BP 2012 Annual Report Download - page 167

Additional disclosures 165
BP Annual Report and Form 20-F 2012
On 20 April 2011, Transocean filed claims in its Limitation of Liability
action alleging that BP had breached BP America Production Company’s
contract with Transocean Holdings LLC by BP not agreeing to indemnify
Transocean against liability related to the Incident and by not paying
certain invoices. Transocean also asserted claims against BP under state
law, maritime law, and OPA 90 for contribution. On 1 November 2011,
Transocean filed a motion for partial summary judgment on certain claims
filed in the Limitation Action and the DoJ Action between BP and
Transocean. Transocean’s motion sought an order that would bar BP’s
contribution claims against Transocean and require BP to defend and
indemnify Transocean against all pollution claims, including those resulting
from any gross negligence, and from civil fines and penalties sought by
the government. On 7 December 2011, BP filed a cross-motion for
summary judgment seeking an order that BP is not required to indemnify
Transocean for any civil fines and penalties sought by the government or
for punitive damages.
On 26 January 2012, the judge ruled on BP’s and Transocean’s indemnity
motions, holding that BP is required to indemnify Transocean for third-
party claims for compensatory damages resulting from pollution
originating beneath the surface of the water, regardless of whether the
claim results from Transocean’s strict liability, negligence or gross
negligence. The court, however, ruled that BP does not owe Transocean
indemnity for such claims to the extent Transocean is held liable for
punitive damages or for civil penalties under the Clean Water Act, or if
Transocean acted with intentional or wilful misconduct in excess of gross
negligence. The court further held that BP’s obligation to defend
Transocean for third-party claims does not require BP to fund
Transocean’s defence of third-party claims at this time, nor does it include
Transocean’s expenses in proving its right to indemnity. The court
deferred a final ruling on the question of whether Transocean breached its
drilling contract with BP so as to invalidate the contract’s indemnity
clause.
On 20 April 2011, Halliburton filed claims in Transocean’s Limitation of
Liability action seeking indemnification from BP for claims brought against
Halliburton in that action, and Cameron asserted claims against BP for
contribution under state law, maritime law and OPA 90, as well as for
contribution on the basis of comparative fault. Halliburton also asserted a
claim for negligence, gross negligence and wilful misconduct against BP
and others. On 19 April 2011, Halliburton filed a separate lawsuit in Texas
state court seeking indemnification from BPXP for certain tort and
pollution-related liabilities resulting from the Incident. On 3 May 2011,
BPXP removed Halliburton’s case to federal court, and on 9 August 2011,
the action was transferred to the federal multi-district litigation
proceedings pending in New Orleans.
Subsequently, on 30 November 2011, Halliburton filed a motion for
summary judgment in the federal multi-district litigation proceedings
pending in New Orleans. Halliburton’s motion sought an order stating that
Halliburton is entitled to full and complete indemnity, including payment of
defence costs, from BP for claims related to the Incident and denying
BP’s claims seeking contribution against Halliburton. On 21 December
2011, BP filed a cross-motion for partial summary judgment seeking an
order that BP has no contractual obligation to indemnify Halliburton for
fines, penalties or punitive damages resulting from the Incident.
On 31 January 2012, the judge ruled on BP’s and Halliburton’s indemnity
motions, holding that BP is required to indemnify Halliburton for third-party
claims for compensatory damages resulting from pollution that did not
originate from property or equipment of Halliburton located above the
surface of the land or water, regardless of whether the claims result from
Halliburton’s gross negligence. The court, however, ruled that BP does
not owe Halliburton indemnity to the extent that Halliburton is held liable
for punitive damages or for civil penalties under the Clean Water Act. The
court further held that BP’s obligation to defend Halliburton for third-party
claims does not require BP to fund Halliburton’s defence of third-party
claims at this time, nor does it include Halliburton’s expenses in proving
its right to indemnity. The court deferred ruling on whether BP is required
to indemnify Halliburton for any penalties or fines under the Outer
Continental Shelf Lands Act. It also deferred ruling on whether Halliburton
acted so as to invalidate the indemnity by breaching its contract with BP,
by committing fraud, or by committing another act that materially
increased the risk to BP or prejudiced the rights of BP as an indemnitor.
