NEW ORLEANS (Legal Newsline) - Edward Sherman, a professor at Tulane University Law School in New Orleans, contends that when it comes to the settlement in the BP oil spill litigation, the legal community remains divided on whether BP should pursue its fight over the payment of business economic loss claims.

Sherman, who teaches complex litigation, explains that some argue that BP and the plaintiffs' steering committee agreed to a formula that removed uncertainty by removing the causation requirement. As a result, businesses along the Gulf Coast collected money strictly based on what they made before the oil spill and what they made after the oil spill.

But, he says, others argue that BP never would have agreed to a settlement that permitted businesses to receive payments without showing losses directly related to the spill.

"BP argues, no, that was not what was intended," Sherman said. "The government and the plaintiffs say yes, that is what was intended, and it was very clear. The judges questioning at the Fifth Circuit really showed a split in the court."

On Oct. 2, a U.S. Court of Appeals for the Fifth Circuit panel sided with BP. The panel issued a split 2-1 decision, finding that U.S. District Judge Carl Barbier lacked authority to approve a settlement that included class members who either showed losses unrelated to the oil spill or suffered no losses at all.

"The balance of equities favors a tailored stay," Judge Edith Brown Clement wrote in the opinion. "The interests of individuals who may be reaping windfall recoveries because of an inappropriate interpretation of the Settlement Agreement and those who could never have recovered in individual suits for failure to show causation are not outweighed by the potential loss to a company and its public shareholders of hundreds of millions of dollars of unrecoverable awards."

The panel remanded the case to the U.S. District Court for the Eastern District of Louisiana with an order that Barbier and claims administrator Patrick Juneau review and revise the agreement so that claimants' payments reflect actual damage.

The following day, on Oct. 3, Barbier ordered Juneau to stop payments for business economic loss claims. He also ordered BP and the plaintiffs' steering committee to submit proposals on how to handle those claims in the future.

On "The State of the Gulf," a new website BP launched to counter critics, the company points out that the Fifth Circuit confirmed its key argument that claimants should not receive payments for "fictitious or inflated losses."

"BP agreed to a settlement that would pay legitimate claims for real financial losses due to the spill, not fictitious losses based on cash receipts that do not reflect economic reality," BP said on its website. "Furthermore, BP argued that the misinterpretation benefitted parties that are not really members of the class and created conflicts - both between them and legitimate class members and among similarly situated class members whose compensation varies dramatically based on arbitrary and irrelevant factors."

BP adds that if Juneau revises the loss calculation and causation policies, the settlement will fulfill its purpose of compensating claimants who "sustained actual losses that are traceable to the Deepwater Horizon accident."

According to "The State of the Gulf," BP has paid nearly $10.9 billion for individual and business claims as of Sept. 30. BP also points out that it specifically paid $3.75 billion for economic and property damage.

Howard Erichson, a professor at Fordham University School of Law, who teaches civil procedure and complex litigation, contends that those following BP's dispute over the interpretation of the settlement should understand why the company negotiated the agreement.

Shortly after the April 2010 Macondo Well blowout dumped millions of barrels of oil into the Gulf of Mexico, BP announced it would create a settlement fund called the Gulf Coast Claims Facility. The company asked Kenneth Feinberg to oversee that fund.

Erichson argues that it was unusual for BP, a mass tort defendant, to set up a program for settling claims one by one, on such a massive scale.

"To me, the amazing thing was that unlike every other defendant in the world, this one was actually willing to say to a claims administrator, you decide how much each person should get in the settlement," Erichson said. "We are willing to relinquish power over that.

"In some ways, it was a potentially excellent precedent if other defendants were willing to do the same thing. But it turns out now not even BP was willing to do it."

Erichson explains that the Gulf Coast Claims Facility was attacked from both sides - claimants expressed concerns over its neutrality, while BP decided it cost too much money.

As a result, BP and the plaintiffs' steering committee negotiated the current settlement class action. In Erichson's opinion, even though BP was settling claims and claimants were receiving compensation, BP needed to establish something more final.

"That was an interesting turn, and it was a turn that says a lot about what the pressures are in mass tort litigation, and the demands that defendants have for closure," he said. "And I think from the perspective of a group of plaintiff lawyers, there was an opportunity here."

But, Erichson contends, BP failed to reach a final resolution, as shown by its objections to the payouts claimants received under the settlement.

"It was BP that wanted the finality of a settlement class action," he said. "But now there's a kind of buyer's remorse. They bought a deal and now it turns out they're unhappy with how that deal is being moved forward."

From Sherman's perspective, BP's case continues to move relatively quickly despite its complexity. However, he refers to BP's appeal over the interpretation of the settlement, as well as its latest appeal over the entire agreement, as a "hitch" in the process.

On Nov. 4, BP again appeared before the Fifth Circuit, arguing over Barbier's approval of the settlement in April 2012, and his order and opinion certifying a settlement class in December 2012.

Sherman says the appeal was consolidated with complaints from attorneys in Louisiana and Texas who opposed the settlement. Those attorneys separated from the plaintiffs' steering committee, claiming their clients did not receive adequate payments.

"BP cited the October 2 Fifth Circuit determining that the administrator and judge had misinterpreted the settlement agreement, but the issue on this appeal was more broadly whether a settlement class should have been certified and the entire settlement approved," he said.

The Fifth Circuit has not indicated when it will rule on BP's appeal of the settlement.

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