Is BP lying to the courts and to the American people? On Friday, BP filed what is known as a Petition for Writ of Certiorari with the Supreme Court of the United States, the content of which certainly calls into question the company’s veracity – to put it kindly.
The petition appears to be yet another dishonest attempt by BP to wiggle out of the Settlement Agreement it authored and signed more than two years ago. Traditionally, the Supreme Court grants less than 2% of such petitions, and the Justices should deny this one, as BP has had its day in court.
The issues are simple enough: are the requirements for establishing that a claimant’s loss was the result of BP’s disaster sufficiently rigorous? And were such requirements the intent of the settling parties?
BP devised and agreed to the construct, known as Exhibit 4B, and descriptively titled “Causation Requirements for Business Economic Loss Claims,” so one would think the company would stand by its own creation. In fact, until the curious interjection by an appellate judge on the 5th Circuit Court of Appeals, no one, including BP, had thought to question the Settlement Agreement’s causation standards.
Instead, for months BP enthusiastically heralded the fairness of the requirements, both in legal filings supporting approval of the settlement deal as well as in open court with remarks made to the Judge presiding over the litigation, Carl Barbier. Further, BP hoped to induce the tens of thousands of businesses and individuals harmed by the spill to choose to participate in the settlement program rather than file individual lawsuits against the company, which could result in decades of costly litigation and a drag on BP’s valuation.
BP’s dog-and-pony show supporting both ends included the following rosy statements about the causation requirements:
“Indeed, in many ways, the causation principles are remarkably favorable to claimants. Once a business meets the causation requirements, for purposes of quantifying compensation, all profit declines are presumed to be caused by the spill, with no analysis required to determine whether the declines might have been due, at least in part, to other causes. In contrast, in litigation, a detailed analysis of the reasons for the profit declines is undertaken because it is part of the plaintiff’s burden of proof.” – BP court filing in support of Settlement Agreement approval, August 2012
“The causation requirements appear more than reasonable. For businesses in certain areas, there is a presumption of causation, which will inevitably include businesses that were not economically or financially affected by the DWH Spill. This alone is an unusually generous feature and atypical, in my experience, in economic loss cases. For those businesses that do not qualify for a presumption of causation, there are multiple tests under which they can qualify and establish causation. This variety of test options gives claimants multiple ways to establish causation, which appears to be more than fair. Moreover, the causation tests reflect reasonable expectations about the economic harm the DWH Spill could have caused to a business, and therefore are appropriate tests for the purpose of establishing causation.” – Statement of BP financial expert, James Henley, in BP court filing in support of Settlement Agreement approval, August 2012
Losses experienced by businesses in certain geographic locations and particular industries “are presumed to be due to the DWH Spill and the Claimant need not provide evidence to establish causation. This approach is consistent with economic principles, which would predict that the DWH Spill would most directly affect industries tied to the Gulf. The available data reflect some decline in performance in these industries in the months after the DWH Spill. Granting a presumption that losses experienced by such Claimants are spill-related benefits Claimants by simplifying the Settlement claims process to avoid costs associated with determining causation for Claimants in areas and industries most likely to have been directly affected by the DWH Spill.” – Statement of BP financial expert, Henry Fishkind, in BP court filing in support of Settlement Agreement approval, August 2012
“The Settlement Agreement establishes a variety of standardized mechanisms that can be used by Claimants that do not receive a presumption to establish that their losses are due to the DWH Spill. These mechanisms are straightforward and transparent, facilitating the review of a claim as well as a Claimant’s decision about whether to participate in the Settlement or to opt out and continue to the claim through litigation.” – Statement of BP financial expert, Henry Fishkind, in BP court filing in support of Settlement Agreement approval, August 2012
“We have presumed causation in Zone A. We’ve presumed causation. It’s irrebuttable. You know as well as I do, Your Honor, how many people come in and think they have got a claim damage for economic loss; but, when the facts come out, they had a bad year because they lost their key manager, they had a bad year because the street was being repaired in front of them, whatever reason. We’re presuming causation for whole sections of the settlement class depending on where you reside and the nature of your business.” – Statement of BP lead attorney, Richard Godfrey, made during oral presentation to Judge Barbier, November 2012
“The Settlement reasonably requires that some business claimants demonstrate that their business was affected by the spill. Where class members are required to prove causation, there are multiple reasonable options for doing so. The causation tests are reasonable and flexible; they use standardized and transparent approaches. The causation tests reflect rational expectations about the economic harm that the spill could have caused businesses.” – BP & Class Counsel’s Joint Proposed Findings, filed with the Court in November 2012
“Once the causation tests are satisfied, all revenue and variable profit declines during the Compensation Period are presumed to be caused entirely by the spill, with no analysis of whether such declines were also traceable to other factors unrelated to the spill.” – BP & Class Counsel’s Joint Proposed Findings, filed with the Court in November 2012
“Qualifying businesses receive compensation for all losses regardless of actual facts and circumstances.” – BP PowerPoint presentation to Court Supervised Claims Administrator, May 2012
“Nothing in the [Settlement Agreement] provides for an offset where the claimant’s firm’s revenue decline satisfies the causation test but extraneous non-financial data indicates that the decline was attributable to a factor wholly unrelated to the Oil Spill. Such “false positives” are an inevitable concomitant of an objective quantitative, data-based test.” – Statement by Mark Holstein, managing attorney for BP America Inc., to Court Supervised Claims Administrator, September 2012
In addition to the preceding statements, BP’s lead appellate attorney, Ted Olson, stood in front of a three Judge panel of the 5th Circuit Court of Appeals in July 2013 and reiterated the company’s support of the causation requirements. As alluded to above, one of the three Judges on the panel came out of left field to question the causation standards, an issue nowhere briefed or considered in the appeal before the panel. BP’s Mr. Olson, presumably taken by surprise, took issue with the Judge’s position, arguing with her that the causation standards memorialized in Exhibit 4B were indeed legal and represented the intent of the company:
Judge Clement: I have a question, sir. In your reply brief, you said the only issue in this appeal is the lost profits calculation and you were talking about how the variable profit is to be calculated . . . . My problem is I think the real issue in the case is causation and consideration. If you look at 4B, where is BP’s consideration for agreeing to pay those claims without proving they were caused by the Oil Spill?
