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Are the Odds Against BP in Appeal Over Damage Claims?

July 9, 2013 at 12:00 AM EDT
Judy Woodruff talks with Paul Barrett of Bloomberg Businessweek for background on the appeal by BP over the settlement agreement to cover claims and clean-up costs associated with the Deep Water Horizon oil spill.

JUDY WOODRUFF: Eleven men lost their lives in the accident. So far, the company has paid $11 billion dollars for all claims. Add in costs for cleanup, response and penalties from the government, and the total comes to nearly $30 billion dollars overall. Billions more could be in the offing. The civil trial over liability for the Deepwater Horizon spill resumes this fall.

For background, I’m joined by reporter Paul Barrett, who wrote a story on this for Bloomberg Businessweek.

Paul Barrett, welcome to the program.

First of all, why the BP saying that some of the claims coming in now are fictitious? What do they base that on?

PAUL BARRETT, Bloomberg Businessweek: Well, what they’re saying is, is that in loosening the criteria under which the settlement facility is paying these claims out, a system has been set up where people can come forward with just about any kind of paperwork, claim that they had a loss in the year 2010, and end up with millions of dollars.

This is, of course, very, very strongly contested by the plaintiffs’ lawyers on the other side, who say that they’re just following the terms that BP agreed to and that BP got out of litigating these thousands of cases in exchange for the settlement. So you have got a classic legal clash.

JUDY WOODRUFF: So, give us an example of one of these claims that BP paid that they say they shouldn’t have had to pay.

PAUL BARRETT: Well, I will give you an example from one of the interviews I did for the article I had.

I spoke to a lawyer in Florida who said he had a real estate agent who was an hour away from the shore who had lost some income in 2010 because of the bursting of the housing bubble in Florida, but made an $80,000 dollar claim they were quite confident was going to get paid.

That’s the kind of claim that BP says that it shouldn’t be paying out. And when you multiply that by tens of thousands of claims, it starts to add up to a lot of money.

JUDY WOODRUFF: But aren’t these decisions based on an agreement that BP itself made, a formula that it looked at and agreed to?

PAUL BARRETT: That’s right, as far as it goes.

BP did say that they agreed to a formula which took into account geographic location and some very, very basic accounting principles. But the idea was that people were supposed to have had real business losses, not just a pile of paperwork that, if they shuffled it around, made it look like they had business losses, but actual business losses.

And the company has said that under the supervision of the administrator appointed by the federal judge you referred to in your setup piece, that millions and millions of dollars are going out the door to people who had absolutely no loss related to either the spill in specific or the larger economic troubles in the Gulf region that occurred as a result of the spill.

JUDY WOODRUFF: How do you account for this? You describe it as a whole new wave of clients who have shown up in the last year or so. How do you account for that?

PAUL BARRETT: Well, I think that’s an important fact to add in. It’s not as if the settlement that we’re talking about right now was the first arrangement that came right out of the box.

Instead, for the first 18 months or so after the spill, there was a whole different settlement program. That settlement program itself paid out billions of dollars. But there were still a lot of lawsuits around the margins. So in order to resolve those lawsuits, the company agreed to a new settlement. And with the new settlement came a new claims adjuster, a new guy. His name is Patrick Juneau. He’s a Louisiana lawyer.

And it was up to him to decide how they continue to disburse the money. When he came into control of the process, that’s when BP says the problems set in. And there is some serious evidence that there are problems there. I mean, right now, the federal judge has gotten to the point where he has brought in Louis Freeh, the former head of the FBI, to investigate allegations of kickbacks in the settlement process.

So there is some pretty substantial smoke on the horizon. And the question is, is what will Freeh find and what will the federal appeals court say about the way the settlement is being administered?

JUDY WOODRUFF: You also write, Paul Barrett, that there’s a risk that BP is taking by going over the head of the federal judge who’s dealing with these settlement questions and who is also the judge presiding separately over that civil trial we mentioned.

PAUL BARRETT: Yes. That’s absolutely true.

BP is taking a big risk. They already have antagonized this federal judge, whose name is Carl Barbier. He’s made that clear in open court by his body language and comments he’s made to BP’s lawyer that he’s very unhappy that the company has come back and complained about the settlement that it agreed to. And, as you say, the stakes go even beyond this settlement, because he still has pending in front of him a trial in which the federal government is seeking up to $17.5 billion dollars on top of everything we have been talking about this evening from the company.

So this is a huge mess for BP and it’s not at all clear that the company’s late-in-the-game aggressive posture is one that will ultimately succeed.

JUDY WOODRUFF: We talked to a legal scholar today who said — who talked about how unusual it is for a company in this situation to appeal, to go as far as the appellate process or an appellate court, as BP has done, and talked how long the odds are against BP in this.

PAUL BARRETT: I think that’s a fair assessment on two counts, one, that once there’s been a settlement that a federal judge has approved, the settlement has been challenged and the federal judge comes back and says, no, it’s being enforced the way I thought it should be enforced, it’s quite unusual for a federal appeals court to intervene at this point.

Normally, they would defer to the trial judge handling the settlement. In a second sense, BP is objecting to the way a basic contract is being interpreted. That’s not normally the business of an august federal appeals court. Contract interpretation of this basic level is usually left to the trial level if there’s a dispute.

So I think the odds for BP are considerable. And that’s why BP has brought in some very heavy-duty legal firepower. Ted Olson, one of the best known appellate lawyers in the country, has parachuted into the case on behalf of the company. And I think Olson’s involvement is also an implicit threat that, if we don’t win at the federal appeals court level, we’re taking this to the Supreme Court, because that’s what Ted Olson is best known for, is his U.S. Supreme Court advocacy. So I think that’s the signal that BP is sending.

JUDY WOODRUFF: Paul Barrett with Bloomberg Businessweek, we thank you.

And, online, you can see what the spill has cost BP. We have a by-the-numbers on our home page.