Manufacturers have been watching with great interest as BP continues to push back against a feeding frenzy resulting from numerous questionable claims arising from the Deepwater Horizon accident. A disappointing ruling was issued from the US Court of Appeals for the Fifth Circuit yesterday when a divided three judge panel ruled against BP in its effort to seek relief from an onslaught of questionable claims under the Deepwater Horizon settlement fund. The fund has so far paid out nearly $4 billion, but further payments have been enjoined since December, pending the court’s ruling in this case. BP’s original estimate for compensating business and individual losses was $7.8 billion. A more recent estimate pegged the cost at $9.2 billion. That seems likely to grow after yesterday’s ruling in which the court missed an opportunity to restore some rationality to this situation.
The issue before the appeals court was whether claimants to the BP settlement fund need to offer evidence that the losses claimed actually resulted from the oil spill. BP sought court relief on this after discovering payments having been made by the fund to many questionable claimants, including famously an escort service, a lawyer whose license had been revoked for the entire year covered by the fund, and a nursing home that closed the year before the spill. In a 2-1 decision, the court held that “The settlement agreement does not require a claimant to submit evidence that the claim arose as a result of the spill.” Accordingly, payments are to be resumed and the claims administrators must simply rely on the word of those applying to the fund for compensation. Is there any doubt that the feeding frenzy will recommence?
In her dissent, Judge Edith Brown Clement wrote that the holding helps those whose injuries had “absolutely nothing to do with Deepwater Horizon or BP’s conduct.” Exactly. The majority holding does an unfortunate disservice to those with legitimate claims, who must get in line behind claimants whose injuries may have no actual relationship to the oil spill. Not only does this delay compensation for legitimate claimants, it also drains the resources meant to help them. And significantly, manufacturers are concerned that this case could establish a nightmarish precedent for boundless liability in mass tort cases in which the fundamental tort principles linking causation to liability are abandoned.
Linda Kelly is the Senior Vice President and General Counsel for the National Association of Manufacturers. She also oversees the work of the NAM’s Manufacturers’ Center for Legal Action.
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