Tuesday, October 14, 2014
The papers in the Deepwater Horizon Settlement cert petition are mostly in. The case is BP Exploration & Production Inc. v. Lake Eugenie Land & Development, Inc. -- you can find the documents on SCOTUSBLOG.
BP's basic argument is that the settlement approved by Judge Barbier in the mass tort class action against it was ultra vires because it contemplated giving money to people who were, according to BP, not injured. The plaintiffs respond that BP is just trying to overturn a settlement it championed through the backdoor now that its unhappy with the deal.
One of the most interesting briefs filed in this dispute is from Kenneth Feinberg, who oversaw both the 9/11 Victims Compensation Fund and the Gulf Coast Claims Facility. The latter was the entity that settled claims arising out of the Deepwater Horizon oil spill immediately after it happened.
Feinberg is a world class mediator and one of the most prominent figures in the mass tort world. The class action settlement that BP is now disputing is the successor to the Gulf Coast Claims Facility, which he headed. What the class action did that the Gulf Coast Claims Facility could not do is give BP global peace. In other words, all civil claims against BP arising out of the oil spill are precluded by that class action settlement.
Feinberg's brief asks the Supreme Court to grant cert. The argument is basically the following: claim facilities like the ones he ran apply a causation requirement that parallels that of the tort system. But, he argues, the settlement agreed to by BP does not include as strong a causation requirement, and this threatens the possibility of future compensation funds to solve mass torts. The brief explains:
..the Fifth Circuit's decisions in this case affecting the causation standard, if permitted to stand, threaten to make these sorely needed alterantives to mass tort litigation unlikely to be replicated. Future funds would either adopt the Fifth Circuit's new standard, thereby threatening to overwhelm the claims process with spurious claims, or continue to require causation, thereby channeling claimants toward litigation where the burden of proof is lower. (Feinberg petition at 6).
This argument seems to me to be just wrong. The settlement imposed a looser causation requirement than tort law requires. But that causation requirement was agreed to in order for claimants collect under the settlement; it is not the causation requirement of the substantive law. In the future, if a defendant perferred to create a settlement fund of the Feinberg-ian variety, they could do so and rest "easy" that the causation requirement of the substantive law remains as it always was. (Whether the requirement of specific causation is the best requirement from a normative point of view in mass tort litigation I leave to another day).
There is no risk that this settlement will affect future litigation because it is a settlement - the defendant participated in crafting and agreed to the causation requirement applied in the claims facility created by the settlement. One might say it is a form of private lawmaking only applicable to these parties. If a future mass tort defendant doesn't like this type of loosened causation requirement, they don't have to agree to it. In fact, they are free to say "we'll litigate every case" as Merck did for five years in the Vioxx mass tort and then in each and every case the standard causation requirement of the tort law in the relevant jurisdiction will apply.
And what of the argument championed by BP that the settlement pays people who were not injured in fact? Welcome to the world of settlements, Dorothy. What happens in a settlement is this: each party has a sense of what the case is "worth" - that is, the likely result at trial. They discount that amount by the risk of loss. Then they substract from that discounted amount their transactions costs (the costs of litigation). If the resulting number is close for both parties, they settle. See Steven Shavell, Foundations of the Economic Analysis of Law, 401-407 (2004). If they settle, they don't litigate. When they don't litigate, there is no trial.
A settlement means that the plaintiff never has to prove causation, or any other element of her cause of action. If the BP settlment violates Article III because plaintiffs didn't prove their legal entitlements, then every settlement violates Article III. The reason is that in no settlement does plaintiff ever prove that they are entitled to compensation because the very purpose of the settlement is to avoid trial. A plaitniff's entitlement at settlement is always uncertain. If settlements in general are constitutional, then so is this one.
A class action settlement is different than an ordinary settlement because it requires judicial approval. But does that judicial approval require that plaintiff establish injury? Here is the requirement for judicial approval of class action settlements: "If the settlement would bind class members," then the court needs to determine at a fairness hearing that the settlement is "fair, reasonable and adequate." Fed. R. Civ. P. 23(e)(2). The reason that a fairness hearing is only required "if the settlement woudl bind class members" is that the purpose of the hearing and approval process is to protect absent class members who are to be bound, but are not before the court to state their objections. This requirement is not meant to protect defendants, who are certainly well able to defend their interests and state their objections before the court.
And what was the benefit to BP? Why would BP enter into such a settlement? They wanted global peace. Only a class action settlement can provide that. They were willing to pay a high price for global peace at the time. Now things are different for BP, time has passed and it is in a better position than it was when it made this agreement, but that doesn't make the agreement unconstitutional or violative of the class action rule.
