In recent weeks, there has been a significant amount of media coverage regarding the class action settlement agreement due to a number of different rulings by the 5th Circuit Court of Appeals that affect business claims. With that in mind, we’d like to take the opportunity to update our clients and offer some insight regarding what the rulings were and how those rulings impact the class settlement and, ultimately, how they will likely impact your claim against BP.
(NOTE: These rulings and the following explanation of those rulings apply to business economic loss claimants ONLY. However, as a result of the appeals regarding business claims, payments on individual economic loss claims dropped off dramatically as well since many individuals tied their causation to their businesses. In general, the entire process has been stifled for the last eight months and we will continue to monitor the current situation very closely in lieu of upcoming action from the Supreme Court.)
We’ll start with a little background information to refresh your memory on the details of the settlement agreement. Two years ago, BP reached an agreement with the Plaintiff’s Steering Committee (PSC) on a settlement that would cover a large percentage of the claims against BP. (Certain categories of claims such as gaming industry claims, real estate property claims, etc. were explicitly excluded from the terms of the settlement agreement.) As a part of the settlement agreement, geographic areas along the Gulf Coast were divided into four unique zones (A-D). Any claimant whose losses were suffered in one of the zones was automatically a class member unless he or she ‘opted-out’ of the class settlement. Additionally, according to the terms of the settlement negotiated by BP and the PSC, if your losses occurred in one of the zones, causation of the loss was presumed to be due to the spill so long as the claim passed what is known as the “V Test” – meaning the business or individual suffered sharp losses immediately following the spill in 2010 and a partial or full rebound in 2011. What that means is that if a client met the “V Test” and resided in one of the zones, BP was required by the terms of the agreement to pay that claim. Because causation was presumed, it was not necessary to prove that the losses were a result of the oil spill.
Now, common sense tells us that this method will undoubtedly create a few “false positives” – meaning, businesses that meet the “V Test” but had losses that had nothing to do with the oil spill. (An example might be a gas station that saw a revenue decline in 2010 because of road construction being performed in front of the building, but saw a rebound in 2011 when the construction was completed.) All parties – including BP - understood that this agreement would create a few false positives, but in effort to capture a large percentage of the cases into this class settlement agreement, it was a concession BP was willing to make and stated as much in court proceedings. After all, that’s how settlements work; neither side gets 100% of its demands.
Fast forward to December of 2013. BP, after seeing that the settlement looks to cost more than it had projected, cried foul. BP appealed the “causation clause” within the agreement and went on a Public Relations offensive claiming it was victimized by being forced to pay fraudulent claims it had never agreed to pay. While the appeal was being reviewed by the 5th Circuit Court of Appeals, all payments of Business Economic Loss claims were frozen until a final ruling was made by the 5th Circuit. Basically, BP stopped writing checks and the settlement ground to a halt. This has proven unfortunate for some companies assisting people with claims, including some accounting firms and law firms, as they were caught off guard and had to dramatically cut staff. Fortunately, your claim continues to be thoroughly represented as BCA continues the fight to make the Gulf whole and get all of our clients compensated fairly.
This freeze or “injunction” on payments lasted until last week when the 5th Circuit ruled that BP must stick to the terms within the settlement agreement and that causation would continue to be presumed so long as the claimant met the “V Test.” The 5th Circuit then lifted the injunction on payment, ostensibly allowing Claims Administrator Pat Juneau to begin paying claims again.
While this is a positive development, BP has already announced its intention to file an appeal with the Supreme Court and has filed a motion requesting that the Supreme Court re-instate the injunction on paying claimants until it either decides it will not hear BP’s appeal or until it does hear BP’s appeal and makes a ruling on it.
In summary, this is just a small piece of all the complex legal wrangling going on behind the scenes. Many reporters and the media do not have a good grasp on the complicated and intertwining elements that create the big picture (as evidenced by the wildly varying reports coming out about what all this means). BCA is among a very small handful of firms in the middle of the action. We are filing motions, appealing decisions and taking a very active role to protect ALL of our clients’ best interests.
So what does all of this mean for your claim?
While this last series of legal moves will keep things in full swing, and no one can give you a definitive answer right now, the fact is that the picture is much clearer than it was just a few weeks ago. While the 5th Circuit’s decision and release of the injunction means that claims will begin to be paid again (Pat Juneau announced that payments will begin being processed again on June 2nd), there is still the possibility that the Supreme Court intercedes on BP’s behalf and issues a “stay pending review” – meaning that payments would once again be put on hold until the Supreme Court made a decision regarding BP’s appeal. In that event, it would potentially be several more months until a decision was reached by the Supreme Court, barring an emergency review of appeal.
To compound these frustrations, even if the Claims Administrator is given the green light to initiate payments again, it will be under new accounting protocols. Originally, there was a type of forensic accounting that was approved as the complex method of determining losses under the formulas adopted by the court. Late last year, in the middle of all of these other appeals, BP prevailed in an argument that a different type of process should be used to calculate a loss. This new protocol has not been used by the Claims Administrator yet because all claims have been stayed as a result of the other appeals. Now that there is a possibility that claims may proceed at some level with the class settlement, there will be delays in payments given the logistics and continued uncertainties associated with the implementation of the new Policy 495 (which deals with the accounting methods used to calculate payments). Even if the Supreme Court doesn’t re-instate the injunction, all businesses must be reviewed under the terms of Policy 495, even those claims that had prior offers under the old formulas.
In the meantime, we will continue to keep you updated on any new substantial developments within the class settlement and/or BP’s appeal to the Supreme Court.
Progress within the class settlement is key to not only to those of you who stayed in the class, but also to those who opted out. Judge Barbier will not move on the opt-out claims until the settlement is back to running and paying claims again, so the sooner that happens, the sooner the court can focus its attention on clients who opted out of the class settlement or where not eligible for the class settlement.
We would also encourage you to read the articles regarding the recent developments. They are provided in the lower right hand box of this newsletter.
NOTE: Clients who are a part of the Seafood Compensation Program should be expecting a letter within the week from our firm regarding the status of the second payments.
Brent Coon & Associates
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