NEW ORLEANS – Over BP's objections, a federal appeals court on Friday upheld a judge's approval of the company's multibillion-dollar settlement with lawyers for businesses and residents who claim the massive 2010 oil spill in the Gulf of Mexico cost them money.
BP has argued that U.S. District Judge Carl Barbier and court-appointed claims administrator Patrick Juneau have misinterpreted settlement terms in ways that would force the London-based oil giant to pay for billions of dollars in inflated or bogus claims by businesses.
During a hearing in November before a three-judge panel of the 5th U.S. Circuit Court of Appeals, a BP lawyer argued that Barbier's December 2012 approval of the deal shouldn't stand unless the company ultimately prevails in its ongoing dispute over business payments.
But the divided panel ruled Friday that Barbier did not err by failing to determine more than a year ago whether the class of eligible claimants included individuals who haven't actually suffered any injury related to the spill.
Affirming Barbier's initial ruling in 2012, the court said in its 48-page majority opinion that it can't agree with arguments raised by BP and others who separately objected to the settlement.
"No case cited by BP or the Objectors suggests that a district court must also safeguard the interests of the defendant, which in most settlements can protect its own interests at the negotiating table," the ruling says.
The majority rejected BP's request for the panel to "find an intraclass conflict of interest because the claimants allegedly include persons and entities that have suffered no injury."
"In support of this allegation, BP presents us with a series of economists' declarations that had not been provided to the district court when the class was certified," the ruling says.
One of the three appellate judges, Emilio M. Garza, disagreed with the majority in a 14-page dissent. Garza said the "attempted global settlement fails in a narrow, but significant, regard" and should be vacated so it can be fixed.
Plaintiffs' lawyers have argued that BP simply undervalued the settlement and underestimated how many claimants would be eligible for payments.
"Today's ruling is an enormous victory for the Gulf, and an important step forward in ensuring that every eligible claimant is fully compensated according to the objective, transparent formulas spelled out in the settlement agreement that BP co-authored and agreed to," said plaintiffs' attorneys Steve Herman and Jim Roy, who negotiated the settlement and urged the 5th Circuit to uphold it.
BP spokesman Geoff Morrell said the company "is assessing its legal options and the further implications of the Fifth Circuit's decision."
"BP will continue to press its position on the proper interpretation of the settlement agreement's provisions requiring a causal nexus between a claimant's injury and the spill."
In October, a different 5th Circuit panel threw out Barbier's rulings on the dispute over business payments and ordered him to change the calculation of some damages. Last month, Barbier rejected BP's argument that the settlement shouldn't compensate businesses if they can't directly trace their losses to the spill. BP has asked the other panel to overturn that ruling.
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.