Wednesday, July 28, 2010
The Associated Press reports that Ken Feinberg announced on Tuesday that he will disclose BP's compensation to him for administering the $20 billion BP oil-spill claims fund, after he had previously stated such information would be "confidential" and "between [him] and BP." Feinberg now concedes the "perception of a conflict." Feinberg also said the he might request that than an outsider "with great credibility" set his salary. (H/t to Ted Frank of the Center for Class Action Fairness for apprising me of this development.)
On Sunday, July 18, I posted about the possible conflict of interest for Feinberg, arguing that he should disclose his compensation and seek a federal judge to assess his billable hours and rate, as is routinely done in class-action fee requests by class counsel. My post triggered a short article by Forbes and a post on Legal Ethics forum. I doubt my post had anything specifically to do with Feinberg's decisionmaking, but I'm happy that he has decided both to disclose his compensation and to seek a reputable third party to oversee his compensation, rather than BP (presumably, BP will agree to whatever the third-party determines). As I mentioned in my earlier post, I never meant to call into question Feinberg's integrity; rather, I urged this path as a way to help the success of the fund by removing any possible conflict of interest, and I expect that both Feinberg and BP will be happy to put this issue behind them.
UPDATE -- A Forbes article today discusses my prior blog post and Feinberg's recent decision to disclose his compensation.
Friday, July 23, 2010
Next week, on July 29, the Multi-district Litigation Panel, a panel comprised of seven judges throughout the country, will gather to determine where to transfer the cases filed against BP arising from the oil spill. (In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, MDL No. 2179) The cases on the docket include around 24 from Alabama, 10 from Florida, 33 from Louisiana, 8 from Mississippi, and 2 from Texas.
Despite the spate of new articles, the story hasn't changed much in the past few months. Plaintiffs' attorneys are, by and large, pushing for New Orleans where they suspect that a potential jury pool would be hostile to the oil industry. And, not surprisingly, defendants are pushing for a Houston venue, in the heart of the oil industry. Much the same scenario plays out in less high-profile cases on a regular basis.
Plus, the MDL Panel doesn't always choose a side. For example, the MDL Panel in the In re Silicone Gel Breast Implant Products Liability Litigation in the early 1990s sent the cases to the Northern District of Alabama despite a push by plaintiffs for the Northern District of California or the District of Kansas and a push by defendants (and a few plaintiffs) for the Southern District of Ohio. Of course, just as in BP's case, the litigants in the Breast Implant litigation urged the Panel to appoint a particular judge (i.e., Judge Henderson or Patel in the Northern District of California or Judge Kelly from Kansas). Back then, the Panel noted in its order that either Ohio or California would be an appropriate forum, but it was "troubled" "by the volume and tone of the negative arguments with which opposing counsel have sought to denigrate each other's forum choices, litigation strategies, and underlying motives." 793 F. Supp. 1098 (JPML 1992).
The same logic seems to apply with equal force to the BP oil spill litigation, so it wouldn't come as a huge surprise if the Panel rejected Louisiana and Texas as a forum. That said, as someone who's written about the value of process and, in particular, about the value of participating in process as a vital component of procedural justice, I would hope that the Panel's forum selection wouldn't undermine the ability of those plaintiffs with fewer resources to participate. And by "plaintiffs" I do mean the plaintiffs themselves, not just their attorneys who will certainly participate regardless of where the lawsuits land.
Sunday, July 18, 2010
The Forbes article, BP's Legal Blowout, by Daniel Fisher and Asher Hawkins, looks at the benefits, risks, and remaining issues surrounding the BP claims fund. I'm quoted in the article's discussion of legal fees.
Today, I saw on Bloomberg Rewind a video of several questions to Kenneth Feinberg, administrator of the $20 billion BP oil-leak compensation fund. (Video of the interview apparently not yet available on the internet.) At one point, the reporter asked Feinberg how he would be paid, and Feinberg responded that BP would pay because neither the victims nor taxpayers should have to pay him. Fair enough. But when the reporter asked Feinberg whether his compensation would be disclosed, Feinberg said that his compensation "would be confidential."
The issue of Feinberg's compensation is interesting. Feinberg worked pro bono on the 9/11 victim compensation fund -- a remarkable and laudable commitment given the substantial time involved. I'm not suggesting that Feinberg should go on doing such monumental administrative tasks pro bono -- but is it appropriate for him to keep his compensation from BP confidential?
