BP Oil Spill Lawsuit Update

So what’s been going on with the BP oil spill crisis?  We’ve blogged about it several times in the past but there have been some recent developments on the legal front.

As expected, the lawsuits are pouring in by the hoards- a major civil suit has already been filed by the U.S. Justice Department, a separate criminal investigation is well underway, and several thousand individual claims have been filed by Gulf Coast residents.  Even Kevin Costner and Stephen Baldwin have a legal claim in connection with the oil spill.

But the latest development in the Gulf of Mexico Oil Spill is a recent move by several attorneys who are calling for a shift in tactics for their plaintiffs.  A group of about 30 lawyers are urging their clients to settle and utilize the “Spill Response Fund” created for the purpose of providing relief for those affected by the disaster.  The $20 billion Fund was created last summer by President Obama in cooperation with BP executives and is currently being overseen by Kenneth Feinberg.

Basically, qualified claimants could receive up to 6 months compensation without waiving their right to sue.   Beyond that, the plaintiff would be required to give up their right to sue in exchange for additional support from the Fund.

Also, a streamlined payment of $25,000 for businesses and $5,000 for individuals is available.  Final settlements for long-term damages would also be covered by the Fund.  However, these options would also require the plaintiffs to forfeit their right to litigation.

On the one hand, the Response Fund is a unique creation with much potential.  It will provide oil spill victims with an avenue of relief that is not typically available in mass tort claims.  Such large amounts of funds are usually not as readily available for plaintiffs.  In addition to providing relief for victims, the Fund was launched with the hopes that it would help to alleviate the court burden by reducing the number of lawsuits that it has to deal with.

But as can be expected with a project of such a grand scale, there are some major flaws with the Spill Response Fund.  The first, of course, is that the Fund is not creating the “immediate” relief that many believed it would provide.  Feinberg claims that more than 168,000 claims for immediate relief have been paid for a total of $3.35 billion thus far.

However, only one final settlement payment has been issued out of 91,000 final settlement claims.  This claim was settled back in December 2010 for $10 million.  That’s a pretty big recovery amount, but with only 1 down so far, victims are wondering when they will ever see their fair share.  For many, this pace is currently unacceptable.

Secondly, the Response Fund is now forcing plaintiffs to make a major decision.  As mentioned, claimants are required to waive their right to sue BP and any other defendants who have been named in connection with the spill.  This places the plaintiffs in a bit of a quandary- either pursue a lengthy litigation process for potentially larger awards, or tap the fund for faster recovery but forgo the right to damage awards.  Many victims need major financial assistance right now, especially those who are regular, everyday citizens.  Something needs to be done to bridge the gulf that has been created by the filing procedures.

And Ken Feinberg is taking a lot of heat for the way that the Fund is being administered.  Feinberg has had some experience with relief fund projects in the past.  For example, he was head of the 9/11 Victim Compensation Fund.  But due to the slow response with the BP situation, many are questioning Feinberg’s leadership and the lack of transparency in overseeing the fund.

Legally speaking this is a very sticky situation.  The reality is, BP has a lot more to clean up than the oil it spilled.  Providing recovery for every single victim is a project of massive, epic proportions.  And so personally I don’t expect to hear about any kind of finality for many years, possibly even decades.

Case in point- there are still claimants who haven’t been compensated for the Exxon-Valdez Oil Spill in Alaska.  And that was way back in 1989, more than 20 years ago.  Over 1,800 Exxon-Valdez settlement claims are still unpaid because some of the plaintiffs either cannot be located or have become deceased.  The same thing could happen here if measures are not taken to keep track of the thousands upon thousands of claimants who need relief.

So just like the slick little oil traps and chemical dispersants, the Recovery Fund seems to me more like a quick fix, a band-aid method rather than genuine, lasting solution.  But that being said, I guess any effort is better than none.  Until the major lawsuits get worked out, the plaintiffs will have to wait patiently on the shores in the meantime.