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Deepwater Horizon BP Oil Spill Update - Beasley Allen Law …expo.beasleyallen.com/media/2013/11/2013_BeasleyAllen_Conf__BP_… · DEEPWATER HORIZON BP OIL SPILL UPDATE Presented

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  • DEEPWATER HORIZON

    BP OIL SPILL UPDATE

    Presented By:

    Rhon Jones

    Beasley Allen, Toxic Torts Section Head

    Assisted By: Parker Miller & Leslie Pescia

  • We Shouldnt Forget Who BP Is

    Deepwater Horizon Oil Spill (2010)

    Deepwater Horizon Oil Spill

    Pled guilty to 11 felony counts of manslaughter for deaths of workers.

    Caused the largest environmental disaster in US history.

    Suspended for doing business with the US due to lack of corporate integrity.

    Lied to Federal Government about the flow rate of spill

    Misled Congress on corporate responsibility.

    Former BP Vice President charged with concealing information and obstructing Congress.

    Former BP engineer charged with deleting critical information that showed BP knew flow rate was three times worse that represented to Congress.

    Convicted felon on probation for three other disasters at the time of the spill.

    Pled guilty to a record $4.525 billion criminal settlement.

  • We Shouldnt Forget Who BP Is

    Texas City Refinery Explosion (2005)

    Texas City Refinery Explosion (2005)

    Killed 15 workers, injured 170 more

    Cited for hundreds of safety violations, including inoperable alarms and safety devices

    OSHA levied even more fines when it learned BP had not implemented procedures it promised after the accident. $21 million fine initially imposed 2nd largest fine ever imposed by

    OSHA on original explosion.

    $87.4 million fine imposed Largest fine ever imposed by OSHA when BP failed to correct hazards after the explosion.

    $50 million fine to US Justice Department to settle criminal charges

    Telos Group: We have never seen a site where the notion I could die today was so real.

    US Chemical Safety Board: Explosion caused by organizational and safety deficiencies at all levels of BP.

  • We Shouldnt Forget Who BP Is

    Prudhoe Bay Oil Spill (2006)

    Worst oil spill ever on the North Slope of Alaska

    (267,000 gallons)

    Pled guilty to negligent discharge of oil and fined

    $20 million as a result

    The largest per-barrel penalty ever at the time of

    the oil spill ($25 million).

    In 2012, the State of Alaska collected $255 million

    related to BP, Plcs pipeline leaks.

  • Settlement Summary

    Last year, the PSC reached two landmark settlements

    with BP.

    Economic and Property Claims

    Medical Claims

    The Economic Facility has paid over $3.7 B in claims.

    Navigating through the Settlement means

    understanding:

    How the objector and BEL appeal could affect claims

    How to deal with the Facilitys aggressive claim review

    How to combat BPs inevitable appeals

  • AN UPDATE ON THE

    APPEALS PROCESS

  • Fifth Circuit Appeal: Class Certification

    The appeal challenges Judge Barbiers order

    certifying the Settlement class.

    Argued on November 4, 2013, and is currently

    under review. There are two possible outcomes.

    The class could be decertified, which

    could bar any further claim filing.

    Class certification could be upheld, which would permit claim filing until

    April 2014 at the earliest.

  • Fifth Circuit Appeal: Class Certification

    What to Know

    File any legitimate claims as soon as possible.

    We believe the Facility must process all

    properly filed claims filed before an adverse

    class certification ruling.

    Claims that are not filed before an adverse

    class certification ruling may be forever

    barred.

  • Fifth Circuit Appeals: The BEL Appeal

    BP raised, for the first time, a matching and smoothing appeal after the company realized it had under-valued the settlement.

    BP believed that Administrator Juneau was misinterpreting the settlement by not matching income earned with expenses incurred. BP also believed that any spikes in revenue should be smoothed out.

    Nowhere does the settlement reference the matching or smoothing of revenues or expenses, and BP never brought this issue up during negotiations.

    Judge Barbier affirmed the Claims Administrators interpretation of the settlement and denied a preliminary injunction.

  • Fifth Circuit Appeals: The BEL Appeal cont

    On October 2, 2013 a divided Fifth Circuit panel vacated Judge Barbiers ruling on matching and remanded the issue for further clarification to ensure matching should not occur.

    The Fifth Circuit overruled BPs smoothing argument 3-0.

    The Court further ordered the district court to craft a narrowly-tailored preliminary injunction that allows the time necessary for deliberation reconsideration of these significant issues on remand.

