SETBACK FOR BRITISH PETROLEUM AS U.S.A. JUDGE REJECTS CALLS TO HALT OIL SPILL PAYMENTS

SETBACK FOR BRITISH PETROLEUM AS U.S.A. JUDGE REJECTS CALLS TO HALT OIL SPILL PAYMENTS

By Ed Crooks, July 22, 2013

BP has suffered another setback at a hearing in the US District Court in New Orleans, failing in its attempt to freeze compensation payments under the settlement it agreed last year over the 2010 Deepwater Horizon disaster.

The company had called on Carl Barbier, the federal judge who is hearing the case over the spill, to suspend payments pending an investigation into allegations of misconduct at the office of Patrick Juneau, the claims administrator.

The result was discouraging for BP’s overall hopes of limiting the cost of the settlement, which is on course to be more than double its original estimate of $7.8bn.

Judge Barbier not only rejected the company’s motion, he also volunteered a sharply worded opinion about its tactics. In particular, he criticised Bob Dudley, BP’s chief executive, for “going beyond the line” with “unfair, inappropriate, personal attacks” on Mr Juneau.

With its attempts to persuade Judge Barbier to stop payments apparently at a dead end, BP’s hopes now lie in the Fifth Circuit appeals court, across the street from the district court in New Orleans. But legal experts say its efforts there to overturn Judge Barbier’s earlier rulings also look like long shots.

Louis Freeh, a former director of the Federal Bureau of Investigation, was appointed by the judge this month to investigate possible misconduct at Mr Juneau’s office, following allegations linked to Lionel Sutton and his wife Christine Reitano, two lawyers who worked for the claims administrator until Mr Sutton resigned and Ms Reitano’s contract was terminated last month.

However, Judge Barbier said in court on Friday that while there was “a serious problem” at Mr Juneau’s office, he had not seen any evidence that it affected the calculation and payment of claims.

“The problem I have here is that you all have made a lot of accusations, put out a lot of innuendo, and I want to know what evidence there is to support this,” he told BP’s lawyer.

“I can’t grant an injunction based on suspicion, innuendo, beliefs.”

He concluded that Mr Juneau’s internal investigation into the allegations “has not found any evidence that either of the two [Mr Sutton and Ms Reitano] played any part in the actual processing of claims or that they improperly influenced the computation of any claims”.

Going beyond those conclusions, he went on to criticise BP’s attempts to publicise its concerns.

He said the company had encouraged media coverage that often conflated the allegations of misconduct with the “entirely separate” question of Mr Juneau’s interpretation of the settlement, which has opened the door to billions of dollars of claims for business losses that were not foreseen by BP.

His strongest language, though, was reserved for a defence of Mr Juneau and an attack on Mr Dudley’s remarks on CNBC on Thursday, when he said the settlement had been “hijacked” by the administrator’s interpretation, leading to “absurd payments” to people not affected by the spill.

Judge Barbier said on Friday: “Those are especially offensive and inappropriate words and language coming from, of all things, the CEO of a party to this settlement agreement.”

BP said in a statement after the hearing that it would “review all available legal options in light of the court’s decision”, but it seems unlikely to be able to expect much support from Judge Barbier in any future attempt to curb compensation payments.

In the appeal court, it is fighting Mr Juneau’s interpretation of the settlement –already upheld by Judge Barbier – and a decision is expected within a few months.

However, experts in class action litigation say it is rare for an appeals court to overturn a settlement decision. “I think BP probably has a very tall mountain to climb,” says Brian Fitzpatrick of Vanderbilt University in Tennessee. Daniel Jacobs of American University describes BP’s challenge as “a Hail Mary pass”.