisiana or maritime product liability law, and therefore no fault can be allocated to Cameron, unless a plaintiff satisfies the “economic loss” rule by proving an injury to either person or property. See Wiltz v. Bayer Cropscience, Inc., 645 F.3d 690, 695-703 (5th Cir. 2011) (Louisiana law); East River SS Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 867-75 (1986) (maritime law).

In short, regardless of the choice-of-law ruling, the notion that a court can adjudicate “allocation of fault issues” in a vacuum, divorced from the claims of any individual plaintiff, alters Cameron’s substantive rights in violation of Rule 42 and the Castano and Fibreboard decisions. This plan is a violation of due process. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2560-61 (2011).

At bottom, the trial plan goes so far in seeking to adjudicate abstract issues without reference to any individual claim that it violates Article III. A plaintiff with standing to sue is the “irreducible constitutional minimum” under Article III. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102-03 (1998). Individual standing is “the core of Article III’s case-or-controversy requirement,” Id. at 104, and it “must be supported adequately by the evidence adduced at trial.”‘ LuJan v. Defenders of Wildlife, 504 U.S. 555, 561 ( 1992) . Because this trial plan would adjudicate “issues” in the abstract, not the claims of individual claimants who seek redress for identifiable injuries, it violates Article III.

The Trial Plan Does Not Accord With the Congressionally Mandated Remedial Scheme Prescribed by OPA

It should not escape notice that the district court’s effort to achieve a global “allocation of fault” is not only irreconcilable with the ordinary rules of procedure, but also with the specific scheme fashioned by Congress for oil pollution claims – by far the most numerous and financially significant claims in this litigation.

OPA establishes a comprehensive remedial scheme governing claims arising from the discharge of oil into navigable waters. The OPA scheme focuses on statutorily designated “responsible parties.” 33 U.S.C. § 2701(32). In this case, the designated “responsible parties” are the vessel owner or operator (Transocean) and the Macondo well lessees (BP, Anadarko, and MOEX). Cameron is not a statutorily designated “responsible party.”

OPA makes the responsible parties strictly liable for specific categories of removal costs and damages “[n]otwithstanding any other provision or rule of law.” 33 U.S.C. § 2702(a); § 2702(b) (specifying the recoverable costs and damages). It sets forth a streamlined process to facilitate prompt payment of verifiable claims. First, as a means of expediting payment and minimizing litigation, OPA imposes a presentment requirement: “[A]11 claims for removal costs or damages shall be presented first to the responsible party.” 33 U.S.C. § 2713(a). Only if a claim is not paid within 90 days may “the claimant … elect to commence an action in court against the responsible party ….” Id. § 2713(c).

OPA does not authorize claimants to sue third persons like Cameron who are not statutorily designated responsible parties. Instead, the statute interposes the responsible parties between claimants and third persons. Once a responsible party “pays compensation pursuant to this chapter to any claimant for removal costs or damages,” the responsible party becomes “subrogated to all rights, claims, and causes of action that the claimant has under any other law.” 33 U.S.C. § 2715(a); see also Id. § 2702(d)(1)(B). Alternatively, a responsible party may bring an “action for contribution against any other person who is liable or potentially liable under this Act or another law.” Id. § 2709.

In short, OPA prescribes a streamlined procedure providing for payment of damages first, litigation of liability later. Responsible parties must promptly compensate all claimants who present verifiable claims; ultimate financial liability is then resolved in separate litigation to which the claimants are not even parties. The legislative history makes this two-stage process explicit: “Whenever possible, the burden is to be on the discharger to first bear the costs of removal and provide compensation for any damages. . . . [L]itigation or lengthy adjudicatory proceedings over liability, defenses, or the propriety of claims should be reserved for subrogation actions ….” S. Rep. 101-94, 101″ Cong., 0 Sess. 1989, 1990 U.S. Code Cong. & Admin. News 722, 732.

First, failure to enforce the presentment requirement delays indefinitely the verification and satisfaction of claims advanced by individual plaintiffs (if any) who have presented claims and been denied compensation by a responsible party; under the proposed trial plan those plaintiffs now will be lumped together with the “large numbers of … plaintiffs who have completely bypassed the OPA claim presentation requirement,” and will sit back to await the outcome of what Congress presciently called “lengthy adjudicatory proceedings over liability.” This is precisely contrary to the prompt payment of compensation that lies at the heart of the OPA remedial scheme.

Second, by proceeding directly to matters of liability instead of resolving the claims of individual plaintiffs, the trial plan invites the PSC to participate in a potentially riotous free-for-all over fault on behalf of an undifferentiated mass of unidentified plaintiffs. The PSC will play this role even though (a) those plaintiffs have not been demonstrated to have satisfied OPA’s prerequisite for bringing suit, (b) those plaintiffs do not need to prove fault to secure compensation under OPA, and (c) those plaintiffs have no statutory right to sue third persons like Cameron who are not statutorily designated responsible parties.

The district court may have believed that its multiple departures from the OPA remedial scheme were justified under the Limitation Act, but that is not so. The Limitation Act’s procedures for marshaling claims and allocating fault cannot be used to circumvent the orderly OPA scheme. As the First Circuit correctly held, “claims arising under the OPA (for pollution removal costs and damages) are not subject to the substantive or procedural law of the Limitation Act or to the concursus of claims [allowed by the Limitation Act].” In re Metlife Capital Corp.,132 F.3 d 818, 819 (1st Cir. 1997). “OPA repealed the Limitation Act with respect to removal costs and damages claims against responsible parties.” Id. at 821. Congress stated that OPA “completely supersedes”‘ the Limitation Act. M. at 822 (quoting legislative history). Thus, after careful evaluation, the First Circuit held “the OPA’s scheme is in irreconcilable conflict with the Limitation Act.”

The plaintiffs’ OPA claims should be adjudicated in the manner deliberately chosen by Congress, i.e., only plaintiffs satisfying the presentment requirement may have their day in court; plaintiffs who do satisfy the presentment requirement are entitled to compensation for all verified claims without awaiting litigation over fault or ultimate financial responsibility, but those plaintiffs may not proceed against third persons who are not statutorily designated responsible parties. Instead, the district court has inverted the congressional order by confusing Transocean’s limitation action with the OPA claims that this case is mainly about. This has become a case of the caboose driving the train, and it needs to be put back on the tracks.

When viewed as a whole, the proceeding envisioned by the MDL 2179 court’s plan is not a “trial” as it is known in Anglo-American law. Its three phases are reminiscent of the procedures followed by European courts in which the judges are active prosecutors in search of justice while the litigants are virtually bystanders. But this procedure is a novelty in American law. It should not be allowed.

THE FIFTH CIRCUIT ORDER

The United States Court of Appeals for the Fifth Circuit chose not to address the issues raised in Cameron’s Petition for Writ of Mandamus. On December 26, 2011, the three-judge panel (Judges Higginbotham, Davis, and Elrod) issued the following three-sentence Order:

“The application for mandamus is denied. The district court did not clearly err in concluding that the limitation proceeding is within the court’s admiralty jurisdiction. The remaining issues fail the demands for mandamus review.”

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Is The Gulf Coast Claims Facility in Violation of The Oil Pollution Act of 1990?

Is The Gulf Coast Claims Facility in Violation of The Oil Pollution Act of 1990?

By Brian J. Donovan

August 10, 2010

INTRODUCTION

On June 16, 2010 President Obama announced that BP has agreed to set aside $20 billion to pay economic damage claims to people and businesses that have been affected by the BP oil gusher. President Obama stated, “This $20 billion will provide substantial assurance that the claims people and businesses have will be honored. It’s also important to emphasize this is not a cap.  The people of the Gulf have my commitment that BP will meet its obligations to them. BP has publicly pledged to make good on the claims that it owes to the people in the Gulf, and so the agreement we reached sets up a financial and legal framework to do it.

Another important element is that this $20 billion fund will not be controlled by either BP or by the government. It will be put in a escrow account, administered by an impartial, independent third party. So if you or your business has suffered an economic loss as a result of this spill, you’ll be eligible to file a claim for part of this $20 billion. This fund does not supersede either individuals’ rights or states’ rights to present claims in court. BP will also continue to be liable for the environmental disaster it has caused, and we’re going to continue to work to make sure that they address it.”

BP and the Obama administration agreed to appoint Kenneth Feinberg, a Washington lawyer and Democratic Party supporter who administered the claims process for victims of 9/11, to run the independent claims process known as the Gulf Coast Claims Facility (GCCF). The GCCF is also commonly referred to as the BP Oil Spill Victim Compensation Fund (BPOSVCF).

This article addresses the issue of whether the proposed GCCF protocol is in violation of the Oil Pollution Act of 1990 (OPA).