    This preliminary injunction only affects those claims where the matching of revenues and expenses is an issue.

  • Fifth Circuit Court of Appeals: The BEL Appeal Judge Barbiers Preliminary Injunction Issued October 18

    1. Process all BEL sufficiently-matched accrual-basis records.

    2. Temporarily suspended final BEL determinations and payments where matching is an issue.

    3. Temporarily suspended final IEL determinations and payments based solely upon employers satisfaction when employers claim isnt properly matched.

    4. Where matching was an issue in an appeal, those appeals were suspended.

    5. Deadlines for Notice of Appeal are not stayed

    6. Claims Administrator to provide (within 7 days of Order) declaration outlining what constitutes a matching issue

    7. Does not affect: Seafood Program Compensation, IEL other than those stated, Subsistence, VoO Charter Payments, Vessel Physical Damage, Coastal Real Property Damage, Wetlands Real Property Damage, or Real Property Sales Damage.

  • Fifth Circuit Court of Appeals: The BEL Appeal

    Claims Administrators Protocol

    Any claim that does not fall within one of the following seven criteria

    outlined on the next slide, or does not indicate otherwise that the

    claimants financial records are sufficiently matched, will be

    presumed sufficiently matched and will be processed.

    If matching is an issue, the Accounting Vendors will determine whether

    that claim is "sufficiently matched" by reviewing the available

    information, including the nature and complexity of the business in

    question, especially if the claim is based on cash-basis accounting

    records. If the claims are determined to be "sufficiently matched,

    they will be submitted to a quality review process, who will confirm

    the records are sufficiently matched.

  • Fifth Circuit Court of Appeals: The BEL Appeal

    Claims Administrators Criteria

    negative total revenue is recorded for any month included within the Benchmark Year(s), Compensation Year or 2011;

    total revenue recorded in any month included in the Benchmark Year(s), Compensation Year or 2011 exceeds 20% of the claimant's annual revenue for the year which includes that month;

    the monthly profit and loss statements or other documentation submitted shows that the claimant's business experienced a period of dormancy during the Benchmark Year(s), Compensation Year or 2011;

    total variable expenses when summed up are negative for any month within the Benchmark Year(s) or Compensation Year;

    total variable expenses for any month within the Benchmark Year(s) or Compensation Year exceed 25% of the claimant's annual variable expense for the year which includes that month;

    variable margin percentages when compared between any two months included within the Benchmark Year(s) and Compensation Year vary by more than 50 percentage points; or,

    in any given month within the Benchmark Year(s) or Compensation Year, the variance between that month's percentage of annual revenues as compared to that same month's percentage of annual variable expenses exceeds 8 percentage

    points.

  • Deepwater Horizon Settlement Program

    Background

    The Claims Administrator, Patrick Juneau, opened the

    Settlement Program on June 4, 2012.

    Since the program opened, it has received 183,594

    Registration Forms and 217,032 Claim Forms as of

    October 15, 2013.

    The first claims reviews and outcome notices were

    completed on July 15, 2012 with payments made on July

    31, 2012.

  • Claim Filings

  • Claims Filed By Type (as of October 30)

    24,807

    41,291

    426

    78,021

    4,804 3,356

    31,447

    10,275

    1,572

    30,897

    8,684

    1,437 0

    10,000

    20,000

    30,000

    40,000

    50,000

    60,000

    70,000

    80,000

    90,000

  • Payments

    First payments were issued to claimants on July 31, 2012.

    As of October 10, 2013, the program has issued 58,725 Eligibility Notices with Payment Offers totaling over $4.9 Billion.

    As of October 10, 2013 the program has made over $3.7 Billion in payments on

    50,132 claims.

  • Payment Information By Type of Claim

  • Basic Documents Needed to File A Claim

    Business Economic Loss

    1. Federal Tax Returns (including all schedules and attachments) for the years 2007-2011

    1. Monthly and Annual Profit and Loss statements (or other documents establishing monthly revenue and expenses) for the years 2007-2011

    1. A properly completed claim form

    For a breakdown of all documents and claims forms required for

    each type of claim see the FAQs page at:

    http://www.deepwaterhorizoneconomicsettlement.com/index.php

  • Claims Review Process

    Identity Verification

    Review

    Employer Verification

    Review

    Exclusions Review

    Claimant Accounting

    Support Review

    Quality Assurance

    Review

  • Claims Review Process

    Step 1: Identity Verification Review consists of verifying the tax identification numbers.

