So who is ultimately responsible for the worst oil spill in U.S. history? BP, the owner of the oil itself, assigns blame to Halliburton, the company that did the cement work on the doomed Macondo Well. And not unexpectedly, Halliburton points the finger back at BP. As the blame game gets set to go to trial in New Orleans early next year, a bombshell legal motion filed Monday by BP in U.S. District Court could prove lethal to Halliburton’s case.
BP accuses Halliburton – the world’s second-largest oilfield services corporation – of intentionally destroying key evidence in the case, including “uniquely relevant cement testing” and “3D modeling results” of the cemented Macondo Well, which Halliburton simply says are “gone.”
In a motion calling for civil sanctions and legal remedies, BP “respectfully submits that Halliburton has intentionally destroyed evidence and has violated this Court’s orders regarding the production of documents.” The allegations are extremely serious. If the court determines they have merit, the judge could impose sanctions, including a court order that Halliburton pay attorneys’ fees tied to the trial, which will no doubt be significant. But, at this point, attorney fees are the least of Halliburton’s worries. If the court rules in favor of BP, it could very well render Halliburton’s defense dead on arrival. BP and its two contractors, Halliburton and Transocean (owner of the Deepwater Horizon rig), have been locked in a bruising legal battle since last year.
Here’s the background as laid out in BP’s filing (known as a Motion for Spoliation Sanctions):
Halliburton has consistently held fast to two core assertions regarding the cement that it pumped into the Macondo well on April 19, 2010. These core assertions have formed the backbone of Halliburton’s defense of its conduct leading up to the Macondo oil spill.
First, Halliburton has insisted that the foam cement Halliburton pumped into the Macondo well on April 19, 2010 was “stable,” despite testing results from multiple sources to the contrary and despite the bald fact that Halliburton’s cement allowed hydrocarbons to flow up the well and into the riser on the night of April 20, 2010.
Second, Halliburton has maintained that the real problem at Macondo was that the cement “channeled” inside the well because of BP’s engineering decisions, including the decision to use fewer centralizers than Halliburton had recommended.
BP goes on to argue that “Halliburton’s own non-privileged, post-incident testing” contradicts both of those core positions. The motion argues that: (a) the Macondo Well cement “slurry” was not in fact stable; and (b) modeling shows that there was no channeling of the cement in the well. (By definition, channeling is “a failure during cementing of the casing to the formation whereby the cement slurry does not rise uniformly, leaving open spaces and thus preventing a strong bond.”)
As for the cement testing and subsequent destruction of results and physical samples, here’s the background according to the motion:
…Ricky Morgan, Halliburton’s Global Advisor in Gulf Cementing, has candidly admitted that he destroyed evidence willfully, with full knowledge of pending litigation, and for the express purpose of keeping unfavorable information out of the hands of Halliburton’s litigation adversaries.
BP goes on to cite Mr. Morgan’s deposition:
Q. And you mentioned that the reason that you didn’t document the test and you threw out the sample was because you were worried about it being misinterpreted in the litigation?
A. Yes, that’s part of the reason yes, ma’am.
A second Halliburton employee, Mr. Quirk, also provides devastating testimony regarding the cement testing:
Q. Do you recall what happened to the physical pieces of cement you tested? Did you dispose of that?
A. Yeah, just discarded it.
Q. Did you have hand notes…
Q. And what happened to those hand notes?
A. I got rid of them.
The testimony from Mr. Morgan and Mr. Quirk is a big problem for Halliburton. The company appears to be caught red-handed, intentionally destroying key evidence. Of course, parties involved in litigation are forbidden from destroying (or disposing of) any evidence. Period.
As for Halliburton’s claim that BP’s engineering decisions caused the cement to channel (or become unstable) in the well, the motion indicates that Halliburton has failed to produce the modeling that would reveal that flaw despite repeated requests and delays:
After still more waiting, and still further requests, BP arranged a meet-and-confer session. During this meet-and-confer session, Halliburton stated for the first time that these critical modeling results were now “gone.” …Halliburton has not explained to BP or the Court why or how such essential evidence could, and apparently did, simply vanish.
Not surprisingly, Halliburton believes the motion is without merit. But as an attorney who has prosecuted oil companies for decades, this motion looks very bad for Halliburton. And it seems the market agrees, as Halliburton shares fell 5 percent yesterday.
The judge has broad discretion to fashion a remedy if he finds BP’s motion to have merit. If the alleged conduct is determined to have indeed taken place, a “spoliation of evidence” jury instruction would be a likely remedy. That amounts to a trial lawyer’s kiss of death. It’s nearly impossible to rehabilitate your client once the judge informs the jury that there has been intentional destruction of key evidence. The judge’s instruction would go something like this: “Ladies and gentlemen of the jury the court has found that the party (in this case, Halliburton) has destroyed or spoiled evidence. The evidence was ******, therefore, you may presume the evidence as adverse to the party responsible.”
If the judge decides a “spoliation of evidence” jury instruction is warranted, Halliburton’s attorneys are going to have an enormously tough time defending their client. Even without the jury instruction, BP has sworn testimony from Halliburton employees indicating that they dumped key evidence. That sort of conduct is almost always lethal in the eyes of a jury.
Review BP’s entire motion here: BP’s Motion for Spoliation Sanctions
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