THE OIL POLLUTION ACT OF 1990

Elements of Liability
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)

Covered Damages
Under OPA, “damages” means “damages specified in 33 U.S.C. § 2702(b), and includes the cost of assessing these damages.” 33 U.S.C. § 2701(5)

The damages to people and businesses specified in 33 U.S.C. § 2702(b) include, but are not limited to, the following:

(A) Real or Personal Property
Damages for injury to, or economic losses resulting from destruction of, real or personal property, which shall be recoverable by a claimant who owns or leases that property. 33 U.S.C. § 2702(b)(2)(B)

(B) Subsistence Use
Damages for loss of subsistence use of natural resources, which shall be recoverable by any claimant who so uses natural resources which have been injured, destroyed, or lost, without regard to the ownership or management of the resources. 33 U.S.C. § 2702(b)(2)(C)

Under OPA, “natural resources” includes land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the United States (including the resources of the exclusive economic zone), any State or local government or Indian tribe, or any foreign government. 33 U.S.C. § 2701(20)

(C) Profits and Earning Capacity
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)

Partial Payment of Claims
Pursuant to the Oil Pollution Act of 1990 (OPA), “the responsible party shall establish a procedure for the payment or settlement of claims for interim, short-term damages. Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a)

Period of Limitations
An action for damages under OPA shall be barred unless the action is brought within 3 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. See 33 U.S.C. § 2717(f)(1)(A)

Subrogation
Any person, including the Oil Spill Liability Trust Fund, 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. Moreover, payment of such a claim shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under OPA or under any other law. See 33 U.S.C. § 2715(b)(2)

Interest
The responsible party or the responsible party’s guarantor is liable to a claimant for interest on the amount paid in satisfaction of a claim under the OPA.  The period for which interest shall be paid is the period beginning on the 30th day following the date on which the claim is presented to the responsible party or guarantor and ending on the date on which the claim is paid. However, if in any period a claimant is not paid due to reasons beyond the control of the responsible party or because it would not serve the interests of justice, no interest shall accrue during that period.

OPA Claims Procedure
Claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). Under OPA, the term “claim” means “a request, made in writing for a sum certain, for compensation for damages or removal costs resulting from an oil spill incident.” 33 U.S.C. § 2701(3). In the event that a claim for damages is not paid by the responsible party within 90 days, the claimant may elect to commence an action in court against the responsible party or to present the claim to the Oil Spill Liability Trust Fund.

Loan Program
The President shall establish a loan program under the Oil Spill Liability Trust Fund to provide interim assistance to fishermen and aquaculture producer claimants during the claims procedure. A loan may be made only to a fisherman or aquaculture producer that: (a) has incurred damages for which claims are authorized under OPA; (b) has made a claim pursuant to OPA that is pending; and (c) has not received an interim payment for the amount of the claim, or part thereof, that is pending.

GCCF VIOLATIONS OF OPA

GCCF will operate for three years. Feinberg explains the compensation plan includes two components: a no-obligation six month emergency payment for lost income and a final lump-sum payment with acceptance of release for BP. A claim for the six month emergency payment must be made within 90 days from the day the well is capped. If claimants choose to accept the second and final GCCF offer, they waive any right to bring further court proceedings against BP.

Single Emergency Payment
A single six month emergency payment for lost income is in violation of OPA. Moreover, the lack of a procedure for the payment or settlement of claims for interim, short-term damages beyond 90 days, as required by 33 U.S.C. § 2705, is also in violation of 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.

The OPA specifically provides for interim partial payments. As noted above, “the responsible party shall establish a procedure for the payment or settlement of claims for interim, short-term damages. Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a).  The fact that a single payment does not preclude recovery by the claimant for future damages demonstrates that the legislative intent of Congress was for the responsible party to pay a series of partial claims in order to ensure that victims of the oil spill are fully compensated. Each of these partial claims would be paid after the date on which the claimant discovers damages resulting from the oil spill.

Final Settlement
A single final settlement payment is in violation of 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.

OPA provides:
(a) “Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a); and
(b) Any person, including the Oil Spill Liability Trust Fund, 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. Moreover, payment of such a claim shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under OPA or under any other law. See 33 U.S.C. § 2715(b)(2)

Period of Limitations
A limitation that no claim may be submitted to the GCCF “more than three years after the date the Protocol becomes operative,” is in violation of OPA.

Under OPA, an action for damages shall be barred unless the action is brought within 3 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. See 33 U.S.C. § 2717(f)(1)(A)

The damages suffered by victims of the BP oil gusher 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.

It is too early to calculate the damages for many potential claimants. GCCF’s “take it or leave it” final settlement requires a financially stressed victim to file a claim before the individual or business knows, and is able to corroborate, the full extent of the damages incurred as a result of the oil spill.

For example, many businesses are concerned it will be difficult, if not impossible, to forecast the long-term recovery of the crab and shrimp populations, or how quickly U.S. consumers will re-embrace Gulf seafood, among other things. So far, economic damage estimates vary widely. Greater New Orleans Inc., the economic-development agency for the 10-parish area, published preliminary estimates that the region’s fishing industry stands to suffer annual losses ranging from $900 million to $3.3 billion.

Gary Bauer, president of Pontchartrain Blue Crab Inc., a seafood wholesaler and processor on Salt Bayou east of New Orleans, said his sales of blue crab and shrimp have dropped to 20% of their normal $8 million-a-year pace. In addition, foreign seafood suppliers are moving in on his network of grocers, restaurants and other buyers, further denting his long-term prospects. “Are we going to have a crab season next year, and are there going to be fishermen who will fish next year?” Mr. Bauer said. “How does BP reimburse for that? I spent 10 years of my life building a brand, and they destroyed it.”

Wayne Hess, manager of American Seafood Inc., a processor and wholesaler in New Orleans, said his sales were down roughly 30% from their annual average of $5 million to $7 million. “How am I supposed to project my losses not knowing how all of the different species we carry will be affected in the next year to five years?” he said. “The female crabs that are mating right now don’t drop their eggs until October or December. Those larvae may not make it.”

More importantly, how can a person predict the long-term health effects of his or her exposure to the oil? The benzene in spilled oil can cause leukemia and lymphoma which may not be diagnosed for several years after the date the GCCF Protocol becomes operative.

Waiver of Right to Sue
GCCF’s requirement that the claimant sign a general release of all rights the claimant may have against BP in order to receive the final settlement is in violation of 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.

OPA provides:
(a) “Payment or settlement of a claim for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled shall not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim.” See 33 U.S.C. § 2705(a); and
(b) Any person, including the Oil Spill Liability Trust Fund, 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. Moreover, payment of such a claim shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under OPA or under any other law. See 33 U.S.C. § 2715(b)(2).

Partial payments, including a partial “final settlement” payment, do not preclude recovery by the claimant for damages not reflected in the paid or settled partial claim. If the claimant must sign a general release of all rights the claimant may have against BP in order to receive this partial “final settlement” payment, this required GCCF waiver of the right to sue by the claimant is in violation of OPA.

GCCF is an attempt to buy peace by overwhelming potential claimants/plaintiffs with “easy” money. Companies have tried this before, with mixed success. Asbestos manufacturers failed miserably when they negotiated a global settlement with plaintiff lawyers in the early 1990s under which they’d pay out $300 million to injured workers in exchange for having cases of workers who were exposed, but not sick, valued at zero. The Supreme Court rejected the settlement in 1997 because it bound future claimants to terms they had no part in negotiating. Similarly in this case, claimants have no way to predict or negotiate the full extent of the damages, including the long-term health effects, incurred as a result of the oil spill.

Intentional and Systematic Delay of Payment
The intentional and systematic delay of payment of claims that has been employed by BP is in violation of OPA. There is no reason to believe that GCCF will be any different.

As of August 10, 2010, BP has made 146,000 payments to claimants for a total amount of $330 million. This equates to an average of only $2,260 per payment!

“Delay, deny, defend” is a strategy commonly employed by unscrupulous insurance companies. The strategy currently being employed by BP is similar: “Delay payment, starve claimant, and offer claimant five to ten percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the final settlement offer, he or she may sue.”

Four Tactics Currently Used by BP to Delay Payments
(1) Providing documentation that is acceptable to BP has been a significant challenge for claimants so far. Arbitrarily requesting unnecessary additional corroborating documentation after a claim has been filed is merely one tactic BP uses to delay payment to claimants.

(2) A second tactic employed by BP is to delay a claim by arguing “the oil is not physically at the claimant’s location.” This is in violation of OPA. In the case of an OPA claim, the claimant is simply required to demonstrate that the damages incurred resulted from the BP oil release. See 33 U.S.C. § 2702(a)

(3) A third delaying tactic is a requirement by BP for claimants who seek lost profits to demonstrate that their loss was caused by damage or loss to property or resources “that are used by the Claimant.” This is in violation of OPA. 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” are recoverable by any claimant against the responsible party under OPA. 33 U.S.C. § 2702(b)(2)(E). Moreover, “the responsible party is liable for damages that result from such incident.” See 33 U.S.C. § 2702(a)

(4) Furthermore, a limitation that payment on claims will be reduced by payments received from collateral sources is inconsistent with the liability of a responsible party under OPA. In no event should a collateral source limitation interfere with the expeditious and complete recovery by any individual or business claimant.

Appeals Process
A panel of three judges will be available to hear appeals of the GCCF administrator’s decisions. The panel will review claims that are denied or offers deemed to be insufficient by a claimant.

