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Should A Victims’ Fund Only Be For Victims?

Almost from the minute it began, the BP oil spill of 2010 has muddied the distinction between error and crime.

Even before the crude oil stopped flowing in the Gulf of Mexico, Attorney General Eric Holder and President Obama made it clear that punishment was a priority. Two years ago, I wrote about the efforts of Ken Feinberg, the administrator of the Gulf Coast Claims Facility, who faced the unenviable task of trying to wrench as fair a result as he could out of a system that seemed designed to hurt BP rather than to fairly measure the company’s liability.

Carl Barbier, the federal district judge who oversaw the final BP settlement last year, appointed Patrick Juneau as the settlement’s claims administrator. BP has insisted, in every public forum it could find, that Juneau misinterpreted the compensation formula to which it agreed in its settlement, paying claims that were inflated or entirely fabricated. As BP has no control over payments to claimants, it could do little else but fight the process in court. Barbier, however, initially upheld Juneau’s interpretation. Meanwhile, claims for exaggerated or nonexistent losses continued to drain the relief fund, for which BP had not negotiated a cap.

BP’s complaints have finally gained some legal traction, yet the dispute remains very odd. In what other advanced country could there possibly be a legal debate over whether a fund established to compensate victims for damages should be limited to compensating real victims for real damages?

According to Louisiana trial attorneys and Barbier, real damages were not a requirement for deciding the amount of the company’s settlement fund. The fund was carved out of the $20 billion that Obama strong-armed from BP when the oil was still flowing from the busted Macondo oil well.

The Fifth U.S. Circuit Court of Appeals, however, took issue with Barbier’s decision in a divided ruling. The judges sent the case back to Barbier, ordering him to craft a “narrowly-tailored injunction that allows the time necessary for deliberate reconsideration of these significant issues.” As a result of the court’s decision, Barbier issued an order for the settlement fund to suspend payments on business claims in which the “matching of revenues and expenses is an issue,” though other claims will continue.

The Washington Post reported that BP has lost about a third of its value since the Deepwater Horizon disaster. The company was initially eager to settle, but the extent of the claims eventually engendered pushback from the company.

Eventually, BP had to fight in two courts - the Fifth Circuit and, through a vigorous ad campaign, the court of public opinion - to make the case that a compensation fund for victims should be limited to compensating victims. The Louisiana bar treated the fund, sadly but characteristically, as just a trough from which to feed.

Of course, BP only won the appellate decision by a 2-1 vote. Judge James Dennis, who wrote the dissent, argued that “BP has not satisfied its heavy burden of showing that a change in circumstances or law warranted the modifications it sought.” When it comes to justice in Louisiana, two out of three may be about as good as it gets.

So the bontemps will roulez a little more slowly now. It is nice to see the system work, after a fashion. Even in Louisiana.

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