BP 2013 Annual Report Download - page 264

and property damages class members will receive payments based on
negotiated risk transfer premiums, which are multiplication factors
designed, in part, to compensate claimants for potential future damages
that are not currently known, relating to the Incident. The Economic and
Property Damages Settlement and the Medical Benefits Class Action
Settlement are not an admission of liability by BP. The settlements are
uncapped except for economic loss claims related to the Gulf seafood
industry under the Economic and Property Damages Settlement and the
$105 million to be provided to the Gulf Region Health Outreach Program
under the Medical Benefits Class Action Settlement.
All class member settlements under the settlement agreements are
payable under the terms of the Trust. Other costs to be paid from the
Trust include state and local government claims, state and local response
costs, natural resource damages and related claims, and final judgments
and settlements. As at 31 December 2013, the aggregate cash balances
in the Trust and the qualified settlement funds amounted to $6.7 billion,
including $1.2 billion remaining in the seafood compensation fund which
has yet to be distributed, and $0.9 billion held for natural resource
damage early restoration. Should the cash balances in the Trust not be
sufficient, payments in respect of legitimate claims and other costs will
be made directly by BP. See Financial statements – Note 2.
The economic and property damages claims process is under court
supervision through the settlement claims process established by the
Economic and Property Damages Settlement. Under the Economic and
Property Damages Settlement, class members release and dismiss their
claims against BP not expressly reserved by that agreement. The
Economic and Property Damages Settlement also provides that, to the
extent permitted by law, BP assigns to the PSC certain of its claims,
rights and recoveries against Transocean and Halliburton for damages
with protections such that Transocean and Halliburton cannot pass those
damages through to BP. Under the Medical Benefits Class Action
Settlement, class members release and dismiss their claims against BP
covered by that settlement, except that class members do not release
claims for Later-Manifested Physical Conditions.
On 24 April 2013, the plaintiffs in two actions arising from the Incident filed
a motion asking the Federal Judicial Panel on Multi-district Litigation to
create new multi-district litigation proceedings for certain claims not
covered by the two class settlements entered into between BP and the
PSC. BP and other defendants opposed the motion and on 9 August 2013
the Federal Judicial Panel on Multi-district Litigation denied the motion.
PSC settlements – appeals
Under US federal law, there is an established procedure for determining
the fairness, reasonableness and adequacy of class action settlements.
Pursuant to this procedure, an extensive notice programme to the public
was implemented to explain the settlement agreements and class
members’ rights, including the right to ’opt out’ of the classes, and the
processes for making claims. The court conducted a fairness hearing on
8 November 2012 in which to consider, among other things, whether to
grant final approval of the Economic and Property Damages Settlement
and the Medical Benefits Class Action Settlement, whether to certify the
classes for settlement purposes only, and the merits of any objections to
the settlement agreements. On 21 November 2012, the parties to the
settlement filed a list of 13,123 individuals and entities who had
submitted timely requests to opt out of the Economic and Property
Damages Settlement Class and 1,638 individuals who had submitted
timely requests to opt out of the Medical Benefits Settlement Class. On
16 November 2012, the court extended the deadline from 5 November
2012 to 15 December 2012 for such excluded persons or entities to
request revocation of their requests to opt out of the settlement. As a
result of such revocations, the number of opt-outs for the Economic and
Property Damages Settlement and the Medical Benefits Class Action
Settlement is fewer than those reported figures.
Following the fairness hearing, the Economic and Property Damages
Settlement was approved by the district court in a final order and
judgment on 21 December 2012, and the Medical Benefits Class Action
Settlement was approved in a final order and judgment on 11 January
2013.
