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White House Legal Authority Over Oil Claims Assessed as Spill Continues

June 14, 2010 at 12:00 AM EDT
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As the Obama administration pressures BP to start an independently monitored escrow fund to expedite oil leak damage claims for people and businesses in the Gulf region, Ray Suarez talks to two attorneys about the White House's legal authority to enforce damage payments.
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RAY SUAREZ: Some further analysis now about the idea of an escrow fund and its basis in law from a pair of attorneys.

Steve Yerrid is a trial lawyer who was appointed as a special counselor to the state of Florida last week by Governor Charlie Crist. He will advise the governor about legal issues related to the spill. And Daniel Farber is director of the environmental law program at the University of California, Berkeley’s Law School.

Steve Yerrid, let me start with you. Can the government, under current law, compel BP to start an escrow fund?

STEVE YERRID, special counsel, State of Florida: Well, Ray, we’re clearly on new land right now, a frontier that was created after the Valdez oil spell — spill — excuse me.

And what I think they’re going to do is premise it upon the — the responsible party connotation and the Oil Pollution Act, which was packed — passed in 1990, which makes a responsible party liable for all the damages and the cleanup.

What they want to do now is front-end that and put it in a trust fund to get away from BP looking like an oversight entity and put it on the government, a government we can trust a lot better than we can trust an oil company.

RAY SUAREZ: Daniel Farber, you’re familiar with what’s in that federal oil protection act. Is there a mechanism in there for the government to say, you must create an escrow fund?

DANIEL FARBER, Boalt Hall School of Law, University of California, Berkeley: Well, I’m having a little trouble seeing that.

They’re — certainly, it’s true that, at the end of the day, victims can go to court and sue. And BP also has to have a mechanism for processing claims before that. But I don’t see anything at least that to my mind requires them to set up this escrow or trust fund. I think it might be a good idea, but I’m not at all sure that it’s in the law.

RAY SUAREZ: Well, Daniel Farber, the advantages of having money set aside well before the years of litigation begin, is there something in it for BP, as well as for the claimants, if that can be agreed to?

DANIEL FARBER: No, I — yes, I think — I think there is.

I think BP is facing a situation where there is enormous distrust about its capability for dealing with this, about its good faith, on the part of a lot of people inside the U.S. government and among the public.

I think setting up a fund like this would be very helpful for them, in terms of showing good faith, of assuring people that they are going to take responsibility for what happened. So, I see a lot of reasons for them to do it. Whether they have to do it, though, is something that’s less clear.

RAY SUAREZ: Steve Yerrid, there have been some very large dollar figures thrown around in speculation about what this escrow fund would hold. How do you determine how big it has to be, and that must be a part of the negotiation that precedes setting it up, no?

STEVE YERRID: First, let’s — let’s set the record straight. This has been a public relations nightmare for BP. I mean, I — I agree with the professor. I don’t think there’s a mandate or a proviso in the statutory scheme of things that requires the setting up of the fund.

What we’re doing now is seeing an administration trying to get ahead of the curve. They’re trying to basically take the direction and control from BP and put it in the hands of the American government, so that we can control the international conglomerate’s liability, which is defined under the act in ’90.

So, what I think is going on is a process whereby they’re trying to speculate — we would call it guessing in the lay terms — but, basically, estimate a multibillion-dollar amount of damages which can’t begin to fathom what could happen to my beloved state and the coastal states of the South, should this spill continue as it has unabated, and even now if it was stopped what may happen to the pollutants as they creep their way towards shore both on top and underwater.

RAY SUAREZ: But wouldn’t they want some protection against future claims in return for this escrow account? When you’re figuring out how much money has to go into that pot, doesn’t BP, as a corporation, want some predictability down the road, so, if they allow this, that you — you won’t come back again in three years, four years, five years?

STEVE YERRID: And that’s such an excellent point. That’s the problem with the amount of money. It would have to have, by definition, a non-capped aspect to it, because we just simply cannot cap our liability right now to some unknown figure.

I think it needs to be couched more of a good-faith show by BP. And there may be others. You know, Halliburton and Transocean were out there. And they have yet to be determined as far as wrongful conduct or liability. We’re looking at all that now.

But, with regard to this fund, whatever it is, it’s got to have an escape clause, so that, if the damages escalate beyond that point — remember, that’s about one year’s earnings, one year’s annual profit for BP. That’s the relativity of what we’re talking about. They earned $17 billion last year, might do a little better than that this year. So, we’re talking about a year’s worth of profit.

What we’re talking about, on the other hand, is a generation’s worth of damages, maybe a legacy that will invade the next generation. So, we’re talking about monumental potential damages. Am I comfortable with any type of cap? Absolutely not.

RAY SUAREZ: Well, Professor Farber, this is a situation with a very large number of claimants, a so far undetermined amount of damage. And in cases, many cases like this, the litigation has taken so long that the original company doesn’t even exist anymore by the time all the lawsuits are wrapped.

Do you have to perhaps create a purpose-built, custom-built legal scheme to handle the BP case?

DANIEL FARBER: Well, I don’t know if we need a custom-built scheme for BP, but I think that this has shown a genuine problem, both here, but also with other kinds of environmental disasters, with public health disasters, which is that we have a very long litigation process, and people may need help right away.

And we need to have a better mechanism for getting people immediate relief, rather than waiting until how many years later the Supreme Court finally disposes of the case. So, I — I really wish Congress would address that, both for these oil spills, not just this one, but others as well, and also for similar kinds of mass court cases. I think that would be a really constructive step forward.

RAY SUAREZ: Is there a precedent that gives some — some positive guidance, a good example of how this might be handled, a model for BP?

DANIEL FARBER: I think there have been, especially in cases where we have already had some litigation. In the asbestos cases, partly as a result of bankruptcies and so forth, we have set up funds to deal with claims.

We have the 9/11 fund. I think that we could find good guidance on how to set up a procedure that would help us in these situations.

RAY SUAREZ: Professor Farber, Steve Yerrid, gentlemen, thank you both.

DANIEL FARBER: Thank you.

STEVE YERRID: Thank you, Ray.