Under the proposed GCCF protocol, a claimant only has seven days to appeal a decision to the Appeals Board. This is insufficient time and in violation of OPA.

Interest
Pursuant to OPA, the responsible party or the responsible party’s guarantor is liable to a claimant for interest on the amount paid in satisfaction of a claim. The period for which interest shall be paid is the period beginning on the 30th day following the date on which the claim is presented to the responsible party or guarantor and ending on the date on which the claim is paid. However, if in any period a claimant is not paid due to reasons beyond the control of the responsible party, no interest shall accrue during that period. Here, GCCF will argue that the “insufficient documentation” submitted by the claimant was beyond BP’s control.

Kenneth Feinberg has promised to pay claims as expeditiously as possible. Therefore, (a) interest should to be factored into the total amount of damages filed by the claimant. This is interest from the date of financial loss to the date on which the claim is presented; and (b) a claim should also stipulate that GCCF will pay a per diem penalty if the claim is not paid within 30 days from the date on which the claim is presented.

CONCLUSION

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.

The proposed GCCF protocol is in violation of OPA for the following seven reasons:
(a) a single six month emergency payment for lost income;
(b) a single final settlement payment;
(c) a limitation that no claim may be submitted to the GCCF “more than three years after the date the Protocol becomes operative;”
(d) GCCF’s requirement that the claimant sign a general release of all rights the claimant may have against BP in order to receive the final settlement;
(e) BP’s current intentional and systematic delay of payment of claims which GCCF will most likely continue;
(f) insufficient time to appeal a GCCF decision; and
(g) GCCF’s failure to provide for interest on the amount paid in satisfaction of a claim and penalties for delayed payment of a claim.

Memories fade with the passage of time. If GCCF is merely a delaying tactic on the part of BP to postpone the day of financial judgment, lawsuits should be filed by BP’s victims and witnesses should be deposed as soon as possible. In the absence of a well-funded and transparent GCCF that fully compensates oil spill victims in an expeditious manner, postponing litigation will only benefit BP.

APPENDICES

References
Adams, Mike, “First Amendment suspended in the Gulf of Mexico as spill cover-up goes Orwellian,” NaturalNews (July 3, 2010), available at: http://www.naturalnews.com/029130_Gulf_of_Mexico_censorship.html

Bhattacharyya, S., P.L. Klerks, and J.A. Nyman. 2003. Toxicity to freshwater organisms from oils and oil spill chemical treatments in laboratory microcosms. Environmental Pollution 122:205-215.

Chokkavelu, Anand, “The BP Stat That Will Shock You,” Motley Fool (July 9, 2010), available at: http://www.msnbc.msn.com/id/38165954/ns/business-motley_fool/

Clean Water Act

Coleman, Leigh and Younglai, Rachelle, “Spill puts Obama’s oil fund chief on hostile turf,” Reuters (July 27, 2010)

EPA: http://www.epa.gov/oem/content/lawsregs/opaover.htm

Fed. R. Civ. Proc. 23(h), Federal Rules of Civil Procedure

Fisher, Daniel and Hawkins, Asher, “BP’s Legal Blowout,” Forbes.com (July 14, 2010)

Greenwald, Glenn, “The BP/Government police state,” Salon (July 5, 2010), available at: http://www.salon.com/news/opinion/glenn_greenwald/2010/07/05/bp/index.html

Hals, Tom, “Analysis: BP investors face tough road in court fights,” Reuters (July 16, 2010)

Hudson, Kris and Baskin, Brian, “Fears Mount That Fund Won’t Cover All Damages,” The Wall Street Journal (July 15, 2010)

Kindy, Kimberly, “Recovery effort falls vastly short of BP’s promises,” Washington Post (July 6, 2010), available at:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/05/AR2010070502937.html

Kirby, Brendan, “BP, federal government remain silent on when company will fund Gulf oil spill account,” Press-Register (July 26, 2010)

Lustgarten, Abrahm, “Chemicals Meant To Break Up BP Oil Spill Present New Environmental Concerns,” ProPublica (April 30, 2010), available at: http://www.propublica.org/article/bp-gulf-oil-spill-dispersants-0430

MMS: http://www.mms.gov/

Murtaugh, Dan, “Attorney General Eric Holder says he’ll try to address oil spill claims concerns,” Press-Register (July 15, 2010)

Murtaugh, Dan, “Feinberg says BP hasn’t put money in escrow account yet,” Press-Register (July 24, 2010)

National Contingency Plan

NOAA: http://www.noaa.gov/

Oil Pollution Act of 1990

Peters, Jeremy W., “Efforts to Limit the Flow of Spill News,” The New York Times (June 9, 2010)

Philips, Matthew, “BP’s Photo Blockade of the Gulf Oil Spill,” Newsweek (May 26, 2010), available at: http://www.newsweek.com/2010/05/26/the-missing-oil-spill-photos.html

Schoof, Renee and Bolstad, Erika, “BP well may be spewing 100,000 barrels a day, scientist says,” McClatchy Newspapers (June 7, 2010), available at: http://www.mcclatchydc.com/2010/06/07/95467/bp-well-may-be-spewing.html

Schoof, Renee, “Scientists propose big experiment to study Gulf oil spill,” McClatchy Newspapers (July 11, 20100, available at:
http://www.miamiherald.com/2010/07/11/1725271/scientists-propose-big-experiment.html

Schwartz, John, “More Delicate Diplomacy for the Overseer of the Compensation Fund,” The New York Times (July 16, 2010)

Stier, Byron G., “Ken Feinberg Compensation for Administering BP Fund – A Problem and Possible Solution,” available at: http://lawprofessors.typepad.com/mass_tort_litigation/2010/07/ken-feinberg-compensation-for-administering-bp-fund-a-problem-and-possible-solution.html

USA Today: http://content.usatoday.com/communities/greenhouse/post/2010/05/how-responsible-is-us-government-for-gulf-oil-spill/

USCG: http://www.uscg.mil/

Walsh, Bryan, “The Oil Spill and the Perils of Losing Trust,” Time (July 7, 2010), available at: http://ecocentric.blogs.time.com/2010/07/07/the-oil-spill-and-the-perils-of-losing-trust/
 

 

Further Reading
The Gulf Coast Claims Facility Limits BP’s Liability and Guarantees the Oil Company’s Continued Operation in the Gulf of Mexico

Is the BP Oil Spill Victim Compensation Fund Legitimate?

Will Victims of the BP Oil Gusher Also Be Victims of Class Action Lawsuits and the BP Oil Spill Victim Compensation Fund?

BP’s Strategy to Limit Liability in Regard to Its Gulf Oil Gusher

Why BP Does Not Want an Accurate Measurement of the Gulf Oil Spill

The Oil Pollution Act Provides for the Federalization of the BP Oil Spill

BP is Not the Only Responsible Party

BP Oil Spill of April, 2010: Why Class Action Lawsuits May Not be in the Best Interests of Potential Plaintiffs
 

 

About the Author
Brian J. Donovan is an attorney and marine engineer with thirty-five years of international business experience.

Mr. Donovan, a member of The Florida Bar, The U.S. District Court, Middle District of Florida and The United States Court of Appeals for the Eleventh Circuit, holds a J.D. from Syracuse University College of Law (where he was recipient of the “Global Law & Practice Award” as the outstanding graduate in the areas of International Law and International Business Law) and a B.S., with honors, in Marine/Mechanical and Nuclear Engineering from the United States Merchant Marine Academy.

Mr. Donovan, with deep family roots in southern Louisiana, has first-hand knowledge of the catastrophic devastation of the Louisiana Gulf Coast caused by hurricanes Katrina and Rita. He fully appreciates that the damage caused by Katrina and Rita may pale in comparison to the massive and potentially unprecedented environmental and economic impact of the BP oil gusher of April, 2010.

Will Victims of the BP Oil Gusher Also Be Victims of Class Action Lawsuits and the BP Oil Spill Victim Compensation Fund?

Will Victims of the BP Oil Gusher Also Be Victims of Class Action Lawsuits
and the BP Oil Spill Victim Compensation Fund?

By Brian J. Donovan

July 16, 2010

INTRODUCTION

The question is whether victims of the BP oil gusher will have to pay thrice: (a) once for the gusher, the environmental and economic damages of which will devastate their way of life and leave many in financial ruin; (b) again for daring to demand justice, which will consume their time, energy and hopes for years to come if they are held hostage by class action lawsuits; and (c) a third time by being mislead and undercompensated by the “BP Oil Spill Victim Compensation Fund (BPOSVCF).”

THE BP OIL GUSHER

The damages suffered by victims of the BP oil gusher 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.

Pursuant to the Oil Pollution Act of 1990 (OPA), for an offshore facility the total of the liability of a responsible party and any removal costs incurred by, or on behalf of, the responsible party, with respect to each incident shall not exceed the total of all removal costs plus $75,000,000.

However, this limit on liability “does not apply if the incident was proximately caused by gross negligence, willful misconduct of, or the violation of an applicable federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party.”

