Supreme Court: BP Must Pay Claims During Appeal

The U.S. Supreme Court says BP must continue paying claims from a fund established after the 2010 Gulf of Mexico oil spill while the company appeals terms of its settlement with some businesses.

The justices on Monday let stand without comment lower court refusals to halt payments while BP PLC appeals lower court rulings that businesses don’t have to prove they were directly harmed by the spill to collect money.

The 5th Circuit and a district court have ruled that BP must stand by its agreement to pay such business claims without requiring strict proof that the spill caused losses.

The order indicates that the high court is unlikely to hear BP’s appeal, said Loyola University law professor Blaine LeCesne, who is not involved in the case. BP contends that that the claims administrator is misinterpreting its agreement with many businesses.

“It’s obviously a major victory for the plaintiffs, who can now proceed with processing these business economic loss claims,” he said. “Given the several months interim before the Supreme Court rules on the appeal, likely many of these claims will have been processed and paid.”

Steve Herman and Jim Roy, lead attorneys for businesses and individuals who have filed claims against BP, said in a one-sentence statement that the order “will allow businesses to continue to receive the compensation they’re rightly entitled to according to the objective, transparent formulas agreed to by BP.”

BP will ask the high court to review whether it must pay claims without any apparent connection to the spill, company spokesman Geoff Morrell said in an emailed statement.

“The company continues to believe that the lifting of the injunction suspending the payment of business economic loss claims will allow hundreds of millions of dollars to be irretrievably scattered to claimants whose losses were not plausibly caused by the Deepwater Horizon accident,” he wrote.

At question are terms of BP’s settlement with businesses that do not have any connection to fisheries — one of eight groups of individuals and businesses set out in a complex March 2012 agreement to settle claims of losses from its 2010 spill.

The 5th U.S. Circuit Court of Appeals ruled 2-1 in March and 8-5 in May that the settlement’s terms were clear. District Judge Carl Barbier had made the same finding in December.

Judge Edith Brown Clement, the dissenter in March, wrote that whatever BP agreed to in its settlement, courts should make sure that payments go only to people who can prove the spill caused their losses.

When the company went to the 5th Circuit, LeCesne said, its arguments were based entirely on accounting principles. “It was only when Judge Clement threw out the question ‘What about causation?’ that the light went on in BP’s head — ‘She’s giving us another argument,'” LeCesne said.

The claims fund was set up after BP’s Macondo well off the Louisiana coast blew out in April 2010 and spewed oil into the Gulf for nearly three months.

BP estimated at first that claims would total about $7.8 billion. It later said the administrator was misinterpreting the settlement in ways that could add billions of dollars in bogus or inflated claims.

There has been no dispute that some Gulf Coast businesses, including tourism and fisheries interests, lost money because of oil on beaches or the closure of fishing waters after the spill.

However, BP argues the claims administrator wrongly interpreted the settlement to mean that businesses without any connection to fisheries must only show losses during and after the spill without proving a direct link. Examples cited by BP and Clement include a wireless telephone company that burned to the ground and an RV park that closed before the spill.

BP says it has paid out more than $12 billion in claims to individuals, businesses and government entities. A trial scheduled for January 2015 in New Orleans is part of the litigation that will determine how much the oil giant owes in federal Clean Water Act penalties.