The Donovan Law Group

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

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

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

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

REASONS TO OPT-OUT

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

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

The Gulf Coast Claims Facility (“GCCF”) data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012. The GCCF paid only 221,358 of these Claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims; the average total amount paid per claimant was $27,466.47.

The status report data further indicates that the GCCF paid a total of 230,370 claimants who filed claims with the GCCF during the “Phase II” period. Of these, 195,109 were either Quick Pay or Full Review Final payments; only 35,261 were Interim payments. In sum, the GCCF forced 84.68% of the claimants to sign a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties; only 15.31% of the claimants were not required to sign a release and covenant not to sue in order to be paid. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012, p. 1).

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

The DHCC data indicates that a total of 36,468 claimants filed Individual and Business claims with the DHCC during the period from approximately June 4, 2012 to October 5, 2012. The DHCC paid only 71 of these claimants. In sum, the DHCC paid only 0.19% of the claimants who filed claims. Of the 19,338 Individual Economic Loss claims submitted, 79 claimants have received payment offers totaling $860,968, resulting in 6 payments totaling $38,173. This equates to an average payment of only $6,362.17 per Individual Economic Loss Claimant! (DHCC Status Report, Oct. 5, 2012).

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

(2) The class action settlements provide for a refund of approximately $6 billion to BP while granting excessive compensation to the PSC and other counsel allegedly performing “common benefit” work.

(a) The Refund

Deepwater Horizon Oil Spill Trust                                                                                                               $20  Billion

(Amount set aside by BP to allegedly pay economic

damage claims to individuals and businesses affected

by the Deepwater Horizon oil spill.)

Approximate Amount Paid to Claimants by GCCF                                                                                   $6.2 Billion

Cost of the Proposed Settlement                                                                                                                   $7.8 Billion

Amount to be Refunded to BP                                                                                                                       $6.0 Billion

(b) The Excessive Compensation

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

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

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

(b) BP has agreed to pay any award for common benefit and/or Rule 23(h) attorneys’ fees, as determined by the Court, up to $600 million. In order to be awarded a common benefit fee of $600 million, the MDL 2179 Court would have to believe that the PSC attorneys worked two million hours;

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

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

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

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

For the following reasons, these class action settlements are not “fair, adequate, and reasonable” (at least not for the “Class Members”) and have not been entered into without collusion between the parties:

(a) Prior to the class action settlements, the Deepwater Horizon Oil Spill Trust had a balance of approximately $13.8 billion from which BP oil spill victims believed they would be compensated by the GCCF for all “legitimate” claims.

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

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

(d) The E&PD class action settlement doesn’t actually provide for funds to be distributed to Class Members; it merely gives BP oil spill victims the right to submit, yet again, a claim for economic and property damages. BP oil spill victims have to ask, “Where’s the settlement?

(e) “……within 15 days after the end of each calendar quarter, the BP Parties shall irrevocably pay into the Common Benefit Fee and Costs Fund an amount equal to 6 % (six percent) of the aggregate Settlement Payments paid under the Economic Agreement in respect of Claimants that have executed an Individual Release.” In sum, the PSC and other counsel allegedly performing common benefit work are financially motivated to have as many Claimants execute an Individual Release as expeditiously as possible regardless of whether the negotiated settlements reflect the true value of the claims.

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

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

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

On December 15, 2010, the PSC filed a B1 Master Complaint. On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1″ Master Complaint. The Court held that any individual plaintiff who is a named plaintiff in a case that falls within pleading bundle “B1″ “is deemed to be a plaintiff in the “B1″ Master Complaint.” Also, “the allegations, claims, theories of recovery and/or prayers for relief contained within the pre-existing petition or complaint are deemed to be amended, restated, and superseded by the allegations, claims, theories of recovery, and/or prayers for relief in the respective “B1″ Master Complaint(s) in which the Defendant is named.”

On February 9, 2011, the PSC filed a First Amended Master Complaint. Rather than allege claims under the Oil Pollution Act of 1990 (“OPA”) (which governs the MDL 2179 cases alleging economic loss due to the BP oil spill) and the Outer Continental Shelf Lands Act (“OCSLA”) (which governs the MDL 2179 personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law), the PSC made the unfathomable decision to allege claims under admiralty law. In the B1 First Amended Master Complaint, the PSC clearly states, “The claims presented herein are admiralty or maritime claims within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiffs hereby designate this case as an admiralty or maritime case, and request a non-jury trial, pursuant to Rule 9(h).”

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

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

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

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

(5) As Judge Barbier aptly stated in his Order of August 26, 2011, “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p. 31, Rec. Doc. 3830).

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

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

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

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

(a) Statute of Limitations

The PSC intentionally fails to counsel those claimants who may opt-out of the Proposed Settlements that a lawsuit brought against BP and/or a non- Responsible Party, e.g., a lawsuit asserting claims for gross negligence, fraud, etc. against Kenneth R. Feinberg, et al, may be barred by the statute of limitations.

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

In federal question cases, the federal court will apply the specific statute of limitations period established by the federal statute under which the plaintiff is seeking relief. Federal courts that are hearing a controversy based on diversity of citizenship of the parties must apply the applicable state law of the forum state. In this case, a lawsuit which could be brought against a non-Responsible Party may be barred by the statute of limitations.

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

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

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

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

Deepwater Horizon OSLTF Costs = $619 million

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

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

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

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

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

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

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

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

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

(9) The MDL 2179 Court has overreached its authority.

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

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

GCCF’s “Release and Covenant Not to Sue” violates OPA: (a) by requiring the release of future damages as requirement for receiving a payment from the GCCF claims process, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2); and (b) Feinberg, et al. intentionally failed to provide a process for presenting, processing and paying interim, short-term damages, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2).

The text and the legislative history of the OPA statute are clear. OPA expressly prohibits Responsible Parties from engaging in a “Delay, Deny, Defend” strategy wherein the victims of an oil spill are starved and ultimately forced to sign a release and covenant not to sue in order to receive a miniscule payment amount for all damages, including future damages, they incur as a result of the oil spill.

GCCF’s “Release and Covenant Not to Sue” violates State contract law because it: (1) was obtained through the use of economic duress; (2) was obtained without free consent (Claimants did not consent to the release by choice, because the only option for receiving payment required Claimants to sign a release, the terms of which they had no opportunity to negotiate.); (3) was obtained through fraud; (4) requires Claimants to discharge, waive and release future claims (including those resulting from gross negligence) for costs and damages (including punitive damages) that are unknown and have not yet arisen; (5) was obtained in exchange for inadequate consideration; and (6) has as its objective the circumvention of the OPA.

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

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

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

(11) A class action may not be brought in a limitation proceeding.

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

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

(12) The DHCC Data

The DHCC data, dated October 26, 2012, indicates that a total of 41,235 claimants have filed Individual Economic Loss, Individual Periodic Vendor or Festival Vendor Economic Loss, Business Economic Loss, Start-Up Business Economic Loss, and Failed Business Economic Loss claims with the DHCC. The DHCC paid only 407 of these claimants. In sum, the DHCC paid only 0.99% of the claimants who filed claims.

Of the 21,058 Individual Economic Loss claims submitted, 204 claimants have received payment offers totaling $2,190,404, resulting in 43 payments totaling $599,428. This equates to an average payment of only $13,940.19 per Individual Economic Loss Claimant!

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

CONCLUSION

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

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HOW TO OPT-OUT

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

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

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

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Approximately 200,000 BP Oil Spill Victims Are Being Illegally Excluded From Proposed Deepwater Horizon Class Action Settlement

Approximately 200,000 BP Oil Spill Victims Are Being Illegally Excluded

From Proposed Deepwater Horizon Class Action Settlement

Plaintiffs File Motion to Nullify Each and Every Gulf Coast Claims Facility “Release and Covenant Not to Sue”

Tampa, FL (September 24, 2012) – Plaintiffs Pinellas Marine Salvage, Inc., John Mavrogiannis, and Selmer M. Salvesen, on behalf of themselves and other Class Members of the Proposed Economic and Property Damages Class Action Settlement who are victims of the “Delay, Deny, Defend” strategy of Kenneth R. Feinberg, et al., have filed a 25-page Motion to Nullify Each and Every Gulf Coast Claims Facility (GCCF”) “Release and Covenant Not to Sue” with the MDL 2179 Court. The motion also requests the Court to vacate its Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement], Rec. Doc. 6418 dated May 2, 2012.

The motion explains that GCCF’s “Release and Covenant Not to Sue,” which excludes approximately 200,000 BP oil spill victims from the proposed Deepwater Horizon Class Action Settlement, and the Proposed Settlement’s “Release and Covenant Not to Sue” violate federal law, State contract law, and are contrary to public policy.

Click here to download the memorandum of law in support of the motion.

The following is an excerpt from Plaintiffs’ Motion to Nullify and Vacate.

I.  BACKGROUND

A. The GCCF Payment Methodology

During GCCF Phase I, the GCCF implemented a claims process by which eligible claimants would receive compensation for the loss of earnings or profits, removal and clean-up costs, real or personal property damage, loss of subsistence use of natural resources and physical injury or death caused by the Spill by submitting a lesser level of documentation than would be required in later stages of the GCCF. This was known as the Emergency Advance Payment (“EAP”) claims process. The GCCF accepted EAP claims from August 23, 2010 through November 23, 2010. A claimant who received an EAP was not required to execute a release and covenant not to sue BP or any other party.