OPA broadened the scope of damages (i.e., costs) for which an oil spiller would be liable. Under OPA, a responsible party is liable for all cleanup costs incurred, not only by a government entity, but also by a private party. In addition to cleanup costs, OPA significantly increased the range of liable damages to include the following:

• injury to natural resources,
• loss of personal property (and resultant economic losses),
• loss of subsistence use of natural resources,
• lost revenues resulting from destruction of property or natural resource injury,
• lost profits resulting from property loss or natural resource injury, and
• costs of providing extra public services during or after spill response.

Given BP’s documented violation of federal safety regulations aboard the Deepwater Horizon, e.g., using an improper cementing technique to seal the well, failing to adequately test and maintain blowout prevention equipment and drilling deeper than BP’s federal permit allowed, there will be no limitation on BP’s liability. (Oil Pollution Act of 1990, 33 U.S.C. 2704).

Furthermore, BP may be liable to the United States and to Louisiana for damages resulting from lost royalties. Pursuant to Section 2702 of OPA, “Notwithstanding any other provision or rule of law, and subject to the provisions of this Act, each 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 specified in subsection (b) of this section that result from such incident…”, including revenue losses such as “taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political subdivision thereof.” (Oil Pollution Act of 1990, 33 U.S.C. 2702(b)(2)(D)).

BP also faces uncapped liability under a little-known Clean Water Act (CWA) civil damages provision.

Pursuant to Section 1321 of the CWA, “Any person who is the owner, operator, or person in charge of any vessel, onshore facility, or offshore facility from which oil or a hazardous substance is discharged in violation of paragraph (3), shall be subject to a civil penalty in an amount up to $25,000 per day of violation or an amount up to $1,000 per barrel of oil or unit of reportable quantity of hazardous substances discharged. In any case in which a violation of paragraph (3) was the result of gross negligence or willful misconduct of a person described in subparagraph (A), the person shall be subject to a civil penalty of not less than $100,000, and not more than $3,000 per barrel of oil or unit of reportable quantity of hazardous substance discharged.” (Clean Water Act, 33 U.S.C. 1321).

Under the CWA, the basic fine is $1,100 per barrel spilled. But the penalty can rise to $4,300 a barrel if a federal court rules the spill resulted from gross negligence. As noted above, the fines were originally set at $1,000 to $3,000 but that was raised in 2004 to keep up with inflation. Accordingly, the number of barrels of oil being released from the well is going to be critical.

If the government pursues civil fines based on the volume of oil spilled, it would take into consideration whether BP has made its best effort to mitigate the spill, its prior history of offenses, if any, and whether BP can bear the cost of fines, among other factors. BP received the third-largest criminal penalty, of $50 million, for an environmental offense in U.S. history for a Texas City refinery fire in 2005. BP subsidiaries remain under federal probation for prior offenses in Texas and Alaska.

As of July 16, 2010, regardless of whether you prefer to say “spill” or “gusher,” these are the numbers to consider:

Total Amount of Oil Released to Date: 4,675,000 barrels
Amount of Oil Recovered by BP to Date (via Containment Cap): 826,800 barrels
Oily Water Recovered (via Skimming): 792,857 barrels of oily water = 79,286 barrels of oil
Oil Consumed by Controlled Burns: 261,191 barrels
Total Amount of Unrecovered Oil in the Gulf of Mexico to Date: 3,507,743 barrels

In this case, “Barrels Spilled” means “Oil Consumed by Controlled Burns” + “Total Amount of Unrecovered Oil in the Gulf of Mexico” = 261,191 + 3,507,743 = 3,768,934 barrels of oil spilled.

Under the CWA alone, gross negligence penalties based upon 3,768,934 barrels of oil spilled would equal $16,206,416,200. This equates to a penalty of approximately $191 million per day. BP’s net profits in the first quarter of 2010 were approximately $6.7 million per day.

It is obvious why BP, despite having the ability to obtain a very accurate flow rate, does not want a more accurate oil spill measurement. It is also very obvious why BP does not want to collect a great deal of the oil spill. Since April 22, 2010, BP admits that its skimming operations have been able to recover only 792,857 barrels of oily water. This equates to collecting a total of only 79,286 barrels of oil from the Gulf of Mexico since April 22, 2010.

The federal government has abdicated its responsibility. Pursuant to OPA Section 4201, and given that the BP oil spill is a “discharge posing substantial threat to public health or welfare,” President Obama should have federalized the collection of the oil that is in the sea and the restoration of the coastal areas impacted by the oil. Both of these activities could be done without having to federalize the operational priority of stopping the flow of oil from the well.

The Obama administration has no intention of holding BP accountable under either OPA 90 or CWA. Under the CWA, BP faces fines of up to $4,300 for each barrel spilled. Furthermore, pursuant to Section 2702 of OPA 90, BP would be required to pay royalties (18.75%) owed to the federal government for the oil gushing from the well.

If the federal government intended to collect $4,300 and a royalty of 18.75% for each barrel spilled, it would:

(a) try to have at least a very rough estimate of the number of barrels gushing from the BP well. This estimate does not exist. From April 28th to May 27th, the official estimated flow rate was 5,000 bbl/day. This intentionally underestimated amount of oil being released from the BP well was from NOAA, not BP. NOAA fully supported, and continues to fully support, BP’s strategy to underestimate the amount of oil being released from the well. “I think the estimate at the time was, and remains, a reasonable estimate,” said Dr. Lubchenco, the NOAA administrator. “Having greater precision about the flow rate would not really help in any way. We would be doing the same things.”

(b) collect every barrel of oil that is released into the Gulf of Mexico before it reaches the marshes of Louisiana and the beaches of Alabama, Mississippi and Florida. This would require stopping the use of dispersants to allow the oil to reach the surface and using tankers to collect the oil. To date, the federal government has allowed BP to use more than 1,840,000 gallons of oil dispersant.

An accurate measurement of the flow of oil and collection of the oil spilled into the Gulf of Mexico could change the way people remember this gusher and their opinion of BP.  Once the leak is plugged and the oil is dispersed throughout the oceans of the world, who’s to say for certain whether BP’s oil well blowout gushed an average of 1,000 or 100,000 bbl/day of oil?

CLASS ACTION LAWSUITS

Teams of lawyers from across the country have descended on the Gulf Coast to file potential class-action lawsuits to recover damages suffered by the lead plaintiff(s) and absent class members as a result of the BP oil gusher.

A class action is a procedural device that permits one or more plaintiffs to file and prosecute a lawsuit on behalf of a larger group. The larger group consists of the class members who have suffered the same wrong at the hands of the defendant but who are too numerous for the court to adequately manage the lawsuit if each class member were required to be joined as named plaintiffs.

In order to proceed as a class action, the case must be “certified” as a class action: that is, a court must determine that the class action criteria set forth in Rule 23 of the Federal Rules of Civil Procedure have been met. A class certified under Rule 23(b)(3) is distinct from a class certified under Rule 23(b)(1) or (2) in one important way. If a Rule 23(b)(3) class is certified, “notice” of the class action must be sent to class members and an opportunity to “opt-out” of the class must be provided. In contrast, a class certified under Rule 23(b)(1) or (2) is “mandatory,” notice is not required, and no class member may opt-out. Despite requirements regarding the notice that must be given to absent class members, there is always the possibility that many class members will not receive notice of the litigation or that such notice will be insufficient to fully inform them of their rights, thereby depriving them of any meaningful opportunity to opt-out.

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.

The Supreme Court has observed that, while the text of Rule 23 does not preclude certification in cases with significant damages, the drafters “had dominantly in mind” the use of the class action to aggregate relatively small individual recoveries into a case that would be worthwhile for an attorney to litigate.

Given that the damages suffered by the vast majority of individual potential plaintiffs as a result of the BP oil gusher are potentially so great, it should be economically feasible for many individual plaintiffs to file individual lawsuits. Here, class treatment would not be necessary to permit effective litigation of the claim. An individual lawsuit would: (a) ensure the plaintiff that the plaintiff’s attorney has his or her best interests in mind; (b) protect the plaintiff’s due process rights; (c) ensure that the plaintiff is not a victim of a class action case in which individual class members receive little or no compensation and only plaintiffs‘ counsel stand to benefit from class certification; (d) give the plaintiff control over the prosecution of the case; (e) allow the plaintiff to present evidence of exposure, injury, and damages relating to his or her particular claim; and (f) allow the plaintiff to make the decision on whether or when to settle.

BP Plc, 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.

Victims of the BP oil gusher who have suffered significant losses should dare to demand justice by immediately seeking competent legal counsel, filing individual lawsuits, and actively participating in the litigation of their claims.

BP OIL SPILL VICTIM COMPENSATION FUND

On June 16, 2010 President Obama announced that BP has agreed to set aside $20 billion to pay economic damage claims to people and businesses that have been affected by the BP oil gusher. President Obama stated, “This $20 billion will provide substantial assurance that the claims people and businesses have will be honored. It’s also important to emphasize this is not a cap.  The people of the Gulf have my commitment that BP will meet its obligations to them. BP has publicly pledged to make good on the claims that it owes to the people in the Gulf, and so the agreement we reached sets up a financial and legal framework to do it.

