5th Circuit’s last word to BP leaves constitutional question-mark

By Alison Frankel
May 20, 2014

The 5th U.S. Circuit Court of Appeals has had it with BP and its attempts to evade the consequences of the deal it struck to end litigation over the 2010 Deepwater Horizon oil spill.

On Monday, eight 5th Circuit judges refused to review the decision of a divided three-judge panel, which held in March that the class action settlement’s payout process complies with the U.S. Constitution. That’s the last word from this court, which has now heard BP’s protestations about the settlement in four different rounds of briefing before two different three-judge panels. But it may not be the last word in the dispute. A dissent by three 5th Circuit judges practically implores the U.S. Supreme Court to take the case and resolve tricky constitutional questions about standing in class action settlements.

Judge Leslie Southwick wrote an opinion explaining the 5th Circuit’s decision not to rehear BP’s appeal en banc. His explanation is heavy on specifics about whether a particular exhibit in the settlement agreement conflicts with a policy statement subsequently issued by the claims administrator and ratified by the judge overseeing the class action, U.S. District Judge Carl Barbier of New Orleans. But Southwick’s opinion boils down to a simple idea: BP made compromises when it bought global peace via a gigantic class action settlement, and now it’s stuck with the repercussions.

That proposition turns out, however, to be quite controversial among the judges of the 5th Circuit. As the court’s en banc order explains, five active judges voted to grant review of the BP case, and one senior judge said he’d have sided with them if he’d had a vote. Three of the judges in the minority — Edith Clement, Edith Jones and Grady Jolly — issued a stinging dissent that basically accused their appellate colleagues of lending the court’s imprimatur to fraud.

The dissent was written by Judge Clement, who has been nothing but consistent in her conviction that the BP settlement, as it has been interpreted and implemented by Judge Barbier, violates the U.S Constitution. You just don’t often see appellate judges use this kind of language on their benchmates. Southwick’s latest effort, she wrote, “is too little too late and leaves the essential results unchanged: The class of people who will recover from this settlement continues to include significant numbers of people whose losses, if any, were not caused by BP,” Clement said. “These are certainly absurd results. And despite our colleagues’ continued efforts to shift the blame for these absurdities to BP’s lawyers, it remains the fact that we are party to this fraud.”

Brutal language aside, Clement’s argument is that by permitting payments to businesses whose losses were not actually traceable to the oil spill, the BP settlement violates Article III’s requirement that to sue in federal court, plaintiffs must allege an injury. If a class action settlement sweeps in uninjured claimants, it’s unconstitutional, Clement said, even if the defendant has agreed to it.

In Southwick’s opinion Monday, he likened the causation requirement in BP’s settlement to a stipulation of facts at a trial, in which the parties’ agreement obviates the need for additional proof. Clement said that’s a specious analogy. “Parties cannot stipulate to force courts to decide cases based on ‘a body of law that is nowhere in force’ or to declare a cactus a rose,” she wrote. “There are limits on party autonomy and judicial efficiency, because a stipulation, like any other judicially enforced agreement, derives its force from the power of the court and its enforcement should not ‘discredit the judiciary.’”

Grudgingly, Clement conceded defeat in the “tortuous” BP case. The 5th Circuit, she said, is obviously not up for the challenge of resolving “deep confusion” amongst the federal circuits on standing, injury and class action settlements. The BP case might have been the court’s opportunity to clarify the law, she said, but her colleagues “declined to do so.”

And even if they had, she said, “this articulation would not have been enough for our sister circuits considering the deep split on this issue.” Clement said it will be up to “another court” to resolve the question.

I wonder what court she’s talking about.

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