During GCCF Phase II, known as the “Interim Payment/Final Payment” claims process, the GCCF received the following three types of claims:

(a) Interim Payment Claim: An eligible claimant could elect to file an Interim Payment Claim to receive compensation for documented past losses or damages caused by the Spill for which the claimant previously had not been compensated by the BP-operated facility, the GCCF or the Real Estate Fund. A claimant seeking an Interim Payment was not required to sign a release and covenant not to sue and, therefore, was able to file future Interim Payment, Quick Pay Final Payment and Full Review Final Payment Claims. According to the protocol, a claimant was permitted to file only one Interim Payment Claim per quarter.

(b) Quick Payment Final Claim: A claimant who had received a prior EAP or Interim Payment from the GCCF could file for a Quick Payment Final Claim and receive, without further documentation of losses caused by the Spill, a one-time final payment of $5,000 for individuals and $25,000 for businesses. Prior amounts received by the claimant from the BP-operated facility and/or the GCCF were not subtracted from this payment amount. Claimants seeking a Quick Payment were required to submit with their claim form a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties.

(c) Full Review Final Payment Claim: An eligible claimant could also file a Full Review Final Payment Claim to receive payment for all documented past damages and estimated future damages resulting from the Spill. Claimants wishing to accept a Final Payment were required to sign and submit a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties. Additionally, any Full Review Final Payment awarded to a claimant was decreased by the amount of any previous payments received from the GCCF, the BP-operated facility or the Real Estate Fund.

Claim forms for Phase II became available to the public on December 18, 2010. The GCCF began receiving Interim Payment and Final Payment Claims shortly thereafter; however, the assessment of claimant eligibility and calculation of losses for those claims did not begin until February 18, 2011. Independent Evaluation of the Gulf Coast Claims Facility, Report of Findings & Observations, BDO Consulting (June 5, 2012).

B. The “Delay, Deny, Defend” Strategy of Kenneth R. Feinberg, et al.

Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. and Selmer M. Salvesen v. Kenneth R. Feinberg, et al. are the only two cases of their kind filed in any court in the country. In each case, the complaint alleges, in part, that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF misled Plaintiffs by employing a “Delay, Deny, Defend” strategy against them. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.” In sum, Plaintiffs allege that BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Delay, Deny, Defend” strategy, are responsible for not compensating, and thereby financially ruining, Plaintiffs and other victims of the BP oil spill.

C. GCCF’s “Release and Covenant Not to Sue”

The ultimate objective of the “Delay, Deny, Defend” strategy of Feinberg, et al. was to obtain a signed “Release and Covenant Not to Sue” from as many BP oil spill victims as possible. Here, the GCCF Status Report as of March 07, 2012 is instructive.

The status report data indicates that the GCCF paid a total of 230,370 claimants who filed claims with the GCCF during the “Phase II” period. Of these, 195,109 were either Quick Pay or Full Review Final payments; only 35,261 were Interim payments. In sum, the GCCF forced 84.68% of the claimants to sign a release and covenant not to sue in which the claimant agreed not to sue BP and all other potentially liable parties; only 15.31% of the claimants were not required to sign a release and covenant not to sue in order to be paid. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012, p. 1) (a copy is attached hereto as Exhibit C).

II.  LAW AND ARGUMENT

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

A. GCCF’s “Release and Covenant Not to Sue” and the Proposed Settlement’s “Release and Covenant Not to Sue” Violate the Oil Pollution Act of 1990.

The proposed Deepwater Horizon Economic and Property Damages Settlement Agreement excludes:

“2.2.6. Any Natural Person or Entity who or that made a claim to the GCCF, was paid and executed a GCCF RELEASE AND COVENANT NOT TO SUE..” (Rec. Doc. 6276-1, p. 11).

The Preliminary Approval Order states,

“Those who accept payments under the Proposed Settlement are required to release their claims against BP, government oil spill liability funds, and all other Defendants in MDL 2179 (except Transocean and Halliburton)…………If preliminary approval is given, the Settlement Program will process claims and make settlement payments to class members so long as they execute an individual release.” (Rec. Doc. 6418, pp. 6-7).

The Honorable Carl J. Barbier addressed the issue of whether OPA prohibits Responsible Parties from requiring victims of an oil spill to sign a release and covenant not to sue in order to be paid for their damages. Judge Barbier stated in his Order of August 26, 2011:

“…….nothing prohibits Defendants from settling claims for economic loss. While OPA does not specifically address the use of waivers and releases by Responsible Parties, the statute also does not clearly prohibit it. In fact, as the Court has recognized in this Order, one of the goals of OPA was to allow for speedy and efficient recovery by victims of an oil spill.” See Order and Reasons [As to Motions to Dismiss the B1 Master Complaint] (Document 3830, pp. 34, 35).

Plaintiffs respectfully disagree with Judge Barbier’s novel interpretation of OPA. OPA expressly prohibits Responsible Parties from engaging in a “Delay, Deny, Defend” strategy wherein the victims of an oil spill are starved and ultimately forced to sign a release and covenant not to sue in order to receive an inadequate, miniscule payment amount for the damages they incurred as a result of the oil spill.

1. The Text of the OPA Statute

OPA is a strict liability statute. In order to recover damages, a claimant merely needs to show that his or her damages “resulted from” the oil spill. OPA provides,

“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 that result from such incident.” 33 U.S.C. § 2702(a).

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

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

OPA further 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.” 33 U.S.C. § 2705(a) (Emphasis added); and

(b) “Payment of such a claim [i.e. payment to a claimant for interim, short-term damages representing less than the full amount of damages to which the claimant ultimately may be entitled] shall not foreclose a claimant’s right to recovery of all damages to which the claimant otherwise is entitled under this Act or under any other law.’’ 33 U.S.C. §§ 2715(b)(1) and (2) (Emphasis added).

“Shall” means shall. The Supreme Court has made clear that when a statute uses the word “shall,” Congress has imposed a mandatory duty upon the subject of the command. See United States v. Monsanto, 491 U.S. 600, 607, 109 S.Ct. 2657, 105 L.Ed.2d 512 (1989) (by using “shall” in civil forfeiture statute, “Congress could not have chosen stronger words to express its intent that forfeiture be mandatory in cases where the statute applied”); Pierce v. Underwood, 487 U.S. 552, 569-70, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988) (Congress’ use of “shall” in a housing subsidy statute constitutes “mandatory language”); Barrentine v. Arkansas-Best Freight Sys., Inc. 450 U.S. 728, 739 n. 15, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981) (same under Fair Labor Standards Act); United States v. Myers, 106 F.3d 936, 941 (10th Cir.) (“It is a basic canon of statutory construction that use of the word ‘shall’ [in 18 U.S.C. § 3553(f) ] indicates mandatory intent.”), cert. denied, 520 U.S. 1270, 117 S.Ct. 2446, 138 L.Ed.2d 205 (1997); see also Black’s Law Dictionary 1233 (5th ed. 1979) (“As used in statutes … [shall] is generally imperative or mandatory.”); Environmental Defense Ctr. v. Babbitt, 73 F.3d 867 (9th Cir.1995) (“We believe our ‘shall’-means-shall approach has been implicitly recognized by the Ninth Circuit); Forest Guardians v. Babbitt, 174 F.3d 1178 (10th Cir. 1999) (finding a strict statutory construction); Yu v. Brown, 36 F. Supp. 2d 922 (10th Cir. 1999) (agreeing with Forest Guardians in finding a strict requirement to force agencies to act under certain circumstances).

2. The Legislative History of the OPA Statute

OPA’s legislative history is shot through with general statements indicative of congressional intent to ensure that all oil spill victims are fully compensated. 135 CONG. REC. H7959 (daily ed. Nov. 2, 1989) (statement of Rep. Tauzin) (“ensure that all victims are fully compensated”); 135 CONG. REC. H7964 (daily ed. Nov. 2, 1989) (statement of Rep. Hammerschmidt) (“ensure that all justified claims for compensation are satisfied”); 135 CONG. REC. H7969 (daily ed. Nov. 2, 1989) (statement of Rep. Dyson) (“assurances that damages arising from spills will be completely compensated”); 136 CONG. REC. H336 (daily ed. Feb. 7, 1990) (statement of Rep. Carper) (“ensure that those people or those businesses that are damaged by these spills are fairly and adequately compensated”); 136 CONG. REC. S7752 (daily ed. June 12, 1990) (statement of Sen. Mitchell) (“ensure the fullest possible compensation of oil spill victims”); S. REP. NO. 101–94, at 12 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 734. (“These provisions are intended to provide compensation for a wide range of injuries and are not so narrowly focused as to prevent victims of an oil spill from receiving reasonable compensation.”); 135 CONG. REC. H7893 (daily ed. Nov. 1, 1989) (statement of Rep. Quillen) (“full, fair, and swift compensation for everyone injured by oil spills.”).

As the Supreme Court explained,

“[I]n interpreting a statute a court should always turn first to one, cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.” Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992).

The GCCF essentially stopped processing or paying OPA-mandated interim claims from BP oil spill victims on November 23, 2010. Ending this interim claims program was in direct contravention of OPA’s mandates, as that Act only envisions a claims process for presentment of interim claims.

GCCF’s “Release and Covenant Not to Sue” violates OPA: (a) by requiring the release of future damages as requirement for receiving a payment from the GCCF claims process, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2); and (b) Feinberg, et al. intentionally failed to provide a process for presenting, processing and paying interim, short-term damages, in contravention of 33 U.S.C. § 2705(a) and 33 U.S.C. §§ 2715(b)(1) and (2).

