Last year, when BP agreed to a historic multibillion-dollar class action settlement with people and businesses harmed by the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, the company pledged to defend the deal against objections and appeals. As is customary, lawyers for the claimants actually filed the motion to certify the settlement class, but BP told the court it fully supported the settlement agreement. The company and class counsel submitted joint expert declarations attesting to the fairness of the proposed deal, including a jointly filed report by Columbia Law School professor John Coffee, who said that although he’s skeptical of broad mass tort class actions, the agreement in this case did such a good job of defining class membership that the settlement class should be certified. When U.S. District Judge Carl Barbier of New Orleans certified the settlement class in December 2012, the case seemed to be on a typical track for a mass tort, with both sides benefiting from use of the class action vehicle. Defendants settle these cases because they want the certainty that comes from a classwide release of claims. They can’t get classwide releases without class certification.
But on Friday, BP swerved drastically off-course, filing a startling brief at the 5th Circuit Court of Appeals in a case first brought by objectors to the class action settlement. Unless the 5th Circuit undoes the trial court’s interpretation of settlement terms, BP now argues, class certification cannot stand. The oil company contends that the class is fatally flawed under both the rules for federal class actions and the U.S. Supreme Court’s 2013 holding in Comcast v. Behrend because the claims administrator’s supposedly erroneous reading of deal terms has permitted improper claims by uninjured businesses alongside legitimate claims by injured class members. “Federal class action rules,” the company said in an email statement, “do not permit class action settlements where such conflicts exist.”
BP, in other words, is doing something apparently unprecedented in class action history: siding with objectors in an attempt to scotch its own deal. That’s a contorted position, one that New York University law professor Samuel Issacharoff – who, admittedly, represents class counsel in a BP appeal at the 5th Circuit – said BP may not even have the right to assert because the company didn’t object to class certification at the trial court level and didn’t appeal Judge Barbier’s class certification ruling. BP’s brief is all the more head-scratching because, according to class counsel, even if BP and the objectors succeed in overturning class certification, the settlement agreement requires the oil company to still pay claims already in the pipeline.
Friday’s brief is BP’s latest maneuver in its very public campaign to rein in claims under the business and economic loss provisions of the settlement. In newspaper advertisements and in its own appeal at the 5th Circuit, the company claims that because of a misreading of the accounting terms “revenue” and “expenses” by claims administrator Patrick Juneau – and because of Judge Barbier’s endorsement of that misconstruction – it is facing billions of dollars in claims by undeserving businesses, including businesses that may not have suffered any economic harm from the Deepwater Horizon spill. BP has told the 5th Circuit about plaintiffs firms and moonlighting accountants openly prowling for clients whose supposed losses are strictly an artifact of contract misinterpretation, citing examples of uninjured businesses that were nevertheless approved for multimillion-dollar recoveries. BP and class counsel argued BP’s appeal of Barbier’s ruling on the terms of the settlement before the 5th Circuit in July.
BP implied in last week’s filing – which came in a separate appeal by class members who objected to Barbier’s certification ruling – that if the 5th Circuit curtails these supposedly unwarranted economic loss claims by overturning Judge Barbier’s approval of Juneau’s interpretation of deal terms, the company’s class certification concerns will evaporate. But if the 5th Circuit upholds Barbier in BP’s appeal, the brief said, “then the settlement would be rendered wholly unfair, irrational, and constitutionally suspect.”