Settlement talks were underway over the weekend. The Wall Street Journal reported that federal and state officials were preparing a $16 billion settlement offer to BP, but that figure is far higher than any figure BP has discussed. Without a deal, opening arguments will begin Monday before Judge Carl J. Barbier, himself a former plaintiffs lawyer, who will try the case under maritime law and therefore without a jury.
“The gulf oil spill case, if it does not settle before Monday, will be unlike any other trial brought under the environmental laws,” said David Uhlmann, professor of environmental law at the University of Michigan. “The Justice Department has never tried an environmental case that involved the human tragedy, economic losses and ecological disaster that occurred during the gulf oil spill.”
Ever since the spill, BP has strived to “make things right,” as its ads say, shelling out huge sums to individuals and businesses and in a criminal settlement with the Justice Department in a bid to put the disaster behind it and get on with the business of being an oil company.
But now BP says it is ready to combat charges that it was guilty of gross negligence in the April 20, 2010, blowout on its Macondo exploration well, which set the Deepwater Horizon drilling rig on fire, killing 11 people and spilling millions of barrels of crude oil into the Gulf of Mexico. The London-based oil giant says that a series of mistakes by its own employees and those working for the drill rig’s owner, Transocean, and oil-field services firm Halliburton led to the disaster. Those companies are also defendants in the trial.
An army of private plaintiffs, the Justice Department, state attorneys general and Transocean and Halliburton will all argue that BP is to blame. Issues of damages and penalties will be dealt with later in separate proceedings.
“In a lot of cases it’s the plaintiffs’ versus the defendant’s version. But here, BP’s defense is really to try to hide behind Transocean and Halliburton,” said Steven Herman, one of the lead plaintiffs lawyers and a veteran of tobacco and Chinese drywall litigation. “We think they were all grossly negligent and wanton and reckless, and at the end of the day we don’t think any of them could hide behind the others.”
The stakes are enormous. If BP is found guilty of gross rather than simple negligence, it could be forced to pay up to the maximum Clean Water Act fine of $17.5 billion, plus billions more in civil and potentially punitive claims by individuals and businesses who did not accept payments already. The company, which is disputing the size of the spill, has also stressed that the Clean Water Act fines of $1,100 a barrel in cases of simple negligence and $4,300 a barrel in cases of gross negligence are maximum, not required, fines and that courts generally do not impose maximum penalties.
“We never got anywhere near the statutory maximum,” said Dan Jacobs, a professor at American University’s Kogod School of Business and a former Justice Department lawyer dealing with environmental cases. “But this is not your normal case. You have a super-deep-pocket defendant, egregious violations and a sordid history.”
Said Uhlmann: “If the case goes well for the government, BP could pay more than $10 billion in civil penalties alone. And even if the government fares poorly, BP still will pay the largest civil penalties ever imposed under the environmental laws.”
People familiar with the settlement talks said that bridging the gap between BP and the states of Louisiana and Alabama would be difficult.
“There were too many actors with too many dollars in their eyes,” said one person familiar with talks that took place earlier, speaking on the condition of anonymity to discuss the private negotiations. He said that the states, “Louisiana in particular,” were “not the only obstacle but the main obstacle.”
Louisiana Attorney General Buddy Caldwell would not comment, but in a court filing the state said, “It is the State’s obligation . . . to protect the interests of its citizens.”
The plaintiffs’ attorneys are a who’s who of personal-injury and large-class-action lawyers who have brought lawsuits against corporations.
They include James Parkerson “Jim” Roy, who once won $43 million for a double amputee, and Robert T. “Bobo” Cunningham, who flew more than 500 missions as a Marine helicopter pilot in Vietnam. Cunningham was the lead trial counsel in the state of Alabama’s $11.9 billion verdict against Exxon Mobil for underpayment of royalties and in an environmental contamination trial that resulted in a $108 million jury verdict against Halliburton in 2007. Paul M. Sterbcow is a maritime and personal-injury lawyer representing 700 commercial divers, fishermen, crabbers, oystermen, deckhands, property owners and business owners.
BP’s team includes Covington & Burling’s Robert C. “Mike” Brock, who has defended pharmaceutical companies in product liability lawsuits, and Andrew Langan of Kirkland & Ellis. BP’s woes have helped bolster the firms. In 2011, Kirkland & Ellis’s profits topped $3 million per partner, up from $2.5 million the year before, according to the American Lawyer Web site.
“Gross negligence is a very high bar that BP believes cannot be met in this case,” BP general counsel Rupert Bondy said in a statement this past week. “This was a tragic accident, resulting from multiple causes and involving multiple parties. We firmly believe we were not grossly negligent.”
Jacobs, the AU professor, said BP will have trouble showing simple rather than gross negligence given past revelations. “If you’re driving down the road within the speed limit and don’t have ear buds in and you’re not texting, and you hit somebody you didn’t see, then you are liable for negligence,” he said. But it is gross negligence “if you are speeding and your ear buds are in and all the warning lights are going on on your dashboard and you ignore them. And that’s what was going on here.”