I hope the Supreme Court does not grant certiorari because the Fifth Circuit correctly rejected these claims. The ideas that underly the BP cert petition don't make sense in a litigation system that permits settlement. And they don't make sense under modern jurisprudential understanding of what a right is. People can sue when they think they have a right that has been violated. If the lawsuit goes to trial, then plaintiff will have to meet their burden of proving that they in fact (1) have a right and (2) it was violated. (Actually, they will likely have to show that they have a colorable case long before then). At the beginning of the litigation these things are uncertain. Uncertainty is the space in which settlements happen.
Wednesday, September 10, 2014
Professor Neal Katyal (Georgetown) and Theodore Olson (Gibson Dunn) take part in a Federalist Society panel on class action reform and the BP Deepwater Horizon case; the panel is moderated by Stuart Taylor (Brookings Institution).
Thursday, April 17, 2014
The Stanford Journal of Complex Litigation is hosting a symposium, "A Complicated Cleanup: The BP Oil Spill Litigation," on Thursday, May 8, 2014 and Friday, May 9, 2014, at Stanford Law School. The keynote address speaker is Kenneth Feinberg, the Gulf Coast Claims Administrator. Other symposium speakers will include Elizabeth Cabraser of Lieff Cabraser, Professor Francis McGovern (Duke), Professor Linda Mullenix (Texas), Professor Maya Stenitz (Iowa), and myself. Panel moderators will include Stanford Law Professors Nora Engstrom, Deborah Hensler, and Janet Alexander.
Friday, March 14, 2014
In a decision issued on March 3, the Fifth Circuit held that BP must stick to the settlement it signed on to, even if it doesn't like any longer the broad approach to compensation it once agreed to. As Professor and former Soliciter General Charles Fried said, in sum and substance, a contract is a promise. Here is an excerpt from the Fifth Circuit opinion:
There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not. One event during negotiations in the fall of 2012 suggests reasons for just requiring a certification [instead of proof of causation]. The claims administrator, in working through how the proposed claims processing would apply in specific situations, submitted a hypothetical to BP and others. It posited three accountants being partners in a small firm located in a relevant geographic region. One of the three partners takes medical leave in the period immediately following the disaster, thus reducing profits in that period because that partner is not performing services for the firm. At least some of the firm's loss, then, would have resulted from the absence of the partner during his medical leave. BP responded that such a claim should be paid.
We raise this not for the purpose of analyzing an issue we conclude is not relevant to our decision, namely, whether BP is estopped from its current arguments. Instead, we mention it in order to identify the practical problem mass processing of claims such as these presents, a problem that supports the logic of the terms of the Settlement Agreement. These are business loss claims. Why businesses fail or, why one year is less or more profitable than another, are questions often rigorously analyzed by highly-paid consultants, who may still reach mistaken conclusions. There may be multiple causes for a loss. ... The difficulties of a claimant's providing evidentiary support and the claims administrator's investigating the existence and degree of nexus between the loss and the disaster in the Gulf could be overwhelming. The inherent limitations in mass claims processing may have suggested substituting certification for evidence, just as proof of loss substituted for proof of causation. ...
In re Deepwater Horizon, --- F.3d ----, 2014 WL 841313, *5 (5th Cir. 2014).
Readers may also be interested in a Bloomberg News article by Laura Calkins and Jeff Feeley entitled BP Must Live with $9.2 Billion Oil Spill Deal, Court Says. In other BP news, looks like it can drill in the Gulf of Mexico again, according to the NYTimes.
Tuesday, January 14, 2014
The Fifth Circuit issued a decision on January 10th affirming the class action settlement in the In re Deepwater Horizon litigation. You can find the opinion here.
This opinion is the result of objections to the settlement, but BP intervened to argue that there was an Article III standing problem with the way the settlement agreement had been interpreted. That interpretation was very generous to claimants in its interpretation of how they must prove economic loss to collect. The problem BP faces now is that it didn't cap the settlement amount in the agreement (yes, you read that right, and furthermore this was a selling point of the settlement). As a result, BP has a classic "if you build it, they will come" problem and is trying to upend the settlement as a result. At the moment, the Fifth Circuit in a separate opinion by a separate panel has stayed the settlement adminsitration as it considers the interpretation of the agreement. In that separate opinion, the panel (which couln't quite agree) indicated that the agreement interpretation may be too generous and remanded for reconsideration. You can find that opinion here.
In the opinion issued on Friday, this panel indicated the interpretation may be just fine, and sent a strong hint to the District Judge about what he should do.
