Payments from BP claims settlement could resume soon — or maybe not

Now that a federal appeals court in New Orleans has decided not to reconsider its stance that businesses can collect money from BP’s multibillion-dollar oil-spill settlement fund without having to show that the 2010 Deepwater Horizon disaster actually caused their losses, some experts following the case believe it is only a matter of days before long-stalled payments of certain claims can resume.

Other experts, though, say the ongoing legal challenges by BP must finish working their way through the courts first.

The 2012 settlement called for treating all claimants who live in a certain area along the Gulf Coast the same if they could show a loss of income after the disaster, regardless of the reason for that loss. However, BP has contended for the past year, in court filings and full-page ads in national newspapers, that businesses should not be paid unless they can show the oil spill led to their losses.

By a 2-1 vote, a panel of the 5th U.S. Circuit Court of Appeals on March 3 upheld an earlier ruling by U.S. District Court Judge Carl Barbier, who is overseeing the Gulf oil spill litigation. Barbier had ruled that the settlement’s terms meant even unharmed plaintiffs could receive money and that BP knew as much when it agreed to the deal in order to avoid having to litigate each case individually.

After that ruling, BP requested a rehearing by the full appeals court on whether businesses must show the spill caused their losses. The court voted 8-5 against the rehearing Monday.

The full appeals court’s ruling apparently consolidated two issues before it: the validity of the entire settlement and whether businesses must show the spill caused their losses. The court voted against rehearing either issue.

Last year, Barbier issued a temporary injunction against payment of certain business claims. The appeals court’s March 3 ruling said the injunction should be dissolved but still left it in place until both issues before the court were completely resolved.

BP spokesman Geoff Morrell said Monday that the British oil giant is “considering its legal options.”

“BP is disappointed that the full 5th Circuit will not be considering the divided panel decisions relating to the compensation of claims for losses that have no apparent connection to the spill,” he said in a written statement.

Appeals Court Judge Leslie Southwick, appointed to the court by former President George W. Bush, wrote in Monday’s decision that the settlement’s policy for issuing payments was put together “with input and assent from BP.”

Southwick wrote that the policy, which served as a substitute for requiring direct evidence of a claimant’s connection to the spill and the cause of losses, “described four geographic zones, several types of businesses, formulae for presenting economic losses, and various presumptions regarding causation that apply to specific combinations of those criteria.”

Satisfying the criteria, he said, “would establish causation for the purposes of the settlement agreement,” a benchmark that he noted was “acceptable to the parties at the time, and remained so through approval of the settlement agreement in December 2012.”

Judge Edith Brown Clement, also appointed by former President Bush, dissented, as she did when the 5th Circuit upheld an earlier ruling by Barbier in March.

Clement wrote that the court’s decision means “the class of people who will recover from this settlement continues to include significant numbers of people whose losses, if any, were not caused by BP.”

“Our courts’ decisions would allow payments to ‘victims’ such as a wireless phone company store that burned down and a RV park owner that was foreclosed on before the spill,” Clement wrote, citing examples of alleged fraud that BP has referenced in the past in denouncing how the settlement has played out. “Left intact, our holdings funnel BP’s cash into the pockets of undeserving nonvictims.”

Clement said the formula for the settlement meant it could produce “certainly absurd results,” and indicated in her 10-page dissent that she thought the appellate court was “party to this fraud” in part because it had adopted “an unreasonable interpretation” of the deal’s stance on showing causation.

At the moment, though, payment of such stalled business claims remains on hold.

Patrick Juneau, the Lafayette lawyer administering the settlement — which was designed to resolve hundreds of thousands of claims for losses tied to the spill — called Monday’s appeals court decision an example of “the legal process running its course.”

Juneau said the business claims in question, which have been stalled for months, could resume following a mandated seven-day waiting period after Monday’s ruling. Still, BP could ask the U.S. Supreme Court to put the payments on hold until that court decides whether to hear BP’s anticipated appeal.

Juneau said he was not particularly surprised by Monday’s decision. “I knew that the panel had already ruled,” he said, “and just looking at the panel’s ruling, it would be a logical conclusion, at least from my standpoint, that it would be sustained.”

Stuart Smith, a New Orleans lawyer who says he represents more than 500 clients in the high-profile litigation, said he believes BP has slim odds of receiving relief from the nation’s highest court. “The ball is now back in the district court, and so it’s up to the judge to vacate the injunction and to order the funds facility to begin paying claims again,” he said.

Smith and others involved in the litigation are optimistic that Monday’s decision could bring a thaw to the hold on payments. Brent Coon, a Texas lawyer who says he represents thousands of businesses and residents who suffered losses in the wake of the disaster, said he was optimistic that Monday’s decision would get the payments flowing again to Gulf Coast businesses.

“I would hope that it frees up the general injunction payments. People have been waiting for two years since the settlement was announced,” said Coon, who has long been a critic of BP’s settlement.

David Logan, dean of the law school at Roger Williams University in Rhode Island, said he expects BP will try to take its case to the U.S. Supreme Court but that the odds the court will agree to hear the case are long, in part because the court receives about 10,000 petitions for a writ of certiorari each year, granting and hearing oral arguments in only about 80 cases.

Even so, Logan said, it’s possible the injunction against payments will remain in place until the Supreme Court decides whether to hear the case. “We’re talking about what might be a six-month delay before the papers get organized and submitted,” he said, adding that the delay could be made “out of an abundance of caution.”

“Once the money gets paid out, you can’t claw it back, so it’s certainly possible (Judge Barbier) would say, as long as there remains a plausible appeal here,” he will not lift the injunction, Logan said.

Since it opened in June 2012, the settlement program’s claims facility has processed more than 278,500 claim forms, federal court documents show. As of May 2, the program had issued eligibility notices affirming the validity of more than 64,800 claims, with payment offers totaling almost $5 billion. More than 57,600 claims had been paid, adding up to almost $3.9 billion.

Louisiana residents accounted for 26 percent of the overall damage claims, second to Florida.

The $3.9 billion is in addition to $400 million that was in the pipeline when Juneau took over from Kenneth Feinberg, whose earlier claims facility paid out $6.1 billion to more than 221,000 claimants.

BP initially estimated the settlement would cost it about $7.8 billion. The company has since adjusted that figure, saying in regulatory filings that it is expected to hit $9.2 billion.

For now, Juneau believes the legal back-and-forth between the district court and the appeals court is winding down.

“It’s an important milestone in this process because it moves the issue now to another level, where the parties will have to make decisions,” he said of Monday’s decision. “From my perspective, I’ll let the legal process play out. All we want to do is go about doing the work we were assigned to do.”

Follow Richard Thompson on Twitter, @rthompsonMSY.