By Nick Malinowski
Law360, New York (May 05, 2010) -- BP PLC is currently facing at least 40 civil lawsuits by property owners, fishermen, seafood processors and restaurants in Louisiana, Alabama, Mississippi and Florida and, like the growing oil slick in the Gulf of Mexico, the spread of litigation shows no signs of abatement.
Even as the company announced Wednesday that one of three leaks in the underwater well that continues to gush more than 5,000 barrels of oil each day into the water had been plugged, class action plaintiffs are lining up seeking millions of dollars in damages.
The oil spill liability limit under the Oil Pollution Act is currently capped at approximately $75 million, but the Obama administration has supported a retroactive alteration of that benchmark that could raise it to as much as $10 billion.
Any estimate of damages at this point is more guessing than actual predictions, according to Barry M. Hartman of K&L Gates LLP, who supervised civil and criminal prosecutions arising from the Exxon Valdez spill in his capacity as acting assistant attorney general for the U.S. Department of Justice
The liability limit under the OPA is also not necessarily a useful barometer for figuring out what the final bill to BP might look like because cleanup costs are not limited, and there are exceptions for negligence and for violations of federal safety standards, Hartman said.
Then you add the Alternative Fines Act, which allows damage judgments up to twice the value of the estimated losses, and the cap becomes pretty soft if the circumstances warrant it, he said.
Attorney Robert Cunningham of Alabama-based Cunningham Bounds LLC, who is representing plaintiffs in eight putative class actions on behalf of a variety of interests, including condominium owners and charter boats, agreed that damage estimates were guesswork because nobody knows how much oil will continue to spill into the gulf or how that oil will react.
“Hopefully they will get it shut down soon and the oil will blow south. Everyone's praying that it won't come this way, but it probably will,” he said.
Eric Holland of Holland Groves Schneller & Stolze LLC said it could take as long as a decade for BP to resolve the claims against it.
“I think there are an awful lot of tentacles,” he said. “It's an environmental catastrophe and no matter what, landfall will happen, but it will be a matter of scope. It remains to be seen how it will eventually play out, but there is no doubt that people will be affected throughout the region.”
Holland filed suits against BP on behalf of two separate classes Tuesday.
BP said Monday that it would pay “all necessary and appropriate cleanup costs” associated with the Deepwater Horizon rig oil spill, though the company continues to maintain that it is not responsible for the disaster.
CEO Tony Hayward has deflected blame to Transocean Ltd., the maker of the Deepwater Horizon rig that exploded and sunk April 30 off the coast of Louisiana, killing 11 workers and triggering the spill.
Transocean, along with Halliburton Energy Services Inc. and Cameron International Corp., is also named as a defendant in many of the recent suits.
Comparing this accident to the Exxon Valdez spill in 1989 — at 250,000 barrels, the largest U.S. spill to date — is problematic because an equivalent number of gallons does not mean equivalent damage, Hartman said.
There is a big difference in environmental and business loss impact if only a thin sheen, as opposed to thick crude, washes ashore, he said.
The Oil Spill Liability Trust Fund, paid for by an 8-cent tax on every barrel of oil imported to or produced in the U.S., also holds more than $1 billion for resolving the claims of individuals and businesses negatively impacted by the spill.
Hartman said it was likely that the various federal claims would be consolidated as multidistrict litigation to facilitate the cases, adding that pursuing claims under the fund, rather than in federal court, could be a way for those affected by the spill to be made whole more expeditiously. The fund does not provide for punitive damages.
Cunningham and Holland both said they had considered pointing their clients to the fund but that its limited resources made individual suits more appealing.
Currently the OPA fund has a $1 billion cap per incident, but the current discussions in Washington suggest that this could change, according to Paul Ginee of the National Pollution Funds Center.
People impacted by the spill would send their claim to BP, and if the company declined to pay it or did not act, they could then submit the same package to the fund.
While the fund does have revenue, the scope of this incident appears such that the fund will be financially challenged, Ginee said.
--Additional reporting by Richard Vanderford
