BP’s Slick Arguments Limiting Settlement Recovery for Business Economic Loss Claims Don’t Hold Water
By: Ramesh Reddy, Graffagnini + Associates, LLC, [email protected]
Last week, Louisiana Federal Judge Carl Barbier rejected BP’s arguments intending to reduce settlement awards for business claimants stemming from the April 2010 Gulf of Mexico oil spill. As a result, the Claims Administrator is now processing claims again that were put on hold. In short, all lights are green for all businesses to submit claims.
The oil spill settlement agreement stipulates that each business claimant must clear two hurdles in order to receive settlement proceeds. First, a claimant must prove the oil spill caused damage to the claimant’s business (causation) and, second, a claimant must show the level of damage sustained by the business (compensation). Both causation and compensation are demonstrated according to a purely economic formula based on a comparison of profits and losses during the time prior to the spill versus the time following the spill, as measured by variable profit (the amount of profit lost by the claimant’s business post-spill; calculated by subtracting revenue from variable expenses).
BP’s main gripe was about how the Claims’ Administrator calculated variable profit. Their argument was simple: a claimant should demonstrate that variable profit should reflect only losses related to the oil spill, not other losses, such as normal business cycles. BP argued that “variable expenses must correspond to revenue those expenses produced.” However, according to Judge Barbier, if that were the case, the settlement program would need to consider expenses that were outside the range required to fulfill causation and compensation – not something previously agreed to by the parties.
Barbier concluded that all parties agreed to an objective, data-based framework, which, when met, presumed causation. He admonished: “[these considerations] are all consequences BP accepted when it decided to buy peace through a global, class-wide resolution. BP’s interpretation injects a subjective notion of alternative causation and a degree of complexity that are contrary to the Settlement’s terms.”
Word on the street is that BP’s unsuccessful attempts to change course stem from unanticipated gaping holes burned in their pockets. In its 2012 annual report, the company stated that, at a minimum, only $7.7 billion in losses could be estimated with certainty for business economic loss and medical claims. Although BP promised to appeal adverse rulings vigorously, it also admitted it actually had no idea how much it would end up paying, once this was all said and done.
This is very good news for claimants! Not only does this legal ruling provide all claimants with greater breadth to show deeper losses, it shows that Judge Barbier continues to be fair and reasonable in his legal reasoning, boding extremely well for faster settlement adjudication. The last thing the Claims Administrator needs is his decision-making authority zapped by a wearisome judge. And, with any luck, that will bring claimants closer to crossing the finish line.
By: Ramesh Reddy, Graffagnini + Associates, LLC, [email protected]
Last week, Louisiana Federal Judge Carl Barbier rejected BP’s arguments intending to reduce settlement awards for business claimants stemming from the April 2010 Gulf of Mexico oil spill. As a result, the Claims Administrator is now processing claims again that were put on hold. In short, all lights are green for all businesses to submit claims.
The oil spill settlement agreement stipulates that each business claimant must clear two hurdles in order to receive settlement proceeds. First, a claimant must prove the oil spill caused damage to the claimant’s business (causation) and, second, a claimant must show the level of damage sustained by the business (compensation). Both causation and compensation are demonstrated according to a purely economic formula based on a comparison of profits and losses during the time prior to the spill versus the time following the spill, as measured by variable profit (the amount of profit lost by the claimant’s business post-spill; calculated by subtracting revenue from variable expenses).
BP’s main gripe was about how the Claims’ Administrator calculated variable profit. Their argument was simple: a claimant should demonstrate that variable profit should reflect only losses related to the oil spill, not other losses, such as normal business cycles. BP argued that “variable expenses must correspond to revenue those expenses produced.” However, according to Judge Barbier, if that were the case, the settlement program would need to consider expenses that were outside the range required to fulfill causation and compensation – not something previously agreed to by the parties.
Barbier concluded that all parties agreed to an objective, data-based framework, which, when met, presumed causation. He admonished: “[these considerations] are all consequences BP accepted when it decided to buy peace through a global, class-wide resolution. BP’s interpretation injects a subjective notion of alternative causation and a degree of complexity that are contrary to the Settlement’s terms.”
Word on the street is that BP’s unsuccessful attempts to change course stem from unanticipated gaping holes burned in their pockets. In its 2012 annual report, the company stated that, at a minimum, only $7.7 billion in losses could be estimated with certainty for business economic loss and medical claims. Although BP promised to appeal adverse rulings vigorously, it also admitted it actually had no idea how much it would end up paying, once this was all said and done.
This is very good news for claimants! Not only does this legal ruling provide all claimants with greater breadth to show deeper losses, it shows that Judge Barbier continues to be fair and reasonable in his legal reasoning, boding extremely well for faster settlement adjudication. The last thing the Claims Administrator needs is his decision-making authority zapped by a wearisome judge. And, with any luck, that will bring claimants closer to crossing the finish line.
