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Court says BP's spill agreement is binding

Campbell RobertsonThe New York Times,John SchwartzThe New York Times

NEW ORLEANS -- In a setback for BP as it deals with the aftermath of the 2010 Gulf of Mexico oil spill, a U.S. appeals court ruled Monday that the company would have to stick to its agreement and pay some gulf businesses for economic damage without their having to prove it was caused by the spill.

BP had argued strenuously in court, and in newspaper advertisements, that the settlement had been unfairly misinterpreted and that it was being forced to pay for damage unrelated to the accident.

But in a strongly worded opinion, Judge Leslie H. Southwick ruled that the company was bound by the agreement it had signed. That deal said businesses in certain areas along the gulf that could demonstrate economic losses under an accounting formula were due payments without having to provide explicit evidence that their losses were caused by the oil spill.

"These requirements are not as protective of BP's present concerns as might have been achievable, but they are the protections that were accepted by the parties and approved by the district court," wrote Southwick, who was joined in the result by Judge James L. Dennis.

People and businesses making claims would still have to attest that their financial losses had been caused by the spill, the judge said. But an objective formula was a rational compromise in a case with large numbers of claimants and the problem of precisely accounting for the natural ups and downs of business.

"There is nothing fundamentally unreasonable about what BP accepted but now wishes it had not," he wrote.

Judge Edith Brown Clement wrote a forceful dissent, arguing that "causation was a critical part of the Settlement Agreement," but that "the interpretation and implementation of the agreement eliminated this requirement" - and that "absurd results" can be expected by the court's ruling.

BP initially estimated the costs of the settlement to run to $7.8 billion; the company now puts that number at $9.2 billion, though it acknowledges that any figure is uncertain as long as these settlement disputes are unresolved.

In a statement, Geoff Morrell, a BP spokesman, expressed disappointment with the ruling.

"BP had asked the court to prevent payments to business economic loss claimants whose alleged injuries are not traceable to the Deepwater Horizon accident and oil spill," the statement read, reiterating BP's assertion that such claimants were "not proper class members under the terms of the settlement."

Stephen J. Herman and James P. Roy, the two lawyers who led the plaintiffs' steering committee, issued a briefer statement: "Today's ruling makes clear that BP can't rewrite the deal it agreed to."

BP and the plaintiffs negotiated for nearly two years, and when the deal was completed in December 2012, both sides hailed it as a victory. But within weeks BP was challenging how the settlement was being interpreted by the court-appointed claims administrator, Patrick Juneau.

BP made two arguments: one, that the use of certain accounting techniques was distorting the losses of businesses and leading to inflated claims payments; the other, that businesses were being awarded payments even though their losses were not proved to have come from the spill.

The oil company did not confine its arguments to the courtroom. In an unusual move, the company also took out full-page advertisements in major newspapers, including The New York Times, criticizing how the settlement was carried out.

Plaintiffs said that BP was simply reneging on the terms of a settlement that both parties had negotiated, signed and deemed fair. They produced documents showing that lawyers for BP acknowledged that while the settlement formula might produce some questionable results, it was valuable as an "objective quantitative data-based test."

In March 2013, District Court Judge Carl Barbier agreed with the plaintiffs, ruling that if BP's positions on these matters were adopted they would inject "a degree of complexity" contrary to the settlement's terms.

The same three-judge appeals panel that ruled Monday weighed in on part of BP's argument in October. That time, a majority agreed that the accounting procedures needed to be revisited, which was a victory for BP. Barbier has since ordered the claims administrator to incorporate revised accounting procedures into the claims process.

Because other rulings in the case from three-judge panels of the 5th Circuit have been appealed to the full circuit, Southwick wrote, "We can anticipate that our decision might not persuade all parties either." Because of that, he wrote, a previous injunction by the court on payment of the claims for business economic losses would stay in place pending appeal.

In BP's statement, Morrell added that BP "is considering its appellate options."


By CAMPBELL ROBERTSON and JOHN SCHWARTZ
New York Times News Service