BP – Let the Drafter Beware

Unless you’ve been living in exile for the past 4 years, you probably have heard your fill about the BP oil spill and oil rig explosion.  However, a closer look at what happened, and what continues in the settlement process is a cautionary tale for future contract drafters and negotiators (and good news for those with active claims pending against BP).

On April 20, 2010, an explosion on BP’s Deepwater Horizon offshore oil rig caused the deaths of eleven people and the largest oil spill in the industry’s history. After the Deepwater Horizon rig sank, oil leaked into the Gulf of Mexico for an astounding eighty-seven days. This disaster led not only to massive wildlife relief efforts, but also to federal criminal charges and civil claims against BP.

Several investigative groups, following the spill, jointly concluded that BP’s conduct in cutting corners to save money and time—thereby increasing its profit margins—had created an irresponsible and unsafe environment that inevitably bred the tragedy. Knowing reparative action was essential for the company’s survival in the midst of the enormous legal and public relations fallout, BP announced the Gulf Coast Claims Facility (GCCF), a $20 billion fund from which it agreed to settle claims related to the spill. The GCCF began accepting claims in August of 2010. $6.2 billion in settlement funds was paid from this account until June of 2012, when the GCCF was replaced by a court-supervised settlement program.

What BP seems to have overlooked prior to opening the GCCF for claims is that claimants without “actual damages” could receive payment from BP, pursuant to the formula drawn up by BP itself. Bleeding money, BP made a motion to a federal court to stop payment on thousands of claims, in July of 2013. The federal judge who heard the motion refused to halt the program. BP, overwhelmed by the enormity of its self-imposed payment obligations, sought relief from the Fifth Circuit Court of Appeals. The Fifth Circuit Court in New Orleans affirmed the lower court’s decision, finding that, under the terms of the BP-drafted settlement agreement, businesses claiming damages were under no obligation to prove direct harm from the spill in order to recover. BP appealed to the United States Supreme Court.

On June 9, 2014, the Supreme Court refused to stay the Fifth Circuit Court of Appeals’ mandate to BP to make payments per the settlement agreement. Not only does this serve as a good lesson in contract drafting (as, by law, a contract is construed against the party who wrote it), but also, it leaves the door open for businesses affected by the oil spill to make claims against the fund.

The law firm of Hollis Wright is currently representing numerous business owners who have been injured as a result of the Deepwater Horizon oil spill. In order to recover, a business need not be based on the Coast, and need not have a direct loss associated with the spill. Virtually any business can qualify. In fact, we represent all different types of businesses, including distribution companies, law firms, car dealers, restaurants, and oil station companies, just to name a few.  The evaluation process is efficient and non-invasive; however, these claims require specialized legal experience.  If you believe you may have been harmed by the BP spill, contact the firm of Hollis Wright for more information and an evaluation of your case.

Additional authors: Alison Almeida