Wednesday, February 22, 2012

Mardi Gras is over. Time for the "Trial of the Century."

Well, another magnificent Mardi Gras has ended, and at this point,I’d normally be slouched on the sofa sipping a tomato juice (neat) and sorting beads.But not this year.  That’s because next week, squadrons of lawyers, journalists, petroleum engineers,and fisher folk are scheduled to descend on New Orleans, squeeze into a federalcourtroom, and begin on Monday what the media have modestly called, “The Trial of the Century,” otherwise known as the BP Oil Spilllitigation.

Whatever the rest of the century holds, it seems fair to say thatthis legal dispute, if it does not settle, will be themost complicated environmental trial anyone has ever seen.  With a thousand plaintiffs, a galaxy ofwitnesses, and 20,000 exhibits, this spectacular has more moving parts than a Madonna half-time show. As the trial unfolds, I’ll provide you with some occasionalshrimp-boots-on-the-ground legal blogging.

First, though, I’ll start with the background of the case (you mayalso be interested in these white papers from the Center of Progressive Reform: Regulatory Blowout: How RegulatoryFailures Made the BP Disaster Possible, and How the System Can Be Fixed toAvoid a Recurrence (Oct2010) and The BP Catastrophe: When Hobbled Law andHollow Regulation Leave Americans Unprotected (Jan 2011)). Here are some answers to commonquestions.

Q: Can you remind me whatthe BP Oil Spill was all about?  Iremember “Top Kill” and “I’d like my life back,” but the rest of it is a littlehazy.

A: On April 20, 2010 BP and its contractors were in the last stagesof drilling a three-mile long hole in the seabed fifty miles off the Louisianashore. They were in the process of plugging the hole, with plans to later extractoil from the massive reservoir that lay below. The oil rig was called “Deepwater Horizon.”  The well was called “Macondo” (yes, the samename as the fictional village in Gabriel Garcia Marquez’s OneHundred Years of Solitude—thevillage that was eventually blown apart by an apocalyptic storm and erased fromhistory.  This is what lit teachers call“foreshadowing”).

The project had not gone smoothly, and already operations were amonth late and $40 million overdue. At 9:30 that night, the well started burpingmethane gas. The gas shot up through the pipes, caught fire, and engulfed therig in flames. Eleven of the 126 people aboard died and many more were injured.Two days later the rig sank and oil began spewing from the wellhead, roughly amile below the surface. BP applied thousands of gallons of toxicdispersants on and below the surface in an effort to prevent the oil fromcoming ashore. Even so, the oil severely damaged beaches, estuaries, andmarshes, from Texas to Florida. Large swaths of the Gulf were closed tofishing.

As President Obama saidtwo months after the blowout: “Already this oil spill is the worstenvironmental disaster America has ever faced.” Earlier, BP’s then-chiefexecutive Tony Hayward invited public vilification when, in an inexplicable burstof self-pity, he whined, “I’dlike my life back.” Despite efforts to cap the well (including the so-called Top Kill method) oil continued to spew until July 15, 2010, when BP successfully capped the well and later sealed it with cement. According to some estimates, nearly five million barrels of oil had billowed into the Gulf before it was capped.

Q: What did later investigations show?

A: We’ve learned quite abit from media reports, industryincident reports, a presidentialcommission, an examinationby the Coast Guard and the Department of Interior, and a report fromthe National Academy of Engineering.

Basically, we know thatbefore the blowout BP used cheaper and quicker methods for building the well’swalls, misread important diagnostic tests, and removed the most importantprotective barrier to methane bursts before it should have. We also know therewere problems with a cement mixture that Halliburton had supplied and that employeesof Transocean made some bad decisions when they realized the rig was going toblow.

Q: So that explains the lawsuit.Who’s suing?

A: The trial in NewOrleans—officially called “Multi-District Litigation-2179”(MDL)—consolidates 535 lawsuits originally filed all over the country. Morethan 110,000 individuals and businesses have filed notice to take part in theMDL. Plaintiffs include fishers, seafood processors, restaurants, coastal landowners,individuals who were harmed by dispersants or oil, and many others.  The litigation also includes claims by thefederal government, Gulf Coast states, and a few municipalities. Several statesin Mexico have also filed claims. The federal and state (?) government claimsgenerally seek compensation for natural resource damage, response costs, ordamage to their economies.