On 1 September 2011, Halliburton filed an additional lawsuit against BP in
Texas state court. Its complaint alleges that BP did not identify the
existence of a purported hydrocarbon zone at the Macondo well to
Halliburton in connection with Halliburton’s cement work performed
before the Incident and that BP has concealed the existence of this
purported hydrocarbon zone following the Incident. Halliburton claims that
the alleged failure to identify this information has harmed its business
ventures and reputation and resulted in lost profits and other damages. On
16 September 2011, BP removed the action to federal court, where it was
stayed until it was transferred by the Judicial Panel on Multidistrict
Litigation to the multi-district litigation proceeding in New Orleans. On
1 September 2011, Halliburton also moved to amend its claims in
Transocean’s Limitation of Liability action to add claims for fraud based on
similar factual allegations to those included in its 1 September 2011
lawsuit against BP in Texas state court. On 11 October 2011, the
magistrate judge in the federal multi-district litigation proceeding in New
Orleans denied Halliburton’s motion to amend its claims, and Halliburton’s
motion to review the order was denied by the judge on 19 December
2011.
On 20 April 2011, BP asserted claims against Cameron, Halliburton and
Transocean in the Limitation of Liability action. BP’s claims against
Transocean include breach of contract, unseaworthiness of the
Deepwater Horizon vessel, negligence (or gross negligence and/or gross
fault as may be established at trial based upon the evidence), contribution
and subrogation for costs (including those arising from litigation claims)
resulting from the Incident, as well as a declaratory claim that Transocean
is wholly or partly at fault for the Incident and responsible for its
proportionate share of the costs and damages. BP asserted claims against
Halliburton for fraud and fraudulent concealment based on Halliburton’s
misrepresentations to BP concerning, among other things, the stability
testing on the foamed cement used at the Macondo well; for negligence
(or, if established by the evidence at trial, gross negligence) based on
Halliburton’s performance of its professional services, including
cementing and mud logging services; and for contribution and subrogation
for amounts that BP has paid in responding to the Incident, as well as in
OPA assessments and in payments to plaintiffs. BP filed a similar
complaint in federal court in the Southern District of Texas, Houston
Division, against Halliburton, and the action was transferred on 4 May
2011 to the federal multi-district litigation proceeding pending in New
Orleans.
On 16 December 2011, BP and Cameron announced their agreement to
settle all claims between the companies related to the Incident, including
mutual releases of claims between BP and Cameron that are subject to
the federal multi-district litigation proceeding in New Orleans. Under the
settlement agreement, Cameron has paid BP $250 million in cash in
January 2012, which BP has applied towards the $20-billion Trust. BP has
agreed to indemnify Cameron for compensatory claims arising from the
Incident, including claims brought relating to pollution damage or any
damage to natural resources, but excluding civil, criminal or administrative
fines and penalties, claims for punitive damages, and certain other claims.
On 20 May 2011, Dril-Quip, Inc. and M-I L.L.C. (M-I) filed claims against
BP in Transocean’s Limitation of Liability action, each claiming a right to
contribution from BP for damages assessed against them as a result of
the Incident, based on allegations of negligence. M-I also claimed a right
to indemnity for such damages based on its well services contracts with
BP. On 20 June 2011, BP filed counter-complaints against Dril-Quip, Inc.
and M-I, asking for contribution and subrogation based on those entities’
fault in connection with the Incident and under OPA 90, and seeking
declaratory judgment that Dril-Quip, Inc. and M-I caused or contributed to,
and are responsible in whole or in part for damages incurred by BP in
relation to the Incident. On 20 January 2012, the court granted Dril-Quip,
Inc.‘s motion for summary judgment, dismissing with prejudice all claims
asserted against Dril-Quip in the federal multi-district litigation proceeding
in New Orleans.
On 21 January 2012, BP and M-I entered into an agreement settling all
claims between the companies related to the Incident, including mutual
releases of claims between BP and M-I that are subject to the federal
multi-district litigation proceeding in New Orleans. Under the settlement
agreement, M-I has agreed to indemnify BP for personal injury and death
claims brought by M-I employees. BP has agreed to indemnify M-I for
claims resulting from the Incident, but excluding certain claims.
Additional disclosures