Attorneys for BP asked a federal judge Friday to allow the British oil giant to demand repayment of potentially hundreds of millions of dollars already paid or committed to businesses from its multibillion-dollar oil spill settlement fund.
The company contends that a newly enacted policy, approved by the court in May, that uses a formula to match a business’ revenue with expenses in showing post-spill losses should be used to recalculate earlier claims.
The 2012 settlement was intended to avoid piecemeal litigation by resolving hundreds of thousands of claims for economic damages when millions of barrels of oil poured into the Gulf of Mexico, into wetlands and onto the beaches of the Gulf Coast. Eleven men died when the Deepwater Horizon drilling rig caught fire and exploded April 20, 2010, about 50 miles off the Louisiana coast, creating what is generally considered the worst environmental disaster in U.S. history.
The deal 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.
U.S. District Judge Carl Barbier, who is overseeing the litigation stemming from the disaster, lifted a temporary injunction last month against payment of certain business claims. That came after an appeals court backed Barbier’s earlier decision that the settlement’s terms meant even unharmed plaintiffs could receive money, and that BP knew as much when it agreed to the deal.
However, BP has argued in court filings and national ads that businesses should not be paid unless they can show the spill actually caused their losses.
Since it opened in June 2012, the settlement program’s claims facility has processed almost 288,000 claim forms, federal court documents show. As of April 30, the program had issued eligibility notices affirming the validity of more than 65,700 claims, with payment offers totaling almost $5 billion.
Of that figure, about 12,450 eligibility notices have been issued to businesses in question that said they lost money, totaling about $3.06 billion, during the spill. It’s unclear how much of that money would be affected if Barbier grants the company’s motion.
In a court filing Friday, BP’s lawyers argued that the company is entitled to get money back — plus interest — from businesses that were overpaid before the new policy went into effect, as well as to collect from lawyers and accountants who received a share of any overpayments. The payments in question occurred between August 2012 and October 2013, BP said.
“Those payments, which were paid pursuant to a now-discredited methodology, constitute (or include) windfalls,” the company said in its filing.
BP came away with a win earlier this year after Barbier agreed to a new policy for matching a business’ revenue with expenses.
The new formula was designed, for example, to avoid overpaying a distributor who recorded inventory purchases as an expense in one month and then, months later, marked the sale of the items as generating revenue when the cash was received, which would create the impression of some months with large losses and other months with large profits.
Now, BP spokesman Geoff Morrell said, the company wants “the return of excessive payments made by the settlement program as a result of what the courts have now determined was the program’s misinterpretation of the settlement agreement’s accounting requirements.”
“BP has consistently and publicly maintained that it would be entitled to recover overpayments once the misinterpretation was corrected,” Morrell said. “Now that the court has adopted a new policy addressing the misinterpretation of the accounting requirements, letting those erroneous awards stand uncorrected would violate basic principles of fairness and equity and would mean that similar business economic loss claimants would receive different compensation from the settlement program solely because of the timing of their claims.”
But Stephen Herman and James Roy, co-lead counsels for the Plaintiffs’ Steering Committee, the group of lawyers that reached the deal with BP, said the company’s latest legal maneuver was “another attempt by BP to back out of the commitment it made to the Gulf.”
This latest turn in the four-year legal saga, which has seen aspects of the once-lauded deal bounce back and forth between the district court and the appeals court, comes weeks after BP said it would challenge the validity of the entire settlement to the U.S. Supreme Court.
Last month, the U.S. 5th Circuit Court of Appeals decided by an 8-5 vote not to reconsider an earlier 2-1 decision upholding Barbier’s interpretation of the settlement’s terms. Appeals Court Judge Leslie Southwick wrote in the decision that the settlement’s policy for issuing payments was put together with input from BP.
Southwick said the policy, which served as a substitute for requiring direct evidence that a claimant’s losses were connected to the spill, “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.”
Two days later, BP said it would ask the U.S. Supreme Court to require businesses to prove the oil spill caused their financial losses in order to collect from the settlement. In doing so, BP asked the high court to put claims payments on hold while the justices consider the issue, contending that otherwise, “BP may have no practical way to recoup many of these wrongly paid awards.”
Follow Richard Thompson on Twitter, @rthompsonMSY.