Last updated: March 6, 2012 12:09 am

Settlement process could delay BP trial

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If the trial over the 2010 Deepwater Horizon disaster had gone according to last week’s plan, BP would have spent Monday morning hearing its procedures and decision-making excoriated by lawyers representing victims of the spill and the US government.

The settlement that the company agreed on Friday with lawyers for the private sector plaintiffs stopped the clock on that process. The trial scheduled for the federal district court in New Orleans has been postponed indefinitely.

Lawyers from all sides will meet the judge soon to discuss setting a new date: an issue of critical importance for the remaining legal actions, including the case against BP for civil penalties and damages being brought by US federal and state governments.

The pressure created by an impending trial makes a big difference to the chances of settling any of those actions, and the states of Louisiana and Alabama have been urging the judge to set an early date. However, the complex task of working out the details of the UK-based oil and gas group’s deal with the private sector plaintiffs make that difficult.

One person who has been close to the case said that a new trial date was likely to be “months, not weeks” away, as BP and the plaintiffs’ lawyers conclude the deal that they have agreed in principle.

The first step is to agree final terms within the 45-day deadline. The agreement, with an estimated value of $7.8bn, covers two settlements: one for economic losses, one for health effects.

Individuals and businesses that have suffered financial losses will be paid according to formulas based on their type of activity and their proximity to the coast. People who have suffered ill health from exposure to oil and dispersant chemicals can claim quickly if their conditions were temporary, but must submit medical records if they have chronic problems. Both of those plans will need to be specified in detail.

Once BP and the lawyers have signed up, they will present their proposed deal to the court for preliminary approval. If the judge grants that, there is then a notice period, when everyone who might be covered by the settlement has a chance to review it. Adverts will be placed in newspapers and magazines advising people of their rights.

That process could turn up many more plaintiffs than the 116,000 that their lawyers estimated had joined the litigation so far.

Steve Herman and Jim Roy, the two Louisiana lawyers who lead the plaintiffs’ steering committee, said that the deal would offer “a full measure of compensation to hundreds of thousands”.

The road to final agreement

Steps needed to finalise the $7.8bn agreement reached on Friday, with rough timings:

Final agreement between BP and plaintiffs’ lawyers signed (45-day deadline set)

Preliminary approval of settlements from court (expected to take one week)

Notice period, advising people of what they need to do to file a claim or opt out of the settlements (two months)

Fairness hearings for court to hear arguments for and against the settlements (one week, or more if more objections are raised)

Final approval from judge (one week)

Total time: at least four months, or more if the settlements are challenged

Claimants who are not happy with the deal will also be able to opt out, preserving their right to sue BP separately.

After that, there will be fairness hearings to debate the proposed settlement, at which other lawyers representing plaintiffs could challenge the deal agreed by Mr Herman and Mr Roy. Only at the end of all that will the judge give final approval to the settlement.

Gerry Nolting of Faegre Baker Daniels in Minneapolis, who represents more than 1,100 clients in the litigation, says that he had not yet seen the terms of the proposed deal. “If I’m of the opinion that it is an acceptable deal for my clients, then I will support it,” he said. “I’m not going to throw rocks at it now. But I need to see it.”

The Gulf Coast Claims Facility, which has been paying money from a $20bn fund that BP pledged for victims of the spill in June 2010, will be wound up and replaced by a new procedure, which is likely to use much of the same administrative infrastructure. The transition between the two systems is expected to last 12-14 weeks. The question for Judge Carl Barbier, who is hearing the Deepwater Horizon case, is whether he can allow a trial to go ahead while that settlement process is being worked through.

Carl Tobias of the University of Richmond law school points out that the judge’s record so far has demonstrated he is determined to keep the process moving. However, to start a trial while the settlement has yet to be finalised could create a problem. If the deal falls through, what happens to the private sector plaintiffs? Would they have to hold another trial later? It would be a messy situation that Judge Barbier might rather avoid.

Professor Tobias says: “I don’t think he wants to wait; I think he wants to move it. But it depends how confident he is that the settlement will go through.”

For BP, every day the trial can be postponed is a bonus. It will allow it to spend more time negotiating with the US Department of Justice, rather than confronting a potentially unpalatable choice between a bruising trial and an out-of-court settlement of US federal and state government claims that could be much larger than the private plaintiffs’ $7.8bn.

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