The text and the legislative history of the OPA statute are clear. OPA expressly prohibits Responsible Parties from engaging in a “Delay, Deny, Defend” strategy wherein the victims of an oil spill are starved and ultimately forced to sign a release and covenant not to sue in order to receive a miniscule payment amount for all damages, including future damages, they incur as a result of the oil spill.

B. GCCF’s “Release and Covenant Not to Sue” and the Proposed Settlement’s “Release and Covenant Not to Sue” Violate State Contract Law.

Releases, compromises and settlement agreements are contracts and the rules of construction applicable to all contracts are used in the interpretation of such agreements. Dore Energy Corp. v. Prospective Inv. & Trading Co. Ltd., 570 F.3d 219, 225 (5th Cir. 2009).

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

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

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

(3) was obtained through fraud;

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

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

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

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

C.  The Severability Clause in the Proposed Settlement is Not an Adequate Solution.

The Proposed Settlement includes a Severability Clause that specifically references the unconscionable releases used by the GCCF and the Release proposed for use in the Proposed Settlement’s claims process. The Severability Clause states:

“21.1. In the event that the Release contained in Section 10 above, or the Individual Releases as to all Economic Class Members contained in Section 4 above, or any portion or provision thereof, shall for any reason be held in whole or in part to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision, or portion thereof, if the BP Parties elect in their sole discretion in writing to proceed as if such invalid, illegal, or unenforceable provision, or portion thereof, had never been included in this Agreement. Alternatively, the BP Parties, in these circumstances, may elect in writing that the entire Agreement be rendered null and void consistent with the terms described in Section 21.3 below.” (Rec. Doc 6276-1, p. 82).

An illegal condition within a contract annuls the entire agreement “only to the extent to which the agreement depends on it.” Lebouef v. Liner, 396 So.2d 376, 378 (La.App. 1st Cir. 1981); La. Civil Code Ann. Art. 1893.

Any class action settlement that incorporates an unconscionable “Release and Covenant Not to Sue” for the purpose of excluding approximately 200,000 Claimants from the settlement benefits, is not “fair, reasonable, and adequate.” However, Plaintiffs respectfully point out to this Honorable Court that merely nullifying the unconscionable releases used by the GCCF, and severing the Release proposed for use in the Proposed Settlement’s claims process, and allowing the BP Parties “to proceed as if such invalid, illegal, or unenforceable provision, or portion thereof, had never been included in this Agreement” is not an adequate solution. The Proposed Settlement would still: (a) have resulted from the B1 Master Complaint which was inexplicably filed under admiralty law rather than the OPA (a strict liability statute); (b) be in violation of the Lexecon Rule; (c) be in violation of Lloyds Leasing Ltd. v. Bates; (c) not be “free of collusion;” (d) still not be “fair, reasonable, and adequate;” and (e) still violate the OPA. See Exhibit A and Exhibit B.

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

____________________

UPDATE

Inadequate Consideration

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

This inadequate compensation and GCCF’s “Release and Covenant Not to Sue” are the product of Claimants’ lack of bargaining power and Feinberg et al.’s use of coercion and economic duress.

The “Delay, Deny, Defend” strategy, although unconscionable, has proven to be very effective for Feinberg, et al. The numbers do not lie: 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. The GCCF denied payment to approximately 61.46% of the claimants who filed claims. The average total amount paid per Claimant by GCCF was $27,466.47.

“BP has estimated the cost of the proposed settlement to be approximately $7.8 billion.” (p. 156, Rec. Doc. 6266-2). Here, Judge Barbier’s admonition in his Order of August 26, 2011 is instructive: “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p. 31, Rec. Doc. 3830) (Emphasis added). Since the long term effects, and therefore the associated costs, of the BP oil spill on the environment and fisheries may not be known for many years, BP can only estimate its cost by multiplying the approximate number of Claimants by an average amount BP is willing to pay each claimant.

What is life worth? According to BP and Feinberg, et al., the life of an individual BP oil spill victim isn’t worth very much.

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

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

The Only Beneficiaries Are BP and the Plaintiffs’ Steering Committee

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

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

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

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

Who Should Opt-Out

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

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

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

When Should Class Members Opt-Out

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

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

How to Opt-Out

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

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

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

Why Class Members Should Opt-Out

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

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

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

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

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

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

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

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

The Miniscule Amount GCCF Paid to BP Oil Spill Victims

GCCF Overall Program Statistics

(Status Report as of March 7, 2012)

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

Total Number of Paid Claimants = 221,358

Average Total Amount Paid Per Claimant = $27,466.47

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

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

(1) The Refund to BP

Deepwater Horizon Oil Spill Trust     $20.0 Billion

Approximate Amount Paid to Claimants by GCCF   $ 6.2 Billion

Cost of the Proposed Settlement     $ 7.8 Billion

Amount to be Refunded to BP     $ 6.0 Billion

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

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

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

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

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

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

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

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

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

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

Collusion Permeates MDL 2179 and These Class Action Settlements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Conclusion

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

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

_________________

OPT-OUT UPDATE No. 1

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

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

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

Objectors Have No Absolute Right to Discovery.

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

Objectors’ Discovery Requests Are Unnecessary.

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

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

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

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

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

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

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

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

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OPT-OUT UPDATE No. 2

DHCC Overall Program Statistics

(Status Report as of October 5, 2012)

Individual Economic Loss

19,338 claim forms were submitted,

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

24 offers were accepted, and

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

Individual Periodic Vendor or Festival Vendor Economic Loss

132 claim forms were submitted,

DHCC made 0 payment offers,

0 offers were accepted, and

DHCC made 0 payments.

Business Economic Loss

14,558 claim forms were submitted,

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

280 offers were accepted, and

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

Start-Up Business Economic Loss

1,202 claim forms were submitted,

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

2 offers were accepted, and

DHCC made 0 payments.

Failed Business Economic Loss

1,238 claim forms were submitted,

DHCC made 0 payment offers,

0 offers were accepted, and

DHCC made 0 payments.

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

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

What is life worth?

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

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

BP Oil Spill: A Pattern of Collusive Unfairness Permeates

the Deepwater Horizon Proposed Class Action Settlement (Part II)

Tampa, FL (July 25, 2012) – On May 2, 2012, the MDL 2179 Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement].

On July 13, 2012, Plaintiffs Pinellas Marine Salvage, Inc. and John Mavrogiannis filed a Motion to Vacate this Preliminary Approval Order.

The following is the second excerpt from this motion.

Click here to download the first excerpt.

D.  The Proposed Settlement Was Not Achieved in the Full Context of the Adversarial  Process.

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

The Proposed Settlement intends to resolve certain claims by private individuals and businesses for economic loss and property damage resulting from the “Deepwater Horizon Incident.” The Proposed Settlement defines “Deepwater Horizon Incident” as: the events, actions, inactions and omissions leading up to and including (i) the blowout of the MC252 Well; …………. (vii) the operation of the GCCF; and (viii) BP public statements relating to all of the foregoing. (Proposed Settlement ¶ 38.43, Rec. Doc. 6276-1 at 99).

Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. and Selmer M. Salvesen v. Kenneth R. Feinberg, et al. are the only two cases of their kind filed in any court in the country. In each case, the complaint alleges, in part, that Defendants Kenneth R. Feinberg, Feinberg Rozen, LLP, and GCCF misled Plaintiffs by employing a “Delay, Deny, Defend” strategy against them. This strategy, commonly used by unscrupulous insurance companies, is as follows: “Delay payment, starve claimant, and then offer the economically and emotionally-stressed claimant a miniscule percent of all damages to which the claimant is entitled. If the financially ruined claimant rejects the settlement offer, he or she may sue.”  In sum, Plaintiffs allege that BP is responsible for the oil spill incident; Feinberg, et al. (independent contractors), via employment of their “Delay, Deny, Defend” strategy, are responsible for not compensating and thereby financially ruining Plaintiffs and other victims of the BP oil spill.

As noted above, the Pinellas case was transferred by the JPML to the MDL 2179 Court on August 9, 2011. Once the Pinellas and Salvesen cases were transferred to the MDL 2179 Court, not only were these cases automatically stayed, but the Pinellas and Salvesen claims were deemed “amended, restated, and superseded” by the allegations and claims of the Master Complaint in Pleading Bundle B1 (See Pre-Trial Order No. 25, Para. 5, Jan. 12, 2011), in which Feinberg, Feinberg Rozen, LLP, and GCCF are not even named as Defendants.

On August 29, 2011, Plaintiffs’ Counsel emailed a letter to James Parkerson Roy wherein he informed Mr. Roy that the Pinellas Marine Salvage, Inc., et al. v. Kenneth R. Feinberg, et al. case had been transferred to MDL 2179. The letter, in pertinent part, stated “I would like to commence discovery as soon as possible. Since this action does not involve common questions of fact with actions previously transferred to MDL No. 2179, please advise as to how we may most expeditiously initiate and coordinate discovery……I look forward to working with you on this case.” On September 5, 2011, Plaintiffs’ Counsel received an email from Stephen J. Herman wherein Mr. Herman stated, “please be advised that the Court has, thus far, declined to permit formal discovery on Feinberg or the GCCF.

Judge Barbier writes, “…the PSC has actively lobbied and argued for increased supervision and monitoring of the GCCF and Kenneth Feinberg/Feinberg Rozen, LLP. These efforts have met with at least partial success. For instance, on February 2, 2011 the Court granted the PSC’s motion (in part) and ordered the GCCF and BP to:

(1) Refrain from contacting directly any claimant that they know or reasonably should know is represented by counsel, whether or not said claimant has filed a lawsuit or formal claim.