Another important element is that this $20 billion fund will not be controlled by either BP or by the government. It will be put in a escrow account, administered by an impartial, independent third party. So if you or your business has suffered an economic loss as a result of this spill, you’ll be eligible to file a claim for part of this $20 billion. This fund does not supersede either individuals’ rights or states’ rights to present claims in court. BP will also continue to be liable for the environmental disaster it has caused, and we’re going to continue to work to make sure that they address it.”

The Obama administration indicated any money paid to claimants will be counted against future settlements, to prevent double-dipping.

BP and the Obama administration agreed to appoint Kenneth Feinberg, a Washington lawyer and Democratic Party supporter who administered the claims process for victims of 9/11, to run the independent claims process commonly referred to as the BP Oil Spill Victim Compensation Fund.  Feinberg declined to comment on how much BP is paying him to run the fund.

BP’s offer to settle quickly might be a savvy move if Feinberg can obtain ironclad releases from the shrimpers, hotel owners and thousands of other people who claim they’ve lost money because of the gusher. BP could save hundreds of millions of dollars in legal fees by preemptively funding the settlement. Feinberg said that at his request, lawyers for BP will be involved in drafting releases that exempt BP – but not other potential defendants – from any future liability for the spill. “This makes sense, since the release is designed to provide BP protection from lawsuits, and BP is paying $20 billion to satisfy claims,” Feinberg said in an e-mail message.

In theory, Feinberg and BP’s lawyers can craft an ironclad release, like the ones used to settle car-accident lawsuits every day. However, that could be a difficult proposition. “In practice, with this incident not only is there an ongoing catastrophe today, but its full effects won’t be felt for years,” said Burton LeBlanc, an attorney in the Baton Rouge, La., office of Baron & Budd, a Dallas firm that is prominent in asbestos and toxic-tort litigation. “The damages for some constituencies can’t be calculated yet.” Baron & Budd has even issued a news release reminding potential plaintiffs that the benzene in spilled oil can cause leukemia and lymphoma and pose “a serious health impact that can last for half a century.”

The BP fund is an attempt to buy peace by overwhelming potential plaintiffs with “easy” money. Companies have tried that before, with mixed success. Asbestos manufacturers failed miserably when they negotiated a global settlement with plaintiff lawyers in the early 1990s under which they’d pay out $300 million to injured workers in exchange for having cases of workers who were exposed, but not sick, valued at zero. The Supreme Court rejected the settlement in 1997 because it bound future claimants to terms they had no part in negotiating. The companies were out the $300 million and still faced thousands of asbestos lawsuits.

Feinberg’s Roadshow
On July 15, 2010, Feinberg, flying on a private jet paid for by BP, toured Louisiana and tried to assure affected residents they would be fairly compensated. He announced that he expects to set up shop for the independent BPOSVCF within the next two to three weeks. The BPOSVCF will operate for three years.

Feinberg explained the compensation plan includes two components: a no-obligation six month emergency payment for lost income and a final lump-sum payment with acceptance of release for BP. All victims can apply for the six month payment, up until ninety days after the well is capped. However, if claimants choose to accept the second and final BPOSVCF offer, they waive any right to bring further court proceedings against BP.

If victims do not consider the final offer sufficient, they may turn it down and pursue higher payments through the courts. However, Feinberg views the lack of court proceedings associated with his facility as a win-win for both sides. “Everyone should come in,” and the matter will be over with, in a matter of weeks or months, rather than years.

“When the oil has stopped, and we all know where it is heading, then I really urge you to come forward with a lump-sum request for payment,” Mr. Feinberg said on July 15th at a town-hall meeting attended by hundreds in Houma, La. Fielding repeated queries about how long-term damage from the spill will be measured, he said that his team would make its best estimates in calculating its final reimbursement offers.

Feinberg plans to apply tort-law principles in weighing claims, meaning plaintiffs will have to show that their losses wouldn’t have occurred “but for” the oil spill. “I am determined to come up with a system more generous and more beneficial than if you file a lawsuit,” Feinberg said.

Opposition to the BPOSVCF
On July 13, 2010, Alabama Attorney General Troy King wrote a letter to President Obama, urging the president to scrap Feinberg’s proposals for administering the BPOSVCF. “The document appears collusive at best and contrary to the public interest at worst,” King wrote to Obama. King said he was shocked that the Gulf states hadn’t been asked for input before Feinberg and BP reached the ninth draft of the plan. He called it “an illegal attempt” to limit BP’s liability under federal law. He also said that it aimed to keep people who have suffered damage out of state courts by making them sign a release waiving lawsuits or additional claims against BP.

“The federal government, especially the executive branch, has no business usurping state court jurisdiction and meddling in the state law liability arising from the oil spill,” King wrote.

Given that losses could continue for months or years after the gusher is stopped, King is justifiably concerned that the BPOSVCF would terminate interim claims ninety days after the well is capped and allow just one final claim thereafter.

On July 14, 2010, attorneys general from the five Gulf states met with U.S. Attorney General Eric Holder in Mobile, Alabama. Attorney General  Jim Hood of Mississippi and Attorney General Troy King of Alabama said the meeting was dominated by talk of a proposal Feinberg sent to the Gulf states that would have ended claims payments ninety days after the well is capped and required people to sign a release of liability before collecting their last payment from the BPOSVCF.

Hood said Holder recognized the flaws in the current BPOSVCF plan. “This is going to go on for three, five, ten years after the spill is stopped,” Hood said. Mr. Feinberg “can’t treat it like 9/11,” which, Hood said, for all of its horror, took place on a single day.

King said Holder would put together a panel of attorneys and officials, with heavy representation from the Gulf Coast, to draft a new proposal to submit to Feinberg. “The focus should be on protecting the Gulf states and making sure everyone is made whole,” said King.

Issues BP Victims Must Consider
Many businesses are concerned it will be difficult, if not impossible, to forecast the long-term recovery of the crab and shrimp populations, or how quickly U.S. consumers will re-embrace Gulf seafood, among other things.

Gary Bauer, president of Pontchartrain Blue Crab Inc., a seafood wholesaler and processor on Salt Bayou east of New Orleans, said his sales of blue crab and shrimp have dropped to 20% of their normal $8 million-a-year pace. In addition, foreign seafood suppliers are moving in on his network of grocers, restaurants and other buyers, further denting his long-term prospects. “Are we going to have a crab season next year, and are there going to be fishermen who will fish next year?” Mr. Bauer said. “How does BP reimburse for that? I spent 10 years of my life building a brand, and they destroyed it.”

Wayne Hess, manager of American Seafood Inc., a processor and wholesaler in New Orleans, said his sales were down roughly 30% from their annual average of $5 million to $7 million. “How am I supposed to project my losses not knowing how all of the different species we carry will be affected in the next year to five years?” he said. “The female crabs that are mating right now don’t drop their eggs until October or December. Those larvae may not make it.”

How can those in the tourism and fishing industries possibly know the extent of the damage to their business without knowing what next year’s season will be like? How can a person predict the long-term health effects of his or her exposure to the oil? As noted above, the benzene in spilled oil can cause leukemia and lymphoma and pose “a serious health impact that can last for half a century.”

So far, economic damage estimates vary widely. Greater New Orleans Inc., the economic-development agency for the 10-parish area, published preliminary estimates that the region’s fishing industry stands to suffer annual losses ranging from $900 million to $3.3 billion.

According to estimates from bond rating agency Moody’s, BP has total proven reserves of approximately 18 billion barrels of oil in the ground. BP has the ability and responsibility to fully compensate each and every BP oil gusher victim.

Conflict of Interest
“I’m working for you,” Feinberg repeatedly stated to the crowds of victims in Louisiana, and he called for local collaboration.

Feinberg is being compensated by BP, travels on a private jet paid for by BP, and has requested that lawyers for BP, not attorneys general from the Gulf states, be involved in drafting releases that exempt BP – but not other potential defendants – from any future liability for the spill.

An important rule of interpretation in administrative law is the “duck rule” – if it walks like a duck and quacks like a duck, it’s probably a duck. Abraham Lincoln reportedly explained a stronger version of this rule in his answer to the question, “If you call a dog’s tail a leg, how many legs does a dog have? Four. Just because you call the tail a leg doesn’t make it one.” Feinberg is a BP duck. Just because he says he is working for you doesn’t mean he is.

Councilman Thomas Capella from Jefferson Parish, Louisiana asked Feinberg if claimants should hire an attorney. Feinberg said that’s not necessary because his office will have attorneys on staff to provide free services to individuals and businesses. The fact that Feinberg’s attorneys intend to represent both BP and BP’s victims is an egregious conflict of interest.

“I am determined to come up with a system more generous and more beneficial than if you file a lawsuit,” Feinberg said. The question is whether the system will be more generous and more beneficial for BP or BP’s victims.

Animated and lively, with a little Bostonian humor, it has been reported Feinberg held the attention of the overflowing crowds during his recent roadshow in Louisiana. A reporter stated, “He jabs the air, punches up words to drive home a point and gets laughs with self-deprecating references to his Boston accent.” Rather than saying “cheese” when he posed for a photo with four police officers, he said, “Everybody file a claim?”

