BP trial in Gulf of Mexico oil spill set to begin

With settlement talks grinding on, the trial of BP over its culpability for the massive 2010 oil spill in the Gulf of Mexico looks set to begin Monday in a New Orleans courtroom — and two nearby overflow rooms — packed with lawyers, public relations specialists, reporters and other observers.

District Court Judge Carl Barbier, a former plaintiffs’ lawyer in maritime accident cases, has allotted a total of 6 hours 40 minutes for 11 opening statements from private plaintiffs, the Justice Department, Gulf Coast states and corporate defendants. More than 300 depositions and 72 million pages of documents have been produced, according to one lawyer involved in the case. Legal fees alone will eventually run well into the billions of dollars.

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“I’ll be down there, and I’m sure other folks will be down there, as well,” said Val Exnicios, a lawyer representing an association of shrimpers and oystermen. Other plaintiffs include hotels, vacation-home owners, fishermen and coastal business owners. “I’m sure it will be a very crowded affair,” Exnicios said.

Lawyers involved in the case said settlement talks were continuing through the weekend. Unlike Exxon, which spent two decades fighting damage claims over the 1989 Exxon Valdez tanker spill in Alaska, BP has been eager to put to rest the entire affair surrounding its ill-fated Macondo exploration well. But while opposing sides often reach agreement on the eve of trials, lawyers familiar with the case said the trial would probably move ahead. “The parties remain significantly far apart,” said one of the lawyers, on the condition of anonymity because negotiations are ongoing.

Firm numbers were hard to come by, but some sources said that the private plaintiffs group and the Justice Department were each seeking more than $25 billion in civil claims. If the Justice Department decides to file criminal charges, that would be a separate trial.

Possible outcomes

Any settlement by the Justice Department could have political impact if voters see it as not large enough given the size of the spill and of BP, still one of the world’s biggest oil giants. The associate attorney general in charge of negotiations, Thomas J. Perrelli, also oversaw talks that led to the recent $26 billion foreclosure abuse settlement with major banks. Perrelli, a law school acquaintance of President Obama, is leaving the department March 9 after three years as its No. 3 official.

If the trial moves ahead, lawyers for the plaintiffs’ steering committee and the Justice Department are expected to attack BP and rig owner Transocean, saying that their gross negligence and willful misconduct led to the blowout on the Deepwater Horizon drilling rig, which caught fire and sank April 20, 2010, killing 11 people and eventually spilling as much as 4.9 million barrels of crude oil into the Gulf of Mexico.

If found guilty of gross negligence, BP and Transocean could have to pay $4,300 a barrel instead of $1,100 a barrel in federal fines under the Clean Water Act and Oil Pollution Act for oil that was not recaptured. (Under one scenario, BP pays $3.5 billion. Worst case: roughly $17 billion.) A gross negligence finding would also hurt BP’s case against private plaintiffs and affect criminal charges the Justice Department is weighing against the company and several individuals.

“We do not use words like ‘gross negligence’ and ‘willful misconduct’ lightly, but the fact remains that people died, many suffered injuries to their livelihood, and the Gulf’s complex ecosystem was harmed as a result of BP and Transocean’s bad acts or omissions,” the Justice Department said in a pretrial memorandum filed Feb. 7. “Whether we look to a single bad act . . . or a series of inter-connected failings . . . discharges of oil from the Macondo Well resulted from the gross negligence or willful misconduct of Transocean and BP.”

Despite several inquiries into the accident, plaintiffs hope to unearth more damaging material about BP’s failure to heed warning signs before the blowout and its alleged willingness to cut corners because of costs. On Friday, Barbier ordered Donald Vidrine, the BP well site leader who has avoided testifying for medical reasons, to submit to examination by a court-appointed physician.

The Justice Department’s memo says BP’s own internal inquiry failed to probe the role of onshore and senior management.

BP’s argument will be that the oil spill was caused by multiple lapses by different people and companies, a conclusion reached by a presidential commission that investigated the spill.

“The record . . . leads directly to the conclusion that no single action, person or party was the sole cause of the blowout,” Mike Brock, BP’s trial counsel and a Covington & Burling partner who has represented Merck and other pharmaceutical companies in the past, said in a statement.

“Moreover,” he added, “BP studied the Macondo prospect, used a peer-reviewed, government-approved well design, and relied upon reputable contractors to drill, cement, continuously monitor, and control the well. BP did not engage in any gross negligence or willful misconduct.”

Motivated to move on

From the beginning of the 85-day oil spill, BP’s strategy has been to settle claims and fines quickly, then move on. It told shareholders it would set aside $41 billion to cover costs and has spent $14 billion responding to the spill. It established a $20 billion escrow account in a meeting with White House officials, and $7.7 billion has been paid out. Part of that has been covered by $5 billion BP collected from its partners in the Macondo exploration and some of the service companies; BP plans to make its final payment to the escrow account by the end of the year. The escrow fund, run by lawyer Ken Feinberg, was supposed to shortcut litigation, but many people have gone to court anyway.

BP’s stock, which initially lost more than half its value after the spill, is now down only about a quarter from its pre-spill price. The company has sold assets and built up a war chest to meet spill-related costs. The company had $22 billion in cash flow last year and reinstated its suspended dividend, but the cost of the spill has still dealt the company a mighty blow and could get worse.

“As I have said before, we are prepared to settle if we can do so on fair and reasonable terms, but equally, if this is not possible, we are preparing vigorously for trial,” BP chief executive Bob Dudley said Feb. 7, when the company released its earnings. The company recently increased its estimate of legal expenses by half a billion dollars.

The lineup of witnesses for the first week includes Robert Bea, a professor at the University of California at Berkeley and a former Shell Oil engineer; Lamar McKay, president of BP America; and Mark Bly, BP’s senior safety officer who led an internal inquiry into the accident.

Barbier is trying to limit the scope of the trial and stick to a timetable; he has said he would bar evidence of wrongdoing that was not tied to the blowout, even though some lawyers might argue that BP had a pattern of bad behavior stemming from similar concerns about cutting costs.

The case is still sprawling and the number of plaintiffs so large and diverse that any settlement would be complex. In August 2010, 77 related cases were transferred to the New Orleans court to avoid multi-jurisdiction litigation. Nineteen lawyers are on the steering committee, and more than 300 others represent tens of thousands of plaintiffs.

If the plaintiffs’ committee agrees to a settlement, Exnicios said, he would still have “the opportunity to go to the judge and say no, this is not enough money.” Exnicios said the settlement would be “not a formula, but more of a grid.” He added that even within groups there are different circumstances.

“You couldn’t just lump all shrimpers together in one basket, so to speak,” he said, “or in one net.”

 
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