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What Concerns BP About Gulf Oil Spill Settlement

By: Michael Kunzelman
Published: November 4, 2013

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A dead crab is seen in a piece of marsh in Ocean Springs, Miss. The marsh was covered in oil after the BP oil spill of April, 2010. Photo by Mario Tama/Getty Images)

NEW ORLEANS  -- A year ago, lawyers for BP and Gulf Coast residents and businesses took turns urging a federal judge to approve their settlement for compensating victims of the company's massive 2010 oil spill.

On Monday, however, the one-time allies will be at odds when an appeals court hears objections to the multibillion-dollar deal. That's because several months after U.S. District Judge Carl Barbier approved the settlement, BP started complaining that the judge and court-appointed claims administrator were misinterpreting it. The London-based oil giant is worried it could be forced to pay billions of dollars more for bogus or inflated claims by businesses.

(MORE: Oil Spill Damaged Sea-Floor Life for Miles)

Plaintiffs' attorneys who brokered the deal want the 5th U.S. Circuit Court of Appeals to uphold the class-action settlement.

As of Friday, payments have been made to more than 38,000 people and businesses for an estimated $3.7 billion. Tens of thousands more could file claims in the coming months.

The settlement doesn't have a cap, but BP initially estimated that it would pay roughly $7.8 billion to resolve the claims. Later, as it started to challenge the business payouts, the company said it no longer could give a reliable estimate for how much the deal will cost.

The dispute centers on money for businesses, not individuals. Awards are based on a comparison of revenues and expenses before and after the spill. BP says a "policy decision" that claims administrator Patrick Juneau announced in January has allowed businesses to manipulate those figures in a way that leads to errors in calculating their actual lost profits.

Last month, a different 5th Circuit panel threw out Barbier's rulings on the dispute and ordered him to craft a "narrowly-tailored" injunction that modifies the damage calculations.

The lead plaintiffs' attorneys said the panel's decision has no effect on the separate appeal of Barbier's December 2012 approval of the settlement.

"The processing and payment of (business) claims has not in any way affected the fair, reasonable and adequate compensation paid under the Settlement Agreement's transparent and objective criteria to any Objector or any other member of the class," they wrote.

BP wants the court to adopt its interpretation of the settlement terms for businesses. If it does, the "otherwise fatal obstacles" would be eliminated and the entire settlement could be upheld, the company told the 5th Circuit.

BP is not the only one questioning Barbier's December 2012 approval of the settlement. Attorney Brent Coon, of Beaumont, Texas, argued that a rush to "close the deal" resulted in a settlement program "mired in implementation problems." He did not have a role in negotiating the settlement but filed one of several formal objections, seeking revisions to the agreement.

"Too much random guess work was needed to determine whether an individual's claim was eligible for settlement funds or not," he wrote.

Juneau's office began issuing settlement payments on July 31, 2012. As of Friday, tens of thousands of claimants have received settlement offers worth more than $4.9 billion.

BP spokesman Geoff Morrell said the 5th Circuit's ruling last month concluded that Juneau's interpretations of the settlement "do not withstand scrutiny under the law."

"If they are not corrected, the settlement class cannot be certified and the settlement should be set aside, ending what once promised to be an historic effort to benefit those who experienced losses as a result of the spill," he said in a statement.

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