How Can the 2012 Settlement Fit within the Larger Oil Spill Litigation?

New Orleans, LA Oil Spill Litigation Lawyers

On May 13, 2010, Transocean, the owner of the Deepwater Horizon, filed a Complaint and Petition for Exoneration from or Limitation of Liability in the United States District Court for the Southern District of Texas under the Limitation of Shipowners’ Liability Act of 1851.

On August 16, 2010, the Limitation Action was transferred to the Eastern District of Louisiana, where it was assigned to Judge Barbier’s Section.

On August 20, 2010, the Judicial Panel on Multidistrict Litigation (a panel made up of seven sitting district court and appellate judges from around the country who consider whether cases pending in multiple districts arising out of similar facts and circumstances should be consolidated in one single district for pre-trial purposes) centralized all spill-related federal actions, (excluding shareholder suits), and assigned them to Judge Barbier in the Eastern District of Louisiana for pre-trial proceedings pursuant to 28 U.S.C. §1407. The Limitation Action was consolidated with the MDL on August 24, 2010.

On October 19, 2010, the Court organized the numerous cases centralized before it by creating pleading bundles for various claims brought by those claiming injury due to the explosion, the oil spill, and its aftermath. The B1 Master Complaint and Amended B1 Complaint were filed on behalf of private plaintiffs asserting economic injuries arising from the spill. The B3 Master Complaint and Amended B3 Complaint were filed on behalf of private plaintiffs asserting the need for medical monitoring and/or personal injuries arising from exposure to oil and/or dispersants. These Master Complaints included a Master Answer and Claim in the Transocean Limitation Action, as well as separate claims under maritime law and (in the case of the B1 Complaint) OPA against BP, Halliburton, Cameron, M1-Swaco, and other parties. The Court established a procedure by which people and businesses could file “Short Form Joinders” which would simultaneously assert a Claim in the Limitation Action as well as a joinder in the B1 and/or B3 Master Complaints. Individual “Bundle A” Complaints were also filed on behalf of workers and the families of workers aboard the Deepwater Horizon who were injured or killed in the fire and explosion of April 20, 2010.  In all, over 130,000 “Short Forms” and other claims were filed in the Limitation.

In the meantime, BP was formally designated as the “responsible party” for the spill under the Oil Pollution Act of 1990, and waived the potential $75 million limitation.

On December 15, 2010, the United States filed a civil action against BP, Transocean, Anadarko and MOEX, seeking penalties under the Clean Water Act, and for a declaratory judgment with respect to the defendants’ liability under the Oil Pollution Act of 1990. The State of Alabama filed two civil actions, as well as an Answer and Claim in the Limitation Action. The State of Louisiana also sought and was granted leave to file an Answer and Claim in the Limitation Action. The Court also established a process by which local governments could join in a Local Government Master Answer and Claim in the Limitation and Master Complaint.

In the meantime, Transocean, on February 18, 2011, filed a Third-Party Complaint, in which the BP Defendants, Halliburton, Cameron, M1-Swaco were tendered to the Claimants-in-Limitation pursuant to Federal Rule of Civil Procedure 14(c). Various different cross-claims, third-party claims, and Rule 14(c) tenders were then asserted between and among the Petitioner-in-Limitation and the various other Defendants.

On August 26, 2011, the Court issued an order granting in part and denying in part various motions to dismiss the Amended B1 Complaint on August 26, 2011. In sum, the Court found that: (i) OPA did not displace general maritime law with respect to punitive damage or other claims against defendants by plaintiffs with maritime standing; (ii) maritime standing was generally limited under Robins Dry Dock to plaintiffs who were directly affected by oil and/or fell under the commercial fishing exception; (iii) State Law causes of action were preempted by the Clean Water Act; (iv) Plaintiffs had generally stated a cause of action under OPA for what BP and the other defendants alleged were losses caused by the Moratorium; and (v) OPA required all plaintiffs to make presentment in all cases against BP, the responsible party. An order granting in part and denying in part motions to dismiss the Amended B3 Complaint was entered on September 30, 2011. An order granting in part and denying in part the actions of the States of Alabama and Louisiana was entered on November 14, 2011.

On September 14, 2011, the Court issued Pre-Trial Order No. 41, governing the scope and structure of the Limitation and Liability Trial. Under the Court’s original trial plan:

On October 18, 2011, Cameron filed a Petition for Mandamus challenging the trial plan. The Fifth Circuit took full briefing and heard oral argument on the challenge, but denied the petition.

Shortly before the February 27, 2012 trial setting, an agreement-in-principle was announced between the Plaintiff Steering Committee and BP. Ultimately, two formal proposed class action settlements were filed and preliminarily approved.

After soliciting from the parties their views on the effect, if any, of the BP Class Settlements on the issues to be tried, the Court, on May 30, 2012, issued a slightly amended Trial Plan. The primary changes were that Anadarko was removed from the Phase One Trial, and the previously outlined Phase Three Trial was replaced with the following:

On November 1, 2012, and by amendment on January 4, 2013, the Court issued Pre-Trial Order No. 54, setting forth pre-trial procedures, and summarizing the previous Orders governing the presentation or exclusion of evidence during the trial.

The Phase One Trial

The Phase One Limitation and Liability Trial commenced on February 25, 2013, and concluded on April 17, 2013.   The Court heard from a total of 62 witnesses, including 42 lay witnesses and 20 experts. In addition, over 160 “Deposition Bundles” including the designated testimony and high-lighted exhibits of witnesses who were unavailable were submitted into the record. Post-trial briefs and proposed findings and conclusions were submitted by the parties on June 21, 2013, with reply briefs submitted on July 12, 2013.

