With Shortcomings, BP Settlement Agreement is a Step in the Right Direction

JURIST Guest Columnist Tim McEvoy, an attorney for Southeast Louisiana Legal Services, says that the settlement agreement between BP and affected plaintiffs in the wake of Deepwater Horizon has benefits, but also has certain drawbacks...
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The April 20, 2010 Deepwater Horizon explosion and resulting gulf oil disaster devastated communities along the Gulf Coast and financially impacted the lives of individuals and businesses on an unprecedented scale for an oil-related incident. For the past two years, those individuals and businesses affected have been able to file for monetary compensation under the guidelines set forth by the Oil Pollution Act. Under these guidelines, claimants are allowed to seek compensation for those specifically enumerated past losses that were caused by the spill. The Gulf Coast Claims Facility (GCCF) claims process, which was set up to manage compensatory claims for spill-related damages has, to date, paid out almost $6.4 billion to a total of almost 600,000 claims. However, there were major complaints about the process including lack of transparency, constantly changing methodology and document requirements, inequitable payments to similarly situated claimants, low calculation estimates, and, most notably, the length of time it took to process a claim.

Organizations like mine are part of the Gulf Justice Consortium, a network of legal service providers and nonprofits that came together in the aftermath of the Deepwater Horizon disaster to provide free legal services and advocate for equal access to compensation on behalf of low-income people. Using direct advocacy and media outreach, the Consortium influenced important changes to the GCCF that made it more equitable for all residents and businesses of the Gulf Coast states. The Consortium secured changes in the way claims are calculated for certain occupations, ensured inclusion of persons whose occupations were originally deemed excluded from the process and expanded the types of acceptable documentation to demonstrate income and loss for the purpose of more fairly calculating claims. Needless to say, we have been keeping a close eye on the settlement negotiations.

On May 2, 2012, US District Court Judge Carl Barbier gave preliminary approval for a $7.8 billion settlement agreement (Agreement) reached by BP and plaintiffs' counsel in the multi-district litigation. Many have hailed the Agreement as beneficial to those who suffered damages due to the spill. Further, those in charge promise that the problems with the GCCF, which were enumerated above, will be diminished or eliminated altogether. The covered claims include: economic loss to an individual or business, property damage, physical damage to a vessel, subsistence damage, damages for seafood operators, and payment to those who participated in BP's "Vessels of Opportunity" program, which involved using personal boats to assist in efforts to deal with the BP oil disaster. The Agreement also creates a health claims compensation program and health monitoring system that will compensate people for any related damages and provide monitoring for future health issues related to the disaster.

Where the GCCF and its calculations and methodologies were often less than transparent, the over 1,000 pages of the Agreement offer specific guidance about the six types of claims that are covered. This may be helpful to attorneys and accountants who are trained to work their way through complicated settlement provisions, but it remains to be seen whether the complexity of the system will prove overly burdensome to individual claimants. Similarly, many of the calculations are based on what the Agreement deems benchmark periods and compensation periods. Although not overly complicated with the assistance of computer programs, the loss determination could be daunting and fraught with errors for those individuals without computer access or knowledge.

Probably the most interesting thing about the settlement is that, by design, it overwhelmingly favors those people involved in the seafood and fishing industries as well as the tourism industry. This is solely based on the Risk Transfer Premium (RTP) multiplier that is built into the settlement to account for future damages. As an example, a shrimper has a RTP of 8.4 while a regular employee has a RTP of 1.5. This means that if both of these individuals lost $10,000 in 2010 as a result of the spill, the regular employee would be entitled to $25,000 in compensation and the shrimper would be entitled to $94,000 in economic loss compensation under the terms of the Agreement. Although the likelihood that a shrimper will face more long-term effects than a regular employee is high, the fact that there is such a disparity in compensation has some claimants upset. The low RTP also under-compensates those people who continue to experience spill related losses.

Finally, other than the exclusion of certain classes of businesses and employment from the class, one of the largest issues that people have with the Agreement is that it does not adequately represent claimants who started suffering losses starting in late 2010 or early 2011. For example, an employee who maintained a job throughout 2010 and then was laid off January 1, 2011, would not receive compensation under the Agreement, as the employee suffered no losses in 2010. This is true even if the employee is still unemployed and/or the business is still closed. In contrast, an employee who was laid off in May 2010 and was rehired in early 2011 would be eligible for a large amount of compensation even if they stopped suffering losses in 2011.

Like any large settlement, this one is not without its issues and detractors. However, if the promises of a simplified submission procedure, streamlined and transparent payment processes, and consistent methodology are met, then the settlement will be highly beneficial to its class members as well as the residents and communities of the Gulf Coast.

We will continue to provide a voice to our constituents who need and deserve equal access to the justice system that is provided to them via the Oil Pollution Act and the Settlement.

Tim McEvoy is a graduate of the Washington College of Law at American University. Before joining Southeast Louisiana Legal Services (SLLS), Tim volunteered for the SLLS New Orleans office, was an associate with Barrasso Usdin Kupperman Freeman & Sarver, L.L.C. and served with Teach for America in New Orleans.

Suggested citation: Tim McEvoy, With Shortcomings, BP Settlement Agreement is a Step in the Right Direction, JURIST - Hotline, May 25, 2012, http://jurist.org/hotline/2012/05/tim-mcevoy-bp-settlement.php


This article was prepared for publication by Stephen Zumbrun, an associate editor for JURIST's professional commentary service. Please direct any questions or comments to him at professionalcommentary@jurist.org

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