From slip-and-fall accidents to billion-dollar toxic torts, courts wrestle with two big questions: Who is a legitimate victim, and what will it take to make that person whole?
The damages resulting from the Deepwater Horizon oil spill in the Gulf of Mexico might outstrip anything that came before. And from the moment BP CEO Tony Hayward pledged to pay “all legitimate claims” tied to the leak, the legal community—and the world—have wondered: What, exactly, is a legitimate claim? And how will those claims be satisfied? The short answer: No one really knows.
But a lot of lawyers are about to spend a large portion of their lives finding out.
“We’re in uncharted waters,” says attorney Burton LeBlanc, a shareholder in the Baton Rouge office of Baron & Budd. “There’s nothing in the history of the legal system that can compare to this.”
The most famous compensation in American history derived from the Exxon Valdez oil spill in 1989. Exxon paid about $1 billion in punitive damages and compensation after two decades of litigation, and experts agree the Deepwater Horizon spill is a far bigger deal in terms of the number of people affected.
Even guessing at the total cost of the disaster is futile. But whether a person counts the claims that eventually will be filed or the value of those claims, the total likely will be greater than suits from any other single incident of any kind.
“It’s especially complex,” LeBlanc says, “because in this case, more than any other case I’ve ever seen, where do you draw the line?”
Clearly, shrimpers, oystermen, boat captains and others along the Gulf Coast have legitimate claims. Coming up with a total will involve income comparisons from before and after the spill. But the recession will complicate that discussion. Does someone’s income from last year accurately reflect what he or she would have made next year, especially if the economy improves? And how long will it take before an oil-tainted fishery returns to normal?
Those people don’t keep detailed financial records. Some, while operating a cash business, don’t even file tax returns, so they’ll need tax experts and forensic accountants.
“When you work outside the system,” says Michael Stag of New Orleans-based Smith Stag, “it’s difficult to come back in the system and get the system to work for you.”
The farther you get from the coast, the trickier the legal questions become, and the more influence the dueling experts on both sides will have. What is owed to Baton Rouge residents denied full use of their Grand Isle fishing camps? What about a bank that owns investment property on the Florida Panhandle? Is its lost value attributable to the oil spill, or to real estate factors that have nothing to do with the disaster? How about a seafood restaurant that has to spend a lot more money for its oysters this year, never mind next year?
Potential plaintiffs are asking about the $20 billion escrow fund that BP has set aside, although some of their questions will be difficult to answer until the exact policies and procedures are put in writing. But highly respected fund administrators Kenneth Feinberg and Michael Rozen have given some basic guidelines.
“We’ve encouraged everyone that calls us to go through the BP claims process,” says Chase Tettleton, an associate with the Babcock Law Firm. “Our ultimate goal is to make these small businesses whole. If BP will do that, and they can be compensated for all their damages through that on a quick turnaround, then, by all means, that’s what we recommend.”
Several attorneys say claimants should have a professional help them through the process. Some victims will receive interim payments from the fund to get through the short term. But once claimants agree to a “final payment,” they waive their right to sue BP, which operated the Deepwater Horizon. At some point, they will have to choose between a bird in the hand and a shot at the golden goose.
Lucky for them, there are plenty of other companies to sue. Anadarko Petroleum owns a 25% stake in the well. Cameron International built the failed blowout preventer. Transocean owned the Deepwater Horizon. Halliburton was responsible for the controversial well cementing job. The list goes on, and things could become interesting when those companies start suing each other.
“They’re already pointing fingers at each other,” LeBlanc says. “I’ve been to several status conferences in front of Judge [Carl] Barbier in New Orleans, and you can see the lines are being drawn.”
BP would love to see all of the cases consolidated in Houston, where BP America is headquartered and where, presumably, juries would be more sympathetic. Plaintiffs’ attorneys argue New Orleans is closer to the rig’s location, and they say BP’s lawyers and witnesses can travel to New Orleans more easily than a charter boat captain can to Houston.
Some firms are taking a wait-and-see approach, but others filed court documents days after the April 20 rig explosion. Some plaintiffs wanted to jump to the front of the line in case, at some point, the money runs out. Rumors are circulating that BP has hired bankruptcy attorneys in Houston; the company has repeatedly denied that bankruptcy is seriously under consideration.
Melissa Landry, executive director of Louisiana Lawsuit Abuse Watch, says the quick suits raise a red flag. Any disaster creates the potential for frivolous claims; an unprecedented disaster also presents an unprecedented opportunity for suits that lack merit.
“Unfortunately, those cases clog up the system,” she says. “If they make it through, they rob the real victims.”