(2) Refrain from referring to the GCCF, Ken Feinberg, or Feinberg Rozen, LLP (or their representatives), as “neutral” or completely “independent” from BP. It should be clearly disclosed in all communications, whether written or oral, that said parties are acting for and on behalf of BP in fulfilling its statutory obligations as the “responsible party” under the Oil Pollution Act of 1990.

(3) Begin any communication with a putative class member with the statement that the individual has a right to consult with an attorney of his/her own choosing prior to accepting any settlement or signing a release of legal rights.

(4) Refrain from giving or purporting to give legal advice to unrepresented claimants, including advising that claimants should not hire a lawyer.

(5) Fully disclose to claimants their options under OPA if they do not accept a final payment, including filing a claim in the pending MDL 2179 litigation.

(6) Advise claimants that the “pro bono” attorneys and “community representatives” retained to assist GCCF claimants are being compensated directly or indirectly by BP.” Rec. Doc. 1098 at 14.

Judge Barbier further writes, “The PSC has advocated for a full and transparent audit of the GCCF and its claims handling practices, and together with the U.S. Department of Justice, has persuaded Mr. Feinberg to agree to such an audit which is now in progress. The PSC has advocated, again with some success, for the GCCF to employ a more liberal causation standard in evaluating claims and has advanced similar causation arguments in this MDL proceeding.” See Order of Aug. 26, 2011, Rec. Doc. 3830 at 32-33. (pp. 4-5, Rec. Doc. 5022).

The PSC allegedly represents the Plaintiffs in MDL 2179. These Plaintiffs deserve more than the PSC merely: (a) “lobbying” for increased supervision and monitoring of Feinberg, et al.; (b) trying to “persuade” Mr. Feinberg to agree to an audit; and (c) “advocating,” again with some success, for the GCCF to employ a more liberal causation standard in evaluating claims.

The JPML believes, “Centralization may also facilitate closer coordination with Kenneth Feinberg’s administration of the BP compensation fund.” However, formal discovery on Feinberg and the GCCF, and the associated pressure of a trial, are required in order exert pressure on the parties to negotiate a settlement which reflects the true value of the claims and not one which focuses on minimizing the liability of BP. Certainly, without formal discovery on Feinberg and the GCCF, “certain claims by private individuals and businesses for economic loss resulting from the operation of the GCCF” may not be properly resolved.

E.  The Proposed Settlement Makes a Mockery of the Oil Pollution Act of 1990 (“OPA”).

Plaintiffs respectfully point out to this Honorable Court that the Proposed Settlement makes a mockery of the OPA for at least the following four reasons:

1.  The Proposed Settlement defines Class Members by geographic bounds and certain business activities while requiring proof of a heightened, vague standard of causation.

2.  The Proposed Settlement requires Class Members to waive their right to sue in  exchange for a miniscule single final settlement payment.

3.  The Proposed Settlement provides for a shortened Period of Limitations.

4.  The Proposed Settlement fails to pay interest on the amount paid.

This Honorable Court has already been fully briefed on these issues. See, e.g., Plaintiff’s Memorandum in Support of His Motion to Vacate Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement] filed in this Court on July 2, 2012 by Plaintiff Selmer M. Salvesen (pp. 15-23, Rec. Doc. 6831-1).

Plaintiffs respectfully bring to the Court’s attention that on April 25, 2012 Mississippi Attorney General Jim Hood filed his Statement of Interest, also objecting to the use of the illegal and illegally-obtained GCCF Releases as an eligibility criteria to exclude 200,000 individuals and entities from the “Economic and Property Damages Settlement Class” definition and from the benefits of the proposed “Deepwater Horizon Economic and Property Damages Settlement,” and renewing his request to nullify the illegal, illegally-obtained and unconscionable GCCF Releases. (Rec. Doc. 6356).

As Judge Barbier aptly stated in his Order of August 26, 2011, “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p.31, Rec. Doc. 3830) (Emphasis added). Requiring Class Members to prematurely waive their right to sue in exchange for a miniscule single final settlement payment is unconscionable.

Notwithstanding the utter failure of the Proposed Settlement to comply with the OPA, Interim Class Counsel and the PSC state, “To give it utmost credit, the GCCF can be said to be a good faith effort to fulfill BP’s OPA obligations……………..” (p. 29, Rec. Doc. 6269-1).

F.  A Pattern of Collusive Unfairness Permeates the Proposed Settlement.

For the following reasons, Plaintiffs respectfully point out to this Honorable Court that the Proposed Settlement is not a “fair, adequate, and reasonable” settlement (at least not for the Class Members) which has been entered into without collusion between the parties.

(1)  Prior to the Settlement, the Deepwater Horizon Oil Spill Trust had a balance of approximately $13.8 billion from which BP oil spill victims believed they would be compensated by GCCF for all “legitimate” claims.

(2)  After the Settlement, the proposed “Settlement Trust” will only have a balance of $7.8 billion from which BP oil spill victims are being told they will be compensated by the CSSP “so long as they execute an individual release.” (p. 7, Rec. Doc. 6418).

(3)  Under the Proposed Settlement, BP will receive a refund of approximately $6 billion; the PSC and other counsel allegedly performing common benefit work will receive $600 million.

(4)  The Proposed Settlement doesn’t actually provide for funds to be distributed to Class Members; it merely gives BP oil spill victims the right to submit, yet again, a claim for economic and property damages. Plaintiffs respectfully ask, “Where’s the settlement?”

(5)  Prior to the Proposed Settlement, under the GCCF, the evaluation and processing of claims were performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. The GCCF denied payment to approximately 61.46% of the claimants who filed claims; the average total amount paid per claimant was $27,466.47.

(6)  After the Proposed Settlement, under the CSSP, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant under the GCCF will increase under the CSCP.

(7)  “BP has estimated the cost of the proposed settlement to be approximately $7.8 billion.” (p. 156, Rec. Doc. 6266-2). Here, Judge Barbier’s admonition in his Order of August 26, 2011 is instructive: “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p. 31, Rec. Doc. 3830) (Emphasis added). Since, as Judge Barbier points out, the long term effects, and therefore the associated costs, of the BP oil spill on the environment and fisheries may not be known for many years, BP can only estimate its cost by multiplying the approximate number of Claimants by an average amount BP is willing to pay each claimant.

The average amount BP proposes to pay each Claimant under the Proposed Settlement is not difficult to surmise. “The BP Parties may appeal a final compensation award determination only where the compensation amount determined by the settlement program is in excess of $25,000.” (p. 58, Rec. Doc. 6276-1).

(8)  “The BP Parties shall make a non-refundable payment of $75 million (the “Initial Payment”) into the Common Benefit Fee and Costs Fund on the first date on which all of the following have occurred: (i) 30 days have elapsed after the Court has granted preliminary approval of the Economic Agreement, and (ii) the Court has entered an Order modifying the Holdback Order to provide that it shall not apply to any Settlement Payments or Other Economic Benefits paid pursuant to the Economic Agreement…..” “……within 15 days after the end of each calendar quarter, the BP Parties shall irrevocably pay into the Common Benefit Fee and Costs Fund an amount equal to 6 % (six percent) of the aggregate Settlement Payments paid under the Economic Agreement in respect of Claimants that have executed an Individual Release.” (pp. 3-4, Rec. Doc. 6276-46). In sum, the PSC and other counsel allegedly performing common benefit work are financially motivated to have as many Claimants execute an Individual Release as expeditiously as possible regardless of whether the negotiated settlements reflect the true value of the claims.

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

BP Oil Spill: A Pattern of Collusive Unfairness Permeates

the Deepwater Horizon Proposed Class Action Settlement (Part I)

Tampa, FL (July 24, 2012) – On May 2, 2012, the MDL 2179 Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement].

On July 13, 2012, Plaintiffs Pinellas Marine Salvage, Inc. and John Mavrogiannis filed a Motion to Vacate this Preliminary Approval Order.

The following is an excerpt from this motion.

INTRODUCTION

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

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

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

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

LAW AND ARGUMENT

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

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

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

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

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

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

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

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

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

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

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

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

On May 2, 2012, Patrick Juneau was appointed as Claims Administrator to oversee the Claims Administration Vendors, who will process the claims in accordance with the Proposed Settlement. Under the CSSP, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, although Patrick Juneau has replaced Feinberg, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the CSSP.

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

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

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

Total No. of Paid Claimants                           = 221,358

Average Total Amount Paid Per Claimant  = $27,466.47

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012.  The GCCF paid only 221,358 of these Claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012). (Rec. Doc. 6831-1).

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

C.  The Proposed Settlement Provides for a Refund of Approximately $6 Billion to BP While Granting Excessive Compensation to the PSC and Other Counsel Performing “Common Benefit” Work.

(1) The Refund

Deepwater Horizon Oil Spill Trust                                                                                                                   $20 Billion

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

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

Approximate Amount Paid to Claimants by GCCF                                                                                       $6.2 Billion

Cost of the Proposed Settlement                                                                                                                       $7.8 Billion

Amount to be Refunded to BP                                                                                                                           $6.0 Billion

(2) The Excessive Compensation

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

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

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

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

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

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

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

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

Amount Awarded                      Billable Hourly Rate                      Hours Required to Have Been Expended

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

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

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

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

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

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

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

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

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

How the BP Oil Spill Proposed Class Action Settlement Makes a Mockery of the Oil Pollution Act of 1990

How the BP Oil Spill Proposed Class Action Settlement

Makes a Mockery of the Oil Pollution Act of 1990

Tampa, FL (July 5, 2012) – On April 18, 2012, the MDL 2179 Plaintiffs’ Steering Committee (“PSC”) and BP filed their Proposed Settlement. The Proposed Settlement allegedly intends to resolve certain claims by private individuals and businesses for economic loss and property damage resulting from the “Deepwater Horizon Incident.” The Proposed Settlement defines “Deepwater Horizon Incident” as the events, actions, inactions and omissions leading up to and including (i) the blowout of the MC252 Well; (ii) the explosions and fire on board the Deepwater Horizon on or about April 20, 2010; (iii) the sinking of the Deepwater Horizon on or about April 22, 2010; (iv) the release of oil, other hydrocarbons and other substances from the MC252 Well and/or the Deepwater Horizon and its appurtenances; (v) the efforts to contain the MC252 Well; (vi) Response Activities, including the VoO Program; (vii) the operation of the GCCF; and (viii) BP public statements relating to all of the foregoing.