The following joke may be more appropriate for Feinberg’s BPOSVCF plan:

Question: What is the name of the bayou that is most representative of the federal government’s response to the victims of the BP oil gusher?
Answer: Bayou Self

CONCLUSION

Under the CWA alone, gross negligence penalties based upon 3,768,934 barrels of oil spilled would equal $16,206,416,200. Unfortunately, the federal government has no intention of holding BP accountable under either OPA 90 or CWA. Pursuant to OPA Section 4201, and given that the BP oil spill is a “discharge posing substantial threat to public health or welfare,” President Obama should have federalized the collection of the oil that is in the sea and the restoration of the coastal areas impacted by the oil. Both of these activities could be done without having to federalize the operational priority of stopping the flow of oil from the well. To date, the federal government has allowed BP to use more than 1,840,000 gallons of oil dispersant. Once the well is capped and the oil is dispersed throughout the oceans of the world, who’s to say for certain whether BP’s oil well blowout gushed an average of 1,000 or 100,000 bbl/day of oil?

Each individual potential plaintiff who has suffered damages as a result of the BP oil gusher should immediately seek competent legal counsel to directly represent his or her interests. If the amount of damages suffered by the individual potential plaintiff is small, it may not be economically feasible for the plaintiff to file an individual lawsuit. Accordingly, a class action lawsuit may be in the best interests of this plaintiff. However, given that the damages suffered by the vast majority of individual potential plaintiffs as a result of the BP oil gusher are potentially so great and will be on-going, class treatment would not be necessary to permit effective litigation of the claim. Here, when the amount of damages suffered by the individual is so great, the filing of an individual lawsuit should be economically feasible and may be in the best interests of the plaintiff. This decision should be made by the potential plaintiff only after a thorough consultation with his or her legal counsel.

The BPOSVCF is not administered by an impartial, independent third party. However, claimants will only waive their right to sue if they accept a final lump-sum payment. They can still sue if they only accept an initial emergency payment. Therefore, acceptance of a no-obligation six month emergency payment for lost income may be in the best interests of victims of the BP oil gusher. The decision to accept a final lump-sum payment, and thereby waive any right to bring further court proceedings against BP, should be made by the BP oil gusher victim only after a thorough consultation with his or her legal counsel.

APPENDICES

References
Adams, Mike, “First Amendment suspended in the Gulf of Mexico as spill cover-up goes Orwellian,” NaturalNews (July 3, 2010), available at: http://www.naturalnews.com/029130_Gulf_of_Mexico_censorship.html

Bhattacharyya, S., P.L. Klerks, and J.A. Nyman. 2003. Toxicity to freshwater organisms from oils and oil spill chemical treatments in laboratory microcosms. Environmental Pollution 122:205-215.

BP is Not the Only Responsible Party, available at: http://renergie.wordpress.com/2010/05/25/bp-is-not-the-only-responsible-party/

Chokkavelu, Anand, “The BP Stat That Will Shock You,” Motley Fool (July 9, 2010), available at: http://www.msnbc.msn.com/id/38165954/ns/business-motley_fool/

Clean Water Act

EPA: http://www.epa.gov/oem/content/lawsregs/opaover.htm

Fisher, Daniel and Hawkins, Asher, “BP’s Legal Blowout,” Forbes.com (July 14, 2010)

Greenwald, Glenn, “The BP/Government police state,” Salon (July 5, 2010), available at:
http://www.salon.com/news/opinion/glenn_greenwald/2010/07/05/bp/index.html

Hals, Tom, “Analysis: BP investors face tough road in court fights,” Reuters (July 16, 2010)

Hudson, Kris and Baskin, Brian, “Fears Mount That Fund Won’t Cover All Damages,” The Wall Street Journal (July 15, 2010)

Kindy, Kimberly, “Recovery effort falls vastly short of BP’s promises,” Washington Post
(July 6, 2010), available at:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/05/AR2010070502937.html

Lustgarten, Abrahm, “Chemicals Meant To Break Up BP Oil Spill Present New Environmental Concerns,” ProPublica (April 30, 2010), available at: http://www.propublica.org/article/bp-gulf-oil-spill-dispersants-0430

MMS: http://www.mms.gov/

Murtaugh, Dan, “Attorney General Eric Holder says he’ll try to address oil spill claims concerns,” Press-Register (July 15, 2010)

National Contingency Plan

NOAA: http://www.noaa.gov/

Oil Pollution Act of 1990

Peters, Jeremy W., “Efforts to Limit the Flow of Spill News,” The New York Times (June 9, 2010)

Philips, Matthew, “BP’s Photo Blockade of the Gulf Oil Spill,” Newsweek (May 26, 2010), available at: http://www.newsweek.com/2010/05/26/the-missing-oil-spill-photos.html

Schoof, Renee and Bolstad, Erika, “BP well may be spewing 100,000 barrels a day, scientist says,” McClatchy Newspapers (June 7, 2010), available at: http://www.mcclatchydc.com/2010/06/07/95467/bp-well-may-be-spewing.html

Schoof, Renee, “Scientists propose big experiment to study Gulf oil spill,” McClatchy Newspapers (July 11, 20100, available at:
http://www.miamiherald.com/2010/07/11/1725271/scientists-propose-big-experiment.html

Schwartz, John, “More Delicate Diplomacy for the Overseer of the Compensation Fund,” The New York Times (July 16, 2010)

USA Today: http://content.usatoday.com/communities/greenhouse/post/2010/05/how-responsible-is-us-government-for-gulf-oil-spill/

USCG: http://www.uscg.mil/

Walsh, Bryan, “The Oil Spill and the Perils of Losing Trust,” Time (July 7, 2010), available at:
http://ecocentric.blogs.time.com/2010/07/07/the-oil-spill-and-the-perils-of-losing-trust/
About the Author
Brian J. Donovan is an attorney and marine engineer with thirty-five years of international business experience.

Mr. Donovan, a member of The Florida Bar, The U.S. District Court, Middle District of Florida and The United States Court of Appeals for the Eleventh Circuit, holds a J.D. from Syracuse University College of Law (where he was recipient of the “Global Law & Practice Award” as the outstanding graduate in the areas of International Law and International Business Law) and a B.S., with honors, in Marine/Mechanical and Nuclear Engineering from the United States Merchant Marine Academy.

Mr. Donovan, with deep family roots in southern Louisiana, has first-hand knowledge of the catastrophic devastation of the Louisiana Gulf Coast caused by hurricanes Katrina and Rita. He fully appreciates that the damage caused by Katrina and Rita may pale in comparison to the massive and potentially unprecedented environmental and economic impact of the BP oil gusher of April, 2010.

Why BP Does Not Want an Accurate Measurement of the Gulf Oil Spill

Posted in BP, Clean Water Act, dispersants, measurement, oil spill, OPA 90, responsible party by renergie on June 14, 2010

Why BP Does Not Want an Accurate Measurement of the Gulf Oil Spill

By Brian J. Donovan

June 13, 2010

INTRODUCTION

The amount of oil that will ultimately be released into the waters of the Gulf of Mexico as a result of  the Deepwater Horizon blowout of April 20, 2010 may never be known.

On April 24, BP reported that approximately 1,000 barrels of oil per day (bbl/day) were being released into the Gulf.

On April 28, it was estimated that approximately 5,000 bbl/day were being released into the Gulf of Mexico. Repeated endlessly in news reports, this figure became conventional wisdom. However, the 5,000 bbl/day estimate was hastily produced in Seattle by a NOAA unit that responds to oil spills. It was calculated with a protocol known as the Bonn convention which calls for measuring the extent of an oil spill, using its color to judge the thickness of oil atop the water, and then multiplying. Alun Lewis, a British oil-spill consultant who is an authority on the Bonn convention, said the method was specifically not recommended for analyzing large spills like the one in the Gulf of Mexico, since the thickness was too difficult to judge in such a case.

On May 27, USGS Director Dr. Marcia McNutt, Chair of the National Incident Command’s Flow Rate Technical Group (FRTG), announced that the amount of oil flowing from BP’s leaking oil well was estimated to be 12,000 to 19,000 bbl/day.

On June 3, BP sawed off the riser pipe that had been kinked near the seafloor, constricting the flow of oil from the leak. The clean cut allowed the company to secure a containment cap to the pipe, capturing some of the escaping oil and funneling it to ships at the surface.

On June 10, is was guesstimated that the well was gushing 20,000 to 40,000 bbl/day. This latest figure is for the size of the leak prior to June 3, when BP sawed off a bent riser pipe, potentially increasing the amount of crude escaping by as much as 20 percent. According to Marcia McNutt, director of the U.S. Geological Survey, a projection for the current rate of oil flow has not been developed. Preliminary figures from a team of Woods Hole Oceanographic Institution scientists suggest the well could be leaking as much as 50,000 barrels a day, McNutt said.