Subsequent to the district court’s final order and judgment approving the
Economic and Property Damages Settlement, groups of purported
members of the Economic and Property Damages Settlement Class (the
Appellants) appealed from the district court’s approval of that settlement
to the Fifth Circuit. Additionally, a coalition of fishing and community
groups (the Coalition) appealed to the Fifth Circuit from an order of the
district court denying it permission to intervene in the civil action serving
as the vehicle for the Economic and Property Damages Settlement and
further denying it permission to take discovery regarding the fairness of
that settlement. On 11 November 2013, the Fifth Circuit affirmed the
district court’s rulings in respect of the Coalition. On 10 January 2014, a
panel of the Fifth Circuit affirmed the district court’s approval of the
Economic and Property Damages Settlement but left to another panel of
the Fifth Circuit (the business economic loss panel, discussed further
below) the question of how to interpret the Economic and Property
Damages Settlement, including the meaning of the causation
requirements of that agreement. BP and several Appellants have filed
petitions requesting that all the active judges of the Fifth Circuit review
the decision to uphold approval of the settlement.
PSC settlements – Deepwater Horizon Court Supervised Settlement
Program (DHCSSP) and interpretation of the Economic and Property
Damages Settlement Agreement
The DHCSSP, the claims facility operating under the framework
established by the Economic and Property Damages Settlement,
commenced operation on 4 June 2012 under the oversight of Claims
Administrator Patrick Juneau.
As part of its monitoring of payments made by the court-supervised
claims processes operated by the DHCSSP, BP identified multiple
business economic loss claim determinations that appeared to result
from an interpretation of the Economic and Property Damages
Settlement Agreement by that settlement’s claims administrator that BP
believed was incorrect. This interpretation produced a higher number and
value of awards than the interpretation BP used in making its initial
estimate of the total cost of the Economic and Property Damages
Settlement. Pursuant to the mechanisms in the Economic and Property
Damages Settlement Agreement, the claims administrator sought
clarification on this matter from the district court in MDL 2179 and on
5 March 2013, the district court affirmed the claims administrator’s
interpretation of the agreement and rejected BP’s position as it relates to
business economic loss claims (the March Ruling).
BP appealed the district court’s March Ruling and related rulings to the
Fifth Circuit. On 2 October 2013, the business economic loss panel of the
Fifth Circuit (by a 2 to 1 vote) reversed the district court’s denial of BP’s
motion for a preliminary injunction and the district court’s order affirming
the claims administrator’s interpretation of the settlement, remanded the
case for further proceedings and ordered the district court to enter a
’narrowly-tailored’ injunction that suspends payment to claimants
affected by the misinterpretation issue and who do not have ’actual injury
traceable to loss from the Deepwater Horizon accident.’ The business
economic loss panel also retained jurisdiction to review the district
court’s conclusions on remand.
On 18 October 2013, the district court issued a preliminary injunction
that, amongst other things, required the claims administrator to
temporarily suspend payments of business economic loss claims other
than those claims supported by sufficiently matched accrual-basis
accounting or any other business economic loss claim for which the
claims administrator determines that the matching of revenue and
expenses is not an issue. On 25 October 2013, the claims administrator
provided a declaration outlining the criteria that the claims administrator’s
office will use to determine the eligibility of claims for payment. In orders
dated 18 October 2013, 15 November 2013, and 22 November 2013, the
district court held that causation (i.e., whether the claims administrator
could properly pay business economic loss claimants whose injuries are
not traceable to the spill) was not an issue for consideration on remand.
On 21 November 2013, BP filed an emergency motion to enforce the
business economic loss panel’s 2 October 2013 judgment and to enjoin
any further payments to the business economic loss claimants whose
injuries are not traceable to the spill. On 2 December 2013, the business
economic loss panel of the Fifth Circuit granted BP’s motion and ordered
that the issue of causation again be remanded for expeditious
consideration and resolution in crafting “[a] stay tailored so that those
who experienced actual injury traceable to loss from the Deepwater
Horizon accident continue to receive recovery but those who did not do
not receive their payments until this case is fully heard and decided
260 BP Annual Report and Form 20-F 2013