Based on the evidence submitted at trial, the Court dismissed defendants Cameron and M1-Swaco.

On September 4, 2014, the Court handed down its Phase One Findings of Fact and Conclusions of Law.　

The Court held that BP was guilty of “gross negligence”, “recklessness” and “willful misconduct”.  Among other things, the Court found that BP lied in its corporate Investigation Report regarding a critical phone call that was placed by the BP Macondo Well Site Leader to BP’s on-shore Senior Engineer shortly before the explosion.  The Court’s holding renders BP liable for enhanced civil penalties under the Clean Water Act, and the Court suggested that BP is liable for punitive damages under the standards developed by some courts in some jurisdictions.  Here in the U.S. Fifth Circuit, the Court felt constrained by a somewhat unique decision that had been handed down by the court of appeals in 1989.  The Court suggested, at the same time, that the egregious conduct at issue was attributable to the corporation, and that plaintiffs subject to the Fifth Circuit rule would be entitled to punitive damages if the 1989 decision were limited, distinguished or reversed by the Fifth Circuit or the U.S. Supreme Court on appeal.

The Court also found that Transocean employees were negligent in contributing to the blowout, and that the company was not entitled to protection under the Shipowner’s Limitation of Liability Act.  The Court found Transocean 30% at fault in causing the disaster.  As a practical matter, however, Transocean’s liability is assumed by BP under a contractual indemnity agreement between the two companies.

Finally, the Court discussed the liability of Halliburton, which had entered into a complex settlement with private plaintiffs and local government entities shortly before the decision was handed down.  While the Court described Halliburton’s conduct as “egregious” with respect to the cementing job, the Court found that, because of other failures by BP, the cement would have failed even had Halliburton done its job properly.  (The Court also found in a separate order that Halliburton deleted evidence after the Spill “intentionally and in bad faith”.)  In all, Halliburton was found to be 3% at fault in contributing to the incident, (as a result of the failures of its mudlogger to properly monitor the well along with Transocean employees).  As with Transocean, Halliburton’s liability for compensatory damages is assumed by BP under a contractual indemnity agreement between the two companies.

The Phase Two Trial

The Phase Two Trial was conducted from September 30, 2013 to October 17, 2013, and focused, not on the original blowout, explosion and fire, but rather the spill which occurred over the next 87 days.

The U.S. Government, in connection with its Clean Water Act penalties case, presented evidence regarding the total amount of oil, gas and other pollutants which escaped into the Gulf over the course of the Spill.

The other Plaintiffs – formally aligned with Transocean and Halliburton – focused on (i) BP’s failure to prepare for an uncontrolled deepwater blowout prior to April 20, 2010, and (ii) the lies that BP told to the Government and others regarding the nature and the scope of the spill after the Deepwater Horizon sank and the oil started flowing on April 2, 2010.

On January 15, 2015, the Court issued its Findings and Conclusions with respect to the Phase Two Trial.  The Court found that, although BP lied to the Government after the Spill, that evidence of intentional conduct did not change the findings and conclusions with respect to punitive damage liability. The Plaintiff Steering Committee has filed an appeal with the U.S. Fifth Circuit, arguing that BP should be liable for punitive damages under the Phase One findings alone, and certainly when the Phase Two conduct is considered together with Phase One.

Halliburton and Transocean Settlements

Approximately $1.25 Billion has been set aside by Halliburton and Transocean to settle claims with some of the persons, businesses, and local government entities that were damaged by the Spill.  These proceeds will be divided between the existing BP Economic & Property Damages Settlement Classmembers and a New Class of those persons, businesses and local government entities who have standing under the general maritime law to assert punitive damages claims (i.e. generally either owned property along the coast that was directly affected by the oil or is a commercial fisherman).  There are a number of procedural and administrative hurdles that need to be satisfied before the settlements reach full and final approval.  Assuming that happens, funds could be distributed to qualified persons, businesses or local governments sometime in 2017.

Global Settlement with the U.S. Government, Local Governments and the States

In July of 2015, the parties announced a massive $18.7 settlement between BP and the Government to resolve the outstanding U.S., State and Local Government claims. The settlement will include the Clean Water Act / RESTORE Act penalties that will go to the U.S. and the States;  the economic damages claims of Louisiana, Alabama, Mississippi, Texas and Florida;  the Natural Resource Damages that will be entrusted to State and Federal Trustees for environmental purposes;  and the economic and property damage claims asserted by various Local Government Entities.

BP’s liability with respect to the Clean Water Act penalties, the State economic loss claims, and the Local Government economic and property damages claims was tried by the Plaintiffs Steering Committee, attorneys representing the United States, and attorneys representing the States of Alabama and Louisiana, jointly, in Phase One and Phase Two.  A decision from the U.S. Clean Water Act “Phase Three” Trial was pending at the time of the settlement.  Trustees for the States and the U.S. had been separately working with BP to assess the Natural Resource Damages.

Remaining Claims

Liability with respect to all claims which are asserted in the Transocean Limitation Action will be determined by the final Phase One and Phase Two Judgments which are now on appeal.

For ‘pure OPA’ cases that have been filed on behalf of businesses that opted out or were excluded from the Economic & Property Damages Settlement, the Court has scheduled seven OPA Causation Test Cases, to be tried sometime in 2016, in order to provide guidance with respect to the interpretation and application of the Oil Pollution Act.

It remains to be seen whether or how individual damages cases beyond that will be tried in the MDL – or in courts around the Gulf Coast.