As with the 9/11 fund, Feinberg will likely have tremendous discretion in fashioning the administrative claim mechanism for the BP compensation fund. His exercise of discretion could possibly result in BP saving substantial funds, especially if any remainder of the $20 billion fund is to be returned to BP. Accordingly, a fair process at a minimum requires that both the amount of his compensation, and the method of compensation be disclosed publicly. If BP has the ability to review and cut his billable hours or his billable-hour rate, for example, Feinberg might have a conflict of interest that could lead him unconsciously to favor BP in structuring the administrative fund or making awards. As a result, in addition to public disclosure, an even better solution might be for BP and Feinberg also to agree to have a federal judge review Feinberg's billable hours, billable-hour rate, and total fee, much as is already typically done by judges reviewing class counsel fee awards in class-action settlements under Rule 23. See Fed. R. Civ. P. 23(h) ("In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement.").
I of course do not mean in any way to call into question Feinberg's integrity; he is widely viewed as the nation's leading claims administrator. But even federal judges have their compensation set publicly and in a manner that could not be said to incentivize them to favor one litigant over another. We would never approve of a judge being paid confidentially by only one litigant -- and we shouldn't here either, especially when the claims structure could be seen as quasi-public in light of the President's central involvement and comments that "[i]n order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party." Ultimately, removing the issue of Feinberg's fees from any controversy would aid Feinberg in making the BP fund a success.
UPDATE -- Professor Andrew Perlman (Suffolk) comments at Legal Ethics Forum on my post above.
UPDATE #2 -- Forbes' On The Docket blog discusses my post above: Feinberg's BP Pay: Should It Be Disclosed?, by Daniel Fisher.
Thursday, July 8, 2010
On July 1, the House passed HR 5503, the Securing Protections for the Injured from Limitations on Liability Act (SPILL Act), which was introduced by Judiciary Committee Chairman John Conyers. If passed by the Senate, the bill would allow for non-economic damages for maritime victims' families. Here's an excerpt from the press release:
"I want to say how offensive it is when the law recognizes only pecuniary loss in cases like these eleven deaths," said Keith Jones, father of spill victim Gordon Jones. "Please believe me; no amount of money can ever compensate us for Gordon’s death. We know that. But this is the only means available to begin to make things right."
The SPILL Act addresses out-of-date legislation from the mid 1800s to the early 1900s: Death on High Seas Act (1920), Jones Act (1920), and the Limitation on Liability Act (1851).
- It amends the Death on the High Seas Act and Jones Act to permit non-pecuniary damages.
- It repeals the outdated Limitation on Liability Act.
- It prevents parties responsible for oil spills from using the bankruptcy courts as a subterfuge to leave victims without adequate legal recourse.
- It provides that these changes will apply to all cases on and after April 20th, consistent with previous liability law changes enacted by Congress.
Here's a link to the Bill's text. The U.S. Chamber of Commerce has opposed the bill, and claimed that it "threatens to negate one of the core purposes of CAFA by creating a loophole that would encourage enterprising attorneys to avoid federal jurisdiction by finding attorneys general to join their class action lawsuits." Meanwhile, the Senate is considering the Big Oil Bailout Prevention Act, which would remove the $75 million cap on economic liability.
Monday, July 5, 2010
CNN reports that BP has so far spent more than $3 billion in connection with the Gulf of Mexico spill, including $147 million to pay 47,000 claims so far of the 95,000 total submitted. CNN also noted speculation that the more than 50% drop in BP's share price has even made it ripe for a takeover.
Margaret Williams (Federal Judicial Center) and Tracey George (Vanderbilt) have posted their paper, "Deciding Who Decides: Consolidating Multidistrict Litigation" on SSRN. Their empirical investigation of MDL fills a tremendous gap in the literature and is a welcome contribution. Here's the abstract:
The United States Judicial Panel on Multidistrict Litigation may transfer factually related actions filed in different federal districts to a single judge for consolidated pretrial litigation. This transferee judge has significant discretion over the management of the litigation, and nearly all cases are resolved without returning to the original district court. Thus, as a practical matter, the Panel controls where these disputes will be litigated. And, the Panel has substantial discretion in making that decision. In its forty years of existence, the Panel has transferred roughly 325,000 lawsuits including high-profile securities and derivative lawsuits (the collapse of Lehman Brothers and the Ponzi scheme of Bernie Madoff), consumer claims (Countrywide Mortgage’s lending practices), and mass torts ranging from the Vioxx litigation to the Union Carbine disaster in Bhopal to the bombing of Pan Am Flight 103. BP already has moved to consolidate and transfer more than 100 Gulf of Mexico oil spill suits filed against it in the various districts along the Gulf coast to the Southern District of Texas for pre-trial litigation, and potentially related suits filed in the future are likely to be transferred as well.
The current study provides the first empirical investigation of the Panel’s decision to transfer and consolidate pending federal civil lawsuits, examining the rationale for transfer and for the selection of a specific district court and judge to handle the consolidated litigation. The results provided here represent a draft paper based on a sample from an ongoing data project which ultimately will include all Panel orders.