Olson: This is a Settlement, and with respect to the causation issue, that is not the issue that is before this court . . . The Settlement Agreement with respect to 4B as to causation provided a mechanism which allowed someone to come through the door, to be then entitled to prove the amount of actual lost profits. It was a compromise, which every settlement agreement is. With respect to causation issues, some businesses that are very close to the spill, the causation issue is waived entirely.
Judge Clement: Right. I’m not talking about those. I’m talking about the example that Administrator Juneau sent out for comments, where if there’s an accounting firm of three members, one is hospitalized for several months, of course they lose money. . . . Where is the legal connexity between a damage or an injury and the ability to make BP pay?
Olson: It was a part of a compromise, which there’s going to be thousands – tens of thousands –
Judge Clement: Where’s the consideration?
Olson: The consideration is the consideration of the settlement class as a whole. But the causation issue is going to be different with respect to each particular claimant. Judgments were made with respect to compromises on a proof of causation.
Judge Dennis: Well, your major consideration is no one can bring suit against you on the oil spill outside of this class action, which you have announced you have settled.
Olson: Exactly, your honor.
Judge Clement: They couldn’t bring suit against you anyway if it wasn’t caused by
Olson: They could bring suit. They’d have to prove causation. They could bring suit – they could. And this is a compromise of tens of thousands of claims. But the important thing, and the issue that we’re talking about here, is, assuming causation, assuming that a claimant gets through the door and is now entitled to prove lost profits; we then come to what everyone agrees in this case. The Appellees say this on page 27 of their brief: This appeal presents a straight forward question of contract interpretation.
Indeed Mr. Olson, we agree. This is a straightforward question of contract interpretation. But unfortunately for you and BP, there is obviously no question as to how to interpret the meaning of the 1,200 pages and your follow on statements supporting same.
As John Adams once said, “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence.” The “facts and evidence” that BP’s army of well-healed legal talent “cannot alter” are BP’s previous statements and positions on the very issues that BP raises to the United States Supreme Court — but now wishes just weren’t so.
While no one suggests windfalls to undeserving parties should be awarded, the rules BP put in place and agreed to are the rules we all must live by. They should not be changed at halftime. There will be winners. There will be losers. As BP has said, this Settlement was a compromise. A yielding of the highest hopes in exchange for certainty and resolution.
In fact, under the current application of the rules, more claimants have been denied payment than have received a check. And there are many deserving businesses that will never receive a dime. In that sense, BP has already won this battle. That’s the truth about the BP Settlement.
BP attorneys Holstein, Godfrey and Olson are all signatories to Friday’s Supreme Court petition. All have previously confirmed in front of various judicial bodies and in court filings that they supported the Settlement Agreement’s causation requirements. All now tell the Supreme Court that they do not.
“BP not only took the position that causation under the Settlement was determined exclusively through [the formulas in] Exhibit 4B, it promoted Exhibit 4B as providing a benefit to claimants in that it was ‘more than reasonable,’ ‘more than fair,’ ‘objective,’ ‘transparent,’ ‘standardized,’ ‘economically appropriate,’ ‘consistent with . . . economic reality,’ and an ‘efficient’ method of establishing causation. Such attributes, BP claimed, were part of the reason the Settlement deserved Court approval. … This Court accepted BP’s previous position when it certified the Settlement Class and approved the Settlement on December 21, 2012. The Court further finds that BP’s change of position was not inadvertent.” – Judge Carl Barbier, Order & Reasons, December 24, 2013 (emphasis added)
Judge Barbier echoed this sentiment in a similar statement from a separate ruling on the issue in late November 2013:
“BP accuses the Claims Administrator of ‘rewriting’ and ‘systematically disregarding’ the Settlement Agreement. To the contrary, when it talks about causation, if anyone is attempting to rewrite or disregard the unambiguous terms of the Settlement Agreement, it is counsel for BP.
“Frankly, it is surprising that the same counsel who represented BP during the settlement negotiations, participated in drafting the final Settlement Agreement, and then strenuously advocated for approval of the settlement before this Court, now come to this Court and the Fifth Circuit Court of Appeals and contradict everything they have previously done or said on this issue. Such actions are deeply disappointing.” – Judge Carl Barbier, Order, November 22, 2013 (emphasis added)
Here’s hoping the Justices on the Supreme Court will be equally disappointed.