On May 2, 2012, the MDL 2179 Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement].

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

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

B.  The Proposed Settlement Violates the Oil Pollution Act of 1990 (“OPA”).

Judge Barbier clearly states, “Moreover, OPA applies of its own force, because that act governs, inter alia, private claims for property damage and economic loss resulting from a discharge of oil in navigable waters. See 33 U.S.C. § 2702(a), (b)(2)(B), (b)(2)(C), (b)(2)(E).” (p. 11, Rec. Doc. 3830); “OPA is a comprehensive statute addressing responsibility for oil spills, including the cost of clean-up, liability for civil penalties, as well as economic damages incurred by private parties and public entities. Indeed, the Senate Report provides that the Act “builds upon section 311 of the Clean Water Act to create a single Federal law providing cleanup authority, penalties, and liability for oil pollution.” S. Rep. 101-94, at 730 (1989). One significant part of OPA broadened the scope of private persons who are allowed to recover for economic losses resulting from an oil spill. OPA allows recovery for economic losses “resulting from” or “due to” the oil spill, regardless of whether the claimant sustained physical damage to a proprietary interest. OPA allows recovery for “[d]amages equal to the loss of profits or impairment of earning capacity due to the injury, destruction, or loss of real property, or natural resources, which shall be recoverable by any claimant.” 33 U.S.C. § 2702(b)(2)(E) (Emphasis added). Furthermore, the House Report noted that “[t]he claimant need not be the owner of the damaged property or resources to recover for lost profits or income.” H.R. Conf. Rep. 101-653, at 781 (1990).” (pp. 20-21, Rec. Doc. 3830).

The Proposed Settlement is replete with references to the OPA: “….the operation of BP’s separate OPA facility…” (p. 27, Rec. Doc. 6276-1); “This provision does not apply to Economic Class Members who have gone through the OPA Process and provided a release as part of that OPA Process.” (p. 66, Rec. Doc. 6276-1); “The Release is not intended to prevent BP from exercising its rights of contribution, subrogation, or indemnity under the OPA……” (p. 72, Rec. Doc. 6276-1); “BP is hereby subrogated to any and all rights that the Economic Class Members, or any of them, may have had or have arising out of, due to, resulting from, or relating in any way to, directly or indirectly, the Deepwater Horizon Incident under the OPA.” (p. 72, Rec. Doc. 6276-1); “Notwithstanding the law applicable to the underlying claims, which the Parties dispute, this Agreement and the Release and Individual Releases hereunder shall be interpreted in accordance with General Maritime Law as well as in a manner intended to comply with OPA.” (p. 90, Rec. Doc. 6276-1); “OPA Process shall mean the claims presentment procedure pursuant to the OPA, including claims that have been submitted to the BP Parties or claims that have been submitted to the GCCF as part of the OPA Process.” (p. 104, Rec. Doc. 6276-1); “….the parties have represented that BP will continue to receive and process Oil Pollution Act (“OPA”) claims for those excluded from the settlement class and those who opt out of the settlement class. (Tr. of Prelim. Approval Hr’g, 4/25/12, pp. 14-15, 49-50, Rec. Doc. 6395); see also Attach. “A” to Supp. Decl. of Cameron Azari, Ques. 15 & 25, Rec. Doc. 6414-4 at 15, 23). Presumably, that process will include an interim payments process, as well as any other requirements imposed by OPA. See 33 U.S.C. §§ 2705(a), 2714(b)(2).“ (p. 18, Rec. Doc. 6418); “This is, unlike most mass torts, a single-incident disaster, governed predominantly by a single body of federal law including OPA and uniform federal maritime law.” (p. 28, Rec. Doc. 6418).

Clearly, BP and the PSC are very familiar with the OPA and quite capable of applying the statute. Unfortunately, BP and the PSC cherry-pick OPA’s provisions for their benefit at the detriment to Claimants and Plaintiffs.

1.  The Proposed Settlement Defines Class Members by Geographic Bounds and Certain Business Activities While Requiring Proof of a Heightened, Vague  Standard of Causation.

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

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

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

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

OPA’s legislative history is shot through with general statements indicative of congressional intent to authorize recovery of “a broad class of damages.” 135 CONG. REC. E842, (daily ed. Mar. 16, 1989) (statement of Rep. Jones). See also S. REP. NO. 101–94, at 12 (1989), reprinted in 1990 U.S.C.C.A.N. 722, 734. (“These provisions are intended to provide compensation for a wide range of injuries and are not so narrowly focused as to prevent victims of an oil spill from receiving reasonable compensation.”); 135 CONG. REC. H7893 (daily ed. Nov. 1, 1989) (statement of Rep. Quillen) (“full, fair, and swift compensation for everyone injured by oil spills”; “residents of States will be fully compensated for all economic damages”).

The OPA statute was carefully drafted by Congress. It seems plain that the combination of Sections 2702(a) and 2702(b)(2)(E) requires an economic-loss claimant to establish that the defendant’s spill was a factual cause of injury, destruction, or loss of tangible property or natural resources that in turn was a factual cause of the claimant’s damages – nothing more and nothing less. Because the prevailing, default test for factual causation in Anglo-American tort law is the but-for test, we can be fairly precise about the evident meaning of Sections 2702(a) and 2702(b)(2)(E) for an economic-loss claimant: The claimant is required to show that if the spill had not brought about the injury, destruction, or loss of tangible property or natural resources, the damages complained of probably would not have been sustained. See David W. Robertson, The Oil Pollution Act’s Provisions on Damages for Economic Loss, 30 Miss. C.L. Rev. 157 (2011).

An early version of a bill culminating in OPA provided that economic loss plaintiffs would have to prove “proximate cause;” Congress took that out of the bill. Neither Section 2702(a) nor Section 2702(b)(2)(E) includes any mention of “proximate cause.” Where Congress includes limiting language in an earlier version of a bill but deletes it prior to enactment, it may be presumed that the limitation was not intended. Russello v. United States, 464 U.S. 16, 23-24 (1983). Therefore, Russello counsels us to conclude that the OPA Congress did not want to require claimants seeking economic loss damages to meet a proximate cause requirement. Id.

OPA’s predecessor legislation included an explicit proximate cause limit. Title III of the Outer Continental Shelf Lands Act Amendments of 1978 provided for the recovery of pollution-caused damages that were “proximately caused by the discharge of oil from an offshore facility or vessel.” OPA repealed this provision, replacing it with Section 2702(a). So here again, the Russello canon calls for the presumption that the OPA Congress did not intend a proximate cause limit to be read into its economic loss provisions. See H.R. REP. NO. 101–653 (1990) (Conf. Rep.) (presenting § 1002(a) of H.R. 1465 as providing for liability for removal costs and damages “that result from” a spill or substantial threat of a spill; the language is identical to the enacted Section 2702(a)). Here once again, the Russello canon requires a presumption that the OPA Congress intended that for purposes of recovering economic loss damages, the only causation requirement should be factual causation (Emphasis added). Id.

The Preliminary Approval Order states that the Economic Loss and Property Damage Settlement Class “would consist of individuals and entities defined by (1) geographic bounds and (2) the nature of their loss or damage. If both criteria are not met……..the individual or entity is not within the settlement class.” “The geographic bounds of the settlement are Louisiana, Mississippi, Alabama, and certain coastal counties in eastern Texas and western Florida, as well as specified adjacent Gulf waters, bays, etc. Individuals must have lived, worked, owned property, leased property, etc., in these areas between April 20, 20108 and April 16, 2012. Similarly, entities must have conducted certain business activity in these areas between April 20, 2010 and April 16, 2012.” (p. 5, Rec. Doc. 6418). “Causation is presumed for some claimants; other claimants must demonstrate that a loss is due to the oil spill as outlined by the Proposed Settlement.” (p. 8, Rec. Doc. 6418).

OPA’s legislative history specifically mentioned classes of claimants as entitled to protection. These included, but were not limited to, fishermen and beachfront hotel owners, fish processing plant employees, and those who work at the companies depending on the fisheries. 135 CONG. REC. E1237 (daily ed. Apr. 13, 1989) (statement of Rep. Miller); “an employee at a coastal motel” 135 CONG. REC. H7898 (daily ed. Nov. 1, 1989) (statement of Rep. Jones); “restaurant operators” 135 CONG. REC. H8263 (daily ed. Nov. 9, 1989) (statement of Rep. Studds); “fishermen and others whose livelihood depended on the once-pristine waters” 135 CONG. REC. H8271(daily ed. Nov. 9, 1989) (statement of Rep. Slaughter).

The following is merely one example of how the Proposed Settlement limits BP’s liability at the expense of BP oil spill victims:

Jack owns a seafood restaurant located in Macon, Georgia which serves seafood exclusively from the Gulf of Mexico. Jack’s restaurant has always catered to those diners who prefer fresh seafood, delivered straight from the Gulf of Mexico, over the processed seafood dishes served by the national seafood restaurant chains.

