As widening reports of severely depleted catches and collapsing fisheries rock coastal communities on the Gulf of Mexico, BP announced late last week that it will cap compensation for “fishing-related claims” at $2.3 billion. The British oil giant is taking a hard-line stance on limiting a potential avalanche of liability tied to a Gulf industry that has been decimated by our nation’s worst oil spill – one that released more than 200 million gallons of crude off the Louisiana coast during the spring and summer of 2010.
Nearly two years on, many local commercial fishermen are convinced that the once-thriving Gulf seafood industry will never return to its pre-spill glory, threatening the livelihoods of tens of thousands of hard-working Americans.
Industry experts predict that this year’s oyster season could be off by as much as 70 percent. Both the white and brown shrimp seasons were the worst in decades. And crabbers have reported not only drastically depleted catches but also the continued presence of tar balls and tar mats in their traps, which has re-ignited the debate on seafood safety. Those grim accounts from fishermen support a growing number of independent scientists, like noted biological oceanographer and marine and oyster biologist Dr. Ed Cake, who believe the Gulf’s fisheries “have already collapsed” and that nobody can really say “if or when they’ll come back.”
That life-altering uncertainty has left commercial fishermen in a quandary as to how they will weather the storm. That is, how will they ensure they will be fairly compensated for their future losses (however devastating and persistent they may be). Should they join in the class-action settlement capped at $2.3 billion or should they sue BP individually for damages, including punitives?
Here’s how David Hammer covered the $2.3 billion cap disclosure in his March 9 report for the Times-Picayune:
In the BP oil spill case, a key component of the proposed class-action settlement between private plaintiffs and BP is a $2.3 billion set-aside for seafood claims, the only part of the settlement that’s capped. That’s what BP is willing to pay to compensate commercial fishing vessel owners, captains and deckhands, as well as oyster leaseholders and harvesters.
The seafood program will not include processing, use or sales of seafood. The $2.3 billion is the only set amount within a larger proposed settlement that BP estimates will cost it $7.8 billion.
According to Mr. Hammer, “details of how seafood program claims will be processed and calculated are still being worked out,” but as you may recall, claims czar Ken Feinberg initially capped damages for most claimants, including fishermen, at two times 2010 losses. That lowball formula was based on BP-funded “studies” that predicted – without any supporting scientific data – Gulf fisheries would fully recover by the end of 2012. Those so-called studies have been widely discredited as being overly optimistic (bordering on delusional) by a parade of independent researchers. Consider this from another Times-Picayune article by David Hammer published Feb. 11, 2011:
Feinberg first proposed a methodology for calculating future spill losses on Feb. 2. Based on the idea that Gulf fisheries would fully recover by the end of 2012, Feinberg said payments of twice a claimant’s 2010 losses would be appropriate in most cases.
More than 1,440 public comments were sent to the Gulf Coast Claims Facility website during the next two weeks. Generally, fishers and their lawyers groused that the Gulf would take longer than two-and-a-half years to fully recover, while BP complained that Feinberg’s plan to pay most claimants twice their 2010 losses was too generous. Those opposing opinions failed to move Feinberg.
It certainly doesn’t bode well for commercial fishermen that BP once described the “two times 2010 losses” formula as too generous. And despite the fact that Mr. Feinberg was officially relieved of his duties last week and his initial “damages formula” was eventually increased for certain claimants, like hard-hit oyster harvesters, you have to wonder how much higher BP will go in compensating commercial fishermen. I anticipate that the calculations will be far more just this time around, if only because District Court Judge Carl Barbier must approve them. But you can bet BP is going to engage in bare-knuckle negotiations toward the lowest possible compensation thresholds. The good news is that in an effort to ensure the fairest possible allocation structure, Barbier has appointed a local mediator with strong experience in reaching agreements in these types of complex cases.
More from David Hammer’s March 9 report:
…U.S. District Judge Carl Barbier named a Baton Rouge mediator, John W. Perry Jr., to preside over the negotiation of remaining details for the seafood program.
In his curriculum vitae, Perry says he has been mediating for 17 years and is “recognized as a leading authority on the process and application of alternative dispute resolution.” He has served as a mediator, arbitrator or special master in more than 4,000 cases since 1995.
We’ll have to wait and see what kind of fruit the mediator-led negotiations produce in the coming weeks. But I will say that many of my fishing-related clients are already hesitant to join the class settlement and compete with other plaintiffs for a limited pool of compensation funds. As fishermen confront depleted catches and scientists point to collapsing fisheries, my guess is many plaintiffs will opt out of the class and sue BP individually to ensure they will be justly compensated. As mentioned, these folks also have punitive damage claims.
In my mind, there’s simply no way $2.3 billion is going to cover – in a fair and reasonable manner – all the “seafood claims” that are pending from thousands of fishing-related plaintiffs. So we will be faced with one of two seemingly unacceptable scenarios: (1) an unfair damages formula that shortchanges commercial fishermen but limits total compensation to $2.3 billion; or (2) a fair damages formula that justly compensates commercial fishermen but busts the $2.3 billion cap. You can’t have it both ways.
Stay tuned. We’ll be posting updates soon.
Read my March 7 post on the collapse of the Gulf’s fisheries here: http://www.stuarthsmith.com/everything-is-dead-gulf-fisheries-collapse-nearly-two-years-after-bp-oil-spill
Read David Hammer’s report for the Times-Picayune on BP’s $2.3 billion cap on “seafood claims”: http://www.nola.com/news/gulf-oil-spill/index.ssf/2012/03/court_mediator_appointed_to_ha.html
Here’s David Hammer’s Times-Picayune report on Ken Feinberg’s initial damages formula: http://www.nola.com/news/gulf-oil-spill/index.ssf/2011/02/kenneth_feinberg_responds_to_c.html
© Smith Stag, LLC 2012 – All Rights Reserved