    Step 2: Employer Verification Review ensures that all employees of the same business are treated uniformly. It also ensures that all businesses are placed in the correct Zone and walks through the intricate analysis necessary to assign correct NAICS codes to businesses.

  • Claims Review Process

    Step 3: Exclusions Review ensures that claims and claimants excluded under the approved Settlement Agreement are appropriately denied.

    Step 4: Claimant Accounting Support (CAS) Reviews involves CAS reimbursement that is available under the Settlement Agreement for IEL, BEL, and Seafood Claims. After a claim is returned as payable, the CAS team reviews the accounting invoices and sworn statements.

  • Claims Review Process

    To ensure that all claims are reviewed in accordance with the policies of the settlement agreement by targeting anomalous claims results through data metrics analysis

    To provide a mechanism to monitor review performance and the necessary tools to efficiently and effectively provide feedback to reviewers

    To identify areas of review resulting in high error rates

    Step 5: Quality

    Assurance Review

    addresses three

    fundamental needs of the Settlement Program

  • Review & Appeals

    BP has the right to appeal certain claims within 14

    days while claimants have the option to seek a Re-

    Review and Reconsideration of their claims after a

    notice has been issued.

  • Review & Appeals

    Must be aggressive at every stage of the review

    and appeals process

    Our experience in the appeals process shows:

    BP is appealing almost every BEL claim

    Many BP appeals are not supported, but you must

    respond anyway

    BP appeals oftentimes hit on a number of complicated

    accounting and legal issues

  • CIVIL TRIALS

    Phase 1 and Phase 2

  • Phase 1

    The First Phase, or Blowout Liability part of the trial,

    lasted nearly eight weeks and concluded on April 17,

    2013.

    Goal: Identify causes of the blowout and apportion

    blame between BP and its contractors -Transocean Ltd.

    (owner of the oil rig) and Halliburton Co. (cement

    provider), including whether they were grossly

    negligent.

  • Phase 1

    At the conclusion of Phase 1 Judge Barbier posed the following

    questions for post-trial briefing: What is the standard for finding gross negligence or willful misconduct under the Clean Water Act (CWA), 33 U.S.C. 1321(b)(7)(D), and the Oil Pollution Act of 1990 (OPA), 33 U.S.C. 2704(c)(A)?

    What is the standard for a finding of punitive damages under general maritime law? Is this a different standard than under the CWA or OPA, and if so how?

    In order to find that a party acted with gross negligence, is it necessary to find that there be at least one single act or omission that equates to gross negligence, or can such a finding be based upon an accumulation or a series of negligence acts or omissions?

    Can an act or omission that is not itself causal of the accident nevertheless be considered in determining whether a party engaged in conduct constituting gross negligence?

    In order to find gross negligence, is it sufficient if only employees on the rig are guilty of such conduct, or is it necessary to find that this level of conduct was attributable to shore-based or management-level employees?

    Does compliance with MMS (or other applicable) regulations preclude a finding of gross negligence regardless of whether a defendant knew or should have known that its conduct or equipment was unsafe, or violated accepted engineering standards?

    Does the fact that a party acted in accordance with industry standards preclude a finding of gross negligence?

  • Phase 2

    Began on October 4, 2013 in New Orleans and just recently concluded.

    Goal 1: Determine volume of oil spilled into the Gulf of Mexico.

    The government argued that 4.2 million barrels (176 million gallons) of oil were released into the Gulf while BP alleged only 2.45 million barrels (103 million gallons) were actually leaked.

  • Phase 2

    Goal 2: Determine if BP adequately prepared the disaster and if their measures to cap the well were appropriate once the oil began flowing into the Gulf.

    If BP and its contractors are found to be negligent in Phase 2, Clean Water Act fines could be $1,100 for each barrel of oil leaked into the ocean. A gross negligence or willful misconduct finding could raise the maximum fine limit to $4,300 per barrel of oil spilled.

    At stake during this phase are penalties and fines

    reaching up to $18 billion.

  • Phase 2

    Phase 2 ended on October 18 after nearly two

    weeks of courtroom debate.

    Summaries and proposed findings of fact and

    conclusions of law are due by December 20

    with post-trial briefs due January 24, 2014.

  • Hypocrisy At Its Best

    BP just recently threatened the Indian Government that

    if the oil minister did not honor its contract with BP, BP

    would stop investing in oil production in that country.

  • Questions?

    [deadline to file claims April 22, 2014]

    [The Fifth Circuits recent opinion regarding objector

    appeals can be found at:]