January 13, 2012 / 10:38 PM / in 6 years

Claimants challenge holdback in BP oil spill case

NEW YORK (Reuters) - In a flurry of court filings this week, lawyers for claimants before the $20 billion BP (BP.L) oil spill fund asked a federal judge to reconsider his December order requiring that six percent of future settlements be placed in a reserve account.

District Court judge Carl Barbier in New Orleans established the account on December 28 to potentially reward lawyers leading the BP multi-district litigation spawned by the Deepwater Horizon rig explosion in 2010. Barbier said he had not decided to award the fees, but he wanted to have the option if he decided they were deserved. On January 4, Barbier amended his order to clarify the order would only affect claimants who hadn’t received a determination letter from the BP fund as of December 31.

That clarification has not appeased lawyers for clients seeking compensation from the fund, known as the Gulf Coast Claims Facility, which is being administered by Kenneth Feinberg. At least seven motions were filed Wednesday and Thursday asking Barbier to reconsider his order.

Lawyers who are appointed to lead complex litigation often ask courts to impose a common-benefit fee on resulting settlements and judgments to compensate them for their work developing witnesses and evidence.

But Gulf Coast Claims Facility claimants argued that Barbier cannot force them to contribute to the reserve account because he does not have the jurisdiction. They also said that the Plaintiffs Steering Committee, a group of more than a dozen lawyers Barbier chose two years ago to lead the multi-district litigation, had not made a sufficient showing that their work had benefited Gulf Coast Claims Facility claimants.

Daniel Becnel, Jr., an attorney for Gulf Coast Claims Facility claimants, said that the vast majority of the Steering Committee’s work to date had been to prepare for a three-part trial to begin on February 27. That trial will be based on maritime law and will allocate fault among the parties responsible for the explosion of April 20, 2010. But Barbier has ruled that most Gulf Coast Claims Facility claimants do not have standing under maritime law, said Becnel. Instead, they can only make claims under the Oil Pollution Act against BP through its fund.

“It would be ironic, as well as grossly unfair and contrary to prior pronouncements of this Court, for claimants whose only possible recovery for their economic damages is through OPA and the GCCF to have those recoveries reduced for work that even this Court has ruled cannot benefit them,” he wrote in a filing made Thursday.

    Lawyers for the U.S. Department of Justice, which is a party to the oil spill litigation, objected to Barbier’s order as well. In a filing made Thursday, the lawyers argued that holdbacks from Gulf Coast Claims Facility payments would conflict with the purpose of the Oil Pollution Act, which was supposed to give parties harmed by an oil spill an alternative to costly and lengthy litigation.

    “By reaching into the claims process and explicitly diminishing the amount possible to be realized by claimants, the withholding vitiates a significant benefit of avoiding litigation,” they wrote.

    The Plaintiffs Steering Committee responded to some of the objections to Barbier’s holdback order in filings made Wednesday and Thursday. It said Barbier’s jurisdiction over Gulf Coast Claims Facility claims had already been settled by his previous order. And it disputed the argument that its preparation for the February trial had no impact on Gulf Coast Claims Facility claims, saying that it ignored “the real-world over-arching dynamics under which a litigant like BP decides whether and how much it will pay to claimants.”

    Reporting by Andrew Longstreth; Editing by Tim Dobbyn

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