The BP oil spill incident devastated the commercial fishing industries of Louisiana, Mississippi, Alabama and Florida, thereby virtually eliminating the ability of Jack’s restaurant to serve fresh seafood to its customers. Fresh oysters and mini-shrimp, two of Jack’s most popular items, were unavailable. Jack was forced to pay higher prices for frozen seafood to East Coast seafood suppliers. The negative publicity generated by the constant media coverage of this oil spill incident made even Jack’s loyal customers fearful of eating seafood from the Gulf of Mexico. A marketing survey commissioned by Louisiana’s seafood promotion board reported in January, 2011 that about 71 percent of consumers polled nationally expressed some level of concern about seafood safety.

Jack claims that the stoppage of fresh seafood deliveries from the Gulf of Mexico, the increase in the price of alternative East Coast seafood, and the fear of seafood contamination and seafood poisoning that resulted from the BP oil spill incident decreased gross sales to the point that the restaurant, after approximately 25 years of successful and profitable operation, was forced to close its doors.

In the above example, Jack was forced to close his restaurant as a result of the BP oil spill. Under OPA, since the damages resulted from the BP oil spill incident, damages shall be recoverable by Jack. Under the Proposed Settlement, due to the arbitrary geographic bounds established by BP/PSC, Jack is out of luck.

As the Supreme Court recently explained:

[I]n interpreting a statute a court should always turn first to one, cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253–54 (1992).

Congress never intended that a claimant’s recovery of damages under OPA be limited by geographic bounds, pertain solely to certain business activities, or require a heightened, and in this case vague, proof of causation between his or her damages and the oil spill incident.

2.  The Proposed Settlement Provides for a Shortened Period of Limitations.

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

In violation of OPA, the Preliminary Approval Order states, “The deadline for filing most claims with the Settlement Program is the later of April 22, 2014 or six months after the “Effective Date” of the Proposed Settlement. Claimants in the Seafood Compensation Program must submit their claim within 30 days from the date of entry of a Final Order and Judgment of the Court after it rules upon final approval of the Proposed Settlement.”  (p. 6, Rec. Doc. 6418).

The Proposed Settlement’s “take it or leave it” period of limitations and the final settlement offer are unconscionable, requiring the financially-stressed Plaintiffs to file a claim before Plaintiffs know, and are able to corroborate, the full extent of the damages incurred as a result of the BP oil spill. As Judge Barbier aptly stated in his Order of August 26, 2011, “The long term effects [of the BP oil spill] on the environment and fisheries may not be known for many years.” (p. 31, Rec. Doc. 3830) (Emphasis added).

3.  The Proposed Settlement Requires Class Members to Waive Their Right to Sue in Exchange for a Miniscule Single Final Settlement Payment.

OPA further 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.” 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. 33 U.S.C. § 2715(b)(2).

The Preliminary Approval Order states, “Those who accept payments under the Proposed Settlement are required to release their claims against BP, government oil spill liability funds, and all other Defendants in MDL 2179 (except Transocean and Halliburton)….If preliminary approval is given, the Settlement Program will process claims and make settlement payments to class members so long as they execute an individual release.” (pp. 6-7, Rec. Doc. 6418).

OPA’s legislative history is shot through with general statements indicative of congressional intent to ensure that all oil spill victims are fully compensated. 135 CONG. REC. H7959 (daily ed. Nov. 2, 1989) (statement of Rep. Tauzin) (“ensure that all victims are fully compensated”); 135 CONG. REC. H7964 (daily ed. Nov. 2, 1989) (statement of Rep. Hammerschmidt) (“ensure that all justified claims for compensation are satisfied”); 135 CONG. REC. H7969 (daily ed. Nov. 2, 1989) (statement of Rep. Dyson) (“assurances that damages arising from spills will be completely compensated”); 136 CONG. REC. H336 (daily ed. Feb. 7, 1990) (statement of Rep. Carper) (“ensure that those people or those businesses that are damaged by these spills are fairly and adequately compensated”); 136 CONG. REC. S7752 (daily ed. June 12, 1990) (statement of Sen. Mitchell) (“ensure the fullest possible compensation of oil spill victims”).

No claimant should receive any less compensation from the Proposed Settlement than they are entitled to under the OPA. Under OPA, as noted above, 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” and 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. 33 U.S.C. § 2715(b)(2).

4.  The Proposed Settlement Fails to Pay Interest on the Amount Paid.

Under OPA, 33 U.S.C. § 2705(a), 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. The Proposed Settlement fails to pay interest on the amount paid in satisfaction of a claim.

Plaintiff Salvesen respectfully points out to this Honorable Court that the Proposed Settlement makes a mockery of the OPA.

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

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

_____________________________

Plaintiff Files Motion to Vacate Preliminary Approval Order

Tampa, FL (July 4, 2012) – On April 18, 2012, the MDL 2179 Plaintiffs’ Steering Committee (“PSC”) and BP filed their Proposed Settlement. The Proposed Settlement allegedly intends to resolve certain claims by private individuals and businesses for economic loss and property damage resulting from the “Deepwater Horizon Incident.” The Proposed Settlement defines “Deepwater Horizon Incident” as the events, actions, inactions and omissions leading up to and including (i) the blowout of the MC252 Well; (ii) the explosions and fire on board the Deepwater Horizon on or about April 20, 2010; (iii) the sinking of the Deepwater Horizon on or about April 22, 2010; (iv) the release of oil, other hydrocarbons and other substances from the MC252 Well and/or the Deepwater Horizon and its appurtenances; (v) the efforts to contain the MC252 Well; (vi) Response Activities, including the VoO Program; (vii) the operation of the GCCF; and (viii) BP public statements relating to all of the foregoing.

On May 2, 2012, the MDL 2179 Court entered a Preliminary Approval Order [As to the Proposed Economic and Property Damages Class Action Settlement].

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

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

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

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

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

Under the Oil Pollution Act of 1990 (‘OPA”), claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). In the event that a claim for damages is not paid by the responsible party within 90 days, the claimant may elect to commence an action in court against the responsible party or to present the claim to the Oil Spill Liability Trust Fund. 33 U.S.C. § 2713(c).

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

(a)  The Oil Spill Liability Trust Fund

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

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

Deepwater Horizon OSLTF Costs     =          $619 million

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

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

(b)  The Litigation Option

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

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

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

BP and the PSC clearly understand that, under OPA, Congress intended presentment to be a mandatory condition precedent to filing suit. However, yet again, the parties mislead this Honorable Court and Class Members by intentionally failing to counsel those Claimants who may opt-out of the Proposed Settlement that, under OPA, claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). In the event that a claim for damages is not paid by the responsible party within 90 days, the claimant may elect to commence an action in court against the responsible party. 33 U.S.C. § 2713(c). If a Claimant files a Complaint against BP under OPA prior to first presenting his, her, or its claim to BP and then waiting 90 days, the case will be subject to dismissal and the claimant will again be left out in the cold.

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

(i)  The Statute of Limitations

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

2.  The Proposed Settlement Grants Excessive Compensation to Attorneys.

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

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

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

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

Total No. of Paid Claimants                           = 221,358

Average Total Amount Paid Per Claimant  = $27,466.47

The GCCF data indicates that a total of 574,379 unique claimants filed claims with the GCCF during the period from approximately August 23, 2010 to March 7, 2012. The GCCF paid only 221,358 of these Claimants. In sum, the GCCF denied payment to approximately 61.46% of the claimants who filed claims. See “Gulf Coast Claims Facility Overall Program Statistics” (Status Report, Mar. 7, 2012) (a copy is attached hereto as Exhibit A).

On March 8, 2012, this Honorable Court terminated the GCCF claims process and appointed Patrick Juneau as the Claims Administrator of the Transition Process and the proposed Court Supervised Claims Program (“CSCP”). On May 2, 2012, Patrick Juneau was appointed as Claims Administrator to oversee the Claims Administration Vendors, who will process the claims in accordance with the Proposed Settlement. Under the CSCP, the evaluation and processing of claims shall continue to be performed by Garden City Group, Inc., BrownGreer, PLC, and PricewaterhouseCoopers, LLP. Accordingly, there is no reason to believe that the percentage of claimants denied payment and the average total amount paid per claimant will change under the CSCP.

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

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

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

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

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

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

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

(i)  The Time and Labor Required

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

In contrast, “In the 20 months that have passed since the JPML’s centralization order, the parties [in MDL 2179] have engaged in extensive discovery and motion practice, including taking 311 depositions, producing approximately 90 million pages of documents, and exchanging more than 80 expert reports on an intense and demanding schedule……..BP and the PSC report that in February 2011 settlement negotiations began in earnest for two distinct class action settlements: a Medical Benefits Settlement and an Economic and Property Damages Settlement.” (p. 3, Rec. Doc. 6418).

In sum, the PSC and other counsel allegedly performing common benefit work in MDL 2179 only took 311 depositions and initiated settlement negotiations “in earnest” merely six (6) months after the JPML created MDL 2179.

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

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

(ii)  The Results Obtained

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

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

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

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

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

The PSC and other counsel allegedly performing common benefit work in MDL 2179 are not double-dipping; they are triple-dipping.

The known sources of compensation received by attorneys allegedly doing common benefit work on behalf of BP oil spill victims in MDL 2179 are:

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

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

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

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

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

(i)  The Percentage Method

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

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

(ii)  The Lodestar Cross-Check

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

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

Amount Awarded                      Billable Hourly Rate                      Hours Required to Have Been Expended

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

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

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

Has the MDL 2179 Court Overreached Its Authority?

