Oil giant's Deepwater Horizon settlement amounting to billions of dollars stands after appeal rejected by US court
The company was seeking to overturn judicial approval of settlement it agreed in 2012 after it said a legal loophole allowed thousands of businesses that were not affected by the disaster to claim “money they don’t deserve”.
But on Friday night an appeals panel rejected BP’s case, finding it had not explained how the courts could check the existence of claimants that did no lose money because of the spill. Two out of three judges on the panel found against BP and said the company should be able to defend itself against bogus claims.
In its appeal filing last year, BP referred to a compensation payment of $21m to a rice mill located 40 miles from the Louisiana coast as an example of the unharmed businesses that were profiting from the disaster and the loophole in the settlement agreement.
The ruling on Friday said: “No case cited by BP… suggests that a district court must also safeguard the interests of the defendant, which in most settlements can protect its own interests at the negotiating table.”
“In support of this allegation, BP presents us with a series of economists' declarations that had not been provided to the district court when the class [settlement] was certified.”
The decision is a major blow to BP, which spent $14bn to cap and clean up the Deepwater Horizon well following an explosion in July 2010 that resulted in five million gallons of crude oil spilling into the Gulf of Mexico. It has already paid out more than $11bn to businesses and individuals and has earmarked more than $17bn for further compensation claims and fines.
The uncapped total bill could reach $90bn.
Lawyers for the claimants argued that BP had simply underestimated how many compensation claims it would face and how many would be eligible for payments.
Their attorneys Steve Herman and Jim Roy said: “Today's ruling is an enormous victory for the Gulf, and an important step forward in ensuring that every eligible claimant is fully compensated according to the objective, transparent formulas spelled out in the settlement agreement that BP co-authored and agreed to.”
In the wake of the failure of its appeal, BP said it would continue to fight what it has described as “fictitious” compensation claims.
Geoff Morrell, a company spokesman, said it was “assessing its legal options and the further implications of the Fifth Circuit's decision”.
He said: “BP will continue to press its position on the proper interpretation of the settlement agreement's provisions requiring a causal nexus between a claimant's injury and the spill.”
The company has separately argued that Patrick Juneau, the administrator of the compensation fund, has been interpreting the settlement agreement incorrectly.
Emilio Garza, the appeals judge who disagreed with the panel’s majority ruling, said the settlement agreement “fails in a narrow, but significant, regard” and that it should be overturned.