Judge Extends Deepwater Horizon Class Action Settlement Payment Freeze

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On Oct. 18, a Louisiana federal judge overseeing the Deepwater Horizon multidistrict litigation (MDL) extended a payment freeze for certain economic loss claims associated with BP PLC’s estimated $7.8 billion oil spill settlement and rejected new claim evaluation criteria recommended by the parties.

The class action settlement between BP and residents and businesses affected by the 2010 Deepwater Horizon oil rig spill in the Gulf of Mexico was reached in May 2012. Under the terms of the class action settlement, BP agreed to compensate those who had economic and property damage and those with medical claims arising from the oil spill.

U.S. District Judge Carl Barbier issued a temporary injunction ordering claims administrator Patrick Juneau to continue the temporary suspension of the issuance of final determination notices and payments with respect to some business economic loss (BEL) claims unless he determines that the matching of revenues and expenses is not an issue.

On Oct. 5, the Fifth Circuit Court of Appeals struck down Juneau’s interpretation of the class action settlement terms that defined expenses and revenue only by cash expenditures and receipts recorded within a certain period, finding that this interpretation could result in rewarding fictitious legal claims.

The Fifth Circuit ordered Judge Barbier to issue a “narrowly tailored” injunction that would allow time for the reconsideration of BP’s allegations that the class action settlement has resulted in systematic overpayments to thousands of businesses, including some businesses that allegedly hadn’t suffered actual harm from the oil spill. In response, the judge immediately froze claims involving the matching of revenues and expenses. He ordered both sides to submit proposed preliminary injunctions.

Last Friday, Judge Barbier said that the proposed injunctions he received were unacceptable. “The proposal by class counsel was under-inclusive, and that submitted by BP was over-inclusive,” the judge said. “For example, class counsel suggested that the injunction be limited only to claims based on cash accounting and only for certain industries. BP suggested that the processing of all BEL claims be enjoined and that new or additional criteria be added to the causation requirements.”

Juneau will have one week to provide “a declaration outlining the criteria that the Claims Administrator’s Office will use to determine whether … a claim is ‘supported by sufficiently-matched, accrual-basis accounting,’” and whether the matching of revenues and expenses is an issue with respect to BEL and IEL claims.

Judge Barbier said that the original language in the class action settlement document will remain the same, and that this ruling only covers how a claimant’s loss is measured. He also specified that the order does not affect claims related to Seafood Program Compensation, Subsistence, VoO Charter Payments, Vessel Physical Damage, Coastal Real Property Damage, Wetlands Real Property Damage or Real Property Sales Damage. These claims, and most individual economic loss claims, will be processed according to the regular class action settlement schedule.

Detailed instructions on how to file a valid claim in the Deepwater Horizon Oil Spill Class Action Settlement, see our Open Lawsuit Settlements section.

The plaintiffs’ steering committee includes Brian H. Barr of Levin Papantonio Thomas Mitchell Rafferty & Proctor PA; Matthew E. Lundy of Lundy Lundy Soileau & South LLP; and Robin L. Greenwald of Weitz & Luxenberg PC. The plaintiffs’ steering committee also includes attorneys from Herman Herman & Katz LLC and Domengeaux Wright Roy & Edwards LLC, among others.

The Deepwater Horizon Oil Spill MDL is In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, MDL No. 2179, in the U.S. District Court for the Eastern District of Louisiana.

UPDATE: Payments from the Deepwater Horizon Oil Spill Class Action Settlement have been further suspended as of Dec. 2, 2013.