Has the MDL 2179 Court Overreached Its Authority?

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Supreme Court Decision Poses an Interesting Dilemma for the BP Oil Spill Trial Court

Tampa, FL (April 11, 2012) – The Supreme Court has held that a district court conducting pretrial proceedings pursuant to 28 U.S.C. §1407(a) has no authority to invoke 28 U.S.C. §1404(a) to assign a transferred case to itself for trial. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998).

On April 8, 2012, Selmer M. Salvesen, a clam farmer in Florida, filed a Motion to Vacate Order and Reasons [As to Motions to Dismiss the B1 Master Complaint] (Rec. Doc. 3830 dated August 26, 2011) with the MDL 2179 court. Mr. Salvesen’s Motion to Vacate poses an interesting dilemma for the BP Oil Spill trial court: (a) Does the court grant the motion to vacate the B1 order thereby derailing the MDL 2179 runaway train? or (b) Does the court ignore the Supreme Court decision in Lexecon in the name of judicial discretion, judicial efficiency, judicial economy and political expediency?

The Lexecon Rule

Justice Souter, in delivering the opinion of the Court in Lexecon, explained 28 U. S. C. §1407(a) authorizes the Judicial Panel on Multidistrict Litigation (the “Panel”) to transfer civil actions with common issues of fact “to any district for coordinated or consolidated pretrial proceedings,” but imposes a duty on the Panel to remand any such action to the original district “at or before the conclusion of such pretrial proceedings.” “Each action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated.” 28 U.S.C. §1407(a).

Justice Souter pointed out that the Panel’s instruction comes in terms of the mandatory “shall,” which normally creates an obligation impervious to judicial discretion. Anderson v. Yungkau, 329 U. S. 482, 485 (1947).

Moreover, the Supreme Court found that neither the statute’s language nor legislative history can unsettle §1407’s straightforward language imposing the Panel’s responsibility to remand, which bars recognizing any self-assignment power in a transferee court and consequently entails the invalidity of the Panel’s Rule 14(b).

The legislative history tends to confirm that self-assignment is beyond the scope of the transferee court’s authority. Justice Souter noted that the same House Report that spoke of the continued vitality of §1404 in §1407 cases also said this:

The proposed statute affects only the pretrial stages in multidistrict litigation. It would not affect the place of trial in any case or exclude the possibility of transfer under other Federal statutes…..The subsection requires that transferred cases be remanded to the originating district at the close of coordinated pretrial proceedings. The bill does not, therefore, include the trial of cases in the consolidated proceedings.” H. R. Rep. No.1130, 90th Cong., 2d Sess., p. 4 (1968) (Emphasis added)

The comments of the bill’s sponsors further suggest that application of 28 U.S.C. §1407 would not affect the place of trial. See, e.g., Multidistrict Litigation: Hearings on S. 3815 and S. 159 before the Subcommittee on Improvements in Judicial Machinery of the Senate Comm. On the Judiciary, 90th Cong., 1st Sess. Pt. 2, p. 110 (1967) (Sen. Tydings) (“[W]hen the deposition and discovery is completed, then the original litigation is remanded to the transferor district for trial”). Both the House and the Senate Reports stated that Congress would have to amend the statute if it determined that multidistrict litigation cases should be consolidated for trial. S. Rep. No. 454, 90th Cong., 1st Sess., p. 5 (1967). (Emphasis added)

MDL 2179

In order to efficiently manage MDL 2179, the court consolidated and organized the various types of claims into several “pleading bundles.” The “B1” pleading bundle includes all claims for private or “non-governmental” economic loss and property damages.  There are between 100,000 – 130,000 individual claims encompassed within the “B1” pleading bundle.

Rather than allege claims under the Oil Pollution Act of 1990 (“OPA”) (which governs the MDL 2179 cases alleging economic loss due to the BP oil spill) and the Outer Continental Shelf Lands Act (“OCSLA”) (which governs the MDL 2179 personal injury and wrongful death actions and borrows the law of the adjacent state as surrogate federal law), the PSC made the unfathomable decision to allege claims under a hodgepodge of statutes.

In the B1 First Amended Master Complaint, the PSC states, “The claims presented herein are admiralty or maritime claims within the meaning of Rule 9(h) of the Federal Rules of Civil Procedure. Plaintiffs hereby designate this case as an admiralty or maritime case, and request a non-jury trial, pursuant to Rule 9(h).”

Under general maritime law, the PSC alleges claims for negligence, gross negligence and willful misconduct, and strict liability for manufacturing and/or design defect. Under various state laws, the PSC alleges claims for nuisance, trespass, and fraudulent concealment. Under the Florida Pollutant Discharge Prevention and Control Act, Fla. Stat. § 376.011, et seq., PSC alleges a claim for strict liability. The PSC also seeks: (a) punitive damages under all claims; and (b) a declaration by the Court that the conduct of BP and its agents and representatives, including the Gulf Coast Claims Facility (“GCCF”), in obtaining releases and/or assignments of claims against other parties, persons, or entities is not an obligation of BP under OPA.

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

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

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

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

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

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

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

Since the PSC requests a non-jury trial pursuant to Rule 9(h) and alleges claims under general maritime law, rather than OPA and OCSLA, the MDL 2179 court has formulated a trial plan that dispenses with trial by jury and instead conducts a bench trial applying general maritime law.

The Heyburn Rule

The Honorable John G. Heyburn II, Chair of the Judicial Panel on Multidistrict Litigation, addressed the Lexecon decision in his article, “A View From the Panel: Part of the Solution,” 82 Tulane L. Rev. 2225 (2008).  The following is an excerpt from Judge Heyburn’s article.

Judge Heyburn points out that five appropriate strategies are available by which the Lexecon conundrum may be avoided:

(a) Provided the plaintiff is amenable and venue lies in the transferee district, the action could be refiled there.

(b) The parties could also agree to waive objections to venue.

(c) Alternatively, the transferee court could try a “Bellwether” case that was originally filed in the transferee district, the result of which may promote settlement of the transferred actions in the MDL.

(d) Another option, suggested in the Lexecon opinion itself, is for the transferor court to transfer the action back to the transferee court under § 1404(a).

(e) Still another option would be for the transferee judge to follow the action to the transferor court after obtaining an intracircuit or intercircuit assignment.

The MDL 2179 court has failed to avail itself of any of these “appropriate” strategies.

A “Bellwether” trial is sui generis; a “walks like a duck, quacks like a duck, it must be a duck” analysis cannot be used. Judge Barbier cannot try the cases transferred for “pretrial proceedings.” Judge Barbier certainly cannot try all of the plaintiffs’ claims in the aggregate in this proceeding. Nor can the Lexecon decision be circumvented by the device of permitting claimants to file “short-form joinders” injecting themselves into the limitation action. Accordingly, Judge Barbier, at the request of the PSC, formulated a non-jury trial plan which does not seek to adjudicate all the plaintiffs’ claims in the aggregate. Instead, it plans a non-jury trial of “issues” related to “allocation of fault” in the abstract. This novel 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. Moreover, the Fifth Circuit has held that class actions are not permitted in limitation proceedings. Lloyds Leasing Ltd. v. Bates, 902 F.2d 368 (5th Cir. 1990). Indeed, such a trial resembles an unsanctioned class action in almost everything but name. It does not remotely resemble a “Bellwether” trial.

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

Judge Heyburn describes the Lexecon decision as a “conundrum” which may be avoided by “resourceful” transferee judges. Plaintiff Salvesen respectfully disagrees. The Lexecon decision is not a conundrum. It is not an obstacle which judicial discretion may circumvent in the name of judicial efficiency, judicial economy or political expediency. It is the law.

GCCF Claimants Should Not be Required to Pay the Litigation Fees and Expenses Incurred by the MDL 2179 Plaintiffs’ Steering Committee

GCCF Claimants Should Not be Required to Pay the Litigation Fees and Expenses Incurred by the MDL 2179 Plaintiffs’ Steering Committee

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BP Oil Spill Victims Should Not be Taxed on the Miniscule Monetary Settlements They Receive from GCCF

Tampa, FL (January 12, 2012) – The amended MDL 2179 court order, dated January 4, 2012, provides:

“ORDERED that Defendants, or any agent or representative acting on a Defendant’s behalf, shall withhold and deposit an amount equivalent to six percent (6%) of the gross monetary settlements, judgments or other payments made after December 30, 2011, by or on behalf of one or more Defendants to any other plaintiff, putative class member or other claimant, arising out of the Macondo / Deepwater Horizon disaster, (with the exception of settlements, judgments or other payments to the United States), into a court-supervised escrow account, in order to establish a fund from which common benefit litigation fees and expenses may be paid, if and as awarded by the Court, at an appropriate time, pursuant to procedures to be determined by future order of the Court. Specifically, this hold back requirement applies to all actions filed in or removed to federal court that have been or become a part of the MDL, whether or not a motion to remand has been filed, claimants who settle directly with the Gulf Coast Claims Facility, or state court plaintiffs represented by counsel who have participated in or had access to the discovery conducted in this MDL. Exempt from this hold back requirement are state court counsel who have or had no cases in this MDL and who have never had access to any of the discovery undertaken in the MDL.”

The Impact of the Court’s Order on Private Claimants Receiving Settlements from the GCCF

The court’s amended order of January 4, 2012 will mean private claimants receiving settlements from the GCCF will be impacted by an unjustifiable financial loss and, more importantly, by their resultant loss of faith in the judicial system.