So here's the question, why did BP agree to these terms? It was an open ended settlement with a broad geographic reach and a flexible standard for compensation - that was clear from the start. I'm sure BP's excellent counsel knew this was a risk. So what happened? Were the economists predictions dead wrong? Is this just a case of buyer's remorse?
The WSJ has some coverage, here.
Wednesday, October 2, 2013
The New York Times reports that an appellate panel has remanded the BP settlement appeal for "clarification" of the settlement in response to BP's allegations that the settlement adminstrator was paying claims to non-injured claimants and engaging in other wasteful conduct.
Update: Here's the Fifth Circuit decision in the case.
Thursday, April 25, 2013
Over at the Conglomerate Blog, Christine Hurt has a great post on the One Fund Boston and individual victim fundraising. Her blog post is entitled One Fund Boston, Torts and Social Capital.
Sunday, October 14, 2012
Two years ago, I blogged about the need for greater scholarly attention to mass tort crisis management. Since then, crisis-management practice groups at law firms have continued to burgeon. Here's a sampling of crisis-management groups at large law firms: Baker Hostetler, Bingham, Cooley, Covington & Burling, Freshfields, Gibson Dunn, McCarter & English, McDermott Will & Emery, Patton Boggs, Pillsbury Winthrop, Skadden, and Steptoe & Johnson.
For media coverage of recent growth in crisis-management groups, see the following:
(1) Ashby Jones, On Covington and the 'Crisis Management' Boomlet, Wall Street Journal Law Blog (Jan. 6, 2011, 1:37 p.m.);
(2) Leigh Kamping-Carder, Savvy Firms Seek Business Through Crisis Management, Law360 (Feb. 19, 2010, 7:12 p.m.) (online registration required for article); and
(3) David Lat, A Look at Orrick's Crisis Management Practice, Above the Law (Oct. 8, 2009, 11:06 a.m.).
While business schools have offered courses on crisis management and leadership, public-policy schools have offered courses on governmental crisis management, and communications schools have offered courses on crisis communications, law schools appear not to have provided curricular attention to legal crisis management. (The University of Texas School of Law has a course on crisis management, but it appears to track public-policy courses focusing on the government's role in a crisis.) What might a law-school course on legal crisis management look like, focusing on the role of lawyers in preventing, managing, and resolving crises? Here's a draft description I put together for such a course that I've been considering more fully developing:
Legal Crisis Management and the Media
BGSAlthough crisis management has long been an important skill for lawyers, formal crisis management practices today proliferate among global law firms seeking to aid clients facing complex crises that span various countries, practice areas, and advocacy settings such as judicial, legislative, regulatory, or media inquiries. This course will examine and integrate insights on legal crisis management from multiple disciplines, including not only law, but also management, leadership, communications, and public relations. Within law, the course will draw upon ethics, counseling, negotiation, and alternative dispute resolution, and address lawyers' and clients' interaction with the media during a crisis, including global perspectives on the legal limits of media coverage. In addition to developing conceptual approaches, the course will discuss case studies of legal crisis management implicating the law, culture, and media of multiple countries and areas, and consider lawyers' actual and potential contributions to successful resolution of the crises.
Friday, October 12, 2012
Two Wall Street Journal articles in recent days have tracked recent settlements talks between BP and the federal government regarding civil and criminal liability in connection with the Deepwater Horizon oil spill in the Gulf. On Wednesday, the Journal reported, BP Close to Spill Settlement: Multibillion-Dollar Deal With U.S. Would Combine Civil, Criminal Liabilities. But on Thursday, the Journal noted in Slick Complicates BP Liability Talks that a new thin oil slick determined to be related to the prior Deepwater Horizon spill has appeared.
Monday, July 9, 2012
NPR has an extended interview with famed claims administrator Ken Feinberg about his new book, Who Gets What: Fair Compensation After Tragedy and Financial Upheaval.
July 9, 2012 in 9/11, Aggregate Litigation Procedures, Current Affairs, Informal Aggregation, Lawyers, Mass Disasters, Mass Tort Scholarship, Products Liability, Settlement | Permalink | Comments (0) | TrackBack (0)
Saturday, March 3, 2012
John Schwartz at the New York Times reports that the litigation surrounding the BP Deepwater Horizon Oil Spill has settled for all of the litigants except the federal government. The Judge overseeing the litigation issued the order late Friday night and will review the settlement.
Here's the report from Bloomberg as well.
According to these reports, either the settlement will be paid by the $20 billion fund BP created to compensate victims or the fund will close and be replaced by a court overseen claims facility. In any event, the amount of the settlement is $7.8 billion that from these reports is not in addition to the $20 billion already set aside.
