Saturday, February 25, 2012

Diving into the Wreck - BP & Kenneth Feinberg's Gulf Coast Gambit

Kenneth Feinberg
The imminent start of the first phase of the liability trial regarding the BP Gulf of Mexico oil spill is an appropriate occasion to post this abstract and a link to the text of my new article. - GWC

Diving into the wreck: BP and Kenneth Feinberg’s Gulf Coast Gambit
17 Roger Williams University Law Review 137 (2012)

by George W. Conk
The 1990 Oil Pollution Act mandate - that a party “responsible” for an oil spill establish a “procedure” to  pay interim damages - has largely removed the courts from the process of determining scope of liability and turned it over to the private ordering of the claims bureau established by the responsible parties designated by the President under the OPA.

BP put its “procedure” in the hands of a lawyer of solomonic reputation - Kenneth Feinberg.  His broad settlement authority was designed to produce both prompt compensation for current losses (without prejudice to future claims) and early settlements of claims for  any future losses.  Through its  Gulf Coast Claims Facility  BP - making interim payments - has had a nearly free hand in determining the extent of its liability under the OPA. Though plaintiffs lawyers have moved to “supervise” the process through the MDL, neither a negotiated grid nor any court ruling has defined the scope of liability.

BP’s  private claims resolution process is almost entirely unregulated.  Only after months of jaw-boning by Gulf Coast Attorneys General and the U.S. Attorney General did BP  agree to be audited.  No regulations govern responsible parties who establish a “procedure”. The GCCF’s allocations are often impenetrable.  BP’s  GCCF can be described as the pseudo-fund model for mass tort claims resolution.  Though its name suggests an independent fund, the GCCF is in fact merely BP’s statutorily compelled mechanism for satisfying economic loss and clean-up claims.  In the absence of either regulatory guidance or court rulings on scope of liability the settlement parameters are indistinct to claimants.  Even BP is uneasy because Feinberg’s settlement offers under the OPA  go well  beyond the narrow parameters of maritime courts which in spill claims have historically denied compensation to all in the supply chain except fishermen and those who suffered property damage.

 The executive branch should examine the OPA’s regulatory gap.  No regulations govern the manner in which a solvent polluter meets its statutory clean-up and compensation responsibilities.  There is no liability guidance, no audit, no reporting, no monitoring of the company’s ability to meet its obligations, no review of its success in meeting its obligations.   If the executive branch does not take this up, Congress in its oversight capacity should do so.

Postscript:  my article does not discuss the August 26 ruling by Judge Barbier that touched on the scope of liability issue.  He ruled that liability under maritime law is limited to fishermen and those who suffered property damage or personal injury. However, he suggests that the scope of liability will be broader under the Oil Pollution Act.

The block quote below gives some of the flavor. - GWC
[The Court notes that OPA does not expressly require “proximate cause,” but rather only that the loss is “due to” or “resulting from” the oil spill. While the Court need not define the precise contours of OPA causation at this time, it is worth noting that during oral argument both counsel for BP and the P(laintiffs) S(teering) (Committee) conceded that OPA causation may lie somewhere between traditional “proximate cause” and simple “but for” causation. (citing CSX v. McBride, U.S. 2011)]

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