Many of these plaintiffs are at the same time trying to resolvetheir grievances through BP’s Gulf Coast Claims Facility (GCCF), a $20 billion compensation fund administered by KennethFeinberg. Plaintiffs who reach a final settlement with the GCCF waive theirclaims and must withdraw from the MDL.

This trialdoes not address shareholder suits (which will be handled in Houston) orcriminal charges.
Q: Who are the defendants?

A: The most prominentdefendants are BP,which held the lease on the Macondo well; Transocean,which owned Deepwater Horizon; Halliburton,which poured the cement lining into the well; Cameron, which manufacturedthe blowout-preventer that malfunctioned during the crisis; and Nalco, which manufactured the dispersants thatare alleged to have made people sick and to have harmed the environment. Inlater stages of the litigation, the federal government and some states may berequired to defend their actions in overseeing containment of the oil andclean-up operations.

Q: What issues will the court decide?
A: For allits complexity, the goal of the trial is pretty simple: to determine theproportion of fault among the defendant companies and to determine the extentof penalties and damages. These questions will be decided in a bench trial(without a jury) by federal district court judge Carl Barbier.  In reaching his decision, he will rely onfederal maritime law, the Clean Water Act, the Oil Pollution Act, and the OuterContinental Shelf Lands Act. (The state law claims have all been dismissed aspreempted by federal law.)
Theallocation of fault, will, of course, affect the share that each defendant mustpay. But that amount also depends on the degree of carelessness the courtattributes to the parties. For instance, a finding of gross negligence orwillful misconduct could result in punitive damages, driving the verdict from afew billion to more than $20 billion. An award on the higher side could go farin helping a state like Louisiana (which suffered the most damage) to restoreits tattered coast and repair its economy. But such an award would almost certainly be appealed.
Q: Tell me more about Judge Barbier.
A:  Judge Carl Barbier has served on the U.S.District Court for the Eastern District of Louisiana since 1998.  He is a Clinton appointee. Judge Barbier wasborn in New Orleans and holds a law degree from LoyolaUniversity New Orleans.He is known for his expertise in maritime law and complex litigation. Over thelast year, he has impressed observers with his efficiency and endurance,wrestling hundreds of cases to the ground and consolidating them into thislitigation.

Q: How long will this trial take?

A: If it does not settle,it will take more than a year. Judge Barbier has planned the trial to unfold inthree phases. The first phase, beginning on Monday, will deal with everythingleading up to the explosion and the start of the oil leak. The second phase, scheduledto begin in mid-July, will focus on attempts to stem the flow of oil, inquiringinto the crucial question of how much oil was ultimately discharged into theGulf (a fact that affects the amount of penalties under the Clean Water Act). Thethird phase, which is not yet scheduled, will deal with the efforts to containand clean up the oil.

Q: You’ve mentioned settlement twice. Will this case settle soon?

A: Honestly, nobody knows.Many of the traditional experts (experienced trial lawyers and legal scholars)say it should. With such uncertainty about the punitive damages, the argumentgoes, both sides have strong incentives to find middle ground. Plus, BP cannotbe looking forward to seeing its dirty laundry aired out in court. But somelocal attorneys I’ve spoken to emphasize that individual personalities matter alot in settlement negotiations and that with so many people involved, negotiationscan easily derail.

Q: I missed Mardi Gras this year, should I make plans to visit NewOrleans to see the trial instead?

A: No. The courtroom will be completely packed with lawyers andjournalists.  There is only a smallamount of seating available to the public on a first-come, first-served basis.  Everyone else will have to watch the trial onvideo from “overflow rooms.” My crack research assistant Stephen Wussow willoccasionally visit the proceedings and report back. I’ve already warned him tobring lots of water and protein bars.

Q: Did Tony Hayward everget his life back?

A: Sort of. The former geologist and yachting-enthusiast left BP inOctober 2010 and now works for Glencore International, a commodities company involved inhardrock mining.  Mr. Hayward oversees policyrelated to environment and safety.

Rob Verchick is a lawprofessor at Loyola University New Orleans and a research scholar at the Centerfor Progressive Reform. This entry is cross-posted at CPRBlog.


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