More to come. ADL
Tuesday, February 28, 2012
You don't need the Mass Tort Litigation Blog to tell you that the imminent BP trial has been stayed pending settlement talks. In the meantime, here are some thoughts from the ever relevant George Conk. Special shout out for his poetic references: Diving Into the Wreck: BP and Kenneth Feinberg's Gulf.
I was just at a wonderful conference at the Charleston School of Law on Mass Torts and the Federal Courts where Feinberg spoke. One of the key questions at the conference is the extent to which claims facilities (BP, 9/11, etc.) are unique and unlikely to be repeated or the wave of the future. The interesting thing about BP is that it shows the interaction between claims facilities and litigation - its not one or the other. Speakers mentioned how companies trying to get ahead of a litigation may well look to the BP model. Others questioned whether BP was really special because the company was prepared to admit liability (although not gross negligence).
I was especially interested by the remarks of Sheila Birnbaum, currently running the 9/11 Fund for first responders and who mediated settlements for the 94 families who chose not to participate in the 9/11 Victim Compensation Fund. Even the families who wanted a public trial to find out what happened ultimately settled because of the uncertainty of trial. This raises important questions about the purpose of litigation for individuals: is it ultimately to get compensation? How important is it to get to the "truth"? How important is vindication? Punishment? When people settle (or waive their right to litigate prior to filing suit), what kind of consent do we want and does money ultimately satisfy? Lynn Baker, who was at the conference, referred me to the following article that addresses some of these questions: Gillian Hadfield, Framing the Choice Between Cash and the Courthouse: Experiences with the 9/11 Victims Compensation Fund. This continues to be relevant, especially if Funds become a model rather than a one-off.
Monday, January 30, 2012
No Formaldehyde Liability for US for FEMA Trailers After Hurricanes Katrina and Rita, Fifth Circuit Holds
The decision in In re FEMA Trailer Formaldehyde Products Liability Litigation, Nos. 10-30921, 10-30945 (5th Cir. Jan. 23, 2012), turns on liablity for the government "to the same extent" as private individuals, under the Federal Torts Claims Act, and the protection afforded private individuals giving voluntary disaster assistance under Good Samaritan statutes in Alabama and Mississippi.
Saturday, January 21, 2012
CNN reports that Chevron has appealed the $8.6 billion environmental judgment to Ecuador's National Court. The case has been closely watched not only for its high dollar amounts, but for the questions raised by Chevron about the integrity of Ecuador's courts. Questions of foreign-court bias may be more frequent as mass tort litigation increasingly becomes global tort litigation, and disputes against large, deep-pocketed corporations are brought by foreign claimants in foreign courts.
Tuesday, January 17, 2012
Adam Zimmerman (St. John's) has a nice post on Prawfsblawg called "The Rise of Executive (Branch) Compensation" in which he discusses the historical antecedents and politics of compensation funds for mass disasters. It reminds us that not all worthy victims have been the beneficiaries of such funds and the reasons why some are picked (and others are not) are not always clear.
Saturday, January 14, 2012
All that in the recent interesting op-ed from New York Times business columnist Joe Nocera -- BP Makes Amends.
January 14, 2012 in Aggregate Litigation Procedures, Environmental Torts, Informal Aggregation, Lawyers, Mass Disasters, Procedure, Punitive Damages, Settlement | Permalink | Comments (0) | TrackBack (0)
Wednesday, November 30, 2011
Monday, September 19, 2011
District Court Judge Carl Barbier (EDLa) has issued a case managment order for the upcoming trial arising out of the BP Horizon Deep Water Oil Spill. You can find the order here: Pretrial Order #41. According to BNA, the MDL has more than 500 lawsuits arising out of the spill.
Thursday, June 9, 2011
The Gulf Coast Claims Facility has appointed twenty-five people to serve as appeals judges for BP's private compensation system. Alabama's Press Register describes the process as follows:
Anyone who files a claim valued at more than $250,000 can protest the claims operation’s initial ruling to the appeals panel. BP can protest the decision on any claim above $500,000.
The judges will serve in panels of three. The panels will have 14 days to rule on each case before them.
If claimants are not happy with the appeals ruling, they can file their claim with the U.S. Coast Guard, or sue BP and other companies involved in the spill.
Jack Weiss, LSU's law school dean selected the following people to serve on the panel:
- Judge Delores R. Boyd (ret.) of Montgomery, Alabama. Boyd is a former Magistrate Judge of the United States District Court for the Middle District of Alabama.