According to Dr. McNutt, the “most credible estimate” for the size of the leak before the riser pipe was cut is 20,000 to 40,000 bbl/day. Based on the midpoint (30,000 bbl/day) of the latest approximation, from April 22 when the Deepwater Horizon rig sank until June 3 the well gushed 1.26 million barrels of oil, or 52.9 million gallons. The midpoint guesstimate of 30,000 bbl/day is six times more than the figure that BP and the federal government used from April 28 to May 27.

BP alleges that it is capturing about half of the new estimated flow rate from the Deepwater Horizon well, almost a mile down on the seabed of the Gulf of the Mexico, and siphoning it to ships on the surface.  BP reportedly collected 15,520 barrels of crude at the surface between noon on June 9 and noon on June 10, the last 24-hour period for which data is available. According to the midpoint of the latest estimates from the group of scientists, this means at least  15,500 bbl/day of crude oil are currently being released into the waters of the Gulf of Mexico.

BP does not want an accurate measurement of the Gulf oil spill for two reasons:
(a) the Oil Pollution Act of 1990; and (b) the Clean Water Act.

THE OIL POLLUTION ACT OF 1990

Pursuant to the Oil Pollution Act of 1990 (OPA), for an offshore facility the total of the liability of a responsible party and any removal costs incurred by, or on behalf of, the responsible party, with respect to each incident shall not exceed the total of all removal costs plus $75,000,000.

However, this limit on liability “does not apply if the incident was proximately caused by gross negligence, willful misconduct of, or the violation of an applicable Federal safety, construction, or operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting pursuant to a contractual relationship with the responsible party.”

OPA broadened the scope of damages (i.e., costs) for which an oil spiller would be liable. Under OPA, a responsible party is liable for all cleanup costs incurred, not only by a government entity, but also by a private party. In addition to cleanup costs, OPA significantly increased the range of liable damages to include the following:

• injury to natural resources,
• loss of personal property (and resultant economic losses),
• loss of subsistence use of natural resources,
• lost revenues resulting from destruction of property or natural resource injury,
• lost profits resulting from property loss or natural resource injury, and
• costs of providing extra public services during or after spill response.

Given BP’s documented violation of federal safety regulations aboard the Deepwater Horizon, e.g., using an improper cementing technique to seal the well, failing to adequately test and maintain blowout prevention equipment and drilling deeper than BP’s federal permit allowed, there will be no limitation on BP’s liability. (Oil Pollution Act of 1990, 33 U.S.C. 2704).

BP may be liable to the United States and to Louisiana for damages resulting from lost royalties. Pursuant to Section 2702 of OPA 90, “Notwithstanding any other provision or rule of law, and subject to the provisions of this Act, each 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 specified in subsection (b) of this section that result from such incident…”, including revenue losses such as “taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political subdivision thereof.” (Oil Pollution Act of 1990, 33 U.S.C. 2702(b)(2)(D)).

THE CLEAN WATER ACT

BP also faces uncapped liability under a little-known Clean Water Act (CWA) civil damages provision.

Pursuant to Section 1321 of the CWA, “Any person who is the owner, operator, or person in charge of any vessel, onshore facility, or offshore facility from which oil or a hazardous substance is discharged in violation of paragraph (3), shall be subject to a civil penalty in an amount up to $25,000 per day of violation or an amount up to $1,000 per barrel of oil or unit of reportable quantity of hazardous substances discharged. In any case in which a violation of paragraph (3) was the result of gross negligence or willful misconduct of a person described in subparagraph (A), the person shall be subject to a civil penalty of not less than $100,000, and not more than $3,000 per barrel of oil or unit of reportable quantity of hazardous substance discharged.” (Clean Water Act, 33 U.S.C. 1321).

Under the CWA, the basic fine is $1,100 per barrel spilled. But the penalty can rise to $4,300 a barrel if a federal court rules the spill resulted from gross negligence. As noted above, the fines were originally set at $1,000 to $3,000 but that was raised in 2004 to keep up with inflation. Accordingly, the number of barrels of oil being released from the well is going to be critical.

If the government pursues civil fines based on the volume of oil spilled, it would take into consideration whether BP has made its best effort to mitigate the spill, its prior history of offenses, if any, and whether BP can bear the cost of fines, among other factors. Interestedly, BP received the third-largest criminal penalty, of $50 million, for an environmental offense in U.S. history for a Texas City refinery fire in 2005. BP subsidiaries remain under federal probation for prior offenses in Texas and Alaska.

Under the CWA alone, gross negligence penalties based upon a discharge rate of 30,000 barrels per day would total $129 million per day. BP’s net profits in the first quarter of 2010 were approximately $6.7 million per day.

It is obvious why BP, despite having the ability to obtain a very accurate flow rate through ultrasound, does not want a more accurate measurement. It is also very obvious why BP does not want to collect a great deal of the oil spill. Since April 22, 2010, BP admits that it has been able to recover only approximately 475,000 barrels of “oily liquid.” This equates to collecting a total of only 47,000 to 71,000 barrels of oil.

BP’S STRATEGY IS TO SYSTEMATICALLY UNDERESTIMATE THE RATE OF THE OIL THAT’S BEING SPILLED INTO THE GULF OF MEXICO

BP’s strategy, to systematically underestimate the rate of the oil that’s being spilled into the Gulf of Mexico, involves: (a) prohibiting independent measurement of the rate of oil flow from the well by unbiased third party scientists and engineers by denying direct access to the Deepwater Horizon well; and (b) applying an unprecedented amount of dispersant to the oil spill both on the surface and underwater.

Denying Direct Access to the Deepwater Horizon Well
Dr. Ian R. MacDonald, an oceanographer at Florida State University who is an expert in the analysis of oil slicks, said he had made his own rough calculations using satellite imagery. They suggested that the leak could “easily be four or five times” the government estimate, he said. Steven Wereley, an associate professor of mechanical engineering at Purdue University, analyzed videotape of the seafloor gusher using a technique called particle image velocimetry.  A computer program simply tracks particles and calculates how fast they are moving. Wereley put the BP video of the gusher into his computer. He made a few simple calculations and came up with an astonishing value for the rate of the oil spill: 70,000 bbl/day.

Dr. MacDonald believes NOAA  has been slow to mount the research effort needed to analyze the leak and assess its effects. Sylvia Earle, a former chief scientist at NOAA and perhaps the country’s best-known oceanographer, said that she, too, was concerned by the pace of NOAA’s scientific response.

Prior to May 27, BP and the federal government had made no attempt to update its estimate of 5,000 bbl/day since releasing it on April 28th. “I think the estimate at the time was, and remains, a reasonable estimate,” said Dr. Lubchenco, the NOAA administrator. “Having greater precision about the flow rate would not really help in any way. We would be doing the same things.”

Scientists have come down hard on BP for refusing to take advantage of methods available to measure the oil. On May 13, The New York Times reported that BP was planning to fly scientists from the Woods Hole Oceanographic Institute to Louisiana to conduct volume measurements. The oceanographers were poised to use underwater ultrasound equipment to measure the flow of oil and gas from the ocean floor when BP canceled the trip.

On June 8, in responding to a question regarding the rate of the flow of oil from the BP well, Admiral Thad Allen told ABC News, “Everything we know and everything we see is through either the remote sensors or remote-operated vehicles that are like looking through a particular keyhole at a particular time.” Access to that keyhole is still completely controlled by BP.

An accurate measurement of the flow of oil could change the way people remember this spill and their opinion of BP.  Once the leak is plugged and the oil is dispersed throughout the oceans of the world, who’s to say for certain whether BP’s oil well blowout gushed an average of 5,000 or 80,000 bbl/day of oil? By allowing BP to obscure the spill’s true magnitude, the federal government appears to support BP’s strategy.

Dispersants: An Out-of-Sight, Out-of-Mind Strategy
To date, more than 1,000,000 (one million) gallons of dispersant have been poured into the Gulf of Mexico by BP since the April 22 sinking of the Deepwater Horizon rig, an unprecedented application and for a duration and at depths also without precedent. BP has an additional 805,000 gallons of dispersant on order.

Dispersants break oil into droplets that decompose more quickly. But scientists worry that extensive use of the chemicals in the BP spill is increasing marine life’s exposure to the toxins in oil. Environmentalists consider their use effective for ridding surface waters of oil but say when the toxins are broken down and become embedded on the sea bed they pose a significant threat to marine life. Experiments by John Nyman of Louisiana State University indicate that the combination of Louisiana crude and the dispersant used on the current spill is more toxic to marsh-dwelling invertebrates than oil alone would be.

BP is using the dispersant “Corexit 9500.” While Corexit 9500 is on the EPA’s approved list, BP is using this dispersant in unprecedented volumes and has been using it underwater at the source of the leak, a procedure that has never been tried before. The EPA has acknowledged that “much is unknown about the underwater use of dispersants.” Moreover, of all the chemicals approved by the EPA for use on oil spills, Corexit 9500 is among the most toxic to certain organisms. It also is among the least effective in breaking up the kind of oil that is prevalent in the area around the spill site, EPA tests concluded. Corexit might also be contributing to the formation of large undersea “oil plumes” thousands of feet below the surface. The undersea plumes may go a long way toward explaining the discrepancy between the flow estimates, suggesting that much of the oil emerging from the well could be lingering far below the sea surface.

