Kickback allegations — and fountains of unearned cash — at the BP gulf spill fund

by Walter Olson on July 4, 2013

A “staff attorney at the Deepwater Horizon Court Supervised Settlement Program… was suspended after being accused of accepting fees from law firms while processing their clients’ claims from the 2010 Gulf of Mexico oil spill.” [Bloomberg] And that’s just the start of what may be much wider problems, according to a cover story by Paul Barrett at Bloomberg Business Week. “The craziest thing about the settlement,” one lawyer wrote in a client-solicitation letter, “is that you can be compensated for losses that are UNRELATED to the spill.” [Bloomberg Business Week] Barrett’s account tells, in his own words, “how the private-claims process following BP’s (BP) 2010 Gulf of Mexico oil spill devolved into a plaintiffs’-lawyer feeding frenzy.” [BBW]

{ 2 trackbacks }

“BP tried to do right by the victims of the oil spill….” - Overlawyered
07.09.13 at 2:00 pm
Joe Nocera on the BP claims gusher, cont’d - Overlawyered
07.20.13 at 3:15 pm

{ 11 comments }

1 William Nuesslein 07.05.13 at 7:39 am

“… the private-claims process following BP’s (BP) 2010 Gulf of Mexico oil spill devolved into a plaintiffs’-lawyer feeding frenzy.”

Who would have thunk it?

2 marco73 07.05.13 at 9:00 am

In the Tampa/Orlando market, plaintiff’s firms have been running breathless advertisements that you only have a few more days to get “your fair share.”
Almost make the 1-800-ASK-GARY commercials sound classy by comparison.

3 Tango One 07.05.13 at 10:07 am

Up in North Alabama, the entire length of the state away from the Gulf, lawyers were running ads saying that anybody who had any drop in business during 2010 had a claim against BP.

4 From The Bayou 07.06.13 at 12:15 am

Walter, I’m going to leave this comment here anonymously, because I don’t want to embarrass a family member, but you can tell who I am by my email address.

Last year I received a phone call from a family member who works for a plaintiff’s attorney here in southern Louisiana. He invited me to apply for BP compensation. I told him that I was not injured by the oil spill, and suffered no loss at all. In fact, at the time of the spill, I was residing out of state.

He said that didn’t matter. “This is all about BP wanting to spread goodwill money around Louisiana,” he said.

I thought that was lawyer bullshit, and ended the conversation. Turns out he called everybody in our family, trying to get us onto the compensation bandwagon, but we all refused to have anything to do with it. I don’t feel sorry for BP, but damn, that’s some dirty business.

5 Walter Olson 07.06.13 at 10:32 am

Thanks. I thought I’d heard every possible lawyer-solicitation gambit over the years — from “It’s a way to get questions answered about how your loved one was hurt” to “The other side has insurance and they’ll know it’s just a cost of doing business.” But “It’s all about their wanting to spread goodwill money” is one of the most insidious. Almost sounds like you’re turning your back on a goodwill gesture by saying no.

6 Texjudge 07.09.13 at 11:47 am

The BP fiasco reminds me of the billions spread around by FEMA after Katrina and how much of the money has been stolen. One example: hundreds of millions have been spent elevating houses in the New Orleans area that are located in areas that have NEVER flooded. However, contractors are major political forces in Louisiana so nothing will be done.

7 Richard A. Harrison 07.14.13 at 12:31 pm

If somebody involved in the processing of claims was taking kickbacks, that’s bad and should be dealt with.

But that has nothing to do with the settlement itself. In fact, BP agreed to a settlement that does not require any “proof,” at least not in the ordinary sense, of any losses attributable to the spill. In lieu of such proof, BP agreed to a formula (a series of formulas actually, depending on the business location) that determines entitlement to compensation based solely on an analysis of the businesses financial records for designated time periods before and after the spill. If that comparison shows a “loss” under the agreed formula, the claim is payable.

And yes, the claims agents and firms are aggressively pursuing claims because they get a share of any amounts paid.

But BP agreed to this settlement formula, based on the presumably informed decision that it made more financial sense for them than to fight every possible claim and the class actions that would and did ensue. If BP elected to waive the proof of causation that would othrwise be required, it is difficult for me to fault anybody, legally or ethically, for submitting a claim irrespective of any “damage” from teh spill in the traditional sense. BP has invited claims based on a formula to which it agreed, and the formula requires only that the financial data meet a certain test.

Whetehr that turns out ot be a good deal or a bad deal for BP remains to be seen, but it was certainly a well-informed decision by them. That isn’t fraud or a scam or anybody stealing government money . . . it’s just the settlement that the parties agreed to.

8 Canvasback 07.14.13 at 7:45 pm

Mr. Harrison:
Here’s where I believe you went off the rails: “If BP elected to waive the proof of causation that would othrwise be required, it is difficult for me to fault anybody, legally or ethically, for submitting a claim irrespective of any “damage” from teh spill in the traditional sense. ”
Please rethink this and resubmit your essay with a more encouraging analysis of plaintiffs’ ethics. Feel free to cite from your own reading in religion, philosophy or economics; or to use a wholly self-generated construct explaining your position.

9 Richard A. Harrison 07.15.13 at 10:56 am

Canvasback,

Sure. Try this.

At common law, “causation” is an element of a tort claim. We all understand the customary standard of causation: something that a defendant did or failed to do caused or contributed to, in a reasonably certain chain of events, the losses or damages being claimed by the plaintiff.

In this case, BP, which we will all agree is a highly sophisticated party with access to the best lawyers in the world, agrees to a different definition of “causation” to be applied in these claims. It does so not out of some corporate largesse or newfound philanthropic world view (depsite the very well done “We care about the Gulf Coast” commercials) but out of that which motivates all sophisticated corporate entities – its own financial self interest. It decides, presumably, that paying claims based on a formula that concedes the causation element if the financial test is satisfied will be cheaper in the long run than litigating causation with thousands of plaintiffs. And oh, by the way, if that also produces some goodwill as a side effect, that’s a benefit to BP too.

If the common law causation test were in effect, then I would agree that a claim asserted in the absence of that more traditional causation would pose an ethical dilemma. But that is not the “causation” that applies here, because BP in a negotiated and court approved settlement agreed to something else. I have no ethical or moral quibble with anyone who meets the new “causation” standard that does apply here – the one BP agreed to – and then submits a claim, even if that claimant wouldnot otherwise meet the traditional common law standard of causation.

There . . . how’s that?

10 Canvasback 07.15.13 at 10:54 pm

Mr. Harrison,
I see your point. Per the terms of the agreement, a claim of business loss wouldn’t be a false claim even if unrelated to the BP spill. That’s some goodwill indeed.

11 William Nuesslein 07.18.13 at 2:55 am

Mr. Harrison,

You point out that BP is a sophisticated party with access to attorneys. But the “no need for proof of causation” was written into the settlement to help little guys affected by the spill get more relief earlier as requested by the powerfully lawyer-ed to the hilt government of the United States. As it happened, the US government caused far more damage by its politically driven moratorium on drilling than the spill itself caused.

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