- Dean John L. Carroll of Birmingham, Alabama. Carroll is the Dean and Ethel P. Malugen Professor of Law at the Cumberland School of Law of Samford University and a former Magistrate Judge of the United States District Court for the Middle District of Alabama.
- Judge William R. Gordon (ret.) of Montgomery, Alabama. Gordon is a former Circuit Judge of the 15th Judicial Circuit Court of Alabama.
- Justice Champ Lyons, Jr. (ret.) of Point Clear, Alabama. Lyons is a former Associate Justice of the Supreme Court of Alabama.
- Judge Edward B. McDermott (ret.) of Dauphin Island, Alabama. McDermott is a former Circuit Judge of the 13th Judicial Circuit Court of Alabama.
- Judge Kenneth O. Simon (ret.) of Birmingham, Alabama. Simon is a former Circuit Judge of the 10th Judicial Circuit Court of Alabama.
- Professor Charles W. Ehrhardt of Tallahassee, Florida. Ehrhardt is the Ladd Professor Emeritus at Florida State University College of Law.
- J. Joaquin Fraxedas of Altamonte Springs, Florida. Fraxedas is an attorney mediator/arbitrator and a Distinguished Fellow of the American College of Civil Trial Mediators.
- Judge Melvia B. Green (ret.) of Tampa, Florida. Green is a former Judge of the 3rd District Court of Appeal of Florida.
- Justice Major B. Harding (ret.) of Tallahassee, Florida. Harding is a former Chief Justice of the Supreme Court of Florida.
- Judge John J. Upchurch (ret.) of Ormond Beach, Florida. Upchurch is a former Chief Judge of the 7th Judicial Circuit Court of Florida and was appointed by the Supreme Court of Florida as a charter member of the Supreme Court Committee on Mediation and Arbitration.
- Dean Donald J. Weidner of Tallahassee, Florida. Weidner is the Dean and Alumni Centennial Professor at Florida State University College of Law.
- Judge Gerald T. Wetherington (ret.) of Coral Gables, Florida. Wetherington is a former Chief Judge of the 11th Judicial Circuit Court of Florida and has served as a Judge Pro Tempore of the 2nd and 4th District Courts of Appeal of Florida.
- Judge Robert J. Burns, Sr. (ret.) of Metairie, Louisiana. Burns is a former Chief Judge of the 24th Judicial District Court of Louisiana and served as a Judge Pro Tempore of the 5th Circuit Court of Appeal.
- Judge Philip C. Ciaccio (ret.) of New Orleans, Louisiana. Ciaccio is a former Judge of the Louisiana 4th Circuit Court of Appeal and has served as a Justice Ad Hoc of the Supreme Court of Louisiana.
- Judge David S. Gorbaty (ret.) of Chalmette, Louisiana. Gorbaty is a former Judge of the Louisiana 4th Circuit Court of Appeal.
- Chancellor Freddie Pitcher, Jr. of Baton Rouge, Louisiana. Pitcher is the Chancellor and Professor of Law at the Southern University Law Center and a former Judge of the Louisiana 1st Circuit Court of Appeal.
- Professor Ronald J. Scalise, Jr. of New Orleans, Louisiana. Scalise is the A.D. Freeman Associate Professor of Civil Law at Tulane Law School.
- Lynne R. Stern of New Orleans, Louisiana. Stern is an attorney mediator/arbitrator and past Chairman of the Alternative Dispute Resolution Section of the Louisiana State Bar Association.
- Professor Guthrie T. Abbott of Oxford, Mississippi. Abbott is a Professor Emeritus of Law at the University of Mississippi School of Law.
- Professor Patricia W. Bennett of Madison, Mississippi. Bennett is a Professor of Law at Mississippi College School of Law.
- Richard T. Bennett of Clinton, Mississippi. Bennett is an attorney mediator/arbitrator, former President of the Mississippi State Bar and serves on the Board of Directors of the American Arbitration Association.
- Judge W. Raymond Hunter (ret.) of Gulfport, Mississippi. Hunter is an attorney mediator/arbitrator, a former Municipal Court Judge for the City of Long Beach and serves as President of the Mississippi Chapter of Attorney-Mediators.
- Harold D. Miller, Jr. of Madison, Mississippi. Miller is an attorney mediator/arbitrator and served as the first Chairman of the Alternative Dispute Resolution Section of the Mississippi State Bar.
- Anne P. Veazey of Ridgeland, Mississippi. Veazey is an attorney mediator/arbitrator and serves on the Executive Committee of the Mississippi State Bar Alternative Dispute Resolution Section