Sylvia Earle, the National Geographic’s explorer-in-residence and former chief scientist at NOAA, stated that “the instructions for humans using Corexit warn that it is an eye and skin irritant, is harmful by inhalation, in contact with skin and if swallowed, and may cause injury to red blood cells, kidney or the liver.” “People are warned not to take Corexit internally,” she said, “but the fish, turtles, copepods and jellies have no choice.”

Earle further states, “We don’t know what the effect of dispersants applied a mile underwater is; there’s been no laboratory testing of that at all, or the effect of what it does when it combines with oil a mile underwater.” One problem with breaking down the oil is that it makes it easier for the many tiny underwater organisms to ingest this toxic soup. “The effort should be in recovering the oil, not making it more difficult to recover by dispersing it,” says Earle. The chemical assault appeared geared, she says, “to improving the appearance of the problem rather than solving the problem.”

Carl Safina, president and co-founder of Blue Ocean Institute, a New York-based conservation organization, believes BP’s dispersant strategy has more to do with PR than good science. “It takes something that we can see that we could at least partly deal with and dissolves it so we can’t see it and can’t deal with it,” he said. It’s not at all clear to me why we are dispersing the oil at all,” Safina said. “It’s an out-of-sight, out-of-mind strategy. It’s just to get it away from the cameras on the shoreline.

Sinking Agents
The National Oil and Hazardous Substances Pollution Contingency Plan, more commonly called the National Contingency Plan or NCP, is the federal government’s blueprint for responding to both oil spills and hazardous substance releases. The National Contingency Plan is the result of our country’s efforts to develop a national response capability and promote overall coordination among the hierarchy of responders and contingency plans.

Pursuant to NCP Section 300.310, “As appropriate, actions shall be taken to recover the oil or mitigate its effects. Of the numerous chemical or physical methods that may be used, the chosen methods shall be the most consistent with protecting public health and welfare and the environment. Sinking agents shall not be used.”

Sinking agents means those additives applied to oil discharges to sink floating pollutants below the water surface.

The question is whether BP’s dispersants are “sinking agents” when they are applied a mile underwater at the source of the well leak.

CONCLUSION

BP is knowingly and systematically underestimating the size of the spill to limit the financial impact on the company. Under the CWA, the company faces fines of up to $4,300 for each barrel spilled. Furthermore, pursuant to Section 2702 of OPA 90, BP may be required to pay royalties (18.75%) owed to the federal government for the oil gushing from the well.

APPENDICES

References
Bhattacharyya, S., P.L. Klerks, and J.A. Nyman. 2003. Toxicity to freshwater organisms from oils and oil spill chemical treatments in laboratory microcosms. Environmental Pollution 122:205-215.

BP is Not the Only Responsible Party, available at: http://renergie.wordpress.com/2010/05/25/bp-is-not-the-only-responsible-party/

Clean Water Act

EPA: http://www.epa.gov/oem/content/lawsregs/opaover.htm

MMS: http://www.mms.gov/

National Contingency Plan

NOAA: http://www.noaa.gov/

Oil Pollution Act of 1990

USA Today: http://content.usatoday.com/communities/greenhouse/post/2010/05/how-responsible-is-us-government-for-gulf-oil-spill/

USCG: http://www.uscg.mil/
 

 

 

About the Author
Brian J. Donovan is an attorney and marine engineer with thirty-five years of international business experience.

Mr. Donovan, a member of The Florida Bar, The U.S. District Court, Middle District of Florida and The United States Court of Appeals for the Eleventh Circuit, holds a J.D. from Syracuse University College of Law (where he was recipient of the “Global Law & Practice Award” as the outstanding graduate in the areas of International Law and International Business Law) and a B.S., with honors, in Marine/Mechanical and Nuclear Engineering from the United States Merchant Marine Academy.

Mr. Donovan, with deep family roots in southern Louisiana, has first-hand knowledge of the catastrophic devastation of the Louisiana Gulf Coast caused by hurricanes Katrina and Rita. He fully appreciates that the damage caused by Katrina and Rita may pale in comparison to the massive and potentially unprecedented environmental and economic impact of the BP oil spill of April, 2010.

The Oil Pollution Act Provides for the Federalization of the BP Oil Spill

Posted in BP, federalize, oil spill, OPA 90, responsible party by renergie on June 5, 2010

The Oil Pollution Act Provides for the Federalization of the BP Oil Spill

By Brian J. Donovan

June 5, 2010

President Obama has stated, “The Oil Pollution Act of 1990 (OPA 90) gives BP primary responsibility to prepare for an oil spill: lining up contractors to supply boom and skimmers and deploying them when needed, then controlling any accident and cleaning it up.” In terms of shoreline protection, President Obama recently stated, “the way this thing has been set up under the oil spill act of 1990 – Oil Pollution Act – is that BP has contracts with a whole bunch of contractors on file in the event that there is an oil spill, and as soon as the Deep Horizon well went down, then their job is to activate those and start paying them.” “Under OPA 90, BP, the responsible party, has the primary responsibility to clean up its oil spill” has been repeated, in one form or another, so many times by President Obama that it has become the truth. The truth is that President Obama, under OPA 90, has the primary responsibility to “ensure effective and immediate removal of a discharge, and mitigation or prevention of a substantial threat of a discharge, of oil.”

Section 4201 of OPA 90 provides,
(c) FEDERAL REMOVAL AUTHORITY
(1)(A) The President shall, in accordance with the National Contingency Plan and any appropriate Area Contingency Plan, ensure effective and immediate removal of a discharge, and mitigation or prevention of a substantial threat of a discharge, of oil or a hazardous substance:
(i) into or on the navigable waters;
(ii) on the adjoining shorelines to the navigable waters;
(iii) into or on the waters of the exclusive economic zone; or
(iv) that may affect natural resources belonging to, appertaining to, or under the exclusive management authority of the United States.
(B) In carrying out this paragraph, the President may:
(i) remove or arrange for the removal of a discharge, and mitigate or prevent a substantial threat of a discharge, at any time;
(ii) direct or monitor all Federal, State, and private actions to remove a discharge; and
(iii) remove and, if necessary, destroy a vessel discharging, or threatening to discharge, by whatever means are available.

Section 4201 of OPA 90 further provides,
(2) DISCHARGE POSING SUBSTANTIAL THREAT TO PUBLIC HEALTH OR WELFARE (A) If a discharge, or a substantial threat of a discharge, of oil or a hazardous substance from a vessel, offshore facility, or onshore facility is of such a size or character as to be a substantial threat to the public health or welfare of the United States (including but not limited to fish, shellfish, wildlife, other natural resources, and the public and private beaches and shorelines of the United States), the President shall direct all Federal, State, and private actions to remove the discharge or to mitigate or prevent the threat of the discharge.
(B) In carrying out this paragraph, the President may, without regard to any other provision of law governing contracting procedures or employment of personnel by the Federal Government:
(i) remove or arrange for the removal of the discharge, or mitigate or prevent the substantial threat of the discharge; and
(ii) remove and, if necessary, destroy a vessel discharging, or threatening to discharge, by whatever means are available.

When responding to a spill, many considered the lines of responsibility under the pre-OPA 90 regime to be unclear, with too much reliance on spillers to perform proper cleanup. OPA 90 strengthened and clarified the federal government’s role in oil spill response and cleanup. The revised response authorities addressed concerns “that precious time would be lost while waiting for the spiller to marshal its cleanup forces.”

Simply stated, Section 4201 of OPA 90 provides President Obama with three options:
(1) perform cleanup immediately (“federalize” the spill);
(2) monitor the response efforts of the spiller; or
(3) direct the spiller’s cleanup activities.

Oil spill response authority is determined by the location of the spill: the USCG has response authority in coastal waters, and the EPA covers inland oil spills. As the primary response authority in coastal waters, the USCG has the ultimate authority to ensure that an oil spill is effectively removed and actions are taken to prevent further discharge from the source. During response operations, the USCG coordinates the efforts of federal, state, and private parties. USCG response efforts are supported by NOAA. NOAA provides scientific analysis and consultation during oil spill response activities. Assistance can include oil spill tracking, cleanup alternatives, and knowledge of at-risk natural resources. NOAA experts also collect data to assess natural resource damages during response operations.

Pursuant to Section 4201(c)(1)(B)(i) of OPA 90, President Obama should federalize the collection of the oil that is in the sea and restoration of the impacted coastal areas. MMS and USCG would monitor BP’s efforts to stop the flow of oil from the well; USCG would collect the oil that is in the sea; and EPA would restore the impacted coastal areas.

In regard to OPA 90 and the BP oil spill, President Obama is either: (a) being misinformed by his advisors; or (b) making a purely political decision not to partially federalize the oil spill incident. The latter is the more probable reason for his inaction. If this continues, historians are going to look back and refer to this as the “Great BP/Obama Oil Spill of 2010.”

For a more complete discussion of the issue, visit: http://renergie.wordpress.com/2010/05/25/bp-is-not-the-only-responsible-party/

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