UNJUSTIFIABLE FINANCIAL LOSS

On January 3, 2012, The Louisiana Record reported that as of December 31, 2011 the GCCF had paid $2.3 billion to about 160,000 individuals, and $3.5 billion to about 60,000 businesses. Assuming BP fully funds its $20 billion commitment to the GCCF, and the GCCF fully utilizes the $20 billion to compensate victims of the BP oil spill, the monetary impact of the court order on private claimants would be approximately $852 million.

Claims which are settled through the GCCF should not be subject to the six percent (6%) hold-back because these settlements are not the result of any common benefit work. The Plaintiffs’ Steering Committee (“PSC”) itself states that, “The only work entitled to compensation from a common benefit fund is work that has demonstrably provided a benefit to all plaintiffs, or to a defined group of plaintiffs as a whole – the common benefit work.” The PSC has not performed work that has “demonstrably provided a benefit” to claimants who resolve their claims under the OPA through negotiations with the GCCF.

OPA is a strict liability statute. In order to recover damages, a claimant merely needs to show that his or her damages “resulted from” the oil spill. OPA states, “The responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages that result from such incident.” See 33 U.S.C. § 2702(a)

Under OPA, claims for damages must be presented first to the responsible party. 33 U.S.C. § 2713(a). 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 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 OSLTF. 33 U.S.C. § 2713(c)

“The overarching purpose of OPA’s mandatory alternative dispute resolution process is ‘to encourage settlement and avoid litigation.’” Boca Ciega Hotel, Inc. v. Bouchard Trans. Co., 51 F. 3d 235, 240 (11th Cir. 1995). Unfortunately, GCCF’s “Delay, Deny, Defend” strategy avoids settlement and encourages litigation.

BP oil spill victims who submit claims and settle them through negotiations with the GCCF are simply following the law. The PSC cannot take credit for the passing of OPA and its “presentment” requirement any more than it can take credit for creation of the GCCF itself, established as a result BP’s designation as a “Responsible Party” under OPA. Both of these factors, OPA’s statutory requirements and the creation of the GCCF, have led to the resolution of many claims and will lead to more in the future. The PSC cannot legitimately claim responsibility for either. See Opposition to PSC’s “Motion to Establish Account and Reserve for Litigation Expenses,” In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010 (10-02179), Doc. R. 4682 at p. 5.

The PSC alleges it has “exerted an enormous litigation pressure, risk, leverage and incentive for BP, through the GCCF, to try to settle its liabilities, in advance of trial.” The PSC further contends its work has “common benefit” for all plaintiffs. As explained below, this is inaccurate.

LOSS OF FAITH IN THE JUDICIAL SYSTEM

Multidistrict Litigation (“MDL”)

The Multidistrict Litigation Act passed by Congress in 1968, codified at 28 U.S.C. § 1407, states that civil actions pending in different districts and involving one or more common questions of fact may be transferred to any district for coordinated or consolidated pretrial proceedings.

The purpose of consolidation is to promote the “just and efficient” conduct of the action. See 28 U.S.C. § 1407(a); see also H.R. Rep. No. 1130, 90th Cong. 2nd Session, 1968 USCCAN 1898, 1900 (explaining that “pretrial consolidation must promote the just and efficient conduct of such actions and be for the convenience of the parties and witnesses”). Congress intended for consolidation to be ordered “only where significant economy and efficiency in judicial administration may be obtained.” See H.R. Rep. No. 1130, 1968 U.S.C.C.A.N. at 1900 (emphasis added).

In the MDL No. 2179 Transfer Order, dated August 10, 2010, the J.P.M.L. held that the Eastern District of Louisiana was an appropriate Section 1407 forum for actions which “indisputably share factual issues concerning the cause (or causes) of the Deepwater Horizon explosion/fire and the role, if any, that each defendant played in it. Centralization under Section 1407 will eliminate duplicative discovery, prevent inconsistent pretrial rulings, including rulings on class certification and other issues, and conserve the resources of the parties, their counsel, and the judiciary. In all these respects, centralization will serve the convenience of the parties and witnesses and promote the more just and efficient conduct of these cases, taken as a whole.” See In re: Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, 731 F. Supp. 2d 1352, 1354 (J.P.M.L. 2010).

U.S. District Judge Carl J. Barbier, who has been appointed by the J.P.M.L. to serve as the transferee judge in MDL 2179, is responsible for ensuring that significant economy and efficiency in judicial administration is obtained. Judge Barbier appointed each member of the PSC and, via the court’s amended order of January 4, 2012, established a fund of potentially $852 million from which PSC’s common benefit litigation fees and expenses may be paid.

The appointment and compensation of the PSC by Judge Barbier raises an important question for GCCF claimants and MDL 2179 plaintiffs: Does PSC’s loyalty rest with: (a) ensuring justice is obtained for the plaintiffs, or (b) ensuring significant economy and efficiency in the judicial administration of the MDL 2179 Court?

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

The Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. § 1331 et seq., governs those cases involving personal injury and wrongful death actions. The Oil Pollution Act of 1990 (“OPA”),  33 U.S.C. § 2701 et seq, governs those cases alleging economic loss due to the BP oil spill. See “BP Oil Spill: Is the MDL 2179 Trial Plan Unconstitutional?” available online at https://donovanlawgroup.wordpress.com/2012/01/03/bp-oil-spill-is-the-mdl-2179-trial-plan-unconstitutional/

Background

In order to efficiently manage MDL 2179, the Court consolidated and organized the various types of claims into several “pleading bundles.” The “B1” pleading bundle includes all claims for private or “non-governmental economic loss and property damages.” There are in excess of 100,000 individual claims encompassed within the “B1″ bundle.

On January 12, 2011, the MDL 2179 Court issued PTO No. 25, in order to clarify “the scope and effect” of the “B1″ bundle Master Complaint. The Court held that any individual plaintiff who is a named plaintiff in a case that falls within pleading bundle “B1″ “is deemed to be a plaintiff in the “B1″ Master Complaint.” Also, “the allegations, claims, theories of recovery and/or prayers for relief contained within the pre-existing petition or complaint are deemed to be amended, restated, and superseded by the allegations, claims, theories of recovery, and/or prayers for relief in the respective “B1″ Master Complaint(s) in which the Defendant is named.”

The “B1″ Master Complaint

In the “B1″ Master Complaint, the PSC alleged claims under general maritime law, various state laws, and OPA. Under general maritime law, PSC alleged claims for negligence, gross negligence, and strict liability for manufacturing and/or design defect. Under various state laws, PSC alleged claims for nuisance, trespass, and fraudulent concealment, and also alleged a claim for strict liability under the Florida Pollutant Discharge Prevention and Control Act, Fla. Stat. § 376.011, et seq. Additionally, PSC sought punitive damages under all claims and requested declaratory relief regarding any settlement provisions that purport to affect the calculation of punitive damages.

The Court’s Order and Reasons [As to Motions to Dismiss the B1 Master Complaint]

On August 26, 2011, the MDL 2179 Court granted in part Defendants’ Motions to Dismiss the “B1″ Master Complaint. The Court ruled: (a) Admiralty jurisdiction is present because the alleged tort occurred upon navigable waters of the Gulf of Mexico, disrupted maritime commerce, and the operations of the vessel bore a substantial relationship to traditional maritime activity. With admiralty jurisdiction comes the application of substantive maritime law; (b) State law, both statutory and common, is preempted by maritime law, notwithstanding OPA’s savings provisions. All claims brought under state law are dismissed; and (c) General maritime law claims that do not allege physical damage to a proprietary interest are dismissed under the Robins Dry Dock rule, unless the claim falls into the commercial fishermen exception. In re Oil Spill by the Rig Deepwater Horizon in the Gulf of Mexico, on April 20, 2010, -  F. Supp. 2d -, 2011 WL 3805746 (Aug. 26, 2011 E.D. La.).

The Rule of Lexecon

The rule of Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) holds that an MDL judge may not try the actions transferred from other judicial districts under 28 U.S.C. § 1407. When the J.P.M.L. transfers a matter to an 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 J.P.M.L. 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. Lexecon applies to MDL 2179.

Potential Reasons for the Loss of Faith in the Judicial System by GCCF Claimants

I. Private claimants receiving settlements directly from the GCCF are being forced by the MDL 2179 court to pay the litigation fees and expenses of a PSC from which the claimants will receive no benefit whatsoever. Moreover, the actions by this PSC ensure that the GCCF has no incentive to settle claims.

II. The PSC appears to be more interested in ensuring significant economy and efficiency in the judicial administration of the MDL 2179 court rather than in obtaining justice for the MDL 2179 plaintiffs. In its “B1″ Master Complaint, the PSC alleged claims under general maritime law, not under OCSLA and OPA, thereby assisting the court in expeditiously being able to:

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

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

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

(d)  Develop a trial plan that dispenses with trial by jury and instead conducts a bench trial applying general maritime law.

Judicial economy is undoubtedly well-served by MDL consolidation when scores of similar cases are pending in the courts. Nevertheless, the excessive delay and “marginalization of juror fact finding” (i.e., dearth of jury trials) sometimes associated with traditional MDL practice are developments that cannot be defended. Delaventura v. Columbia Acorn Trust, 417 F. Supp. 2d at 153 (D. Mass. 2006). By forcing Plaintiffs in the instant case to await resolution of irrelevant discovery and factual disputes relating to completely different parties, theories of recovery and remedies, consolidation with MDL No. 2179 unreasonably delays Plaintiffs’ pursuit of their claims.

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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?

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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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