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BP challenges mandated payouts to thousands

Just over four years after the massive oil spill in the Gulf of Mexico, the British oil giant BP PLC asked the Supreme Court on Wednesday to put on hold lower court rulings that it contends would mandate hundreds of millions of dollars in unconstitutional payments on damage claims.  The application (13A1171) can be read here.

As a result of a welter of recent rulings in lower federal courts, BP argued, it is now under orders to pay more than $600 million to businesses and law firms that are making claims that the company insisted are not in any way traceable to the April 2010 oil spill.

Two years ago, the company and attorneys for a class of Gulf Coast residents and businesses worked out a settlement deal.  But the company in recent months has claimed that, as the special manager of the compensation plan has defined who will benefit under the economic losses category of the settlement deal, the class has been expanded to cover thousands who cannot prove any harms due to conduct by BP.

BP soon will file a petition asking the Supreme Court to review the validity of any such payments.  In the meantime, its filing on Wednesday asked that the latest rulings by the U.S. Court of Appeals for the Fifth Circuit be blocked until after the Supreme Court could rule on them.   The plea was filed with Justice Antonin Scalia, who is the Circuit Justice for the geographic region that includes the Fifth Circuit trial and appeals courts.

Justice Scalia has the option of acting on his own, or sharing the issue with his colleagues.  He also has the option of seeking a response from the claimants’ lawyers before he or the Court would act.

At the center of BP’s case is an issue that has been returning to the Supreme Court with some frequency, but apparently has yet to be finally settled.  That is the question of whether it violates the Constitution’s Article III limits on federal court power, or Federal Rule of Civil Procedure 23 governing class-action lawsuits in federal courts, for a judge to approve a class that includes members who cannot show they were harmed by the sued company’s actions.

BP’s application told the Court that eight federal appeals courts have ruled on that issue, resulting in a six-to-two split, with the six courts in that list concluding that such a class cannot be legally or constitutionally certified.   The Fifth Circuit and the U.S. Court of Appeals for the Third Circuit are on the other side, BP said.

The oil company contended that, under the claims administrator’s interpretation of the class to benefit from economic damages payouts, “hundreds of millions of dollars” would have to be paid to “thousands of entities whose purported losses were not plausibly caused by the spill.”

Among the payouts, it said, would be $76 million to entities “whose entire losses clearly had nothing to do with the spill, such as lawyers who lost their law licenses and warehouses that burned down before the spill occurred.”

In addition, it said, awards of an added $546 million would go “to claimants who reside far from the coast and are engaged in business activities that bear no logical connection to the spill, such as commodity farms that sell in a nationwide or worldwide market or contingent fee law firms.”

If the Supreme Court does not put the appeals court’s latest rulings on hold, the company’s application contended, the money will go out and will be spent, beyond retrieval by BP if it ultimately wins its legal appeal.

For the past year, BP has been challenging in lower courts a federal district judge’s approval of the claims administrator’s interpretation of the economic loss provisions under the 2012 settlement agreement.  The company has sometimes won, but most recently has been on the losing end.

Recommended Citation: Lyle Denniston, BP challenges mandated payouts to thousands, SCOTUSblog (May. 29, 2014, 6:50 AM),